Envista Holdings Corp Stock

Good morning, everyone. I'm Jim Gustafson, Vice President of Investor Relations for Envista, and it's my pleasure to welcome you to our 2026 Investor Day. We want to thank you for your interest in our company. And a special thanks to those of you who've made the journey to join us in-person here at our Nobel Biocare facility in Mahwah, New Jersey.

I'd like to remind you that during the presentation, that we are sharing today, it will also be available for download at the Events & Presentations section of our IR website at investors.envistaco.com. Additionally, this is being webcast live on the same Events and Presentations section of our IR website and will be available for replay later today after the event has concluded.

So in our presentation today, we will make forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties. For more information on these risks, please refer to our SEC filings, including our recently filed Form 10-K and subsequent filings.

Additionally, we will reference some non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the appendix of this presentation, which, as I mentioned, is available for download on our website.

So today, you'll have the opportunity to hear from 6 members of Envista's leadership team. Paul Keel, our CEO, will lead off the agenda with a discussion of our Value Creation Plan. This will be followed by a presentation from the leaders of our 4 main businesses: Stefan Nilsson will discuss our dental Implant business; and Veronica Acurio will go over our plans in Orthodontics; Filippo Impieri will then review our dental Consumables business; and Robert Befidi will share details on our diagnostics business; Eric Hammes, our Chief Financial Officer, will then close with details on our multiyear financial outlook. And after a brief break to set up for Q&A, those of you in the room will have the opportunity to ask questions to members of our leadership team.

And after that, I will now turn it over to our CEO, Paul Keel.

Were the applause for Jim or for me? All right. Good. We appreciate it.

So good morning, everybody. Thanks for joining us. I am going to kick things off with 3 kind of opening comments to set the frame for the rest of the morning. So first, you'll remember in March of 2025, we shared a Value Creation Plan that consisted of 3 core priorities: accelerating our growth, improving our operations and investing in our people. Now at that time, we believe that improvement along these dimensions would also bring up increase in Envista's financial performance, particularly around the 4 medium-term metrics that you see here.

So looking back across the past 18 months since that event, we're encouraged by our progress, propelled by new product and commercial execution we posted now 6 straight quarters of fairly broad-based growth. Leveraging the Envista Business System, we've amplified that top line growth into even faster EBITDA and EPS expansion. And with a deeper commitment to people and culture, we're seeing sustained increases in employee engagement, talent development and our community impact. The resulting financial performance as we hoped has improved alongside this. And we're consistently delivering at or above those ranges that are shown here.

So now across multiple dimensions, Envista is an even stronger company today than we were just 2 years ago. Our new product pipeline has never been stronger. Margins are up around 300 basis points, and we've gained market share in most of the main categories where we compete. Envista is now performing at a higher level. And as such, we're raising our medium-term outlook. I'll say more about this in just a moment.

Now before we go through the drivers underpinning the step up, let's take a step back and look at the broader dental market. So as everyone in this room knows, dental is a structurally attractive industry. Across the full landscape, it amounts to around $400 billion in annual spend, making it one of the larger health care categories. This stands to reason as it's one of the few markets where every person on the planet is a potential patient, and most of us, our dental demand grows as we get older.

Now supported by a number of structural factors like those you see on the right side of this chart, dental consistently outgrows the broader economy. Now this has been true in stronger economic times, like 2004 to 2007 or the run-up to COVID in 2016 to 2019. It's also been true in contractionary times like the global financial crisis of '08 to '09. In fact, if you look at the chart on the left, you can see that there's only a very small handful of years where dental growth materially lagged GDP.

The COVID lockdown of 2020, of course, is the most extreme example when U.S. dental expenditure compressed by 11% against a nominal GDP decline of just 1%. But if you look to the right of the COVID bar, you can see that dental is once again settling back into its long-term trend, outgrowing the broader economy in 2 of the last 3 years.

Now while dental is a good category in general, we participate in some of the very best segments within the market. We've been in and out of various parts of the dental landscape across our history. And you see some of those at the bottom of the chart, but we particularly like the 4 at the top: Implants, Ortho, Diagnostics and Consumables, and we hold a top 3 position in each of these. Now there's a clear logic to this focus. Every dental procedure has the same 3 steps: scan, plan and treat. Scan describes the upfront diagnostic step where a patient's needs are assessed. Plan is the middle step where the care is designed. And treat is a therapeutic step at the end where the care is delivered.

Now it's difficult to serve customers across the full continuum. But for the small handful of players that can do it, there are clear economic, clinical and operational benefits that accrue. We aggregate our 4 businesses into the 2 reporting segments you see here. Specialty Products & Technologies accounts for about 2/3 of our sales and Equipment & Consumables accounts for the remaining 1/3. Specialty categories like implants and ortho are most often sold directly to clinicians with no distribution layer in between. This requires unique clinical, education and service capabilities that take years to build. But as a consequence, the supplier set tends to be smaller. For these and other reasons, over time, Specialty dental tends to grow more quickly and with higher margins than general dentistry.

Now unlike Specialty products, Equipment & Consumables products are used by all clinicians. As such, suppliers like Envista, again, who support customers across that full continuum have a distinct competitive advantage, especially with diversified customers, like DSOs or universities or outside the U.S. with public hospital systems.

Consumables are typically used in primary care procedures, which in turn are most often covered by insurance, so while through cycle growth for consumables tends to be lower than specialty, demand also tends to be more stable. Now Envista, with our full portfolio, we benefit from both of these dynamics. We have greater stability in periods of heightened uncertainty, and we also benefit from accelerated growth when sentiment is stronger.

Now having touched on the broader market, let's focus in on Envista. We've been a leader in the global dental market now for over 135 years hammer home to many of the most respected brands in the industry. Brands like Nobel Biocare, Ormco and Kerr enjoy 100% recognition amongst clinicians in those respective categories. As you can see across the bottom of the chart, in addition to being well balanced in terms of product, our portfolio is also nicely diversified in terms of geography and go-to-market model. Roughly half of our sales come from North America, with the balance roughly equally split between Europe and developed markets.

In terms of channel, about 60% of our sales, as I mentioned, are sold direct and the remaining 40% go through distribution partners, many of whom we worked with for decades. We hold over 1,500 patents and have played a role in many of the most important innovations in dentistry and I'll say more about this shortly.

You'll recognize this slide from last March when we first communicated our Value Creation Plan, and the architecture of the plan remains unchanged. A clear purpose, a shared set of values, and 3 enterprise priorities. Everything begins on the left with our purpose of partnering with dental professionals to improve patient lives. The purpose connects us directly to our customers. It gives true meaning to our work each day, and it keeps everyone focused on patient outcomes, which is at the center of everything in dentistry.

Just as important are the values that define how we operate. Across more than 130 countries, the 12,000 employees of Envista are unified by our circle values, all nonproduction employees in our company and the resulting compensation that comes from that are measured both by what we achieve as well as how we achieve it. We do this because sustainable performance demands both. We bring our purpose and values to life through the 3 core priorities you see: Growth, operations and people. And these priorities form the seabed of how we continually advance our capabilities, improve our performance and create value for all stakeholders.

You'll also recognize this slide from our last Capital Markets event, it laid out the specific areas we said we were going to work on.

Let's now turn to our assessment of how we're progressing across those priorities. The headline here is that we're moving the needle in all priority areas. On growth, we strengthened both our customer penetration and our commercial execution. We're building on our strong position in core developing markets like China and Russia, while also expanding our smaller presence in other fast-growing countries like India and Brazil. We're also deepening our penetration with DSOs, and we're taking share in many of the largest accounts around the world. You'll see we gave ourselves a half moon rating here to recognize the progress we've made but more importantly, the very significant upside that's still available to us.

In terms of commercial execution -- let me catch up here. In terms of commercial execution, you'll see that implants has now returned to growth. And last year, we delivered our fastest performance since 2022. We also gave ourselves a half moon rating here. We're encouraged but not yet fully satisfied with our accelerating growth. Stefan?

Spark is performing wonderfully, having gained share and expanded margins every year since launch. Tremendous progress, but even more upside still ahead of us even with Spark. With respect to innovation, we've materially increased our R&D investment and early returns are promising. Alongside improved organic execution, we've also restarted our inorganic engine and we completed 3 small bolt-on but accretive acquisitions over the past 18 months.

Moving to operations in the orange. We're delivering durable improvement to sustainably fund our faster growth. We've redoubled our focus on factory productivity, launching enterprise footprint, automation and procurement efforts that didn't exist 2 years ago. We gave ourselves another half moon here, pointed in the right direction, but still with a lot of margin to play for.

G&A as a percentage of sales is down almost 3 points, and our working capital turns are steadily in the 5s amongst the best in the industry. So we thought that earned a 3/4 pie.

Maybe most importantly, on people, we're strengthening the foundation that makes all this progress possible. We've refreshed our leadership team. We're investing in talent development, and we're seeing broad-based year-on-year improvements in employee engagement, 3/4 of a moon. And now while we've covered a lot of ground over the past 1.5 years, it's important to underline that we're not just pursuing near-term improvement. We're building repeatable capabilities to support stronger performance over time.

Let's now take a look at how this progress has translated into results. As you see on this slide, we have delivered above the outlook range for each metric in 2025, and we're guiding to be again in the range for 2026. We're encouraged by this performance, both the absolute numbers as well as what Eric calls the say-do ratio. Are we clearly and transparently communicating to all of you, are current, and as well as can be expected, our future performance. That's the say. And are we delivering in line or better when taking into account exogenous factors. That's the do.

Now central to the say-do ratio is making both tailwinds and headwinds visible. So to iterate what we talked about on prior calls, our performance over the past 18 months has benefited from some nonrecurring tailwinds. For example, Spark deferral, channel inventory normalization and tariff-related pricing actions. Netting all of these out, Envista is consistently growing around 3% to 4%. Through the work I just described in COGS and G&A productivity, we leverage this into EBITDA growth of about twice as fast. Add to that another point or 2 in EPS growth from expanded initiatives in tax and capital deployment, and we convert all of this into cash at a sustainably efficient 1:1 ratio. The takeaway for all of you is that Envista is now durably operating at a higher level than where we were 2 years ago.

So where do we go from here? Our plan moving forward builds on our 2 prior phases of life as a public company. From 2019 to 2023, we executed the spin from Danaher. We navigated COVID, strengthened our portfolio and rapidly scaled Spark. This critically important phase formed the foundation of what's now in Envista.

In 2024, we refreshed our leadership team, adding new capabilities to supplement the strengths that were already in the organization. We developed a new value creation plan. And as we just covered, are progressing well and delivering it. We strengthened our balance sheet and capital deployment. And all of this in combination has strengthened stakeholder confidence, with our customers, with our colleagues, with the communities that we support, and hopefully, with all of you.

Envista is now in the next phase of performance. We're not changing direction in this phase, but rather we're building strength on strength. That means deploying the Envista business system even more deeply across the enterprise. It means further accelerating our new product momentum and translating that innovation into further share gains. It means advancing productivity initiatives to fund this growth while also expanding our capacity for disciplined capital deployment. And higher performance, of course, means high expectations and consistent with us, as I mentioned, we're raising the outlook.

Across the next few slides, I'll outline the new LRP as well as the capabilities we're building to support the step-up. I'll begin with growth. Innovation has long been the lifeblood of Envista. Over the past 135 years, we've had a hand in many of the most defining advances in dentistry, like inventing the now ubiquitous endodontic K-file or dental implants or panoramic radiographs for both conventional and customized orthodontic systems.

Our strong pipeline today is built on this firm foundation of innovation. The next slide captures just a few of the many recent launches. So we've increased new product investment at a double-digit rate each of the last 2 years, and this has allowed us to grow R&D as a percent of sales from 3.7% to 4.2%.

Some of the new programs funded by this step-up are still in development, but many of them have already launched, like the new Nobel S Series just 6 months after introduction already accounts for about 20% of our premium implant sales and 1/4 of these have come from competitive accounts or the new CBCT platform from DEXIS which has already grown to be one of Envista's largest launches across the last 5 years or ErgoZoom, a novel new loop system that combines superior economics with adjustable magnification, where the half dozen plus major launches from Spark, which have allowed that business to go from 0 in sales to over $300 million since our launch in 2019.

Now the business Presidents are going to say much more about these and other innovations. And those of you who joined us today are going to get a deeper dive at the innovation forum this afternoon.

Now innovation is the way we grow at Envista and EBS is the way we work. EBS is deployed throughout our enterprise and underpins all of our growth, operations and people priorities. An even deeper deployment of EBS is driving measurable impact. Over the past year, we have -- past 2 years, we put in place EBS leaders in every business, every function and every factory. When tariff activity started heating up, for instance, in the first half of last year, we launched a number of high-impact Kaizens to nimbly rebalance our supply without impacting our industry-leading service levels.

To help fund the many new growth initiatives that I just mentioned, EBS is the centerpiece of a company-wide factory productivity effort. This has supported the consolidation of 3 sites and the automation of many more. And as inflationary pressures continue to mount, EBS underpins both our new procurement and pricing programs.

As Eric will say more about shortly, we'll generate roughly $10 million in incremental procurement savings this year, in addition to the $100 million or so in pricing benefit we've generated over the last 3. And most encouraging for all the progress we've made, we are still very far from realizing the full potential of EBS at Envista. This is by design because that is the very nature of continuous improvement.

Our third priority is people because sustaining better performance takes even more than accelerating growth and improving operations. Most of all, it takes engaged teams, capable leaders and a shared sense of purpose. With respect to engagement, our efforts have resulted in broad-based sequential increases in our last 3 annual employee surveys. This stands to reason as stronger performance and stronger engagement go hand in hand.

On talent, we've implemented a disciplined approach to leadership development and succession planning, supported by targeted work shops and individual growth plans. More than half of leadership roles in our company right now are being filled internally, both to effectively build our bench and also to create even more meaningful career path for our employees. And we're living our purpose through the Envista Smile Project and dozens of associated activities around the world every year. Last year alone, we donated more than $2 million in cash and materials working side by side with our customers and our partners to reach roughly 20,000 patients in underserved communities. Together, these priorities advance the high-performing continuous improvement culture that we're building.

Let's now take a look at the financial outcome of this. With respect to our medium-term outlook, we are raising 3 of the 4 metrics: core revenue, EBITDA and EPS growth. And one, free cash flow conversion remains unchanged at a healthy 100%. You'll see we're raising the top end of our core growth range from 4% to 5% supported by market share momentum and a stronger new product engine, but with continued macro uncertainty, we're leaving the low end unchanged at 2%. We're shifting our entire EBITDA growth range up 1 point from 4% to 7% to 5% to 8%, expanding gross margins, together with the productivity initiatives that I just outlined, support our ability to grow profits even faster than sales.

For adjusted EPS, we're also raising the top end of the range by 1 point to 11%, reflecting a combination of stronger operating performance and disciplined capital deployment. As Eric will detail in just a moment, we'll also be laying out our balance sheet priorities. While this will give us even greater flexibility in the current environment, it will also likely come with higher interest expense. As such, we leave the bottom end of our EPS growth range unchanged at 7%.

So to summarize the approach, we've strengthened our capabilities, execution and results. So we're raising our outlook as well.

Let me close by bringing it back to 4 main points. First, in March of 2025, we communicated a Value Creation Plan centered around 3 priorities of growth, operations and people. Second, we're continuously improving our capabilities, resulting in financial performance consistently above the ranges we initially gave you. Third, it naturally follows then that we're raising our outlook. And fourth, Envista is now in a new phase of performance, extending our momentum, advancing capabilities and creating ever more value for all stakeholders.

In summary, Envista is a stronger company today. We have greater momentum, deeper capabilities and an even clearer path to sustained value creation. Most importantly, we're building a company that will keep getting better for our customers, our colleagues to the communities that we work in and for our shareholders. That's what gave us confidence to raise our medium-term outlook and to move to the next phase of Envista's performance.

With that, I'm going to hand it over to Stefan to walk us through the implants plan. Thank you.

Thank you, Paul. All right. So good morning, everyone. Welcome to Procera. This is our home to the prosthetic and Digital business unit. I'm Stefan Nilsson. I'm the President of the Implant Group, and I'm excited to be here today with you. We want to share the progress we are making within our business, and we believe we are in a uniquely positioned global leader that is gaining momentum in the market. As we think about the opportunity ahead, I would highlight 3 themes that gives us confidence in our future and differentiate us within the industry.

First, we are a top global player in one of the most attractive categories in dental care. Second, we are a healthier business today than we were just a few years ago, just like Paul mentioned. And third, our innovation engine is back. Together, these strengths create a powerful foundation for sustained growth, market share gain and long-term value creation.

So with that context, let me start by showing how these strengths are translating into momentum across the business and why we believe we are increasingly well positioned to capture growth opportunities across both premium and challenger segments. Our ambition is to be the leader in the global implant market and be the preferred portfolio of brands across both the premium and challenger segments.

One of our unique advantages is the strength of the Nobel Biocare brand. For decades, Nobel has always been linked with a scientific leadership, innovation and clinical excellence. That trust extends beyond the premium segment. We believe Nobel Biocare creates a powerful halo effect for Implant Direct, Alpha-Bio Tec, Procera and our regenerative portfolio. As customers engage with Nobel Biocare, it strengthen credibility across a broader portfolio and helps accelerate adoption of our challenger brands.

We're also seeing the benefits of recent investments. New innovations such as the S-Series, EmPro, SmileGrid, are beginning to gain traction, while our commercial and marketing investments are driving improved engagement with clinicians from all around the world. That momentum is important, but it becomes even more compelling when viewed against the backdrop of the market opportunity itself. Let me spend a minute on the category and why we remain so excited about the long-term growth potential. We participate in a highly attractive $12 billion global market that continues to grow at the mid-single digit. What is particularly attractive is where much of that growth occurs.

The Challenger implants segment continues to grow at a faster pace than the overall market, creating meaningful opportunities for market share expansion. We also have 2 very strong challenger companies with Implant Direct and Alpha-Bio Tec, each with its own unique offering and value proposition. Overall, our portfolio is uniquely positioned to support a wide range of segments and key patient demands. We also see attractive opportunities within prosthetic and regenerative solutions. What differentiates us is our ability to participate across the entire treatment journey through a highly connected ecosystem.

At the beginning of '24, we increased annual investment by approximately $25 million. This was focused on 3 priorities: strengthening commercial execution significantly expanding clinical education and rebuilding our innovation engine. Those investments are producing results. We improved sales coverage. We also revitalized our marketing organization and the Nobel Biocare brand, expanded the number of clinicians trained and increased investments in R&D.

The chart shows the impact following the investments initiated in '24, the business returned to growth in '25. We expect further improvement in '26 and beyond. The key message is that this is a company gaining momentum. We have a healthier commercial foundation, a stronger customer engagement and an innovation pipeline that is the beginning to deliver are now focused and sustaining this trajectory, growing in line with the implant market, increasingly capturing the faster growth opportunity within our challenger segment, the prosthetic and regenerative businesses.

Our improving performance is supported by more than the commercial investments. It's also supported by the breadth of our portfolio and our ability to connect solutions across the implant treatment workflow. One of our key differentiators is our ability to support clinicians across the entire implant ecosystem. We bring together the full clinical journey with one of the most comprehensive integrated digital workflows. This supports not only Nobel Biocare, but also our challenger, prosthetic and regenerative businesses. The broader and more connected our offering becomes, the more value we create for customers and the more opportunities we create for growth.

The strategic value is important. We are not competing for just a single implant sale. We are building an ecosystem that can improve clinical predictability, reduce complexity, strengthen customer loyalty and increase participation across the complete treatment workflow.

The reason we have been able to build such a comprehensive digital workflow starts with the foundation of Nobel Biocare itself. To understand our future opportunity, it's worth reflecting on the success of our past innovations and what lies ahead.

Our company holds a unique position within the industry. More than a leading implant brand, we created modern implant dentistry through the pioneering work of Professor Brånemark and the discovery of Osseointegration. Over the decades, Nobel Biocare has consistently introduced innovations that have revolutionized the shape of this industry. From the development, the invention of the All-on-4 protocol to the first same-day guided treatments, with NobelGuide. We also introduced NobelActive, a truly disruptive new implant design that still leads the way in its innovative thread design and desirability for immediate function. This heritage matters because it continues to influence customers today and it's the foundation we use for future innovations. We have the trust and credibility associated with being a decades-long leader in implant therapy.

We are focused on the future and looking for new ways to improve clinical outcomes of our clinicians. Patient is and always will be our North Star. This is what guides our purpose and what drives us. Our goal is not simply to celebrate our history, but to leverage that heritage to drive future growth. While we are incredibly proud of our history, we are focused on what comes next. And that starts with rebuilding the innovation engine that has historically made Nobel Biocare, a leader in this industry.

Innovation is fundamental to our strategy, just what Paul mentioned, and it is a critical driver for long-term growth. What is important about this pipeline is its breadth. It spans all major categories across Nobel Biocare, Implant Direct, Alpha-Bio Tec, Procera, Osteogenics and Versah. This ensures that innovation is contributing to growth across the entire portfolio, not just a single brand or area of the business.

We are investing behind the areas where we see the greatest opportunities for customer adoption, market share gain and profitable growth. Over the last 2 years, we have increased focus on our R&D activity. This has led to a 50% increase in the number of high-impact launches over the last 2 years. This is the table I presented to you in March '25, showing our innovation pipeline at that time. However, the pipeline only creates value if it ultimately reaches the customer.

Let me show you how we are translating the innovation pipeline into commercial product launches today. This slide reflects our ability to convert innovation into commercial execution. Over the past 2 years, we accelerated the pace of launches. Since '24, we have increased the number of annual launches by 50%, with 4 meaningful launches in '26. It is important to note that 2 of those 4 launches this year are considered high impact versus low or medium.

Our Challenger business where innovation can be meaningful differentiator is gaining momentum as well. We had a strong push in late '25 with 4 key launches that position us well to compete for market share with more complex cases. Sand Scanbody for both ABT and Implant Direct as well as new Multi-unit Abutment for both systems.

Implant Direct launched a direct arch digital workflow, while ABT added the omni-based final abutment system. The key message is simple. Our innovation engine is delivering today while also building a foundation for future growth. Among those launches, S-Series is one of the best examples how we are bringing meaningful innovation to the market while driving customer adoption and competitive conversion. S-Series is a strong example of customer-focused innovation, built on decades of Nobel Biocare clinical evidence, S-Series simplifies workflows for clinicians while maintaining the performance and predictability that customers expect from a premium franchise.

The response has exceeded our expectations with strong adoption and meaningful competitive conversion. We view this as an important proof point that our renewed innovation strategy is translating into commercial success. Our launch of S-Series has started off very well. In the last quarter, S-Series made up 18% of Nobel Implants sold across Europe and North America. Innovation for us doesn't stop at the implant itself. We are also investing across the broader treatment workflow, including prosthetic solutions that help improve clinical outcomes and customer experience.

EmPro. EmPro represents another example of innovation designed around customer needs. Its emergence profile design provides the clinicians and laboratories with great flexibility in managing soft tissue and achieving natural-looking aesthetic results. This is strategically important because clinicians do not judge success only whether an implant integrates, they judge success by the quality and appearance of the final restoration.

EmPro launched in Europe in the second quarter of this year. So far, we have seen fast adoption of the new product with 58% of our customers moving over from legacy components in just the first 6 months. In addition, EmPro is playing a significant role in getting our prosthetic product category back to growth. It is a strong example how we can leverage previous proven technologies like Seal with a newly designed product to create a better system for clinicians and patients. And as dentistry becomes increasingly digital, connecting these technologies together becomes just as important as the technologies themselves. That is where SmileGrid plays a critical role.

SmileGrid is our new cloud-based workflow platform. It helps clinicians, specialists, laboratories and treatment teams to collaborate through a connected digital environment. Rather than forcing customers into a fixed process, it allows them to customize workflows based on the way they prefer to practice and the needs of their patients. Strategically, SmileGrid helps connect our customers to the systems and services they choose to better treat their patients. They can do this in a completely open environment with the confidence that all their data will be accessible from anywhere.

They also have the security of knowing all their patient data is protected and fully HIPAA compliant. We believe this opportunity is particularly compelling within our challenger portfolio, where clinicians increasingly expect easy to adopt digital solutions that improve efficiency and enhance customer engagement.

Beyond digital workflows, we are also expanding our portfolio through strategic acquisitions and highly differentiated technologies. Versah is a great example of that approach in action. Versah is an excellent example of how we are expanding our portfolio through differentiated technologies. Earlier this year, we completed the full acquisition of the business and began integration activities in May. Since then, we have expanded commercial reach from 3 primarily education-focused representatives to more than 300 implant and regenerative sales representatives across our premium and challenger business. The business is performing well, tracking towards double-digit growth by year-end, while generating attractive margins.

Beyond the financial opportunity, Versah strengthens our position in implant surgery and creates additional cross-selling opportunities across implants and regenerative solutions. Technology alone is not enough. Adoption requires education, clinical confidence and scientific validation. That's why our partnerships with the clinical community remains such an important strategic advantage.

Education remains a critical part of our growth strategy. Our partnership with the Foundation for Oral Rehabilitation supports global clinical education, scientific advancement, and leadership development. This is valuable across all our businesses because education helps drive adoption, improve clinical confidence and expand access to implant treatment. We are very excited to see momentum and interest building with the foundation.

In '26, we will launch a new council in Turkey, and we have plans to expand to India in '27. These councils provide a framework for local education, humanitarian support as well as scientific research platforms for local clinicians. Our partnership with FOR is just one part of a much broader commitment to education, which continues to be one of the most important drivers of customer engagement and long-term growth.

Education has always been one of Nobel Biocare's greatest strength. By supporting clinicians throughout their professional journey, we help accelerate adoption of implants, prosthetics, regenerative solutions and digital workflows. As more clinicians enter implant dentistry globally, education becomes an important growth engine that supports procedure growth and expands our customer base. As you can see from the slide, our investments in '24 have yielded strong results in this area. Significant growth in the last 2 years has resulted in a 10x increase in the number of clinicians trained around the globe. This forms a strong foundation for future growth.

When our customers grow, we grow with them. While innovation and education create demand, sustainable growth also requires strong execution. Paul spoke about EBS. EBS is helping us to become a more focused and disciplined organization. Alongside innovation, EBS is helping us improve execution across businesses. Our focus area include go-to-market effectiveness, supply chain agility, pricing discipline and manufacturing optimization. These efforts helps us scale our businesses while improving efficiency and profitability. When we bring innovation, education, commercial execution, and operational excellence together, we create something much more powerful than individual products. We create a complete solution for our customers.

What differentiates us is not simply having a strong premium implant franchise. We have built a portfolio that spans premium implants, challenger implants, regenerative biomaterials, prosthetics, digital workflows and clinical education. The strength of Nobel Biocare creates credibility across that portfolio, enabling us to drive adoption across multiple customer segments and geographies. We believe specifically that our challenger and regenerative businesses represent some of the most significant opportunities to accelerate growth in the years ahead.

So let me close by bringing everything together and highlighting why we believe this business is exceptionally well positioned for the future. First, we participate in an attractive and growing market with significant unmet patient need and substantial room for expansion. Second, we have built a uniquely advantaged position through our premium challenger, prosthetic, regenerative and digital portfolios. We believe the strength of Nobel Biocare can continue to create a halo effect that accelerates growth across the broader portfolio. Third, we have a clear growth strategy centered around innovation, commercial excellence, education and operational discipline, combined with the strength of the Nobel Biocare brand and the revitalized innovation pipeline, we believe we are well positioned to deliver sustainable growth, margin expansion and long-term value creation. Thank you.

I would like now to introduce Veronica, who will tell you about the orthodontic business within Envista.

Thank you, Stefan. Good morning, everyone. It's a pleasure to be here to share the work we are doing to expand Envista's leadership in orthodontics. And as you all know, Ormco is a business of Envista that has a significant potential for accelerated growth and a compelling opportunity to further transform the orthodontic market.

The market in which we compete is attractive. Orthodontics is a large, approximately $7 billion global category growing at a mid-single-digit rate, with a long runway for further growth because of the substantial number of unserved patients globally. With 65 years of experience and a legacy of introducing many of the foundational and best-known innovations in orthodontics, we are distinctively positioned to serve orthodontists.

Ormco is a global market leader with a differentiated digital platform designed to address needs of both patients and clinicians. We have a strong presence in fixed appliances traditionally known as Brackets & Wires and in clear aligners a category with a significant growth potential. We are the leaders in self-ligating appliances, a treatment modality within Brackets & Wires that offers more predictable treatments with greater efficiency and comfort. And Spark, one of the best and fast-growing aligner products in the market is a product that we developed through internal R&D and successfully launched only about 7 years ago. These strong products served by an extensive clinical education and leading digital orthodontic treatment platform are here for success.

We have demonstrated a track record of profitability growth. Ormco is one of Envista's most important profit drivers. Our Spark business just turned profitable last year, and within 7 years have achieved global sales of more than $300 million. We intend to sustain this promising trajectory of growth and profitability over the coming years. We believe this market offers significant opportunity. About half of the world's population suffers from malocclusions, with over 6 million -- 600 million who would benefit from orthodontic treatment and have the ability to pay, only approximately 21 million begin treatment every year, almost 3.5% of the estimated addressable market.

Evolving treatment modalities and channel expansion are helping to address several barriers for treatment, including concerns of appearance, the need for more predictable and shorter treatment times and affordability, particularly in minor or relapsed cases. Of the approximately 21 million annual cases starts, about 75% continue to be using Brackets & Wires and 25% use aligners.

Although some general dentists have expanded into orthodontics, care over the past decades, orthodontists still represent approximately 3 out of every 4 cases. They have the most specialized training and experience in tooth movement and Ormco remains focused in serving this specialty.

The introduction of clear aligners more than 25 years ago represented a major breakthrough in orthodontics. It significantly expanded interest among adults an unserved population seeking aesthetic, more comfortable treatments and a modality that fits their lifestyle. And despite the growth of aligners, most teenagers are still being treated with Brackets & Wires. Teen patients can be less compliant with removable appliances and fixed appliances are widely accepted because of many of their peers are still treated with the Brackets & Wires as well.

Within Brackets & Wires the principal modalities includes traditional twin brackets and self-ligating systems, such as our Diamond franchise. Self-ligating systems are the fastest-growing modality, offering a more predictable treatment with greater efficiency and comfort.

Similarly, clear aligners span a range of options designed for complex and simple cases, early intervention and expanded indications. In recent years, both Brackets & Wires and clear aligners have expanded their use of digital treatment planning. Aligner treatment is fully supported by digital planning and customized trace, and the resulting data will continue to improve treatment predictability. In Brackets & Wires, digital adoption is growing and enabling more customized treatments. But it remains still in early stages and represents a meaningful opportunity for further transformation. We believe Ormco is positioned to lead in digital orthodontics.

Ormco has a well-defined business model that we use to compete and win in this category. First, our training and education. We collaborate with an extensive network of key opinion leaders and clinicians to communicate the science behind our treatment options. Last year, our team and clinical experts delivered more than 3,000 educational events, reaching over 50,000 clinicians. Second, our global reach. Our commercial scale extends to more than 120 markets with direct sales supporting -- supported by more than 500 commercial resources that represent our complete portfolio.

Third, our innovation. Our R&D and product management continues to advance both modalities of Brackets & Wires and aligners with a particular focus on digitalizing both modalities through our Ormco DTX platform. And third, our comprehensive offering. We support more than 2 million cases annually. Ormco is differentiated as one of the largest orthodontic product companies. We are unique because we have a scale, leading position in both clear aligners and Brackets & Wires with a strong and resilient Brackets & Wires business, supporting the needs of a stable teen orthodontic market, and a leading growing aligner that has grown and captured share every year since launch.

We are clearly a market leader positioned to serve orthodontist, the clinical segment that delivers today more than 75% of orthodontic treatment globally. One of the most exciting opportunities that we have is to leverage our digital platform to plan treatment and help clinicians select the best solution for patients. Our digital platform was initially developed to plan treatment with the Spark aligners.

Last year, we launched StageRx, a groundbreaking visual treatment planning platform for Spark that improves treatment predictability, reduces design time and simplifies workflows for orthodontists. This platform now can not only support aligners and retainers, but also treatment planning for Brackets & Wires. And this year, we have expanded our Ormco digital bonding within the platform to include our full range of Brackets.

This single platform supporting both aligners and Brackets & Wires creates an opportunity for new hybrid treatment approaches that combines modalities within a single case, an area that we are actively developing. This is the power of our portfolio, with leading offerings in both, Brackets & Wires and clear aligners supported by one digital platform. We can help clinicians choose the treatment approach that fits better patient needs. We are not constrained to a single modality that may not be appropriate in every case. Around this platform, we're also building a comprehensive ecosystem to better orchestrate and simplify clinicians' workflow. With Ormco and Envista's portfolio and integrating partnerships, we plan to cover across all workflow stages, supporting all treatment modalities through one Ormco DTX platform.

We continue to expand partnerships, creating open, integrated orthodontic ecosystem that simplifies clinicians' work and supports greater treatment predictability, shorter treatment times and a superior patient experience. When it comes to product innovation, we take inspiration from the orthodontic experts we serve. Ormco has a long history of introducing game-changing products and treatment modality.

Our 65-year legacy of innovation spans the breadth of our portfolio. Ormco pioneered with straight wire appliances, helping clinicians position teeth more precisely and introducing a series of advancements in self-ligating appliances. We also have been pioneers in customized treatments. In the recent years, we mobilized our teams to build a compelling clear aligner offering, leading to the introduction of Spark, while continuing to advance our Brackets & Wires through our Damon Ultima and ultimately, our Ormco digital bonding. These solutions are designed to improve control of tooth movement, bracket placement accuracy efficient and patient experience.

Some of our latest innovations include the introduction of Spark on Demand, Spark Retainers, Ormco EtchFree, an innovative orthodontic adhesive system that eliminates the need for acid etching during bracket and attachment bonding, Spark Jr. with BiteSync, Ormco's clear aligner solution designed for growing patients a two-phase orthodontic treatment for early interception combining the proven performance of Spark aligners with BiteSync, Class II correction supporting healthy development, jaw correction and tooth alignment in a single workflow and StageRx.

This year, we expect to deliver close to $75 million from products that we have introduced in the last 3 years. We are orthodontic experts with an unmatched record of innovation and one of the industry's most complete offerings for both patients and clinicians. We are leading the way towards faster, more efficient treatments and improved outcomes. With a strong innovation pipeline, Ormco is well positioned to accelerate growth and shape the future of orthodontics.

Continuing to drive Spark growth is our first priority. We are gaining share and with a 10% revenue CAGR over the -- growing faster than the market. And since Spark's introduction, we have surpassed more than 1.4 million cases globally. We plan to continue to build on the success of gaining share among patients that are treated with clear aligners by doing 2 things: one, our relentless focus on expanding customer reach, strengthening our commercial execution. We will continue to prioritize markets in Europe, in North America, expanding our partnerships in orthodontic practices and DSOs, but also further penetrating and entering in new high-potential geographies. Like this year, we just introduced Spark in Japan and are all being supported by an increased investment in our education.

And the second piece growing our Spark is increasing utilization through the expansion of our portfolio with new products, with more in our pipeline. As I mentioned earlier, we recently introduced Spark 35, Spark On Demand, BiteSync, Spark Jr. and StageRx, and there's many more introductions that we're planning to support the growth in this category.

We achieved profitability last year for Spark, and we'll continue to drive a Spark towards greater profitability, supported by our efforts of our operations team and the Envista business system. Over the past 12 quarters, we have reduced the cost per aligner by approximately 40%. This progress reflects our team's use of Envista business systems to drive continuous improvement. Our improvement of efforts have focused on further automating our production lines and increasing our case design productivity.

With major production facilities across 3 continents, we have a differentiated model for scale in automation. At a pilot plant in Newark, California headquarters, engineers identify opportunities, test and refine processes and then deploy proven improvements across our global production network. This enables consistent, continuous improvement, and we have an ambitious plan to continue to improve Spark's cost position and service levels. Our roadmap includes further manufacturing automation, expanded case design automation, optimization of our global footprint and additional material cost improvements.

In summary, I am excited about the opportunities that is ahead of us. The orthodontic market is large with a substantial unserved population around the world. Ormco has expanded market and margin position every single year over the past 7 years. And we will continue to be one of Envista's most important profit drivers. We believe we are distinctively positioned to continue to be a market leader serving orthodontists under a differentiated platform designed to address needs of all patients and clinicians.

With Damon, we will lead and will continue to lead the self-ligating appliances, the fastest-growing modality within Brackets & Wires. And with the Spark, we have one of the industry's leading and fastest-growing clear aligner offerings. Both supported by a single leading digital treatment planning offering. While we drive growth, we will continue to have -- we continue to have significant opportunities to improve design and manufacturing efficiency to improve margins. We believe we have a great capabilities, a clear plan and the right team to deliver continued innovation, growth, profitability and operational improvements.

So with that, this -- I will finish my presentation. And now I will hand it over to Filippo. Thank you.

Well, thank you, Veronica, and good morning, everyone. It is great to be here. Let me start with a quick introduction. I've been with the organization for over 2 decades. I was part of the very first acquisition that Danaher made in dental to build a platform that eventually became Envista. And since July, I stepped into a new role leading our consumables organization. And over the last year, we have changed our posture on this business, assuming a more growth-oriented mindset. So over the next few minutes, I would like to talk about the market opportunity, how we win but also why we believe the runway ahead for consumables is meaningful.

Consumables is at the heart of dentistry. Every day, our products support the clinical workflows that keep dental practices moving, preparing for new patient visit, preventing infections, restoring the dentition, helping clinicians deliver consistent outcomes for patients. That everyday relevance is important. These are not occasional procedures. They are recurring treatments that clinicians perform every day, creating a stable and resilient demand fundamentals. On this slide, there are 3 ideas that I would like you to keep in mind. First, demand for everyday dental treatment is steady, demographic trends like aging population, the expansion of the middle class in emerging markets, this trend support demand for routine and preventive procedures. In addition, we continue to see interest in aesthetic and early treatment treatments, and at the same time, infection prevention remains an important aspect in clinical environments.

Second, we are a trusted leader in consumables. Our heritage spans over 135 years with a track record of category defining innovation from the very first in-office furnace solution to manufacture crowns, to the invention of the K-file still used today in endodontic procedures to a series of dental innovation in material science. Today, we hold leading positions in some of the most differentiated consumable segments, positions that are supported by clinical evidence, customer trust and brands that clinicians know well. Metrex adds another important dimension to our leadership, our surface disinfectants are among the most mentioned in dental equipment instructions for use.

Third, we have multiple opportunities to drive sustainable growth in consumables. We see opportunities for additional share gain by delivering a steady cadence of innovation and we see opportunities to expand in underpenetrated segment as well as geographies. What I would like you to take away here is the combination. Stability by itself is attractive, but stability, combined with the differentiated positions in multiple growth levers is what makes this business compelling in the entire Envista portfolio.

With this framework in mind, let's look at the size of the market opportunity. The starting point is the scale of the clinical need. This marks the importance of what we do, but also speaks to the economic opportunity as a leading player in consumables. According to estimates from the World Health Organization that 3.5 billion people suffer from oral diseases. And only 2 billion people see a dentist each year. 2 billion patients create a large recurring base of preventive, restorative endodontic and routine treatments, and yet, we have clear opportunities to treat more patients and expand our patient population over time. In parallel, infection prevention remains a significant need across health care environments.

Today, 1 in 10 patients is affected by a health care-associated infection. And while emerging economies are more affected, mature ones are not excluded. In the U.S. alone, the economic burden of such infection is estimated to be up to $45 billion per year. Together, this these needs support a $10 billion addressable market for dental categories in which we participate in. An important point is not just the size of the market it's where the opportunity sits relative to our current position.

Today, roughly 2/3 of our consumable business is in North America, while more than 60% of the total addressable market is outside of North America. This creates meaningful opportunities and white space for us to expand overseas. It does not mean going after every market, it means being selective about the segment and countries where our brands, clinical evidence and educational models gives us the right to win.

For instance, just last month, we have taken the first steps to relaunch and establish a consumable presence in the fast-growing Indian market. As we look at the total market, our opportunity is twofold: continue building share in the core North American market, while expanding our presence in attractive international markets. Market opportunity matters, obviously, but only if there is a clear business model able to capture it. So let me cover that next.

Our model begins with innovation. We have strong R&D capabilities that allow us to develop differentiated clinical solutions. In restorative and endodontics, that means solution designed to improve performance, predictability of clinical outcomes without compromising on workflow simplicity. In infection prevention, it means formulation that are designed to address pathogens of concerns as well as evolving requirements.

The second element of our winning formula is training and education, a differentiated product has value only when clinicians understand how to use it with confidence and when they can see how it improves their daily work. Our network of key expert, learning platforms, educational tools as well as events help translate product performance into clinical confidence and product adoption. We continue to evolve and expand our offering in training and education from tailored educational programs to larger events like the sold-out Kerr Summit in Lisbon in October.

The third element is about brands and partnerships. Our brands have earned the trust of clinicians. They have established credibility in their respective segments. This, combined to our global network of trained, highly specialized and experienced distribution partners helps us extend our reach in the marketplace. Our partners helps us connect innovation and education with customers. Those 3 capabilities: reinforce one another, innovation, gives our sales organization a stronger product, a stronger story to tell. Education gives clinician confidence in our partnerships allows us to scale our value proposition around the world.

The result is not only commercial, but most importantly, it makes a difference for clinicians and patients. Every year, our restorative solutions helped transform more than 30 million smiles. And every year, our infection prevention solutions contribute to more than 500 million patient visits taking place in a safer environment. These figures makes the model a tangible -- behind each number is a clinician completing a procedure with confidence, a patient receiving care in a workflow supported by products that have earned trust over time.

Not all consumables categories are created equal and all have the same attractiveness. We are positioned where differentiation matters most. On the left of this slide, you can see 2 categories: restorative materials and surface disinfection. These are our 2 largest consumable categories. Together, they represent more than 70% of our business. Adhesive, cements and composite are critical to the clinical outcome and to the longevity of our restorative treatments. Clinicians evaluate these materials based on science, handling predictability and confidence. In the U.S. market, branded product represent more than 95% of the category. Clinicians gravitate towards brands solutions that have learned to incorporate into their workflows.

We have a very strong portfolio of product brands in these categories, in names like OptiBond, Harmonize, Maxcem are among the most trusted and premium solution in this market segment.

In surface disinfection, formulations have unique properties. They are incorporated into clinical protocols, and they are carefully validated through equipment IFUs. Here again, the category is predominantly branded at approximately 90% of the entire U.S. market. Our portfolio includes the dental market's most popular brands in surface disinfection, CaviWipes and CaviCide.

Now compare those categories with others that are more commoditized, as disposable gloves, for instance. Gloves are more price-sensitive, are more prone to switching, private label represents most of the market and Envista does not have a product in this category. This comparison is strategically important. Our portfolio is concentrated in segment where clinical performance and workflow sensitivity influence the purchase decision. One of the ways we sustain our differentiation and our premium positioning is through a consistent cadence of innovation.

This slide shows the breadth of our recent innovation across 4 parts of our portfolio. In infection prevention, CaviWipes and CaviCide HP use hydrogen peroxide technology to enable faster, simpler disinfection. The platform is also positioned for evolving pathogens concerns through its EPA emerging viral pathogen designation. We have launched our HPE formulation in the popular wipe canister format first and gone through the routine EPA and state-by-state approval, which was completed middle of last year. And now we have switched our focus towards expanding the HP portfolio with ready-to-use packaging solutions. HP has been a wonderful addition to our product portfolio formulation, especially in clinical environments dedicated to young and elderly patients.

In April, we launched the Demi Pro curing light. Dental practices spend more than $3 billion a year in dental materials that rely on light curing to be properly set in place. Demi Pro combines leading curing performance with a lighter, more ergonomic experience. It's 360 rotating tip gives maximum freedom, it's transillumination tip expands the application of the light outside of the traditional curing function by providing a simple yet powerful vision aid to identifying areas that need attention.

In April, we have also launched ZenSeal Pro, a product designed to provide durable seal during root canal procedures. ZenSeal Pro provides advanced bioceramic chemistry compatibility with all operation techniques while ensuring elevated levels of pH to help create a favorable environment for the success of the root canal procedure. These premium material properties are combined with a new dispensing tip, which is designed to minimize waste and allow for more root canals treated per syringe compared to similar competitive solutions. ZenSeal Pro expands our endodontic portfolio into a multimillion-dollar segment bioceramic sealers that is mostly new to Kerr, providing good market gain opportunities.

And finally, in magnification loupes, ErgoZoom launched just last September, is among the very first to offer an ergonomic optical system with the convenience of variable magnification. ErgoZoom allow clinicians to work in a more upright posture while adjusting magnification to the task at hand. These are different products in different categories, but the innovation logic is consistent, identifying a meaningful customer problem and create a clinically differentiated solution and launch it with the educational and commercial discipline needed to drive adoption. The customer comments on this slide bring that logic to life. They speak to those practical benefits that our customers enjoy in the everyday use of these products.

EBS is essential to our value creation story in consumables. So let me illustrate that with 3 examples. First, in manufacturing, our challenge was optimizing our manufacturing footprint, improved factory productivity, our team using EBS tools simplified the global manufacturing footprint going from 9 to 6 sites in just 3 years. And streamline the distribution of our products around 3 global distribution centers, greatly simplifying how we work with distributor partners. The second example is in sales and marketing. Our opportunity was to improve targeting, increased win rates and advanced share of wallet.

Again, as several EBS tools have been instrumental in our improvement journey. Our team have improved account targeting, create greater visibility to the sales organization and strengthen training and education tools. The new learning management system, for instance, allows us to provide flexible educational pathways to clinicians and DSO organization using a combination of online and off-line tools.

Third, EBS in innovation. The opportunity at hand was about expanding the funnel of innovation ideas, accelerating the pace of innovation and ultimately increase the commercial impact of our new product launches. Once again, EBS tools have helped improve our launch revenues. And over the last years, we have seen over 30% increase in the revenue impact of innovation. The recent Demi Pro launch is one of the latest examples of EBS in action. Just in the first 3 months since product introduction, the new product was able to triple our share position in this category.

So in summary, let me leave you with 3 conclusions. First, we operate in a large and attractive $10 billion consumables market with stable recurring demand, and we have opportunities to expand our presence in strategic segment as well as key geographies. Second, we hold a leadership position in differentiated segments. This is supported by trusted brands a portfolio with strong clinical evidence and an ever productive innovation engine. Our innovation, combined with our training and education offering and key opinion leader network, allow customers to incorporate our solution in their clinical workflows with confidence. And finally, EBS gives us a repeatable operating system that improves how we innovate, how we manufacture, how we commercialize our solutions. And ultimately, how we support customers and distribution partners.

As I mentioned at the beginning, consumables is at the heart of dentistry, and we are excited about the role that we can play in the Envista portfolio and its value creation story.

And with that, let me introduce you to Robert to talk about diagnostics. Thank you.

Good morning. It's great to be here with all of you. My name is Robert Befidi, and I lead the diagnostics business at Envista. A couple of comments about my background. So over the past 30 years, I've held leadership roles across industrial, diversified health care technology, private equity and consulting organizations. My academic background spans software engineering, finance, marketing and operations management. I joined Envista in late 2023, and have been focused on advancing a diagnostics portfolio and growth strategy.

Diagnostics is the equipment business of Envista. It's a global leader in dental imaging and diagnostics. In the coming 15 to 20 minutes, I will make 3 points. First, we participate in an attractive category. Second, we offer one of the industry's most comprehensive imaging and diagnostic portfolios. And third, with more than 70 years in the business, we have built a large installed base that we are converting into a durable ecosystem advantage across hardware, AI-powered software, clinical workflows and services.

Let me start with the business at a glance. There are 3 ideas on this slide and to frame the rest of our presentation. First, digital industry adoption is driving growth. So Imaging and Diagnostics is a $3.5 billion category with growth coming from areas where we are strongest, namely increased adoption of digital imaging equipment, software and services. Critically, the marketplace is moving towards integrated solutions where our connected ecosystem gives us a competitive advantage.

Second, DEXIS is a leader in units in service and in innovation. We hold the #1 share position in dental imaging in North America. Globally, we have more than 450,000 devices and workstations in service across more than 50,000 dental offices in 128 countries. DTX Studio Clinic, our software that integrates all modalities of dental imaging is a leader in AI assisted diagnosis, treatment planning, collaboration and patient communication.

Third, we have a clear plan for profitable growth. Our differentiated solutions are built for diagnostic confidence, productivity and simplicity in the clinic. In diagnostics, like in all Envista businesses, EBS continues to be the engine underneath both growth, margin expansion and fundamentally our culture.

Let me take those points in order, beginning with the category. The diagnostics category has 3 primary segments: 2D and 3D imaging, about $1.5 billion. This segment has been flat. Intraoral scanners about $1 billion, growing low single digit and software and services about $1 billion, growing high single digits. We actively participate in all 3 segments.

Now let me show you how our portfolio and execution are translating into performance. This chart shows the performance journey of the Diagnostics business. Revenues declined in 2023 and 2024, driven largely by portfolio and geography exits as well as post-COVID market normalization. The imaging market began to recover in the second half of 2025, and that recovery has continued into 2026.

At the same time, we started to turn the business around and returned to growth in late 2025 and in the first half of 2026, core growth has averaged double digit. Those gains were driven by innovation across the portfolio, stronger operational and commercial execution, growth in software and services and disciplined price positioning. The key message is that we move from decline to stabilization and then to grow with both market recovery and our own execution contributing to the improvement.

With that performance context, let me describe the composition of the business. Our business is concentrated in attractive parts of the market and benefits from the broad route to customers. By geography, 75% of our business is in North America. By solution, hardware represents 73% of revenue, while software and services represent 27%. Our strategy is to increase the recurring revenue contribution from software and services while sustaining leadership in hardware.

By channel, 77% of our revenue flows through distribution, 23% is direct. We work very well with distribution and have long-lasting partnerships globally as they provide reach, local expertise, service coverage across thousands of practices. Our direct business is mostly software and services. Our portfolio is an integrated and connected ecosystem that supports dental imaging and diagnostic modality, whether it be 2D X-ray, 3D X-ray, intraoral scans or intraoral pictures or generally pictures of patients. We go to market primarily through the DEXIS brand, with i-CAT, an iconic CBCT brand, and DTX Studio, a hardware agnostic software platform. The scale of that ecosystem is one of our most important advantages.

Let's talk about our impact on dentistry. DEXIS powers modern dentistry at scale. And this slide shows the reach of our platform. Each year, clinicians use that technology in more than 150 million patient cases, capture more than 0.5 billion images, transfer data to more than 100 practice management systems and seamlessly connect to roughly 10,000 labs. We also made a deliberate choice to remain open. Our software can read images from third-party imaging systems allowing clinicians to bring more of their diagnostic information into one workflow.

2 numbers deserve particular attention. First, our AI capabilities help clinicians detect more than 100 million -- 180 million 2D and 3D AI diagnostics annually; and second, our platform supports tens of millions of specialty procedures each year. Our implant planning software help plan more than 3 million implants last year alone.

To understand why this footprint matters, consider where DEXIS sits in the clinical workflow. Paul mentioned the 3 steps of each clinical procedure, whether a simple restoration or complex full arch reconstruction, they all followed same 3 steps, generally speaking, scan, plan and treat. Scan is capture and diagnosis. We bring CBCT, intraoral scanning and 2D X-ray in one suite, enhanced by 2D and 3D AI diagnostics MagicAssist automated case setup and smart focus tooth level navigation across our modalities. Plan is AI-assisted treatment planning. We support automated implant planning endodontic diagnostics, orthodontic planning with Spark and collaboration with labs, clinicians and patients as well as workflow integration for prosthetic production, whether it is milling or 3D printing, chairside or with lab partners. We also, in this step, provide case presentation, patient communication tools to assist clinicians with case acceptance.

Treat is clinical execution. We provide the diagnostic information and workflow connections clinicians use to execute the treatment plan. DEXIS is the leader in scan and plan the first 2 steps. That position is upstream of everything else. Everything starts with diagnostics. Our systems capture data and are used before treatment decisions get made. That means every downstream vendor, whether for restoration, an implant, an aligner or a lab consumes output from DEXIS. Other Envista businesses are leaders in Treat, the third step.

Here is the operating playbook that we use to extend that advantage. Our operating thesis is straightforward: deliver differentiated diagnostic solutions to diagnostic confidence, productivity and simplicity. Those are the outcomes our customers value so they are how we organize the business. On growth, we're building the best-in-class imaging and diagnostics ecosystem for clinicians and patients, building strength on strength through a robust hardware new product cadence, supported by training and education, services, software and lasting partnerships.

On operational excellence, we are modernizing processes to create productivity and operating leverage. This includes margin expansion through efficiency and automation, manufacturing and supply chain footprint actions, including insourcing and agentic AI across sales, customer experience and support. And on people, we are accelerating the mindset and capability required for an AI adapted work environment. That means global talent development and deeper capabilities in EBS, process automation and generative AI.

Now let me show the architecture that connects our priorities. I want to be precise about how this ecosystem is built because its architecture is a core competitive advantage. Imaging Hardware is the foundation. Every order capability in the ecosystem, including image visualization, AI diagnostics, clinical workflow, treatment planning, training and support depends on high fidelity images across 2D X-ray, 3D X-ray and itraoral scanning. That dependency runs in one direction. You can build software on excellent images. You cannot build trustworthy AI on unreliable ones. More than 70 years of imaging leadership, more than 450,000 deployed devices and workstation and integrated modalities give us the foundation to turn our ecosystem into a durable advantage.

We continue to strengthen that foundation through a robust cadence of innovation. Over the past 4 years, looking across to reinforcing layers, driving diagnostic hardware and the AI powered solutions that run on it. Here are the things that we've done. On diagnostic hardware, we have advanced every imaging modality. That includes Imprevo, our new itraoral scanner, Ti2, our new 2D X-ray sensor, the OP 3D EX, our new CBCT with automated x-ray dose control. And coming later this month, CBCT Motion Correction across all our OP 3D CBCT models and the NOMAD Pro 3, our handheld to the X-ray generator. On AI-powered software, we have introduced DEXassist for 2D AI diagnostics, 3D AI-driven surgical guide design, Scanflow 2.0 with GPU support, the DTX Studio Clinic implant module, and this year, DTX Studio Clinic 4.7 with 14 2D AI diagnostic detections. And in the coming months, we will launch DTX Studio Clinic Endo Module, DEXIS Cloud 2D imaging and IOS cloud.

Noticed the 2 rows moved together. Every hardware release opens capabilities that the software complements offering an unparalleled platform for imaging and diagnostics in dentistry. This innovation has also been recognized externally, including Cellerant, Best of Class, Dental Townie Awards from 2023 to 2025. And most recently, in 2025, most improved IOS and People's Choice Award.

Let me go deeper on how hardware and AI come together to create diagnostic confidence. The organizing concept is the DEXIS digital patient model. High clinical fidelity 2D X-ray, 3D X-ray itraoral scan data combined with intelligent software and AI in one model of the patient to support downstream clinical decisions. We talked about the criticality of our hardware image quality across all modalities. Our latest hardware breakthrough innovations include the OP3D LX and EX for next-generation 3D imaging. Imprevo for GPU-powered intraoral scanning and the NOMAD Pro 3 for improved handheld 2D image quality with an unwavering focus on clinician safety. This product has 10x less rear-directed radiation leakage than the leading competitor, unique to our offering on top of that hardware foundation, FDA-cleared 2D and 3D AI diagnostics are built directly into the platform.

Our solution does full-mouth AI detection of an entire X-ray series in less than 5 seconds. That is industry-leading in workflow efficiency with about 18 images processed in less than 5 seconds. We automatically detect 14 FDA-cleared dental findings on every intraoral radiograph enabling clinicians to review cases quickly. We do one click perio analysis that measures bone high levels and compared to previous exams. And finally, with 2D AI, we do tooth segmentation that allows clinicians to present cases in color, turning clinical terms into visuals that help patients understand why they should act now. For example, showing how carriers progress from enamel to dentin and to pulp.

With 3D AI, we segment various landmarks on the CBCT volume, including the upper and lower jaw, teeth, airway and nerve canal. AI also automatically to traces pan curves from 3D volumes. This AI capability enable clinicians to automate previously manual cases, particularly the setup steps and quickly moved into chairside treatment planning. Ultimately, we have a comprehensive imaging and diagnostics platform that integrates all modalities of imaging into one DEXIS digital patient model with AI running across all of it. When we apply that intelligence to complex treatment planning, we have the following example of workflows.

At DEXIS, we believe we have the most comprehensive suite of clinical AI in dentistry. On the left is our AI-powered implant workflow. MagicAssist automates CBCT setup. SmartFusion aligned CBCT and intraoral scans, clinicians can virtually extract teeth and generate a surgical guide, then place the implant in one click. From an extensive virtual library of implants and abutment libraries, they can connect the treatment plan to 3D printing, robotic surgery and labs, scan to plan for implants in under 3 minutes versus more than 90 minutes using traditional methods. This is a massive productivity gain for specialists and generalists alike.

On the right and new this year, we have AI-powered endodontic workflow in DTX Clinic Studio. It combines advanced 3D visualization and AI-assisted canal mapping with trajectory and length calculation in a single click. Endodontics is the highest variability procedure in dentistry, and we're taking the guesswork out of it. These practical examples of AI embedded in the clinical workflow, turning high quality data diagnostics into faster and more confident treatment planning.

Let's talk about EBS, and let me connect the strategy to the operating system that helps us execute. EBS is how we run that business. This is our return strategy into results. I'll walk through a couple of examples in R&D, operations and commercial execution. In R&D, EBS is helping us build better products faster, fewer parts, more efficient manufacturing and stronger quality outcomes from day 1. We've had a 25% improvement in new product interaction, velocity and cycle time improvements of more than 75%. In operations, EBS is helping us eliminate waste, standardizing processes and creating more value for customers. We have had more than a 19% improvement in global factory productivity. And year-to-date, improve working capital turns in the Envista management system.

Commercial execution, EBS drives disciplined execution, stronger customer engagement and market share gains. Ultimately, it starts with our people, and it's the way we work, creating a network that scales continuous improvement across the business and compounds year-over-year.

In closing, 3 things to take away. First, the category; second, our position; and third, our strategy. The category, a $3.5 billion category, growing low to mid-single digit through the cycle with service and software outpacing hardware and customers increasingly wanting fewer vendors and integrated workflow. That consolidation favors incumbents who have scale, and that is us. We hold the #1 share in dental imaging in North America. Globally, we have more than 450,000 devices in our workstations across more than 50,000 clinics in 128 countries. And we have the leading 2D and 3D AI diagnostics and treatment planning software in use globally.

Third, our strategy. We will continue hardware innovation across every modality. Capture recurring revenue from the installed base with services and subscription and scale AI-powered software on the cloud. We have the installed base, the innovation, the plan to capture profitable growth. And rather than take my word for it, I would like you to hear from a clinician. So Dr. Gillespie is a key opinion leader that works with us. He owns Gillespie Dentistry, and he runs the DEXIS ecosystem in his practice every day.

Let's roll the video.

[Presentation]

Thank you for your time. Now let me hand it over to Eric, who will walk through our financial performance and opportunities.

It's great to get out of the front row seat of the movie theater. So Robert, let me just say thank you. It's wonderful to see the value that our DEXIS business is generating for customers and also about the integration of comprehensive digital solutions across all of Envista. I hope you all see that. Good morning, everyone. I'll take a moment to wrap this up, take us through the financial portion of our day which will mostly be a continuation of the journey that we've been on for the last few years. In short, I think what you'll see is we continue to turn our recent investments into strong business performance, but always with an opportunity to go further, as you heard earlier from Paul.

So let's just start with a quick look back at the foundation that we've built over the last few years. As you all well know, our first capital allocation priority is organic growth. That's given the strong margins across our portfolio. And over the last 2 years, we've fed that growth engine in several different ways by investing at R&D levels with double-digit growth, coupled with high single-digit increases in commercial front end, while elevating our manufacturing capability and regional self-sufficiency through strong double-digit growth in CapEx.

As a result of all of this, our core growth has performed at or above market, while building momentum for a sustainable future growth, as you heard earlier from Paul. All of these investments, importantly were enabled in large part by the space and productivity that we delivered within our business. That's thanks to things like manufacturing automation, G&A efficiencies and most recently, pricing execution.

Our overall financial performance over the last few years has been equally strong. we've been able to deliver consistently at or above our guidance expectations. But importantly, we've been able to drive profit growth and earnings growth above the rate of sales growth. All in, based on our 2026 guide, our adjusted EBITDA is projected to improve approximately 40% over the last 2 years, with EPS growing even faster and our cash position remains flexible and strong at over $1.1 billion. As you've also seen, we've strengthened our balance sheet and begun to deploy capital more effectively and actively. Our net leverage ratio reflects the health of our operations. We've rebuilt our M&A pipeline, and we've recently deployed capital towards a few smaller but important acquisitions in the implant space that's helped Stefan's business to improve its geographic reach and also accelerate its growth.

And lastly, we've added a third leg to our capital allocation strategy over the past few years and returned over $280 million of cash to shareholders over just the last 6 quarters through our share repurchase program. If you put it all together, we've invested in the business. We've delivered on our growth agenda, and we're positioned well for the future. When we introduced our medium-term outlook in March of last year, we emphasized a couple of points within the overall financial framework. First was the assumption of a modestly growing dental market. The second was that we estimated our ability to outgrow the market given the strength of our portfolio and the targeted reinvestments that we made in 2024 and early 2025. We also reinforced a very important point, which was the shift in our financial strategy, putting more emphasis on growing profit dollars and growing earnings per share dollars.

And lastly, we elevated free cash flow conversion to a primary metric that was simply to reflect the increased focus that we wanted to put into translating profits into cash which we see as only strengthening our balance sheet and our capital allocation playbook going forward. Since then, we've consistently performed, exceeded initial medium-term expectations. And more specifically, as you can see on the bottom of the slide, core growth was strong in 2025 at 6.5% growth. And this year, our guidance around the top end of our medium-term range at 3.5% to 4.5% growth. EBITDA growth has also overperformed with strong double-digit growth in 2025 and estimated for 2026, while continuing to invest for the future.

Earnings growth has been very strong double-digit growth each year, backed by the structural improvement in our tax rate and as mentioned, the most recently repurchased authorization. And free cash flow conversion has also helped us build an even stronger cash position for Envista. Again, if you add it all up, the business is performing better, the quality of execution through EBS is improving and we have a stronger base from which to work from going forward. Given the progress that we've made, and as you heard earlier today from Paul, we're updating our medium-term outlook. We now expect core growth of 2% to 5%, adjusted EBITDA growth of 5% to 8%, adjusted EPS growth of 7% to 11% and free cash flow conversion of approximately 100%. Important that our financial outlook reflects both the work that we've already completed, but the opportunities that were outlined today, and then I'll talk about further that are still ahead of us.

But we see it also as grounded in the factors that we can directly influence, namely continued investment in innovation, disciplined commercial execution, continued rigor within our operations via EBS investment in the people strategies that Paul and each of the businesses laid out and active capital deployment.

Overall, the Envista team and our EBS engine can create an attractive return for shareholders while building on a sustainable future. Let me now take a couple of minutes to talk through each of the primary financial metrics, where I'll give you a view of the insight that got us to where we are. and of course, what can continue to move the business forward. Throughout the morning, I think you've gotten a good, strong sense for our core growth momentum and importantly, how each of our businesses will continue to outgrow their markets, which translates to our outlook of 2% to 5%.

We're operating in a stable and resilient dental market that we continue to believe will return to its long-term growth rate over time. But in the meantime, as mentioned, we're focused on the pieces that we can control and delivering results through our growth initiatives. As you heard today, our R&D commercial investments are collectively aimed at reaching our customers globally, while providing solutions that simplify dental procedures and enhance workflows, delivering clinically backed outcomes and, most importantly, improving lives. The recent launch of new products from Envista is a strong testament to our innovation and growth strategy. You saw compelling examples today from each of our business leaders, which will transform the markets across their categories.

Our implant brands via SmileGrid, which you'll have a moment to see or to see in a moment, aims to digitize and simplify case collaboration. Ormco is focused on delivering one orthodontic platform for the best treatment solution in the market. Consumables is focused on clinical performance, and enduring brands. And DEXIS continues to create collaborative solutions to simplify digital dentistry. Pricing also continues to be an EBS priority for us and a durable contributor to growth which I'll talk about in just a moment. Before we go into our price execution, let's just take a step back for a moment and take an outside look at inflation, pricing within the marketplace.

The chart here reflects the 25-year trend of 2 publicly available sets of data, CPI and dental service inflation. There's 3 important takeaways from this chart. The first is the dental procedure prices over time outpaced CPI. The second is that you can clearly see that COVID injected a period of uncertainty or disruption, where this longer-term trend didn't hold up.

But most importantly and notably, the longer-term trend has returned in recent quarters. We expect not only will the long-term trend continue forward, but that our pricing strategies will be similar, where pricing offsets or even outstrips our net rate of inflation, even though historically, those product price increases have been below our customers' procedure price increases. If you take a look at our business, and Paul mentioned it earlier, our focus on pricing is a great example of stronger operating discipline translates into natural performance.

Over the last 3 years, Envista's delivered approximately $100 million of price realization. That change in trajectory required a change in our approach, which started in 2024, better analytics, tighter coordination between our finance teams and our commercial teams and as noted earlier, improved accountability. Important to note that we don't view pricing as just a onetime macro inflation response. We view it as a core commercial capability in each of our businesses.

We have brands with strong clinical credibility, innovation and differentiated value propositions that improve outcomes and practice productivity which gives us the ability to have price power within the marketplace. Additional focus and discipline in pricing can also be a durable contributor to our annual growth. That's exactly the kind of repeatable capability-based improvement that we want investors to see enabled by our EBS engine.

Turning to adjusted EBITDA growth. We expect 5% to 8% annual growth over the medium term. Our core growth is an important starting point due to the strength of our strong gross margins, but importantly, we're not dependent on volume leverage, but we want to continue to leverage productivity in the next few years as we have in the past few years. We expect EBS to continue to support operational initiatives like factory productivity, line automation, procurement and G&A efficiency. You saw examples from each of our businesses as to what they've been doing in the past and still opportunities going forward in each of these areas. And as Paul outlined earlier in his presentation, we've progressed over the past few years in each of these areas, but at differing speeds, right? Some with the full circle, some sort of partial implying that we have more to go.

Manufacturing automation in Spark as well as G&A efficiencies were 2 great examples over the past few years that drove significant value. It enabled us to invest in growth, but importantly, we have many opportunities that remain to improve on this base, replicating good examples in one place is in other areas of the company while making sure that we continue to add new capability. Procurement is one of the most recent tangible examples of where we've delivered recently and where further opportunities exist. During the second half of 2025, we completed an assessment across our global direct and indirect procurement spend, which represents nearly $1 billion in addressable annual spend.

In 2026 alone, we'll generate $10 million of savings with a pipeline of opportunities ahead. We've also strengthened our procurement leadership and organizational model, including improved coordination globally across all of our indirect categories, and also targeted strategies for several of our direct categories. We'll continue to strengthen our capabilities over the next few years and leverage procurement teams to help fund the business growth but also drive profit improvement. In March of last year, we elevated EPS as a primary financial metric. That change helped us to better align and prioritize our efforts internally but also to drive a broader set of shareholder value creation levers. We now expect medium-term adjusted EPS growth of 7% to 11%. Beyond growing our profits, we focused the last 2 years on additional levers for value creation.

The first and where it started was creating a more efficient access to our international cash. That improvement enabled us 2 other significant benefits. The first was optimization of our interest income, and the second was the addition of our share repurchase program, where we deployed over $280 million of cash to shareholders in the last several quarters. The last area, which I'll talk about in a moment is our tax rate. All of these efforts have been a great example of a single financial strategy coming together collectively, helping to deliver earnings leverage but importantly, supporting our capital allocation plan. Please also note that our EPS outlook does contain capital deployment aligned with our capital allocation priorities to offset likely headwinds from increased net interest expense from likely refresh of our debt stack, which I'll cover in just a moment.

On the tax front, we've delivered a significant improvement recently. Over the past 2 years, our tax rate was reduced by roughly 13 points driven by improved U.S. earnings and strategic tax planning. We've also worked through prior structural and legal entity constraints, including the legacy intercompany loans that we've talked about several times. Looking forward there are opportunities that we have, which can be unlocked through legal entity simplification and geographic mix. Our tax and treasury organizations are also working very closely together to deliver a more efficient flow of global cash, which is aimed at enhancing returns from our capital deployment plans. Our debt strategy also supports our longer-term capital allocation plan. Our current capital structure includes a mix of convertible debt, term loans and revolving credit. And while it has been interest rate efficient, it's also relatively short term in nature.

As we consider the debt structure, our objectives moving forward are straightforward: length and duration, diversify our instruments, stagger our maturities and most importantly, preserve efficient access to capital for our capital allocation priorities. At a similar level of gross debt, we're likely to see higher interest expense, net interest expense which will create some EPS headwinds to our organic plan. This includes or is included in our outlook ranges, but the strength of our balance sheet and improved debt structure will also benefit longer-term capital allocation and the value that results from that. Free cash flow conversion is another primary metric that we elevated in our March 2025 Capital Markets Day, as it's foundational to our long-term value creation plan. We continue to expect approximately 100% free cash flow conversion over the medium term. There are several reasons for both strong cash generation and conversion at Envista.

The first is that our capital expenditure model is efficient, and we're very disciplined about prioritizing high-returning investments. You've seen this play out in the last couple of years relative to our investment in smart automation, manifesting in both growth and margin opportunity. Second, as we invest in manufacturing footprint optimization, those investments are largely aimed at improving growth, improving cost, improving quality, which all helped generate strong profits and again, efficient conversion for Envista. And working capital also remains a core strength. Envista has historically operated with strong working capital turns and EBS gives us the process to keep improving and working on our velocities. When you combine our cash position, annual free cash flow generation and attractive leverage, Envista is positioned with capital deployment flexibility, which can create additional shareholder value.

Our priorities for capital deployment remain very much the same. First, investing organically in the business; second, leveraging M&A to expand geographically and to strengthen our portfolio and lastly, to return cash to shareholders. We hope that you agree that Envista is well positioned for continued success. So with that, that wraps up the morning and the planned presentation of our day.

We'll now take about 10 minutes to set up on stage here where we'll prepare for about an hour of Q&A. And for those of you that are in the room, there's refreshments outside, if you be back within 10 minutes, that would be fantastic. Thank you.

[Break]

All right. We're going to get going with Q&A here. So we have our presenters and speakers upfront, and we will take questions from in the room. So Elizabeth, we'll start there.

I guess this guidance range change seems at least in line with our expectations and what makes sense for the business. If we think about your performance obviously done much better than your previous long-term guide. So if we think about the upside potential drivers to this guidance or potentially some areas of weakness on the downside, what would you call out as the biggest upside potential drivers there?

All right. Well, Bob, thanks for kicking us off, Elizabeth. I tell you what, why don't I cover the first 2 metrics, so I'll do core growth and EBITDA growth, and then Eric, I'll ask you to do EPS and free cash flow. So core growth, again, the heightened outlook moving forward is 2% to 5%. As you saw in the presentation sort of our proven process capability has been around 3% to 4% so right in the center of the range. For us, around $30 million of incremental revenue is a point of growth. So across this morning's presentation presentations, you've seen multiple examples of initiatives that are underway that could get you $30 million of incremental growth. either as an individual initiative or certainly collectively.

But I'd probably categorize them into 3 groups. So the first big emphasis on new products. Many of us kind of grew up in a new product culture. And when we came to Envista, we instilled that increased investment and it's starting to pay off. several of those programs that the presidents talked about are of that magnitude, $30 million-ish type new products or better. Second category I would talk about is specific either product categories, geographic categories or customer categories that are growing faster than the overall market. And where we're still under-indexed. So the best product example of those, you heard from Stefan and Robert, we'd like to be bigger in challenger implants, grows a little more quickly than premium. And we're a strong market leader in diagnostic hardware.

The diagnostic software category is small right now, but very fast-growing and we're very well positioned to succeed in that. So those are 2 product categories where we could grow even more quickly. Geographically, developing markets, of course, grow more quickly than developed markets. We have very strong positions in 2 of the bigger developing market. We're strong in Russia, strong in China, as we've talked about. We'd like to be even stronger in markets like India or Brazil. And then on the customer front, the obvious one there is DSOs. We know in most big dental market DSOs grow more quickly than the overall category. We're strong, but we could be even stronger in DSOs.

So let's see that covers the core growth piece. Let's go on to EBITDA. For us, we moved that whole range up from 4% to 7% to 5% to 8%. Over the past 2 years, we had very strong EBITDA growth, much more than vice as fast as the top line growth that helped get that extra profitability. We also did very well on the G&A front. We took about $35 million out of G&A. Moving forward, as you saw in the presentations, we have a particular focus on COGS. We've started to bend the curve on COGS after several years of gross margin compression. We've now had 2 great quarters of gross margin expansion. And we have very explicit programs underway, procurement footprint, factory automation to claw back some of that position in -- on the COGS line.

The third I would talk about, and you'll probably counterintuitive for dental is, I would say macro is another potential accelerant to the top end of that range. And what I mean by that is on the pricing front. So Eric has showed very good data over time, dental inflation outrun CPI by about 1 point over the last couple of quarters, it's been even greater than that. if that inflationary delta between dental and CPI persisted, that, of course, would be helpful to us. So that takes you through the growth and the EBITDA front.

In terms of what could tip us to the low end of that range, I guess I'd go back to macro again. Four main indicators describe most of what happens in underlying dental. You guys know them well, GDP growth, unemployment, consumer confidence and interest rates. In the back half of '24, all 4 of those were headed in the right direction. Then beginning in '25, one of them turned yellow-ish red. That was consumer confidence and now a second one is flashing yellow, that being interest rates. So were those to get worse or if either of the remaining 2 were to start flashing yellow that, of course, wouldn't be helpful for the dental market would be helpful for us either.

Do you want to talk about EPS and cash flow?

Yes, it would be great. So let me just start with EPS. Maybe the place to start would be just reinforcing what I mentioned in the preread remarks and what's effectively in our earnings outlook. So I won't repeat the adjusted EBITDA growth. You see that clearly from the range, and you heard from Paul on the sort of the variability, the 5% to 8%. In our earnings per share growth, we're assuming things. We're assuming a continued reduction of our tax rate. Obviously, a lot has happened in the last few years. Some of that is more structural. But we still have improvement opportunity to get back to or slightly below our, call it, long term or early years as we spun out of the company tax rate which is like mid- to lower 20%. So that's sort of baked in. We have ideas around that. I mentioned geographic mix as well as just some structural things that we can continue to do in tax planning.

We're assuming that we're deploying capital towards share repurchases, dependent on other capital allocation priorities at roughly 1/3 of annual free cash flow. So that's sort of the base assumption that we have within our model. I think really the biggest opportunity as we think about more of the top end of the range is capital deployment. You saw it feathered quite a bit throughout the day to day. We've done a lot to position ourselves well, whether it's our cash balance, whether it's what we're looking at in terms of a potential future debt structure, but also where all of our global cash sits. And you guys all know for a good earnings generating company, for a good 100% free cash flow conversion company with a good starting point, we have a lot of opportunities, whether it's organic, inorganic or maybe a share repurchase program extension that we can do more there. M&A is probably the #1 lever, I would say, can be a differentiator to the plan.

Our plan is largely an organic plan, as you would expect. And I think we have a good position to be able to lever up on that. Free cash flow, just in terms of variability, I'd say it's less interesting, right? For starters, we just want to always reinforce internally and externally that we have a very efficient capital model today. There's a few things we have as opportunities. As I mentioned on the procurement side, we're also leaning in hard on the term side of procurement. That's what good companies do. We run today around 55 days. We know we can make improvements there. And there's a lot of simple, innovative ways for suppliers to also access more efficient rate models that we have not deployed to date. So that's a good example of an opportunity in working capital.

I would just say on the automation front, that may be more on the low side, if you want to call it that or the moderate side of free cash conversion the more opportunities we see in automation to replicate opportunities like we've accessed in Spark. That's probably going to be a little bit more CapEx than what runs in our historic model. but we can still generate around 100% free cash flow conversion with that.

And then there's one last piece I'll just mention, which I think everybody here probably understands and that's that the more we grow our Spark business, the more we have a sustained, solid above 100% capability for free cash conversion. That's because we revenue recognize over a period of time. we bill upfront, we collect upfront. So it's a natural benefit, if you will, to our free cash conversion. That's just one other reason among many that we want to continue to grow well in our Spark platform and business.

Great. Steve, and if you can identify yourself and your company affiliation.

It's Steven Valiquette from Mizuho Securities. Just a quick question really on the market sizes in the slide deck. If you compare today's slide deck to the March '25 slide deck from 18 months ago, the dental implant market size of $12 billion was unchanged, orthodontic market size was unchanged at $7 billion, consumables went from -- increased from $8 billion to $10 billion, diagnostics from $3.2 billion to $3.5 billion. So really the question is, can you just provide us with a quick headline summary to reinforce the drivers of the increase in the consumables and diagnostics market sizes? And then is there anything to read into the lack of increase in the faster-growing implant nor the market sizes in the slides? Or am I just overthinking it?

Why don't I take why ortho and implants didn't increase, and I'll ask Filippo and Robert talk about their specific segments. You get better data on ortho and implants and you triangulate across all the available data. It says the same numbers. Consumables is more fragmented and diagnostics is smaller. So not as much data availability, but you guys know the markets better.

Yes. I can comment on consumables specifically. As I mentioned, our point of view, we have a strong position in North America. We know that market very well. We have opportunity internationally over a recent period, we have done more research around consumable business globally. And we think that $10 billion is a good actually assessment of the total market opportunity around categories where we play in. So I think it's linked specifically to our renewed focus as well around the category.

Robert, diagnostics?

On Diagnostics, the expansion on software and services is the biggest driver a lot more software value we generated in the industry today than there was been 2 years ago.

Jeff, you want to pick up here?

Thanks for all the information today. So 2 questions, if I could. Paul, I wanted to pull on 2 strings maybe of things you said in your answer to Elizabeth's question. First, just on the EBITDA side, maybe this is a question, I guess, for Eric. Margins fell from 18%. I think a few years ago, you had been trending in kind of that upper teens to 12% you've improved EBITDA, 40% here off those 12% troughs. But As I think about kind of the arc of Envista, the arc of maybe one of your bigger competitors, there seems like there's always a cycling from upper teens EBITDA down to low double-digit EBITDA margins, you're on a path on the way back up, which is good. But how do we think about instead of over the medium range longer term, what's the right EBITDA margin for a well-run dental manufacturer. Can it be upper teens again? Does that mean you cut back on too much? But you're 14% now, how do we think about maybe the next 5 years?

I get the frame and then you can give the details. So March '25, our first Capital Markets event, we moved away from guiding EBITDA margin to guiding EBITDA growth. We did that very intentionally for 2 reasons. One, we think it's EBITDA growth that creates value, not a percentage. The second is we had seen when we came into the business that decisions were made that in support of a percentage that we thought were not supportive of total value creation. So that would be point number one. Point number two is, I mean, you guys run the math if you grow the top line at 2% to 5%, take the middle of that, you grow EBITDA, 5% to 8% take the midpoint of that, you get about 50 basis points of margin expansion year. So whatever you want to call medium term, you can just run that math out.

Yes. No, I think that's right. Maybe 2 points I would mix Jeff. One would be -- there's never an end point, right? But if your question is more about an endpoint, yes, high teens is the way that we think about the healthy landing place over time for our business. I think the important point relative to the profit growth piece I like to think about the bridges that we've shown in the last 2 years. For me, that's like -- that's how we look at running the business, right? So we estimate what our growth can be. We look hard at our productivity we consider how all of that can impact the bottom line and then we're just consistently making decisions on how much we can invest in the business to continue to try to consistently improved the profile of the business, right?

Our bridges in the last 2 years have shown sort of that same propensity, right, getting volume growth, having that be part of our margin expansion story getting price. Sometimes it's offsetting inflation, sometimes it's pure margin expansion, investing in the business, having underlying productivity, net productivity offsetting inflation, right? But we are consistently looking at that formula, right? What investments do we have to be able to make? How do we continue to grow profit dollars. We're also very conscientious of the fact that the margin rate of any company is a signal of the health of the company, a signal of its kind of growth potential, pricing power, innovation in the marketplace.

Fair enough. A follow-up question. Paul, I'm not sure for you or Robert, maybe -- how big can maybe a services get as a percentage of Diagnostics revenue over time? How much of that today is subscription-based versus maybe an on-prem single sale? How competitive are you guys to some of the stand-alones out there, the over jets, the pearls, things like that? And maybe -- yes, do we get to a point where you can connect all of that to then the insurers, the insurers can kick back and chairside. You can talk about a patient we know that these 3 things would be reimbursed today. Here's what your co-pay would be, let's structure organize or prioritize this procedure over this one because of your co-pays or something? I mean that to me is where AI could really drive an increase in utilization of dental over time. How close are we to get into all of that?

Yes. Maybe I'll give the Envista view and then you drill in just the diagnostic and the workflow piece of that. I mean, of course, AI software is helpful to across the spectrum. So it's very interesting to us just as a stand-alone product, what you're asking about. Robert will go more deeply into what we're doing in that regard. AI software is very interesting to us in how we improve the efficiencies of both our manufacturing as well as running the business. And you've seen it -- you heard a couple of examples of that. Probably most visible is the AI software we use to drive efficiency in the design stage of making clear aligners.

And then the third piece of that puzzle, of course, is we use software to help drive appliance sales. So an easier user interface from an IOS makes an easier job for Veronica to provide clear aligners for that example. You saw Robert talked about the software he's developing for AI-driven treatment planning. That's very good for Stefan's business. So another example, AI treatment planning for Endo very good for the product that Filippo provide. So AI software is interesting for us across the enterprise. But yes, there is a specific piece of that in Robert's world, that is also quite interesting.

Yes. So with respect to what mix is going to look like. So I think in the preferred materials, we talked about 23% of revenue coming from Software Services, I think disclosures beyond that, I'd refer you back to Jim for those conversations. But strategically, right, there are a couple of things to consider. A number of companies who play in AI and dentistry are looking at both administrative tasks as well as clinical tasks. We are very focused on diagnostics, which is predominantly clinical. And so we're not looking to build RCM, which is where you're going with the thing, right? But if you consider our footprint and our installed base, and you can see there our share of hardware that happens in -- that happens to be used in practices. There are 2 places where all treatments start, either start a PMS or sat on a device, and we lead the device category. And so we anticipate that as we scale our tools off the desktop on-prem version to cloud versions, we will convert the majority of those customers to what that's going to look like going forward. on the back of our hardware installed base and our existing software on-prem base. And that's going to play out over the next, call it, 36 months or so, right? The replacement cycle is not as rapid with dentists, but we're excited about it. But an very clinical.

Jon, and then Mike.

Great. Jon Block with Stifel. Maybe Paul, for you, the first one, what are the assumptions behind the LRP regarding the market growth. I think you used to sort of say stable with green shoots. I did hear Eric in one of his slides, say resilient. So maybe if you can get a little bit more granular what LRP assumes and then in the near term, have you seen any change of late? And then I'll just ask the follow-up.

Yes, that would be 2 good questions. First, our guidance doesn't assume any market help to deliver those rigs. We think those are within our control consistent with Elizabeth's question, the macro could be both friend or headwind here, depending upon what plays out. The second part of your question was around...

Just in the near term, if you've seen any change in the rate of growth of the market.

I mean, the first couple of earnings calls when Eric, and I joined, we said that the market was slow. And then we moved into the phrase we use slow but stable. In the last 2 earnings calls, we said stable with green shoots. And so yes, we believe it is getting better. I would point to a couple of things in evidence of that. So the first most visible is the diagnostic category. As Robert showed, that category was in compression for 2-plus years. It's now growing. That clearly is improvement for overall dental.

Second thing I'd point you to is the data that I showed, you can get great data for total dental expenditure. You can get it very easily in the U.S. Other big markets, you can get it. You can compare it to the overall economy. And once again, dental is outgrowing the overall economy. I think that's another clear green shoot. And then the third relates to dental again being able to capture price in a predictable way. I really liked Eric's data. Because of that air pocket after COVID, people thought that dental wasn't a category, was thought of it as a category that was price elastic. It's just not statistically the case. I mean you can pull a 25-year data set. You see it's typically not a very price elastic category.

The way it plays out is procedure prices go up at about that 3%. And looking back, most manufacturers have priced below that 3%, which structurally is a very healthy way for an industry to behave. If the customers are raising 3%, happens to go in line with what insurance reimbursement growth is, that's about 3%. And then the suppliers 1% to 1.5% price increases structurally very stable market in that regard.

And just a second question, the follow-up, maybe for you or Stefan. For implants, the S-Series, I believe you gave a metric 18% of the revenue was S-Series, maybe 1/4 was from competitive wins. Where do you expect that to go? I mean, does that go to 40%, 70%? Eric, is that margin accretive? And the tack on within plants challenges growing faster, I would suspect you don't expect that to change over the coming years. Maybe if we could just get an update on the M&A landscape there, where prices are or asks are at in terms of your interest in bringing in an additional challenger franchise.

Three questions we got. How big could S-Series get for you? We've got margins for you, and we got M&A for me. So somebody tried to remember that. Do you go with the first part?

Yes, sure. Well, we have -- I mean, from a customer focused, I used to run a DSO before in Europe. And simplicity, inventory when you have a lot of clinics, also predictability outcome to build confidence. This is something we've been working on for a while. We also wanted to make sure that we keep all the great things we have in our systems. So it's very easy for our clinicians to move to our area. I believe it will be our pro -- predominantly sold implants going forward. You can see adoption of these percentages various in different markets, but that's also linked maybe also to the launch. We're launching this broadly. So I see very positive. It brings so many advantages for our customers to move over to S-Series. So I look, it's a fantastic start, and I continue to see that.

Yes. Short answer, Jon, on your question on margin is, yes, it's accretive for Stefan's business, it's accretive for Envista. It's accretive to the balance of our portfolio. The modestly longer version of that, which I think is important, is that Stefan laid out, I think, a very compelling story for the growth of our implants business collectively getting much, much better over the last few years. We've talked to this group many of times that a lot that's behind that strategy relates to how his digital sales for Salesforce end-to-end is getting out and selling that full solution portfolio. That's everything from prosthetics to regenerative biomaterials to guided surgery, which you see out there in X-Guide to the implant itself, right? But what's also true is that the growth momentum of our business has come more outside of the implant itself. This is a very, very significant element of both our growth story and our margin story.

And let's see, on M&A. I mean Envista has very deep M&A capabilities. I was pleased to see this morning, Daniel Raskas, who's on our Board, I joined us day he ran corporate development for Danaher from the very beginning. He's the architect of what's now in Vista. And it's a very logical coherent portfolio. So our philosophy with respect to M&A is that provided you understand the landscape, and I think we do. It's principally an execution exercise. And so for us, we didn't do a lot of M&A at the beginning because we needed to get that execution rhythm back. As we've now improved execution across the company. You've seen us start to dip our toe back into M&A. We did these 3 small bolt-on accretive acquisitions.

When we say accretive, we mean grows faster than Envista in total, as margins above Envista in total, and you can buy them for a multiple below Envista in total. All 3 of those were those type deals. Now we'd like to deploy more capital if the execution is going I don't know that we can hit those on 3 bull eyes on every deal as you get bigger, it's harder to do. But we were clear on where our priorities are, and we're looking at potential ways to deploy capital, M&A cattle across those priorities.

Great. Mike?

Mike Cherny from Leerink Partners. Two follow-ups, one to John and one back to Elizabeth's first question. Just on the challenger side, you answered the M&A question. In terms of what's underpinning your growth algo for implants on the challenger component, how are you winning most in challenger? And do you have the pieces in place to continue to do that? And then on the enterprise-wide LRP, I think earlier you addressed the upside, I wanted to talk about the bottom end in particular, what does the world need to look like? And what does your execution need to look like for 2% organic growth to be the right number, given that you've obviously comfortably outdone that over the last 18 months since the last capital markets day?

Okay. I'll take the LRP question then you talk about what we're doing to organically grow our challenger business. What does the world need to look like for us to be 2%. It would need to be a world where the dental market was growing a little bit under 2%. So there's a lot of different macro conditions. We've lived them over the last 5 years where the dental market was a low single-digit growth. Our aspiration, of course, is to continue capturing share even if markets soften. How about the challenges?

Sure. I mean, we have 2 great companies, implant direct and Alpha Biotech. Having that said, we are not geographically everywhere. So I mean, we can bring those systems to more geographies. And that's something we -- we are also now part in the same family, so to speak. So we can support digitally and prosthetic and regenerative, these challenger brands on a bigger effect. That gives us growth opportunities as well. So our premier focus is now organically grow Implant Direct and Alpha Biotech. But of course, I mean I'm squeezed here between the gentlemen. But of course, I'm looking at the market at where can be maybe even grow faster if we can grow inorganically. So yes, that's for sure something I'm looking at.

Jason, then Brandon.

Jason Bednar, Piper Sandler. I wanted to start actually on product sourcing. I appreciate the color on the $10 million in savings that you've already realized. It sounds like there's more to be had there. How do you balance that against this narrative that's out there that's building that product sourcing is actually -- the costs are rising for a lot of manufacturers, especially those with operations or sensitivity to Europe?

Yes, a couple of things. I'll give an answer that maybe first starts outside of the -- like the core of the question, which is the direct space. So $1 billion in addressable spend, that's what you heard today. For us, it's roughly 50-50, half that's indirect, half of that's direct. As we've gone after the pipeline or defined the pipeline and then gone after the first part of that pipeline, the majority of that $10 million is indirect. So some say that's easy to get after. Others say it's hard to get after. It doesn't really matter. We got after it. And I would say there's more there. So admittedly, we are -- we prioritized that earlier to kind of build capability. It's something you can get your hands around. It was obvious from my seat that it was also an easier access opportunity. We'll continue to do that.

The direct space in a couple of things that I would say. So for me, the direct side of procurement always starts with 2 things. One, it starts with just really understanding where you spend your money. I know that sounds very basic, but then that it moves towards how do you connect internally for a health care company, a med tech company what you manufacture, who you source from and how you develop products, right? So a little longer trend for us, but we have a process where we're deeply engaging suppliers, our own internal R&D teams to be able to move our dual sourcing strategy over time. When you do that, you obviously get better leverage internally to our company, we also have something that's called VAEE value-added engineering effectively, right? That's engineering teams that are innovating for growth but innovating for cost out.

The last piece of it maybe is just an admittance which is absolutely, we are in an environment 6 months removed from the start of the Middle East conflict where every manufacturer understands that oil like propylene, ethylene, polypropylene, we all know where it ends up, right? And personally, I just think companies that understood or understand that faster and get ahead of it faster at a very minimum, can try to combat the rate of inflation. Hopefully, in some cases, with good VAEE or connections to your R&D or just good procurement organizations, you can reduce cost.

Okay. All right. And Eric, actually, one more for you. You mentioned the direction of tax rate kind of gave us a landing point on tax rate. I think the one other piece here below the line is on the interest expense side. You brought up the meeting to address the debt stack. Can you give a little more color there on timing on when you plan to execute on some of this? Where does the blended rate land or just anything to help us out as we model out kind of inter mines and your models in the next 3 years? .

Yes. I mean most of it is in disclosures. But the big headline would be almost all of our existing debt, $1.4 billion, matures in basically the same period in 2028, mid of 2028, right? Now that's partially because when you spin a company, you stand up an element of debt kind of happens at the same time. but it also happens to come on the back of the COVID period. Envista needing to acquire. So 2028 is the that we're looking at. What that tells you is that there's not a lot of time between now and then. Of course, we don't want to run up that refresh right to the end, right? Otherwise, you're sort of victim to where the markets are at. Because of the attractiveness of our 2028 convert, our blended rate is a little over 3%. You guys know -- so treasuries are at today, that kind of gives you directionally where things would go.

And the last piece I would just mention is, I mean, we still see it as -- so yes, it could be an interest expense headwind to us. But the flip side of that is we're trying to continue to position Envista to be able to invest in its capital allocation organically to be able to grow the business but inorganically to be able to grow the business. If for whatever reason, we have less capital allocation needs in our first priorities -- first 3 priorities. We'll look at debt paydown. But I think all of you would expect us to go find better ROIC opportunities.

Brandon, and then Kevin?

Brandon Vazquez from William Blair. Two smart questions, one maybe for Veronica and then one for Eric. Veronica, I think one of the really interesting updates you guys gave was around StageRx and the combination of wires and brackets planning and clear liners into one. Can you walk us through a little bit today, what does the workflow look like today of the orthodontist that's using both? So I could -- we can maybe better understand how much this can potentially streamline the workflow for the orthodontists because then, obviously, the benefit here is the pull-through of what are your market-leading brands in wires and brackets as well. Eric, I'll answer you. As you think about the medium-term financial targets we've talked a little bit about I think we're switching now to talk gross margins on Spark. What are you kind of assuming Spark can get you in terms of gross margins as we think about those interim part?

For clarification, you asked about StageRx and then in clinic workflow for Brackets & Wires?

Yes, my understanding, correct me if I'm wrong, was that the new software that you guys are talking about combined...

Veronica will clear that up.

Yes. So yes, as I mentioned during my presentation, one of the most exciting opportunities that we have today is that we are building under one platform, the ability to treat both aligners as well as Brackets & Wires. If you walk through the workflow, I mean it goes back to what Paul was mentioning, you scan, you define a treatment plan and then treat the patient, correct? And today, the ability of scanning starts the same way for both Brackets & Wires as well as aligners. Then you go into a treatment plan, which obviously the treatment plan of aligners a little bit different than what you do for Brackets & Wires. But we still have the ability for Brackets & Wires with our indirect bonding of placement of brackets in the right way, making it more efficient for doctors when they apply Brackets & Wires.

So it's taking them to the same platform, which, as I mentioned earlier, we now have the ability to have that being run in the same platform. and we are working towards even identifying the possibility of hybrid treatments in the future, which we believe have a lot of opportunity because of treatment predictability, time of treatment there are still great opportunities for further transformation of this industry. So I hope that, that makes sense.

Yes. A couple of points on the second part. So maybe just one, I just want to piggyback on your lead. So yes, we are making this transition from profit, operating profit to gross profit. The reason for that is, if you follow a lot of the things that Veronica set over the last few years that we've talked about with you in the marketplace in today's presentation. This is a business that, yes, we can find our way to like the profit of Spark, but brackets and wires aligners, whether it's R&D, sales force, even to some degree, manufacturing is coming together. So we don't want to sort of be beholden to profit view that really isn't as clean as we. would love it to be. So we graduate the gross profit. That's ultimately what Veronica and her team are driving on that level. .

We are today, call it, slightly below the Envista average for gross profit in Spark. You guys all know roughly where the public company competitors sit low 70s, upper 60s. We don't think in a medium-term outlook a couple of years, 3, 4 years. We don't think we can get there. And there are differences between the business, right? We treat in the orthodontic space, others treat more in the general practitioner space, that allows some economics as well. But we will certainly progress a good portion of the way over the LRP.

Kevin? And then Lily be after.

Kevin Caliendo with UBS. I want to talk a little bit about the health of the customer, we've heard and read and learned about some of the DSOs are struggling financially, maybe more so than normal. Is it affecting you guys in any way, either positively or negatively? Is it like an opportunity? Is it changing any of the terms? Is it also impacting demand in any way, shape or form or change? I'm just wondering how that's impacting the business as were hearing these anecdotal stories. .

Yes. So let me answer it geographically. The 3 markets where DSOs are most penetrated are China, Europe and North America. I would say, across the 3, the healthiest group right now is in Europe. The market in total grows a little bit more quickly than North America right now and faster than China. So I would say there, yes, there are some DSOs private equity backed that might have balance sheet issues. But writ large, I would say that's the healthiest of the 2 -- rather 3.

And then I guess I'd go to China next. China 60-40, the dental market between private and public. Of course, public goes through VBP that pressures the margins of a public hospital. If the procedure cost is reduced at the same time that supply costs are like what we saw with implants, that inevitably trickles down to the private markets. So you feel some of that same pressure to the DSOs in China, VBP related. And then you come to North America and the -- I would say there's 2 things pressuring the DSOs. The first is coming out of COVID, if you remember that chart I showed with dental expenditure, all-time record year for dental in 2021. And there was a view amongst private equity investors, also amongst the dental manufacturers that's something that's structurally changed in dental in that it was no longer a 3% to 5% growing category. It was something more. That attracted a lot of capital into dental, in particular, dental services. And a lot of these DSOs got funded that year at high multiples and the high leverage. And then underpinning all that, high value creation models that said they were correctly capitalized.

You then had the second issue, which was that air pocket, '22 and '23 when they didn't perform at those levels, and it ratcheted up that pressure. So right now, yes, you're correct. Some of the North American DSOs are working through that sort of balance sheet issue. Underlying performance of the DSOs, generally pretty good. When I joined, I want to get even closer to customers, so we moved the North American DSO organization to report directly to me. So I spent a lot of time with the U.S. and Canadian DSOs, I happen to be a big DSO customer on site. Today, you guys might bump into. But I think they'd tell you the underlying part of their business is just fine. It's that capitalization in some cases that they're trying to work through.

Lily Lozada, at JPMorgan. I just want to follow up on some of the earlier questions on the overall revenue guidance range. So the range you gave today is a bit wider than what you gave previously and you reiterated the low end. So hoping you can unpack the thinking behind that a bit more. The business is clearly in a better place than it was 1.5 years ago. So why not raise the low end of the guide?

Yes. So yes, point number one, you're correct. The business is growing faster and more consistently than it was 2 years ago. big numbers if you normalized from where we were in '24. We have told you it was about a 1% grower. Today, we'd tell you it's sort of a 3% to 4% grower and the delta between the 2 comes down to kind of 3 things. New product engine is growing more quickly, we're capturing more share. And then we're getting a little bit of help as you saw from that extra price. So we think the range ought to move up. We moved it up about one point. And then when we thought about what we wanted to publish for the lower end, we had the same conversation that we just had here about the uncertainty -- we don't give you a range and then assign a confidence interval to it. All we can do is expand that or, in this case, leave the same -- the lower end of that range. So think of it as the, yes, faster-growing business but uncertainty is as high, if not higher than it was 2 years ago.

Great. And then just a quick follow-up on the EBITDA guidance. Hoping you can unpack the different levers down the P&L, where you see the most opportunity gross margin, OpEx and R&D in particular, has been increasing as a percentage of sales the last few years? Is that something we should expect to continue? .

I could take that. Yes. So again, Lily, I would say think back, my sort of mental map is what we've done over the last 2 years, at least at a high level, right? So the levers are largely the same. We're going to continue to get adjusted EBITDA growth and margin expansion, primarily from our first capital priority, which is investing organically in the business and growing the business, which you know just from our published financials has very strong gross profits. To a lesser degree, probably because of the inflationary environment, tariff environment, we expect price to continue to be a contributor to that margin. We would like to be able to advance even further in productivity. I think when Paul talked about a few of the sort of ratings on our priorities and process capabilities, things like manufacturing productivity, we've moved the needle on, but we think we have more to do there. And so I would say, while we've gotten productivity in the last few years, a lot of it has come thanks to Veronica's business, and we want to see more of that across the rest of the footprint.

And then we won't invest at the same level as you've seen in the last 2 years, very significant investment, high single-digit plus investment in commercial low double-digit plus investment in R&D. We will continue to invest, I would say, at or slightly above the rate of sales in R&D. I would say more at the rate of sales for sales and marketing. And then kind of back to Jeff's question, we'll judge the business every quarter, every year, every half year. And if we feel we have the ability to continue to invest in the business to be able to get sort of an acceleration of the growth rate and long term and acceleration of the profit rate, we'll continue to do that. I think important, you'll -- you heard today, and you'll hear now in just a few minutes. Some of the things that we've invested in the last few years, you saw in terms of like new product pipeline. But as we went through quarters made this assessment, SmileGrid was an example of something that we made a conscious choice end of last year to put money into as we were seeing the flywheel of the business perform well, and we'll just continue to do more of that.

Okay. Last question from Allen here.

I want to follow up on that, Eric. Allen Lutz, Bank of America. On new products and pricing, I think it was mentioned that new products at Ormco drove $75 million of revenue over the past 3 years. And then pricing drove another $100 million over the last 3 years. As we think about the last 3 years, obviously, a different environment for both of those 2 items. You've worked really hard to introduce new products and the pricing environment has been a little bit firmer maybe over the past 18 months or so. How do you think about the revenue contributions from new projects over the next 3 years relative to the last 3 years and the same on pricing?

Yes, why don't I take that one. So we -- like many other med tech companies, we think of new product vitality index. What proportion of the current revenues come from products previously introduced in some time increment. We think that as 3 years. And across our portfolio, we have different NPVI rate. Right now, the strongest MTDI is in our diagnostics business. I mentioned that the OP 3D platform, which is down in the lobby in particular, is one of our biggest new product launches over the 5 years. Across the portfolio, the businesses are at a different phase in that strengthening of the new product engine. Veronicas even when we joined was already going pretty well. She and her team have amplified that.

Stefan talked about the big investment we made in '24 to restart the engine in implants. And then when Filippo took over the consumables platform, the very first thing he did is said, I want one of the CEO Kaizens, focused on the R&D pipeline for consumables. And that led to the 2 launches that you saw in the first quarter here. So across the portfolio, we working to accelerate the proportion of our growth that comes from new products because it's such a sustainable way to keep propelling the business forward.

Okay. With that, we probably have to wrap up. I would thank everybody who participated today, whether online by dialing in or here in the room. Hopefully, across the presentations and the Q&A, you got to better understand and confidence both in Vista specifically, but the dental market more generally. With that, I think we're going to shut down the webcast. I'm going to release my co-presenters here for good behavior. And I'm going to ask Jim to come back up and tell you guys the run of show for the afternoon. So thanks, everyone.

Thank you.

You're allowed to if it's a piece of sales collateral. But otherwise, you got to use real employees, real...

Employees. Got to be...

Dentist or the dental tech down there, she's real customer or...

I think top left is fake.

Yeah top left.

Top right and bottom left, I think are real. I think that's an employee bottom left sitting in the chair of a patient.

That's right.

I recognize them.

All right. Good morning, everyone. We'll get started here. My name is Jeff Johnson. I'm one of the senior medical technology analysts at Baird. And our next presentation this afternoon is from Envista Holdings, a leading manufacturer of dental consumables and equipment. With us from Envista today, we're happy to have CEO, Paul Keel; and CFO, Eric Hammes. Paul, I'll turn it over to you if you have any prepared remarks for a few minutes, and then we'll go straight into Q&A.

Jeff, I have no prepared remarks.

What I'd like to hear. All right. So straight into Q&A. And if anybody in the room has questions, please feel free to raise your hand, ask questions. I can repeat them from here.

So I think, Paul, you've been at Envista just over 2 years now. You've held an Analyst Day about 18 months ago. You laid out some LRP targets. I've been told not to ask about those LRP targets since there's an analyst meeting coming up 2 days from now out Mahwah.

So maybe I'll cut through the first couple of questions I had here. But you have exceeded those LRP targets each of the last 2 years. So what's gone right in a macro that has not been overly supportive probably over those 2 years?

Yes. So as you mentioned, Eric and I both joined Envista a little over 2 years ago. We grew up in dental. So in and out of dental for 20-something years. And we wanted to come back to dental.

Our thesis was threefold. And that is what our first Capital Markets Day in March of 2025 covered. tenet #1 of the thesis was that dental is a fundamentally good category and that the air pocket in '23 and '24 was predictable after the COVID disruption and that the market would generally return to its consistent pre-COVID long-term growth rate. Second thing we believe is that Envista was a fundamentally good company.

We knew the assets well, having grown up in 3M's business. We've competed with this company. We tried to buy many of the components of it. And we thought that it was a good set of assets that could be managed better.

And third, consistent with your question is we thought, okay, better market, better managed company, the financial results ought to get better as well. And looking back across the last 2 years, I would say the thesis was generally right. A couple of the components have played out more clearly than others.

I think there is credible evidence that the market is better today than it was in 2024, not yet back to 2019. You'll probably ask more questions about that.

Second, as I think the middle part was absolutely true that the strength of that portfolio now has become clearer over the past 2 years. We put a lot more money into new product development, a lot more money into the commercial front end. And we've now gained share across the portfolio, most categories, most years.

And then third, probably most visibly is, yes, the financial performance is better pretty much across the P&L. And then Eric and his team have done a lot of good work on the balance sheet as well. So I think broadly speaking, the original thesis was correct.

Yes. No, that makes sense. Let me pull on that string. You said you think the market is in a better place than it was in 2024. Maybe if we just go around the world here on your 3 main -- 4 main segments, consumables, do you feel like patient demand from a U.S. or global perspective is better or worse than it was in 2024?

It would seem our checks, I'm not sure volumes have really picked up much in the last couple of years.

Yes. No, I think our checks would say about the same. Many nice things about dental. One is there's great data, especially in the U.S. on data, you can just pop on to BLS and you can pull down total dental procedural spending by year. You can even see procedure inflation by year.

You can just ask ChatGPT to pull it all down for you. And it gives you a good indication of how close the market is back to its pre-COVID levels. The 2 things I think that you would see is that dental almost always outgrows the broader GDP. That has again been the case 2 of the last 3 years. And inflation in dental is almost always above CPI.

That, again, is true. Now when you break it down to the categories that you asked about, consumables is one of the covered categories in dental. About 60% of all dental gets reimbursed in the U.S. from private insurance. In other markets, there's a bigger public insurance component of that.

And so consumables typically does better on a relative basis than other parts of dental when macro uncertainty is high. It's not sensitive to consumer sentiment because it's covered. I think you're seeing exactly that. Most of the consumables players, us included, are overperforming the long-term trend for those 2 reasons. One, dental inflation is a little bit higher.

So you get more price in consumables. And then secondly, it's not impacted by consumer sentiment like the specialty categories, which you'll probably come on to.

Yes. Okay. So let's -- as you talked about consumables there on the equipment side, obviously, a very big pull forward in '22 into '23, even had maybe a couple of years of digesting some of that pull forward in that. Is that where you feel like now we're back to at least that market sustainably being a growth market even if it's low to mid-single digits, something like that?

Yes. No, you hit the nail on the head. During COVID, clinics were shut down, nobody bought equipment. When the lockdowns were lifted, some dental providers also got government funding. Everybody bought equipment, record year for dental equipment in 2021 and then the air pocket you talked about. The diagnostic category was in contraction for 2.5, 3 years. Second half of last year, it started to turn back to growth.

And so right now, it's the fastest-growing category in dental because of 2 reasons, principally, your question, easy comps, very easy comps, so growing as a result of that.

The second is it's a category that is getting a lot of innovation right now, both on the hardware and the software side. All of the AI things we're all familiar with apply in these large data sets you get, in particular, from a 3D CBCT image.

You can draw a lot of clinical findings with a bit of math. So yes, right now, diagnostics growing mid- to high single digits. Over time, that will settle back down into its long-term low single-digit growth rates.

And where is the willingness to spend, especially on some of the larger DSOs and other kind of large customers on those diagnostics and other kind of equipment. We've heard kind of some mixed things over maybe the last 6 months or so on slowing down some DSO expansion, things like that. Just where do you think the large customer is at in making those purchases?

Yes. I mean the answer is baked right into your question. When the DSO segment is well funded, they use that funding to open clinics. If you open a clinic, you need to buy equipment.

Specific to the U.S., I would say that the DSO market is still under pressure. In that big run-up year, Jeff knows this well, in 2021, a lot of private equity dollars went into DSO at very high valuations.

You then had that air pocket we've talked about. And so that put pressure, I think, on the balance sheets of a lot of U.S. DSOs. So yes, I would say that market is still working through that.

Okay. And as we talk about kind of the equipment and consumables part kind of as the core part of your business before you get into specialty, any difference U.S. versus Europe versus rest of the world, if you just kind of think from a high level, those combined core businesses?

Yes. Specific to us, yes, there's a difference. In those 2 businesses, in particular, we overweight to North America. So our -- we're the #1 player in diagnostics in North America, and it's our -- by far, our largest market, 3/4 or so of our business is generated in North America.

Consumables, also our biggest market is North America. So those 2 businesses for us are growing high single digits right now. So as the U.S. returns to its more stable kind of low single-digit growth in those 2 categories, we're trying to increase our penetration in other markets, which will help kind of amplify that growth.

Health of those end markets, though, in Europe, we've heard mixed things on dental spending in some European countries, just generally speaking, Europe holding in?

Yes. If we're going through the world on dental spending, I would say fastest growth developing markets ex China right now, second fastest growth in Europe, third fastest growth low single-digit North America. And then the slowest market, which I'm sure you'll come on to is China because of VBP.

Yes. A couple of things there I want to go to. But Eric, let me just ask you on pricing. Paul has kind of alluded to it as inflation. But you guys, I think, are running at about 1.8% consolidated company-wide pricing this year. It's a little bit hotter probably than we'd expect longer term.

But where do you think pricing settles out on kind of a pure apples-to-apples or like-for-like basis over the next couple of years? Can you take a third round of price increases next year? I know you're just into your second year of price increases here in the last couple of months, so hard to predict 9 or 10 months from now. But is this a market where every year, you should be able to push price or the last couple of years with tariffs and oil prices and that giving you some cover to maybe do it a little more or more frequently than you might going forward?

I think 3 things. One, at the market level, as Paul talked about in terms of just the macro, our view is that long term, the dental market and what you see in terms of dental market price inflation, that's largely public data through the services side of dental, right, what's coming out from dental clinicians runs at or above CPI.

We think that continues to be the case going forward. And then our price and what we're seeing, I would say, likewise from our competitors, we think, is durably around 1 point to 1.5 points of price over time. I think all the discussion is accurate in terms of just the fact that we've gotten a little more price because of some of the exogenous effects, right?

We took a little bit in the tariff environment as many companies did in addition to actions in supply chain and G&A. And as we saw what we now believe is true, and here we are 6 months removed from the conflict in the Middle East, we believe that, too, is going to create some pressure, if you will, in general raw material markets.

And so for that reason, we tried to get ahead of it with a little bit of a price increase midyear. But you can expect Envista to have a durable point of price somewhere in that range over a normal horizon. China side. China VBP is a dynamic that we're all managing.

All right. We'll get into that maybe in a few minutes. But Paul, let me go back on the dental implant side, just kind of the state of dental implant demand globally, if we again look at it, kind of U.S., Europe and rest of world.

That market seems like it's been a little bit tougher here over the last couple of years from a demand perspective, but I would love your thoughts.

Yes. So I mean you can segment the implant world. Let's do it by premium versus challenger and then let's do it geographically, as you asked about in your question. So the premium piece, of course, much more concentrated from a supplier perspective.

The 2 main suppliers are most of the share, that's us and Straumann in premium. And it is right now globally growing low single digits. The challenger side, also about half the market, much more fragmented from a supplier perspective.

You probably need to get to 7 or 8 suppliers to get to that same share captured by the 2 main ones in premium. But the category grows a little quicker, maybe a little bit better than mid-single digits. And the combination of the 2 globally is a mid-single-digit growing category for implants.

If you then go across the columns, break it down geographically, developing markets, by far the fastest-growing category or geographic mix right now, double-digit growth in emerging markets for implants.

Second fastest right now is Europe. Procedure prices tend to be lower in Europe. And so isn't as impacted by consumer sentiment as it is in the U.S., which is the slower growing low single digit for implants right now.

And then again, slowest growing from a revenue perspective right now at this particular instance because of VBP, I would say, is China, although it's the one of the fastest-growing unit volume markets, again, because of VBP, and we'll unpack that.

Yes. Again, we'll get there. On the implant side, so I think 5 of the last 6 quarters, you guys have been low single digits on your dental implant global revenue growth, probably being bolstered a little bit, I'd assume, by Procera and by some of the biologics in that.

So help me unpack premium implants, I would peg you guys at kind of low single-digit growth, maybe a little bit below market. I don't know if that's fair or not. And Challenger, it's just -- it seems like Straumann gets most of the challenger growth, and it's tough for anyone else to get much growth in Challenger over the last year or 2.

Again, just take your thoughts on that and see how you answer it.

So I would agree with your first. I think I might modify your second. So in the first, especially in premium, the workflow gets sold, not the screw. And so the 2 main players, the reason they do so well is because they have full end-to-end workflows.

They have a diagnostic solution. In our case, we have a very good diagnostic business. In the case of Straumann, they just bought a good intraoral scanner to try to strengthen their front end of the workflow. And then there's a very important software piece, a treatment planning step where you take the CBCT, you take the intraoral scan and you develop the treatment plan for the patient.

This is oral surgery, very important that you place the implant correctly, so you don't impact nerves or anything like that. And then there are other digital steps that attach to that. There's different equipment you can use to design if you want a placement guide to make sure you get that implant exactly right. There are some devices that will physically help guide your hand as you place that implant. We have a good solution there. And then there is the products that go into the treatment. There is the screw which is the implant. But on top of the implant, there's a component called an abutment.

And then like any other medical procedure, there are regenerative biologics that support the healing and the preparation of the site. There's growth factors, there's collagen matrices, all of that.

And it's that whole workflow that you sell. Correct in your question is that individual components of that workflow grow more quickly than the screw itself.

The regen part industry-wide grows very fast. We have the highest share in regen in North America. So that part of our business is doing very well. We're particularly good at the digital side because of our diagnostic business. That's growing very well.

And then you're right, the implant itself part of that is the slowest growing part of that workflow right now.

The second question that I was going to take a little -- was going to modify is I think many people are growing faster in challenger than in premium. Our challenger business outgrows our premium. You are correct. Straumann's challenger business called Neodent grows faster than its premium business. There's no other big player that has both. So...

I guess let me phrase the question this way. I would think if you needed to bolster your implant business, it would be more on the challenger side.

No, that's correct. Yes. That's simple math, where we over-index on premium call it, 85% premium, 15% challenger. As I mentioned, Challenger grows faster than premium as a category.

So we want to increase the percent of our total business from Challenger, so that's the weighted average of the 2 grows.

At this point, it's only, what, 10%, 15% of your category?

Yes. About 15%, yes.

Yes. And from there, can that be done organically? Does that have to be done inorganically? And inorganically, does it have to be done by cobbling together a couple of different businesses? Just how do you attack that issue, which is not an easy issue to solve?

Our primary strategy is what we can control. That is to grow it organically. And as I mentioned, it is growing organically nicely, faster than the premium side, but off a smaller base. And so Challenger tends to be an active category in dental from an M&A perspective.

Our 2 Challenger businesses, we got through acquisition and we'd look at M&A in Challenger. But we have such a strong organic value creation opportunity in Envista. Our primary use of capital is organic growth. And then our second use is to do accretive M&A. We did 3 small bolt-on acquisitions over the past 18 months. All 3 were in implants.

If you had to do a decent-sized deal in Challenger implants, could something like that be done that isn't dilutive? Or would you accept a little dilution to do that?

No, I wouldn't do a deal that had unattractive return.

Well, I think if we talk about a mid- to long-term positive decent ROIC that dilutes EPS in the short run...

I would prefer not to answer a hypothetical -- our track record.

I guess my point is just there are some big things out there that could come up properties. But is first year EPS dilution a no-go for you? And so if we hear something comes to the market and our math would say it might be dilutive, do we just rule that out for you?

The bull's eye for us, when we say accretive, we mean 3 things. We love to buy something that grows faster than Envista. We like something that has better margins than total Envista, and we like something that can be bought for a lower multiple than Envista.

The 3 deals we did hit all 3 of those dead bull's-eye. would I do one that's in the second ring in terms of margin.

I don't mean to get into...

Yes, somewhere...

I'm just trying to understand if there was a hard line in your mind. Okay. VBP China implants, has that process fully now gotten underway? -- and visibility on still that 10% to 15% maybe price reduction this time in a second round as opposed to the 40% or 50% we saw last time.

Yes. Let me answer it even more broadly because the more interesting part of VBP right now is the ortho.

And I want to get to the ortho.

All right. So let me just hit both at the same time. So VBP in China, everyone will be familiar, health care reform, dozens of categories have gone through VBP in China, started with pharmaceuticals, went into med tech.

3 years ago, the Chinese government started on dental. The first one was implant. The second one, which just started is ortho, and they decided to do a second implant VBP at the same time as they're doing the first ortho VBP. As a hasty generalization, all VBPs have the same 3 steps.

The government announces the category, and it asks all the public hospitals to submit their prior year purchases and their current year forecast for the suppliers of that category, goes in a big database, 5,600 or so public hospitals in China.

The second step is it looks at the suppliers that aggregate to about 3/4 of the total share, and it invites them to bid on all of the volume, so the piece above outside that 75% plus they reduce the supplier count by. So they say, here's your opportunity for more share in the public hospitals, tell us what you would bid for that volume.

The third step is they announce the winners and the new price goes into effect. About 40% of the dental market in China goes through the public hospitals, about 60% of it is private. -- but what happens in the public informs pricing in the private. We are in that third phase right now.

They announced the categories. They collected all the volume from the hospitals and they asked all of us to bid. We're now waiting to hear step 3, who are the winners. The important thing for suppliers is that while ortho and implants are sold directly, they get -- the logistics are through distribution.

So distribution has learned to reduce inventory in advance of announcing the winners because that inventory gets repriced when the new price gets announced, they revalue that asset.

So they draw down inventory. For us, big numbers, we have a $70 million ortho business in China. And the government -- or I mean, the channel takes out 10% to 20% of inventory so that there isn't as big a restatement. So the net of that is it shifts some volume for us from -- out of Q3 when this process is underway, and it puts it back into either Q4 or Q1 when the new price gets announced.

So all of this is playing out like any other VBP. It's that piece, how much channel gets drawn down in the very near term that we're paying attention to right now.

Is that channel inventory drawdown that's happening right now, both ortho and implant?

It's mostly ortho. -- a typical VBP reduces price by 50% first round VBP. We expect the same thing with ortho. That's what we saw 3 years ago with VBP1 on implants.

The second VBP for implants is going to be much smaller, 10% to 20% price reduction. And so the channel impact is commensurately smaller. So ortho is really the game right now.

So Jeff, a couple of important points, I think, on the back of that. One would be coming out of the second quarter, we gave, I think, a pretty similar view of what Paul just mentioned, right? We knew where we were in the process. We saw the bidding taking place. We saw the volumes coming in.

And we understood the timing of this to be, call it, like early to mid-fourth quarter in terms of when we would then have more like a definitive these companies won, maybe these companies didn't, and then you would have sort of the proceeds. So I'd say all of that is the same.

I'm talking both implants, but again, to Paul's point, ortho is really the important one. The piece that's newer information for us is now because we are further along in that process and here we are towards the end of third quarter, we are seeing the drawdown, if you will, of inventory on the ortho side, probably about $10 million for us that we're seeing in softer revenues in Q3.

Majority of that, we expect to be coming back in fourth quarter. If timing is like uncertain, maybe you have a little bit more movement in that. But that also says that we're in the process so much that customers, distributors, end consumers like it looks more definitive now in how it's happening because we're getting information from our channel partners that they are managing in and then they will manage out.

For us, again, it means maybe a little bit lighter revenues in Q3, Q4. And then importantly, we -- I would say we also have good confidence. Paul mentioned he was just recently in China. Our teams are confident in what we're hearing from the customers in public hospitals. Our channel partners are seeing us as a valued participant in the future in VBP, and our supply chain is ready.

So a lot of uncertainty, but we do feel confident that as we're getting into the now back half of this year, we're seeing the process manifest in execution.

A couple of quick follow-ups here. So that $10 million you referenced, how is that compared to what you expected the inventory drawdown to be in the second half of this year when you last updated guidance?

Yes. I would say similar in total when we look at -- just pull forward second half 3Q. A little bit heavier in Q3. We expect a little bit more rebuild in Q4. And all of that sitting in a guidance that is unchanged for us, which I mentioned.

And you guys are a very large implant player in China, I think 30% or something... Straumann...

Second largest player.

Largest player, Straumann bigger than that, but between the 2 of you, a very big share. In ortho, I believe the same is true in brackets and wires. You have a... Big player.

Biggest player.

So the odds that you get squeezed out that you're the vendor that goes away seems...

Are low.

Yeah.

But I mean it's an -- we expect to win, but...

But, okay.

Others have been surprised.

Okay. And then we have 1.5-minutes call. But the other issue, when implant VBP 1 happened, prices came down both on the implant, but also on the procedures that stimulated a lot of patient demand for implants; they can now afford that instead of getting a crown or a bridge or something like that, it made sense to get an implant.

In ortho, it doesn't sound like the procedural price is necessarily going to come down. So if you have to give up 40% or 50% on price, how do you make that up between market share versus other manufacturers and/or end markets getting accelerating demand-wise?

Yes. So VBP for high share suppliers is generally a good thing. You're likely to come out of the process with more share than you went in and you're likely to get more volume because more of the public hospitals now order from you at that new price.

That can be amplified if the procedure price is lowered as well because now patient demand goes up in addition. So in implants, it was very good for us and Straumann because the procedure price was cut in half at the same time that the supply price was. So patient volume doubled. Ortho, we don't think they're going to drop the procedure price.

The winners in VBP will still get that expanded volume because now they're going to be in more public hospitals, and they're going to pick up that extra share from those who weren't invited to bid and the 1 or 2 players who got kicked out of the process.

So our volume in ortho, we expect will still go up. I don't think it will be that same [indiscernible] doubling of volume that we saw with implants.

Okay. So still not a big headwind from this, but we don't get that slingshot effect necessarily that it felt like we got for a couple of quarters after VBP.

We think if it plays out like other VBPs and implants in particular, we will be stronger after VBP than we are today. And today, we're the #1...

Okay. We're about 30 seconds over, but Eric, I'll just ask you real quick. I think you talked about China was down a little bit year-over-year in the first half of this year.

You expected it to be up a little bit in the second half and up year-over-year in '27. Maybe that second half '26 needs to be reevaluated or no?

I'd say in large part, we still expect China to be modestly growing second half, but likely declining in Q3 as we talked about channel preparation. And then as long as we don't have a shift in the implementation, call it, the date in which prices are active in the market, we would expect to grow in fourth quarter.

In '27.

'27, we would expect our China business to be slightly growing.

All right. I think we're going to stop it there. So please join me in thanking Paul and Eric for a great overview here of Envista.

And our next presentation is set to begin at 10:15 p.m. or a.m. Eastern includes Universal Health in the Grand Ballroom, Cortera in Grand Ballroom 3, Lumis in Empire Ballroom and Fate in the Empire Ballroom 2. Thank you.

All right.

Hello. My name is Chloe, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Envista Holdings Corporation's Second Quarter 2026 Earnings Results Conference Call. [Operator Instructions]

I will now turn the call over to Mr. Jim Gustafson, Vice President of Investor Relations of Envista Holdings. Mr. Gustafson, you may begin your conference.

Good afternoon. Thanks for joining Envista's Second Quarter 2026 Earnings Call. We appreciate your interest in our company. With me today are Paul Keel, our President and Chief Executive Officer; and Eric Hammes, our Chief Financial Officer.

Before I begin, 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 available on the Investors section of our website, www.envistaco.com. The audio portion of this call will be archived in the Investors section of our website later today under the heading Events and Presentations.

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 our results. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the second quarter of 2026, and references to period-to-period increases and decreases in financial metrics are year-over-year.

During the call, we may describe certain products and solutions 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 and 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, and actual results may 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 as required by law.

With that, I'll turn the call over to Paul.

Thank you, Jim. Good afternoon, and welcome, everyone. On today's call, I'll kick us off with a summary of our Q2 performance. Eric will then take us through the numbers in more detail, and I'll wrap things up with some closing thoughts before opening it up for Q&A.

In the second quarter, we continued our momentum in executing on our growth and operational plans, delivering a strong first half to the year with core growth of just over 7%. The dental market continued to show its characteristic resilience as patient demand for dental care remained stable despite macro pressures. For the second quarter, Envista posted a 5% core growth, delivering balanced growth across both reporting segments and all major geographies. Spark once again grew double digits. Consumables and diagnostics were up high single digits, and implants in total ortho were up low single digits.

Our continued growth and focus on operational excellence led to another quarter of both gross and EBITDA margin expansion, up 70 and 230 basis points, respectively, a strong top line converted to even stronger earnings growth, with adjusted EBITDA up 28% and EPS growing 58%. We also had strong free cash flow conversion in the quarter, coming in at 158%.

Alongside this, we purchased 2.4 million additional shares in Q2. And rounding out Slide 4, based on our strong first half performance and continued momentum, we're raising our full year guidance. Our updated 2026 expectations are now for core growth to grow 3.5% to 4.5%, adjusted EBITDA to grow 11% to 14% and adjusted EPS of $1.50 to $1.55.

Let's now turn to progress we made in the quarter in support of our 3 core priorities of growth, operations and people. Starting with growth, we delivered continued broad-based performance across the portfolio with balanced contributions coming from both reporting segments, all major geographies and volume and price. In terms of segment performance, core growth in Equipment & Consumables was 8.5% as both diagnostics and consumables were up high single digits. Core growth in Specialty Products & Technologies was up over 3%, with Spark again growing double digits but brackets and wires down high single digits, impacted by a strong prior year comp that benefited from customers buying ahead of announced tariff and price activity.

Implants grew low single digits, in line with the market. Geographically, North America, Europe, APAC and Latin America all grew nicely, with new products continuing to play an important role, and I'll provide further detail on this in just a moment.

Turning to operations. We continue to see widespread benefits from our Envista Business System. Improving manufacturing productivity helped drive our gross margin expansion; and when combined with sustained G&A productivity, adjusted EBITDA margin expanded by 230 basis points. We further reduced our effective tax rate in Q2, contributing to the very strong EPS growth that I mentioned earlier.

And with respect to people, we continue to advance our high-performing continuous improvement culture through numerous customer, employee and charitable events around the world. I had the good fortune to participate in several of these, including an Envista Smile Project mission to the Dominican Republic, where we treated approximately 1,500 patients, continuing to live our long-standing purpose of partnering with clinicians around the world to improve patients' lives.

Now coming back to the central role that new product innovation is playing in our growth, Slide 6 touches on 3 of the new product launches we had during the quarter. We covered some implants and diagnostics new products on the Q1 call, so we'll focus on consumables and ortho today.

We had 2 important launches in our consumables business, 1 in endodontics and 1 in general dentistry. ZenSeal Pro is an all-in-one bioceramic endodontic sealer. The product category is used in most root canal procedures, which is the largest segment within the $1 billion-plus endodontic category.

This solution is used to close gaps between filling material and the canal wall, and this particular product is novel in 2 respects. First, the flowable bioceramic formulation creates an alkaline environment that helps block bacterial formation, a central objective of the procedure. Second, the product is delivered through specially engineered tips that improve access in complex anatomies while also reducing material waste by roughly 1/3, resulting in improvements in both clinical efficacy as well as efficiency.

DemiPro is a lightweight cordless curing light. Curing lights are broadly used across many restorative dental procedures. This solution is ergonomically designed to reduce fatigue while also improving access by way of a 360-degree rotatable tip. Our consumables business has been consistently gaining share across the last several quarters, and we expect these 2 innovations to further build on that momentum.

In our orthodontics business, we've spoken a fair bit about how we've been leveraging our digital capabilities to consistently take share in clear aligners. Ormco Digital Bonding, or ODB, uses much of the same technology but on the brackets and wires side. When we first launched this platform in 2023, we did so with our market-leading Damon Ultima System. In Q2 of this year, we expanded coverage of ODB to all of our bracket systems, further solidifying our position as the only scaled player in the market offering complete solutions in both aligners and fixed orthodontics.

New product innovation has long been a hallmark of Envista, having created numerous important categories in dentistry across the years such as dental implants, passive self-ligating brackets and digital treatment planning. Over the last 2 years, we've materially ramped investments in new product development and commercialization. It's exciting to see the positive impact that these investments are making for all our stakeholders, customers, colleagues, our communities and our shareholders.

Having provided an overview of the quarter, I'll now turn the call over to Eric to walk us through the numbers in more detail.

Thanks, Paul. In the second quarter, we delivered sales of $731 million. Core sales in the quarter increased 5%, with FX and recent acquisitions combining to add an additional 200 basis points. As Paul noted, we delivered positive growth in both reporting segments with well-balanced performance across our businesses and geographies and strong contribution from both volume and price.

Q2 adjusted gross margin was 55.1%, an increase of 70 basis points versus the prior year. Volume, price, productivity and FX all contributed to the year-on-year improvement. We continued to increase investments in sales and marketing as well as R&D in the quarter. At the same time, adjusted EBITDA increased by 28% year-over-year with margins for the quarter of 14.7%, up 230 basis points year-on-year. As we've talked about on previous calls, the healthy gross margins of our business enable our ability to invest for the future while delivering profitable growth.

Working further down the table, adjusted EPS in the quarter was $0.41, growing 58% compared to the same quarter of last year. Our non-GAAP tax rate was 25% in Q2, better than the expectations we had entering the year. We've executed on a number of important initiatives over the past many quarters to reduce our tax rate, which are reflected in our year-to-date results. We now expect the 2026 full year rate to be around 26%, about 2 points lower than our initial guidance for the year and significantly below prior year.

Rounding out Slide 7. Q2 free cash flow was $105 million, a $29 million increase over the second quarter of last year. This increase was driven by improved profitability as well as the $13 million recovery related to IEEPA tariffs paid in 2025. We continue to expect free cash conversion for 2026 to be approximately 100% of adjusted net income. As noted in our Q2 release, while the IEEPA tariff refunds do benefit free cash flow, they're excluded from Q2 adjusted earnings as the refunds are not part of regular operations.

Now let's turn to 2 bridges to help break down our year-on-year results, beginning with sales. Core revenue grew 5% in the quarter, and total revenues grew just over 7%. Increased sales volume was the largest single contributor, driving $17 million of the sales increase and reflecting a return on our investments over the past 2 years. Net pricing added $12 million, balanced well across our businesses and geographies. The weaker U.S. dollar year-over-year contributed about $11 million. Note, on a sequential basis, foreign exchange rates have recently stabilized.

Spark deferral tailwinds contributed $5 million of year-on-year growth. This is the final quarter that we expect any meaningful impact from the Spark deferral changes made back in mid-2024. And finally, acquisitions completed over the past year contributed $4 million in sales. Our acquisition of Versah, the osseodensification technology we discussed last quarter, represents the largest driver of acquisition-related growth.

Slide 9 shows the components of the $24 million year-on-year increase in adjusted EBITDA. Price contributed $12 million. Foreign exchange rates also contributed $12 million. This reflects a small benefit from translation and a larger impact from reduced year-on-year transactional FX losses. As you'll recall, in mid-2025, we began hedging our balance sheet to reduce the net impact from quarter-to-quarter exchange rate changes.

Volume and mix combined for an $11 million improvement, reflecting the strong gross margins across our portfolio. Net productivity delivered a $5 million benefit, with EBS and other initiatives more than offsetting input cost inflation. Q2 tariff costs were similar to recent quarters, with an increase of $5 million versus Q2 of 2025. As we've communicated over the past year, we continue to more than offset growth tariff costs through supply chain, G&A and pricing actions. We expect quarterly tariff costs to be similar in the second half, with recently announced Section 301 levies effectively replacing the prior tariffs.

Finally, as Paul mentioned, we continue to invest in sales, marketing and R&D to drive future growth, an amount of $11 million in Q2. All in, our adjusted EBITDA margin in the quarter was 14.7%, up 230 basis points over last year.

Turning to segment performance. Revenue in Specialty Products & Technology grew nearly 6% year-on-year with core sales up 3.1%. In orthodontics, Spark again delivered double-digit growth or high single digits after adjusting for the net deferral change, while brackets and wires was down high single digits against Q2 2025 comparable noted previously. Implant core growth was up low single digits, consistent with recent quarters and well balanced across geographic markets. In Q2, Specialty Products & Technologies posted adjusted operating profit growth of $9 million year-on-year, up 15%, with a 120 basis point improvement in margin rate. Both businesses had positive price capture.

Moving to Equipment & Consumables. Core sales in the quarter increased 8.5% versus prior year with high single-digit growth in both consumables and diagnostics. Our consumables business continues to deliver well across the portfolio, driven both by innovation and good price performance, while diagnostics was particularly strong in North America, posting yet another quarter of above-market growth. Here again, growth was broad-based across the business as consistent innovation in equipment and software is combined with growth in services to meet customer needs for comprehensive solutions. Adjusted operating profits increased 25% year-on-year, with operating margins up 250 basis points, driven by strong pricing and volume benefits as well as the FX tailwind that I mentioned previously.

Now I'll turn to cash flow and our balance sheet. Q2 free cash flow was $105 million, an increase of about $29 million from the second quarter of last year, primarily as a result of improved profitability. This, in turn, resulted in strong free cash flow conversion of 158%, including $14 million of invested CapEx during the quarter. Our balance sheet remains strong and stable with net debt to adjusted EBITDA of 0.7x. Our balance sheet continues to provide welcome flexibility as macroeconomic uncertainty remains high.

In Q2, we continued to return cash to shareholders as we purchased approximately 2.4 million shares of our stock at an average price of $24 per share. As Paul mentioned previously, we are both raising and narrowing our guidance ranges. Our new guidance for the full year 2026 is 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%.

Let me provide a couple of details underlying this guidance. You'll notice that we expect second half revenue growth to be lower than the first half. This reflects the calendar impact that we discussed on the Q1 call, where our first quarter had 4 extra selling days over Q1 2025 and Q4 will have 4 fewer. As a result, we expect Q4 core growth to be flat to slightly down. Absent the billing day effect, we expect Q4 core growth to be in line with our full year guidance range.

Excluding China VBP, we expect price capture to remain strong in the second half. With respect to China VBP, our revised guidance assumes both VBP 1 for ortho and VBP 2 for implants to take place in the second half. The process is now underway for both ortho and implants.

As for the earnings cadence, we expect EBITDA growth across both Q3 and Q4 to be roughly in line with sales growth for each quarter. As noted previously, we expect our full year tax rate to be approximately 26% of adjusted pretax income. Overall, we performed well in the first half of the year, and our continued momentum gives us confidence that we expect to drive solid top line growth in 2026 and even faster profit growth.

With that, I'll turn the call back over to Paul.

Thank you, Eric. Now before I wrap up our prepared remarks, I'll note that we recently announced an Investor Day coming up in about 6 weeks on Thursday, September 17. The event will include an update on our progress executing the value creation plan that we laid out in March of 2025 as well as some insights into innovation priorities for our 4 main businesses. We will provide an opportunity for you to hear from several members of our leadership team, including Eric and myself, and details can be found on our investor website. We hope you'll be able to join us.

A few closing thoughts on the quarter before we open it up for your questions. The global dental market continues to demonstrate its characteristic resilience even in the context of ongoing macro uncertainty. Specific to Envista, we again delivered balanced growth across our portfolio, with strong performance in both reporting segments and all major geographies.

Our improved execution helped convert 5% core revenue growth into 28% adjusted EBITDA and 58% EPS growth while also allowing us to continue investing for the future. Behind strong first half performance and continued momentum, we're raising our full year outlook for core sales growth, adjusted EBITDA and adjusted EPS.

And finally and most importantly, I'll close by recognizing the skill, effort and commitment of the global Envista team. Well done, everyone.

That completes our prepared remarks for today. We'll now open it up for your questions.

[Operator Instructions] Our first question comes from the line of Jon Block from Stifel.

I'll start with maybe the E&C segment. This was Envista's fifth straight quarter of high single-digit, low double-digit growth for E&C. It's certainly a step-up from the past performance for this segment. So Paul or Eric, I'm just curious if you could speak to, is this faster growth driven by a market upturn? Or is it more specific to Envista factors like share gains, new products, et cetera?

Jon, thanks for the question. I'll start it off, and I'm sure Eric will jump in with whatever I miss. To start, you're absolutely right. Our E&C segment is delivering consistently faster growth. And I think I would point to at least 3 contributors that are supporting the trend.

First, with respect to the market, we are benefiting from some tailwinds in these businesses. As consumable products support procedures that are typically covered by insurance, this segment tends to be better insulated from macro volatility. And so on a relative basis, it outperforms. And since we have a strong position in consumables, we benefit along with that.

A little bit different with respect to diagnostics. After the post-COVID downturn, that market was in contraction for a couple of years and has now returned to growth. As we're a leader in this category, we benefit from that rising tide. Now on top of the underlying market support, we're also clearly gaining share in both consumables and diagnostics, and that has been the case now for several quarters.

We estimate that the markets grew sort of mid-single digits in the first half. And as you noted in your question, our business has been growing more like high single-digit to low double-digit rates. Now there's, of course, a number of commercial and operational initiatives that underpin this, but I would again underline new product activity as a particular contributor.

Maybe thirdly, I'd also note that the broader benefit we get from having a well-balanced portfolio. Macro uncertainty, of course, has a bigger impact on more elective categories like implants, and we feel that. But for us, the impact is offset by our similarly strong positions in less sensitive categories like surgical loops, restoratives, infection prevention and the like. And we expect that as consumer confidence rebuilds, particularly here in the U.S., that we'll benefit from our commensurately strong positions in ortho and implants. So both of those businesses are growing for us at or above market rates, but as conditions improve from a market perspective, we expect to get a helpful sort of incremental tailwind.

I should probably also note that a similar diversification plays out geographically. On a relative basis, the North American market is a bit softer today, and so we experienced that. But we also have good positions in Europe, APAC and Latin America, and these markets are currently healthier on a relative basis. So just as we expect consumer confidence to improve, helping implants and ortho, we expect the North American dental market to rebound as it always has, and we'll benefit from that.

So let me pause there to see if Eric has anything more to add, but we appreciate the question. We understandably get a lot of interest in our ortho and implants businesses due to their size and strategic importance, but consumables and diagnostics are also central to our broader portfolio strength. So it's important that we underline their continued progress. Eric, anything more to add?

No, nothing more. I think that's comprehensive. It was a great quarter for E&C.

Yes, certainly was comprehensive. I'll try to ask maybe a quicker or tighter second one. For VBP 1 and VBP 2, I just want to think about this at a really high level for '26 headwind and maybe '27 tailwind. In other words, if the timing holds for 2H, I understand that's probably a big if, but if that timing holds, at a high level, is this a dilutive event for both ortho and implants specific to '26 and an accretive event, or call it, tailwind in '27? Just at a high level, any way to size that or think about that?

Let's tag team this one. First, I'll just start with what the new news is on VBP, and then Eric can have specific thoughts on how that will play out moving forward. So first, again, the new news, we have heard now that both the ortho 1.0 and implants 2.0 processes are underway. We expect them to complete in the second half. You'll remember on the Q1 call, there was still uncertainty around that. As Eric noted in his prepared comments, we have incorporated that new news into our updated guidance.

On previous calls, we've talked about VBP, and on balance, it has been a positive for Envista. In the first VBP for implants, we did see a material price decrease. It was around 45-ish percent. And gross margins also compressed as a consequence, but volumes more than doubled. So net-net, total gross margin dollars increased and our market position improved.

So now as we look forward to the 2 VBPs here in the second half, they're similar but a little bit different. Starting with orthodontics, this is VBP 1. So we think we'll have a similar price compression as what we saw in VBP 1 for implants, and then we expect market share gains. The way these things work is that the large market share players going in, if you're willing to accept the price concessions, you tend to get even stronger position coming out.

With respect to implants, though, it's a little bit different. Because this is a VBP 2, the price compression will be much smaller. We're expecting around 10% to 15%. So let me pause there and see if Eric has thoughts on how that plays out across the second half and into '27.

Yes. I think a couple of points, Jon, at a high level on the growth. So in the first half -- it's probably easier to go by quarters, but let's just take it by half to make it a little simpler. We were down in China year-over-year. More of that compression came in Q1 and less so in Q2. With what Paul mentioned, with the expected VBP timing, which is roughly the same in our sort of calculus for ortho and for implants, we expect China to grow moderately in the second half with slightly better growth in the fourth quarter.

And I think the main reason for that last piece is really twofold. So one would be we have had a well-prepared channel, so we've talked, I think, in the last many quarters about the fact that we've kept our channel as small and lean and tight as possible. That just means that it can respond a little bit more quickly post VBP.

And then the second piece, I think, is really important that as a strong global player and the #1 brand in these markets, we do expect to get share from that. And likewise, if our supply chain is healthy, we expect that our volumes will rebound as well. So down slightly in the first half, growing in the second half. And then because we're likely facing slightly easier comps in the first half of next year, we would expect to see some growth as well in the business.

Our next question comes from the line of Elizabeth Anderson from Evercore.

I was wondering if you could talk a little bit more about the implant performance. Obviously, maybe -- and focusing outside of China since you just did such a good job on that. But how are you seeing that? Is that mostly a macro phenomenon? And can you sort of remind us about sort of how you're thinking about like new product cadence and sort of the commercial execution and sort of how to think about this besides just sort of the tough comps in the back half of the year, but like more broadly into '27 and beyond?

Sure. I'll take that, Elizabeth. Thanks for the question. I would say our implants outperformance in Q2 has been very similar to recent quarters, balanced performance by geography and pretty balanced across the 2 main categories of Challenger and Premium.

I'd also remind the audience that, for us, implants is much more than just the screw. We also have a very strong position in regenerative biomaterials, and we have a very good digital workflow business. Those latter 2 categories tend to be accretive to overall implants growth.

You'll remember in 2024, we made an important sizable investment into restarting the new product engine in implants. We talked a lot about the gestation period for those programs, and they are now just starting to come to market. We had the S series launch in Q1. That's off to a very good start, running ahead of our launch plan. And about 1/4 of the sales for that program are coming from competitive conversion. We feel good about that.

We have another important launch in the abutment category. It's currently available in Europe, and we hope that will launch in the second half of '26 here in North America, provided regulatory approvals are gained.

And then, of course, we talked about the Versah acquisition on the Q1 call. You can probably think about that as outsourced R&D. In that case, we bought a product that had already been developed and had gained registration in many markets. And our strategy has been to commercialize it globally through our very strong worldwide presence. That one is also off to a good start, running ahead of the acquisition plan. So I think for implants, very consistent performance, and we expect additional sort of returns on those investments that we've made.

Our next question is from Jeff Johnson from Baird.

Paul, maybe if I could follow up on your implant comments there because you have been getting that strong biomaterials growth and some of the other non-screw part of the business, I guess, I'd call it, how do you think your performance is shaping up on the Premium side and on the Challenger side relative to market these last few quarters?

And then you've done a couple of acquisitions, small acquisitions, Versah being one, as you just mentioned, a couple of other small ones. It seems like you're building some muscle there, really good balance sheet, good cash flow here. Talk to me maybe about your M&A strategy going forward and what would be some boxes you would have to check on, growth accretion, earnings dilution, risk, things like that.

Let's see, a lot in the question. Let me start with kind of the balance of the implants outperformance. I'll start geographically. For us, our largest businesses are in the U.S. and -- or North America and in Europe. I would say they're growing at market rates.

We already touched on China and the impact that VBP had for us there. I would say we're stronger in China as a consequence of VBP than we were previous to that. We're working hard now to try to increase our developing markets implants business. So maybe that's a spin through the world from the -- through a geographic lens.

In terms of the categories, for us, the 2 businesses grow about the same. Challenger outpaced Premium last quarter, consistent with the market trend. The Challenger category outgrew Premium. And we under-index, as you know, in Challenger. So we'd like to have a bigger Challenger business, and right now, our primary focus is to do that organically. We have 2 good brands. We have Implant Direct and we have Alpha-Bio Tec, investing in both the same sorts of growth levers that we talk about for Premium. So activity on both the commercial and the new product front.

And then to the third part of your question, we do have good M&A capabilities at Envista, and implant is a category we look at. We did 3 acquisitions over the past 18 months. All of them were in that implant platform. All of them were small, but I think they are representative of the types of deals we'd like to do, strategically aligned and financially accretive deals where we are the logical owner, where we can cause the business to perform better than the previous owners. So that's what we're trying to do in implants.

Appreciate that. Maybe one quick follow-up for Eric, if I could, just to clarify. I think you talked, Eric, in your prepared remarks about EBITDA growing in line with core revenue growth in the back half of this year. Just remind me or any high-level details maybe, one, did I hear that correctly; and two, why EBITDA won't grow faster than revenue in the back half?

Yes. For starters, Jeff, you got it correctly. I think the first sort of element to the equation here is what we expect for core growth in the second half. We talked -- I think we've talked actually all year long about the fact that we would have slower core growth in the back half, primarily because of our billing day effect, which will be minus 4 days year-on-year in fourth quarter. And that just simply means that, on an adjusted basis, we'll be growing within the guidance range, so nothing significantly different with the business as a trend. But the billing day phenomenon is going to slow our revenues, and that's specific to fourth quarter.

That also is part of the reason why we're going to have slower adjusted EBITDA growth. My prepared comments basically said we expect adjusted EBITDA growth to be roughly in line with what our revenue performance will be. So that makes it kind of low single-digit growth year-on-year. Part of that is also just how we're thinking about investing in the business as we look specifically at the back half of the year and the success, I'd say, of the totality of the year.

So we expect R&D to be up high single digits year-over-year in the second half, relatively consistent with how we've invested in the business year-to-date. And we expect sales and marketing to be up, call it, mid-single digits year-over-year, again, reasonably consistent with what we've invested year-to-date, so first half but just on a slightly lower revenue growth basis.

Your next question is from Allen Lutz from Bank of America.

One for either Paul or Eric. You talked about 3% volume growth and 2% pricing growth in the quarter. How should we think about how that evolves over the course of the rest of the year? And I guess, as we think about exiting 2026, how do you think about the contributions from volume and price growth at that portfolio level heading into 2027?

Yes, I can start with that one, Allen. So I think first off, I would just say half to date, this year-to-date, we have had a very good mix through our lens of price performance and volume performance. I think the quarter was actually a very clean view of that. You mentioned it, about 2 points from price, about 3 points from volume. And of course, that's certainly an equation that we would love to continue to take forward.

I won't repeat what I just mentioned on the back half relative to billing days, but that particular effect will impact our volume in the second half, specifically the fourth quarter. But if we normalize that, we would expect it to be growing in line with our normalized volume year-to-date and consistent with our guidance range.

And then there are 2 pieces, I think, that are relevant in the kind of price equation for us globally. We expect price growth in the second half to be consistent with how we grew price in the first half ex China. That's all of our businesses around the world, developed and developing markets.

But we expect China to be down roughly an equal amount, and that's really just the VBP implementation that Paul talked about, significant price down in ortho. We expect volumes to be up. And then implant price down to be slightly, we expect volumes to be up there, but it will play out on the price line for roughly a neutral price for Envista in the second half. I think it is important to understand that outside of China, however, we've got price growth which is coming on the back of price increases that we implemented last year and then targeted price increases by portfolio and geography this year.

Our next question is from Lily Lozada from JPMorgan.

Great. Hoping you can talk about your guidance ethos and how you're thinking about the rest of the year. You've done mid-single-digit underlying growth a few quarters in a row now, and guidance implies a slight step-down over the back half of the year, even ex selling days on a true organic basis. So is that just conservatism? Or are there other dynamics to be keeping in mind for the back half of 2026? And then I have a follow-up.

Yes. So I think maybe the big number as we look at it is 4% to 5% billing day impact in Q4. If we adjust for that, our guidance assumes we're growing roughly in line with how we grew year-to-date on a normalized basis. When we say normalized year-to-date, that includes really one significant factor. That is the Spark deferral benefit that we've had year-to-date. And then, of course, we have the opposite beneficial impact on billing days.

So squiggly line, approximately 4% year-to-date, and that's reasonably in line with what we're expecting in the back half of the year. So we see our growth being actually pretty consistent half 1 to half 2.

Got it. That's helpful. And then just on EPS, you're raising guidance by almost double the beat. So what gives you confidence in that? And what's better in the second half than The Street was forecasting?

Yes. I think there's really 2 pieces outside of growth, which I think we've just talked through. We will have obviously a very solid growth year. We continue to see very good profit leverage. That's thanks to our volume benefits. That's thanks to our price equation. We've also had very good productivity in the first half and I think particularly in second quarter. We expect basically our fundamentals continue to deliver in the second half in that same range.

And then we talked about a tax rate benefit. Most of this is really just carryforward of the strategies that we executed last year and then what we're seeing in terms of U.S. income performance, which is really helping to absorb that interest rate deduction penalty that we've had in the past.

So our rate guidance, if you didn't catch it, is 26%. It's 2 points less than what we expected entering the year. It's reasonably consistent with where we are on a year-to-date basis. And I think really importantly, we see that as a good, sustainable, predictable rate going forward. We know that we've implemented a lot of strategies in addition to just better business performance that's making that tax rate sustainable.

Our next question is from Brandon Vazquez from William Collier (sic) [ William Blair ].

I want to start with kind of wrapping up a couple of questions that have been asked already and just ask a little more clearly. Like are you able to quantify some of the moving pieces in the back half or at least like shore us up on what is an underlying growth rate in the second half of the year? Is it in the low single-digit range? Because what we're trying to figure out is, essentially, what is the jumping rate or what's the exit rate on an underlying basis into 2027. So like what is the growth when you normalize for things like selling days, deferrals, VBP? There's just a bunch of moving pieces, so curious if you can talk about that a little bit.

Yes. So I think at a high level, when you do the normalization, it would be about 3.5% core growth in the second half. That same math, Spark deferral and billing days was about 4% in the first half. So I think big picture, it's a very similar underlying growth rate first half to second half.

Just as a reminder, we will not have any more effect from our Spark deferral benefit. I think we've telegraphed as we've gone throughout entering this year through the first couple of quarters that we basically lapped that final piece, which is about $5 million in the quarter itself.

And then I think if you get really to the pieces of the business, there's not a lot of significant moving parts, Brandon, underneath that. We will have slightly better growth, as mentioned I think earlier in the call, from China. That's a slight accretive benefit. We'll have slightly less price benefit. We talked about that as we entered the year just based on sort of the roll-off of what we see from tariff-related price actions last year into this year. But you put, I think, everything sort of in the basket. And it will be a very consistent underlying first half, second half performance as we see it, 3.5%, call it, core growth.

Our next question is from Kevin Caliendo from UBS.

Just getting back to China really quick to understand the meaningful price down in ortho, down 10%, 15% in implants. You're still expecting growth. I'm guessing that's based on just a huge amount of pent-up demand ahead of or waiting for VBP.

And if that's the case, how should we think about China into '27? Like how much of that carries forward? Will China be a growth tailwind in '27 or a headwind? I'm just trying to figure out the sizing of this sort of bolus that you're expecting to get in volumes in the second half and how that runs through going forward.

Yes, Kevin, I'll take that one. Thanks for the question. Maybe 3 components will help clarify it. So first, yes, we do expect an acceleration of growth. That comes from 3 things. The first is, as Eric mentioned, we've been keeping the channel tight. Product in channel, of course, gets revalued when the price changes, and so it's neither helpful to us nor our channel partners for that revaluation. So we keep that tight. It will expand back to more normal levels post VBP, so you get a short-term effect from that.

The second effect you get is related to market shares. The way that VBP works is there's 2 bidding processes, 1 for the setting the procedure price and the second for the supplies price. The clinicians give a forecast. The hospitals give a forecast of the volume demand for each of the players. And so the larger market share players going in tend to get more coming out, and you get growth from that.

And then the third piece, which was very evident with implants, was the underlying patient demand. When you reduce the procedure price, demand by patients went way up. Now specific to ortho VBP 1, I think you'll see less of a patient impact to volume. And that's for 2 reasons. It's still unclear if procedure price will be changed on ortho, so we'll have to see whether that happens.

And then the second, all things equal, it's easier to expand supply for implants than it is for ortho. Ortho is an 18-month to 24-month procedure. And it's more difficult to train a clinician to do orthodontics than it is to do implants, particularly in fixed wire orthodontics, which is still the largest category in China. So hopefully, that unpacks for you a little bit where the growth will come in the second half.

Moving forward, we're -- continue to be long on China. It's currently the second biggest dental market in the world. We expect it to become the largest at some point. And so in the same way that we are continually making investments in other big dental markets, U.S., Germany, Japan are good examples, we're investing long term in China. A good example of that is the new Suzhou plant that we announced about this time last year.

Envista has been doing this now for 130-something years. So we're pretty comfortable navigating short-term uncertainty to support longer-term growth, and China lines up well against that long-term strategy.

That's helpful. Really helpful. Can I ask a quick accounting follow-up? Because I'm...

If you ask it of Eric, yes.

You had an $11 million revenue good guy from FX and -- on the revenue side. But on the bridge for the EBITDA, it was a $12 million good guy. Is that just the delta there hedges unwinding or something like that? I'm just trying to understand how that works.

Yes, Kevin. If you go back to last year, so the answer to your question really lies in our prior year comp. Last year, in the first half, we did not have an active hedging program for our balance sheet. And the dollar was weakening pretty substantially, if you might recall, from late 2024 through first half 2025. We had losses last year against that weakening U.S. dollar for balance sheet revaluation.

Starting third quarter of last year, we started hedging our balance sheet. And so you're not -- we're not seeing -- you're not seeing any intra-quarter significant losses or gains because we're hedging appropriately. And so the better profit impact, which is, I think, the core of your question, is just coming from not having that prior year Q2 loss.

Our next question is from Jason Bednar from Piper Sandler.

I wanted to come back quick first on the pricing discussion. Eric, could you maybe unpack the volume versus price contribution within consumables? I'm assuming there isn't a ton of pricing that you're capturing in that high single-digit growth in diagnostics, but correct me if I'm wrong. And then in SP&T, you referenced capturing price there. Can you talk about the regional or portfolio variations in price capture for implants?

Yes. So let me just catch the first one. I think it was a comment really on E&C price capture. So we did get better price capture, just call it, above average, 100 basis points or so above the Envista average of almost 2% in E&C. We tend to get more in consumables. We see it as a less elastic market, and we also have extremely strong brands. But we did also get price capture in our diagnostics business.

That also means that our volume growth, as Paul laid out, the 8% growth in E&C was very solid. So I think we're seeing good performance on multiple fronts there. Obviously, that means we got less price capture in SP&T. We're very select in terms of the portfolios that we're looking at there for price, and then it's sensitive as well to geographies. So hopefully, that gives you a little bit of a dip down, Jason.

Yes, it does. That's helpful. I wanted to come back also then maybe to follow up on the VBP discussion. We have the analog here for ortho on how volumes may respond to price declines. We don't really have a good analog here for VBP 2 in implants. I guess, what are you -- sorry if I missed it. But what are you assuming with respect to the volume growth response in VBP 2? Assuming we do have a 10% to 15% decline in price like you're expecting, what do you expect in volumes in response to that?

Yes, Jason, let me take that one. So first, we're not sure we'll see the same volume effect from ortho VBP 1 as we saw from implants VBP 1. As we mentioned on a previous call, it's not as easy to expand supply on an orthodontic procedure as it is to implant. So we'll have to see how that plays out. We think the market share effect will be very similar, but the patient response, time will need to tell.

With respect to VBP 2 on implants, we think that the volume growth there will come from additional market share gain. We think the patient demand response will be muted, one, because the price isn't going to change much; and two, because, there, we're also not sure that the procedure price will change. We think we'll get more share as a result of VBP because that's how that bidding process works, but the patient component of it for VBP 2 will be less pronounced.

Okay. Paul, I mean, just real quick, net positive, net neutral on VBP 2 for implants? Or is it too early to say?

I think I'll hold on that one. I'm not sure. Eric, do you have a view on whether the 10% price increase will be net beneficial?

I mean, our view is that we're now getting down sort of to this rate and range where it's less impactful, right? It's less impactful from a price and an economics perspective. I think there's also an open question as to whether or not that will, through procedure price, drive demand. But we also look to a lot of previous med tech VBPs.

And I would say that the Chinese government has done a good job in getting it right, meaning getting this equation right of sort of the price down, volume up. And as a leader in terms of brand market global presence, we think it's going to bode well for us in terms of volume. Obviously, there's variability around that. And it comes down a lot to how we're prepared with customers and how we're prepared with channel and our own supply chain, and we feel strong about that.

Our next question is from Michael Cherny from Leerink Partners.

I think we've beaten a lot of these topics to death, so I'll ask kind of a big picture one. What should we expect at the Investor Day? And how are you thinking about positioning, obviously, either there or at various different conferences, the product portfolio and the R&D engine?

Yes, happy to take that one. It's been about 1.5 years since our last Investor Day, so it feels about like the right time to give you guys an update. In terms of the agenda, our current thinking is that I will kick things off with a deeper dive into the strategic and operational progress against the original plan, the value creation plan we unveiled in March of 2025.

Eric will then do a similar kind of update but through a more financial lens, quantifying those sort of strategic levers I'll talk about. Then, we'll have each of the leaders of our 4 main businesses walk you guys through the main drivers that they're prioritizing. And then we expect to have an extended Q&A session.

We're going to host this event and webcast it from our Procera facility, which is just outside of New York City. It's about an hour outside. We make custom prosthetics there. The presentation and supporting materials will be, of course, available on our website. And for those who are able to attend in person, we'll provide a tour of that facility. It's pretty interesting. And then we'll also showcase some of our higher-impact new products that have recently launched. So whether you're able to join us in person or online, we certainly hope you can make it on September 17.

Our next question is from David Saxon from Needham.

Maybe I'll just keep it to one given the time, so -- and higher level, too. So just when you're thinking about Envista's overall margin improvement potential, just curious where you see the most opportunity across SP&T and E&C. I think E&C has generally seen a higher op margin, but I'm not sure how significant you're thinking Spark could be longer term for SP&T.

Yes. Let me answer the question along 2 vectors: first, by reporting segment, as you asked; and then secondly, maybe a look across the P&L. Yes, you're correct that Spark remains a very important margin expansion lever. We've had, I don't know, how many consistent quarters of year-over-year unit cost reduction.

We still see progress ahead of us. There's a multiyear improvement -- unit cost improvement plan that the teams put together in a very organized sequential way that they go about introducing that and then spreading it across the 3 factories we have. So plenty of work left to do there. We think a similar sort of opportunity is available to us in implants. The businesses are similar, implants and ortho. And seeing what is possible through our Spark experience has motivated us in other parts of the company.

I would say, though, on the E&C side, there's still room to grow as well in our diagnostics business. As you know, that's a comprehensive solution. That's a hardware business, but it also has software and services. And the software and services parts right now are growing even more quickly than the hardware part, and they have better margins. So as those sides of that business grow, there's a natural margin expander that comes with it.

If we look at it across the P&L, last year, we had a particular focus on G&A. We took out $35 million. I think that not only helped the economics of the business, but it also helped the speed and decision-making. We're continuing to work on G&A productivity, but the bigger opportunity for us is on the COGS line. We have a number of programs that we're working to drive increased COGS productivity. And the last 2 quarters, you've started to see that manifest itself in our gross margin line. We had gross margin expansion in both Q1 and Q2, and we're hopeful that there's more room to go there. That's kind of a thought on margins cut both by business and by line to the P&L.

Our next question is Michael Sarcone from Jefferies.

Just a quick one on the model. Eric, any update on what you're expecting for the FX impact for the back half of the year on sales?

Yes. I think it's a pretty straightforward perspective. So we do not expect FX, if you think about translation on revenues, to be material at all in the next 2 quarters. In fact, our model has got it almost dead flat, so call it 0% growth year-over-year in Q3 and Q4.

And if you just look at how rates have moved sequentially in the last several months, a little bit of a weakening euro but a strengthening of a few of the other currencies. And effectively, if that environment doesn't change, we'll be in a near 0, if you will, foreign exchange impact, top line and bottom line.

And we've largely worked through what we talked about, I think, midway through the Q&A, in terms of just these benefits that we had from losses last year, which were all in the first half. So you add all that up, and there should be a very nominal to near 0 impact unless rates move forward on the second half.

There are no more questions at this time. I would now like to turn the conference back to Mr. Paul Keel.

Okay. Thanks, everyone. Let me just briefly underline a couple of thoughts by way of wrapping up the quarter. First, our second quarter results supported a strong first half performance for Envista. Compared to the first half of 2025, we delivered 7% core growth, 27% adjusted EBITDA growth and over 50% EPS growth. Secondly, our Q2 performance was once again broad-based, with both reporting segments and all major geographies posting strong results. Third, we continue to focus on executing our value creation plan with ongoing progress against all 3 of our priorities: growth, operations and people. And fourth, this performance gives us confidence to increase our full year 2026 guidance.

We look forward to the upcoming Investor Day that we referenced in a previous question. Again, that's on September 17, where we'll take a longer look at our strategy and execution. I think that covers it for now. Have a great day, everyone, and a terrific week.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Hello. My name is Melissa, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Envista Holdings Corporation's First Quarter 2026 Earnings Results Conference Call.

[Operator Instructions]

I will now turn the call over to Mr. Jim Gustafson, Vice President of Investor Relations at Envista Holdings. Mr. Gustafson, you may begin your conference.

Good afternoon. Thanks for joining Envista's First Quarter 2026 Earnings Call. We appreciate your interest in our company. With me today are Paul Keel, our President and Chief Executive Officer; and Eric Hammes, our Chief Financial Officer. Before we begin, 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 available on the Investors section of our website, www.envistaco.com. The audio portion of this call will be archived in the Investors section of our website later today under the heading Events and Presentations.

During the presentation, we will describe some of the more significant factors that impacted year-over-year performance. Supplemental materials describe additional factors that impacted our results. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the first quarter of 2026 and references to period-to-period increases and decreases in financial metrics are year-over-year.

During the call, we may describe certain products and solutions 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 and 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, and actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.

With that, I'll turn the call over to Paul.

Thanks, Jim. Good afternoon, and welcome, everyone. On today's call, I'll kick us off with a summary of our Q1 performance. Eric will then take us through the numbers in more detail, and I'll wrap things up with some closing thoughts before opening the Q&A. As an overarching statement on the quarter, Q1 was a good start to 2026 for Envista, extending momentum we built across 2024 and '25. As you will have seen in the various market surveys and peer results, the dental market is again showing its characteristic resilience despite continued high macro volatility. We're naturally keeping a close eye on how the situation in the Middle East evolves. But thus far, we've seen minimal impact to the global dental market.

Specific to Envista, we posted 9.5% core growth in Q1. And for the fourth straight quarter now, all of our major businesses delivered positive growth. Ortho consumables and diagnostics were all up double digits and implants was up mid-single digits, excluding China. As a reminder, this quarter did benefit from 4 additional billing days which Eric will discuss in more detail. As we did across 2025, we reinvested a meaningful portion of our gains into continued future growth as sales and marketing and R&D investments were both up double digits. We also completed an accretive tuck-in acquisition in our implants platform, of which I'll say more in just a moment. Our improved execution and operating discipline continued in Q1, helping to convert good top line growth into even better adjusted EBITDA and EPS growth, up 25% and 50%, respectively.

This in turn gives us confidence in extending the share repurchase program that we initiated early last year. Our board recently authorized an incremental $300 million addition to the program. Finally, our continued momentum and strong start to the year give us confidence in reaffirming the 2026 guidance that we issued on our Q4 2025 call.

Let's now turn to progress we made in the quarter in support of our 3 core priorities of growth, operations and people. Starting with growth, we delivered strong broad-based performance across the portfolio. As mentioned, ortho, consumables, diagnostics and the implants all delivered good growth. In terms of segment performance, Specialty Products & Technologies grew core revenue by more than 8%, while equipment and consumables was up nearly 12%. Geographically, North America and Europe both grew double digits, developing markets grew high single digits with some specific exceptions like China due to VBP and the Middle East due to the conflict. New products again played a central role in our success, and I'll provide further detail on this on a later slide. Rounding out growth, volume contributed over 7 points in Q1 with price accounting for the remaining 2-plus percent.

Turning to operations. We continue to see widespread benefits from our Envista business system, improving manufacturing productivity helped drive 100 basis points of gross margin expansion. And when combined with sustained G&A productivity, adjusted EBITDA margin expanded by 120 basis points. On a prior call, we noted a legacy intercompany loan that impacted our interest deductibility in the U.S. With that loan now resolved, our Q1 effective tax rate declined contributing to the 50% year-on-year EPS growth that I mentioned earlier.

With respect to people, we remain focused on engagement, development and community impact. Last quarter, we noted wide ranging improvements in our 2025 employee survey. We built on this momentum in Q1 with further gains and colleague engagement. In addition to this, we launched an enterprise-wide talent development program last quarter with structured opportunities for career advancement and personal growth. We embraced our circle value of continuous improvement by conducting 60 kaizens across our company, and we extended our long-standing track record of investing in our communities by supporting close to 4,000 underserved patients through our charitable Envista Smile project. Highlights in Q1 included a mission trip to Antigua and 2 events in partnership with USC's Ostrow School of Dentistry, providing critical care to children and veterans through their mobile dental clinics.

Coming back to the central role that new product innovation is playing in our accelerating growth. Slide 6 covers 3 of several new product launches in Q1. In our implant business, we introduced Nobel S Series, which combines evidence-based designs and surface technologies with a common conical connection across all sizes of Nobel implants. This significantly reduces complexity for clinicians by improving inventory efficiency, planning and chairside workflows. Early market response to launch has been encouraging with over 1/4 of orders coming from competitive conversions.

In orthodontics, we achieved an important geographic milestone with the launch of Spark in Japan. We have long been a bracket and wire leader in this market, and the Spark launch allows us to leverage our strong position to also win in Japan's attractive clear aligner segment. Spark has captured share every year and in most geographic markets, and we expect to do the same in Japan. DEXIS continued its streak of market-leading innovations with the release of DTX Studio Clinic with enhanced AI. The platform includes algorithmic image management, AI-driven diagnostics, automated treatment planning and workflow enhancements.

DTX Studio automatically generates a series of diagnostic insights from intraoral radiographs, including new tools such as colored tooth segmentation and diagnostic findings such as carries, bone loss and root canals. Full mouth AI detection and intelligent layout create a digital twin of a patient's anatomy in less than 5 seconds. DEXIS has the largest installed base of imaging systems on the market with roughly 275,000 connected devices and workstations in operations.

Collectively, this network processes over 500 million images annually. And processing this vast data set, DEXIS' AI-powered digital ecosystem continually refined and advances the clinical benefits that we bring to customers. New product innovation has long been the lifeblood of Envista and this very much remains the case today.

In addition to the progress we're making with respect to organic growth, we also completed a small but clinically important acquisition in the quarter. Versah is a pioneer in a novel implant preparation technique called osseodensification. In the traditional osteotomy, the bone is excavated in order to make room for the endpoint. With osseodensification, however, the bone is compacted and autografted leading to improved osteo integration in certain clinical indications. This patent-protected solution offers a number of key benefits. For the clinician, Versah simplifies clinical workflows as its universal kit can be used with most implant systems.

For the patient, the procedure supports more immediate implant placement, reducing chair time as well as the number of visits. And for Envista, Versah adds yet another clinically differentiated offering to our implants portfolio and a synergistic growth opportunity as the system integrates seamlessly into our existing clinical education and go-to-market strength. The acquisition is expected to be accretive to Envista in terms of growth, margin, EPS and valuation multiple.

Summarizing Q1 before turning it over to Eric, we furthered the good momentum we built across 2025 and posted a solid start to 2026. There continues to be no shortage of exogenous factors demanding attention, but specific to what we can control, we're encouraged by our progress. With that, I'll ask Eric to walk us through the financials in more detail.

Thanks, Paul. In the first quarter, we delivered sales of $706 million. Core sales in the quarter increased 9.5% and FX added a bit over 400 basis points. Our Q1 growth benefited from additional calendar days and the Spark deferral benefit. Excluding these effects, core growth was around 4%, in line with our expectations. As Paul mentioned, this was another strong quarter of growth for Envista with positive growth in both segments and particular strength in developed markets. Q1 adjusted gross margin was 55.8%, an increase of 100 basis points versus the prior year. Volume, price, productivity and FX all contributed to the year-on-year improvement in gross margins. Our adjusted EBITDA increased by 25% year-on-year with margins for the quarter of 14%, increasing 120 basis points versus prior year.

Profit margins were helped by the previously mentioned gains in gross margins as well as continued strong G&A productivity while investing in the business. Adjusted EPS in the quarter was $0.36, up $0.12 compared to the same quarter of last year. Our non-GAAP tax rate for the quarter was 26.1%, slightly better than our expectations. The actions we delivered and communicated throughout 2025 have contributed significantly to the beneficial trend in our non-GAAP tax rate, and we still expect the 2026 full year rate to be around 28%.

Rounding out Slide 8. Our Q1 free cash flow was negative $16 million. The first quarter is historically our lowest cash flow quarter for the year, and we continue to expect our free cash conversion for 2026 to be approximately 100% of adjusted net income.

Now let's turn to 2 bridges to help break down our year-on-year results, beginning with sales. Core revenues grew 9.5% in the quarter, with positive growth in all major businesses. As outlined previously in our 2026 guidance assumptions, Q1 had 4 additional billing days compared to last year. Given the makeup of our businesses, the estimated impact was $28 million or 4.5% growth, consistent with what we outlined in the Q4 call. We expect a similar negative impact year-over-year from 4 fewer billing days in Q4 2026. The weaker U.S. dollar year-over-year contributed about $26 million in revenues. Underlying unit volume and price delivered another $22 million in growth, reflecting another strong performance for Envista. Spark deferral tailwinds contributed $9 million of year-on-year growth. And finally, we had a minor benefit from acquisitions completed over the past year, all 3 of which support a more competitive implants business.

Turning to the adjusted EBITDA bridge on Slide 10, we're now showing both the dollar and margin rate change year-over-year. This is consistent with the primary financial metrics that we laid out in our March 2025 Capital Markets Day and the specific focus that we placed on growing our profit dollars. I'll walk through the adjusted EBITDA dollar growth where we were up $20 million or 25% year-on-year. Volume and mix combined for a $27 million improvement, reflecting the strong gross margins across our business portfolio. Price contributed another $11 million. Foreign exchange rates contributed $7 million. This was driven by transactional FX losses in the first quarter of 2025.

As we outlined last year, we're now hedging our balance sheet, which is aimed at minimizing quarter-to-quarter volatility due to exchange rates. Productivity was a small tailwind in the quarter as we continue to drive both factory and G&A productivity, offsetting inflationary impacts. Year-on-year tariff costs increased $11 million in the quarter with a gross tariff cost similar to recent quarters and consistent with the guidance assumptions we outlined for 2026. As mentioned throughout 2025, we offset our gross tariff costs through supply chain, G&A and pricing actions. We expect quarterly tariff costs to be similar going forward in 2026 with the new global tariffs effectively replacing the prior IEEPA tariffs.

Finally, supported by our strong growth and productivity, we continue to invest in sales, marketing and R&D to drive future growth. All in, our margins in the quarter were 14%, up 120 basis points year-over-year.

Turning to segment performance. Revenue in Specialty Products & Technology grew more than 14% year-on-year with core sales up 8.4%. In our orthodontics business, Spark was up double digits even after adjusting for the net deferral change and Brackets & Wires also grew double digits. While the increased billing days in the quarter did benefit both orthodontic categories, the underlying growth remains strong as we continue to strengthen our competitive position globally.

Implant core growth was up low single digits in the quarter as solid growth in developed markets was offset by declines in China as our channel partners are reducing inventories in preparation for an expected VBP process. In Q1, Specialty Products & Technologies posted adjusted operating profit growth of $10 million year-on-year, up 18% with a 40-basis point improvement in margin rate. Both businesses had positive price capture, and we continue to see factory improvements in orthodontics, which allowed for increased investment in commercial and R&D.

Moving to our Equipment & Consumables segment, core sales in the quarter increased 11.5% versus prior year, with double-digit growth in both consumables and diagnostics. Our consumables business continues to deliver well across the portfolio in both Kerr and Metrex, while diagnostics were particularly strong in developed markets, posting its fourth straight quarter of positive growth. Adjusted operating profit increased 33% over last year, with operating margins up nearly 300 basis points driven by strong pricing and volume benefits, offsetting investment in sales, marketing and R&D. This segment also benefited disproportionately from the year-over-year FX tailwind that I mentioned previously.

Now I'll turn to cash flows and our balance sheet. Q1 free cash flow was negative $16 million, a reduction of about $11 million from the first quarter of last year, primarily driven by an increase in CapEx as we invest in new manufacturing facilities in China and Finland to support our growth objectives. Our balance sheet remains strong and stable with net debt to adjusted EBITDA of less than 1x. Our balance sheet continues to provide a strong flexibility during periods of macroeconomic uncertainty.

In Q1, we purchased approximately 1.6 million shares of our stock. At the end of the quarter, we had $41 million of remaining capacity in our stock repurchase program. As announced today, our Board recently authorized an incremental $300 million in repurchases through the end of 2029, assuming an even deployment of capital per year, this would allow for investment of approximately 1/3 of our annual free cash flow to repurchases, leaving capacity to invest in organic growth and M&A.

As Paul mentioned previously, we are reaffirming our 2026 guidance range of 2% to 4% core growth, 7% to 13% adjusted EBITDA growth, EPS of $1.35 to $1.45 and approximately 100% free cash flow conversion. With that, I'll turn the call back over to Paul.

Thanks, Eric. A few closing thoughts on the quarter before we open it up for your questions. The global dental market continued to demonstrate its characteristic resilience in Q1 even in the context of ongoing macro uncertainty. Specific to Envista, we again delivered balanced growth across our portfolio with strong performance in both reporting segments and most geographies. Our improved execution helped convert 10% core revenue growth into 25% adjusted EBITDA and 50% EPS growth, while also allowing us to invest in both organic and inorganic growth priorities. Behind this progress, our Board has authorized an incremental $300 million for share repurchases. While heightened macro volatility brings additional challenge, our continued momentum and strong start to the year gives us confidence to reaffirm our full year 2026 guidance.

Finally and most importantly, I'll close by noting that everything Eric and I shared today is made possible by the skill, effort and commitment of our global Envista team. We recognize and appreciate all you do in the service of our stakeholders. Similarly, we're grateful for the support we receive from our customers, partners and shareholders. And that completes our prepared remarks for today. We'll now open it up for Q&A.

[Operator Instructions]

The first question comes from Elizabeth with Evercore ISI.

Congrats on another good quarter. I mean, this really helps sort of extend some of the momentum that you built from '25. Maybe from a high level first, like what is it that sort of like clicking nicely for Envista? And then sort of what areas do you sort of view as having been more difficult to get traction in?

I'll take that one. Thanks for kicking us off, Elizabeth. As we talked about on previous calls, Eric and I came in just about 2 years ago now, having been in and around dental for a good portion of our careers. So we already knew that dental was an attractive industry and that Envista was well positioned within it. But for a variety of reasons, neither the performance of the market nor the business were consistently reflecting those advantages. So the plan that we laid out this time last year at the Capital Markets event centered on improved execution in 3 principal areas, those being growth, operations and people with the thought that they would help bring their performance better in line with the company's potential.

So now looking back, assessing our progress in that regard. On the growth front, I'd say that the investments we're making in areas like clinical education and customer support and new product development are all beginning to bear fruit. We saw that in the Q1 results as well as 6 quarters now of generally broad-based growth and market share gains.

Looking at it operationally, and this has always been a pretty strong business in this regard in large part because of our continuous improvement focus that comes through the Envista Business System. During COVID and the turbulence that followed it, though, in all candor, our focus did slip a bit, and that resulted in compression on the gross margin line as well as some overspending in G&A. So we trimmed overhead last year by about $35 million.

That has helped speed decision-making, and it's also improved earnings leverage as we just shared. And now we're starting to get similar traction on the manufacturing front with 100 basis points of COGS reduction in the quarter. And then we're really excited about the momentum that we're building on the people front. There were a few openings, as you know, in the management team when I joined, and that afforded the opportunity to bring in additional dental market expertise from outside the company, to supplement the strong team that was already in place when I arrived. And so the combination of the 2 has jelled nicely, and you see that in a lot of the metrics we shared on the call. Collaboration is up, internal promotions are up. Engagement is up. All of this is, I think, healthy and helpful.

And now in terms of the second half of your question, areas that have been less helpful. Of course, we'd have to start with macro uncertainty and in particular, the impact that has on our customers and patients. If we look back across the last 24 months or so, several of the, kind of, key market indicators for dental that many of us watch, things like interest rates and unemployment and consumer confidence, all of those were beginning to trend favorably across the back half of '24. Then of course, in Q1 of last year, we had tariffs, which caused an unexpected disturbance to that upward trend. Dental showed its resilience, conditions again started firming up in the back half of '25 and then we had the Gulf events heating up in Q1 of this year. So now we're all trying to assess how that might impact conditions moving forward.

But as this audience knows well, dental has proven its resilience. We saw solid evidence of that in Q1, both in our results and others. In addition to that, Envista, as we've shown, has a portfolio that's well balanced by segment, by geography, by go-to-market model. So that is all helpful. And I guess kind of bringing it to a close, net-net, we're confident that the dental market will weather the current uncertainty and that the continuous improvement you're seeing from Envista will continue. So thanks for the question.

Yes, that is helpful. And maybe as a follow-up, obviously, we saw a solid -- very good performance this quarter, and you pointed to the 4 extra days that changed in the back half of the year. But can you just talk about, is it really those sort of macro drivers that are causing you guys to not raise the guidance at this point for the outperformance? Is it just too early in the year? Obviously, you didn't do it 1Q last year either. So I'm just trying to sort of calibrate your expectations in terms of how things are faring versus when you originally set the guide.

Yes, it's a fair question. As part of our regular process in preparing for these calls, we give very careful thought to full year guidance. So we appreciate the spirit of your question. On the plus side, we are seeing stable to slightly upward trends in the dental market. We just walked through the many things that are going in favorably for Envista specifically. And then we're building, I think, a pretty good track record now of consistent performance. So all of these do give us confidence in continued performance moving forward.

But as you suggested in your question, you have to balance those with a recognition of the current macro climate. The frequency and amplitude of the geopolitical shifts over just the past 1.5 years has to be taken into account. And since we don't give a confidence interval along with our guidance, you need to capture that uncertainty in the guide, and it typically takes the form of a larger buffer reflecting a less certain environment. So net-net, Elizabeth, I'd say we're encouraged by our progress and feel that reaffirming 2026 guidance is the most appropriate outlook to provide at this point.

Your next question comes from Michael with Leerink Partners.

Maybe just one quick first point of clarification. You mentioned the implant performance in China in terms of VBP. Can you just remind us what's embedded in guidance on VBP timing?

I'll let Eric get in on this one.

Yes. So Michael, when we talked in the fourth quarter call, at that point in time, we were looking at ortho and implants and effectively a VBP process that would start for both of those in the Q2 and/or Q3 time frame. We don't have certainty on either of those, right? We have modestly updated information. But I would say, at this point in time, our best estimate and to your question, what's included in guidance is both of those VBPs starting the process in Q2 or Q3. So that's maybe the first point. And then what we always remind I think our sell-side analysts and investors on is we are relatively well prepared as we see the channel in both of those businesses.

We've been going through that process now for 18 months, particularly as we've seen some of the delays in VBP, but we will likely see a little bit of channel once the process begins, that will mean we'll have a slight compression of revenues in the short term. And then we'll see some benefits as our businesses particularly our good, strong global brands are able to leverage the important impact of VBP, which is bringing more customers to the market. So no change on the macro, I'd say, in line with our guidance, and we'll give you the best information we can as the market gives us the same.

It's helpful, Eric. And then just if I could stay on implants, if you don't mind, encouraging to see the mid-single-digit growth in the quarter ex China. Can you give us a sense on what component of the growth came from new product launches, I know you mentioned the S Series, but in terms of the vitality index contribution from implants, any way to characterize where the growth shook out?

Yes, I could just talk to that one, Michael. So I think it was in my prepared remarks, likely Paul's as well. So big picture, the number to hinge on is we grew low single digits in core growth in implants in first quarter. Very different trend as we look at China versus developed markets. I'll just take those 2.

We were down strong double digits in China. That's a nod to what we just talked about in terms of the start of the VBP process even though there's nothing formally confirmed in place. But nonetheless, the market is showing kind of the signals of that. So within that positive low single-digit growth, we were down significantly in China. We had strong mid-single-digit to even high single-digit growth in developed markets, roughly equal when we look at Europe as well as the United States.

Paul mentioned in his pre-read remarks, Nobel S Series. We're seeing good early signals from that. But I wouldn't say that at this point in time, new product launches are really significantly contributing to our implants growth overall. Most of what I think we've talked about in the past has been the return to growth based on the commercial investments we've put in, the same portfolio, if you will, that we've had as well as investments into clinical and then having also a strong portfolio around the entirety of implants.

So we had a very strong growing regenerative biomaterials business this quarter. That's been pretty consistent over the past many quarters. We had good growth in our prosthetics Procera business, and we continue to have a strong growth rate, albeit not a significant percent of the share of our business in the digital space. Good performance coming from some early new product launches, but certainly more to come there.

Michael, do you have a follow-up?

I am all set, thank you.

Your next question comes from Jeff with Baird.

I love the first name basis. Here we're all such good friends. Just wanted to ask a question -- a follow-up question on that implants business. Eric, would we think most of the impact of the VBP prep in China is now done? Do we get another quarter or so of the same kind of headwind before we stabilize for a quarter or 2 and then maybe get some tailwinds a quarter or 2 after that? Just how to think about that? And just what are you hearing on ortho VBP, that's the one that's been harder to get any kind of updates on, it seems like over the last quarter or 2?

Yes. So to your first question, Jeff, I would say the significant decrease that I mentioned, a double-digit decrease in Q1. We expect that to be the larger percent, if you will, of the year-on-year impact from VBP, but that also presupposes that VBP doesn't get pushed out, delayed or changed. There will be a little bit of a headwind from it in second quarter and then again, as plans get updated or remain the same, we expect to get more into the sort of the growth part of that.

Importantly, though, with prices reduced and volume up. And then we don't have great better information on the ortho side. Right now, Q3 is what our planning assumption is. That's effectively how we also went into the year. But I think as Paul talked about in the Q4 call, just be mindful that we've got an implants and an ortho business that's among dozens if you will, of other med tech businesses that are also being considered in and around the next couple of quarters, and I think that's creating some level of complexity. But right now, our planning assumption is third quarter and we hope we get some consistency out of that.

Yes, fair enough. And then just a follow-up on pricing, if I could. A 2-parter, I guess. One, it's -- you guys have taken some good price. I think we've been surprised that especially some of the price inelasticity, it seems like on the Wires & Brackets side, especially one of your larger distribution peers talking the other day about maybe seeing some additional price increases from manufacturers going through starting in 2Q of this year. Just how are you thinking about next round of potential price increases? I know you don't want to tip your hand on this call necessarily. But just generally, was it a one and done last year? Do you feel like there might be still some room in this environment.

And it looks like you have a new calculation for pricing for your 10-Q. Can you just kind of help us understand what pricing under the old calculation might have looked like versus what it looks like now, just so we can kind of understand in our model, how we could really think about this apples-to-apples growth this quarter coming from volume versus price at least as we modeled it?

Jeff, I'll take the pricing strategy part, and I'll let Eric weigh in on any disclosures in the queue. Our pricing algorithm has been the same since Eric and I joined. We've always thought of dental as a health care broadly, dental specifically, as less price elastic than the broader market. That's what's contributed to dental generally outgrowing the broader market both in times of economic expansion and contraction.

All of that got turned a little bit sideways in multiple categories during COVID. And I think Envista and our peers all lost sight a little bit of the importance of pricing from kind of the '22 to '23 period. So when Eric and I joined, we refocused Envista on this important component and it has both a strategic and an executional element to it. Strategically, our focus is always begins with our customers. We want to help them capture greater value in their offerings, and then we try to get a portion of that. So that's code for saying, we try to limit our price increases below procedure price increases so that as customers continue to do well, we get a portion of that.

And then executionally, you have to make price visible. You have to put it on the P&L. You have to put it in people's objectives. You have to show it on your dashboard. Of course, we have good capabilities in turning those targets into delivery through EBS. So we have focused kaizens on the execution of the pricing strategy that I just articulated.

So moving forward, Jeff, all that will remain the same. We were -- we got extra price last year because exogenous effects required it. And I think customers understood that. Again, we'll have to see what happens with inflation here in response to the situation in the Middle East. And if it required -- if we see inflation coming into the P&L, we'll have to take additional action on the pricing side. But the strategy here are high-level kind of algorithm remains the same.

Eric, do you want to talk about the Q?

Yes. Thanks for the question, Jeff. Good digging. We didn't expect you to get there that fast. But -- so what we disclosed in our Q for everybody on the call is that our price methodology changed -- I'd say, changed slightly. We now calculate price by looking at current quarter price versus prior year, full year. And the headline really is that's just to reduce volatility. We calculate price internally the way almost every company does by looking at the SKU and the customer.

And because we do that, we simply have a better base when we calculate it over the full year. If we have regular normal predictable cycles of price increases, which are traditionally in roughly the first quarter time frame. And we do that rhythmically over the years. There's no impact relative to this methodology and any other methodology. If we have any significant off-cycle price changes, that's where you may start to see some effect. This quarter, it was very nominal. It was immaterial in terms of kind of prior method versus current. But the headline is we're doing it for reasons of getting a better, stable price growth metric, just given how we calculate at the customer and SKU level.

Your next question comes from Michael with Jefferies.

I just wanted to ask about -- I believe you briefly mentioned in your prepared commentary, some headwinds around the Middle East tension. Just wanted to get a sense for what you're seeing in terms of input costs, freight costs around inflation and higher oil prices. And what's baked into the guide, if anything? And if you do see increases in input costs, do you have methods or ways to offset those.

Yes. Thanks, Michael. I'll take that. So maybe just at the highest level before I get into the operations side, 2 reinforcing points, our direct business, if you just look at it from a revenue perspective, the Middle East is less than 1% of our total revenues. And if you look at it through the operational lens, we have, I'd call it, nominal very small amount of operations in the Middle East. So that really has us primarily focusing on what we would consider kind of the core of your question, which is the second and third order impacts. That's code for what inflation may end up looking like.

I'd just say a couple of things on that. One, I would reflect back on last year's experience that we built through the -- kind of the whole tariff landscape. We learned a lot, right? We stood up task forces, we did scenario planning. We had teams that mobilized. So while I would wish -- not wish that on any company, I would say we feel stronger as a company having gone through that because it's sort of now a different version of being able to understand your situation. We have task forces that are in place, have been in place since the beginning of the conflict, and we're focused basically on 2 areas.

One is your question, which is fuel costs and logistics. Our supply chain overall is functioning well. The majority of our supply chain moves through ground transportation. We have like 5% of our total logistic costs and movement that's ocean and air. And that just simply means the disruption is very minimal. We estimate like a mid-single-digit million dollar type of risk from fuel increases and related surcharges.

And to your kind of opening question, we're working on mitigation to those. We don't consider those significant in our guidance and we will mitigate. Then we've also done some work on the second piece, which is the more complex piece. That's really just understanding how all of the oil and polypropylene and chemical feedstocks may create risk to an inflationary environment. I would just say, number one, we have it well understood. And secondly, we have mitigation plans that are in place. Again, drawing from sort of the same kind of agility that we had to go through last year with tariffs, right? It's looking at your supply chains and making sure that you're shifting sources of supply where possible.

It's looking at your own cost structure internally and then it's using the lever of price if that should need to be the case. So I'd say at this point in time, we haven't made changes to the guidance, but we have contemplated what the risks are and what the mitigations are and unless something goes significantly kind of off trend from where it's at, we feel we can mitigate.

Great. And just one other one on the Versah acquisition. I believe you mentioned the system can be used with a broad array of implant systems. From a strategic standpoint, do you have plans to kind of close that off and only make it usable with Envista's implants? Or will you keep it open?

No, we'll keep it open. It currently -- it's a key attribute to clinicians is the versatility of the system. And again, we start from what's best for the clinician. So we'll keep it open.

Your next question comes from Jon with Stifel.

Paul, you reviewed some new products that were recently introduced. But I believe the amount that you plowed back into the business in terms of growth investments via the bridge, if I'm reading that correctly, really was sort of a step function higher. It seems it was solidly higher than what the bridge suggested in 4Q '25 and 3Q '25. So maybe just talk about where the company is with the next wave of innovation. I don't know if you're going to tell us where it's focused, but maybe the timeline for some of those initiatives would be helpful.

Yes. Thanks for the question, John. So starting at the high level, the way the model here works is get the top line growing, good gross margins generate more gross margin dollars than you could reinvest but fund every accretive new product development and commercial program that you can and you're still going to have more drop to the bottom line until margins will continue to expand. That's a virtuous cycle as you invest more in growth, you get more of that top line, you get more of the gross margin dollars and it's a beautiful thing.

And I think if you look back, I know you look very closely across the last 8 quarters, you see that trend playing out. So you're exactly right. We did put more money into new product development and into front-end commercialization in Q1 because we had more money to invest and we think that those investments will generate continued strong growth. So hopefully, we'll be having this conversation in future quarters as well.

Okay. Fair enough. And maybe just as a second question. A lot of focus on implants. I'll take it over to E&C, and your performance has been very different than the industry in terms of, well, outperforming some of the other results. So just how do we think about maybe the durability and you're coming up on difficult comps. And I'm just trying to maybe vet that a little bit as you lap some of those numbers, and again, I don't think the consumable industry nor diagnostics is a high single digit, let alone low double-digit grower. Just thoughts on how you're performing in this industry and then any shout out in terms of how we should think about it, considering the comps going forward?

Yes. Let me take the 2 components of E&C in turn, starting with the consumables piece. Yes, I think you're right. We, over the past several quarters have clearly outgrown the consumables market. I think we benefit from a couple of things in that regard. The first is, remember, our Metrex business is part of our consumables. The antimicrobial infection prevention business, that has just done very well, have captured a lot of share and has had a couple meaningful high impact on new products. We talked about one in the last call. We have a hydrogen peroxide version of a surface disinfectant that's unique on the market. Customers really like it, and that has really captured a lot of share.

Second thing, in consumables, echoing a prior question, it's one of the categories that we have found tends to be less price elastic. It's such a small portion of total clinical spend that a couple percentage increase in the cost of consumables is a no percentage increase in the cost of a procedure.

So we probably benefit a little more from price in consumables. And to the extent that we focus on that more than others in the market, that would explain a bit of that delta. Coming to diagnostics. We've also outgrown the market. I think we talked about that on every quarter. That's principally driven by 3 things, Jon. The first is this very strong installed base and strong brand of DEXIS. As that market starts to turn back positive, whether we have 3 years of compression. We get more than our fair share because we have such a strong presence there.

The second piece related to diagnostics is that has been a very strong new product generator for us. And we had a couple of very big launches at the end of 2024, the new CBCT platform. And then last year, of course, we had the very big iOS launch with Imprevo that has made a big impact.

And then the third thing I would say in diagnostics, this is as much a market comment as is a DEXIS comment is software is really making an impact in diagnostics. This used to be principally a hardware game, but now differentiated software and the various AI-enabled solutions that I know you see when you walk through the booth at the trade show, that's really very exciting stuff because we have the largest installed base, we, I think, can have the biggest impact for customers on these sorts of digital add-ons. So I think all of that is the reason that we're outgrowing the market in E&C, both on the consumable side and on the diagnostics side.

Your next question comes from Erin with Morgan Stanley.

So on capital deployment, you did announce a buyback, $300 million or buyback program. I guess I want to ensure none of that's embedded in guidance today that would offer incremental upside to EPS. And then how are you weighing just M&A versus buybacks? You had a small tuck-in. Are there a lot of attractive dinks and dunks out there in certain markets? Like what are you looking at? What is the acquisition pipeline? I guess, how would you characterize it?

Yes. Thanks, Erin, for the question. Let me start with the first half with capital deployment. I'll just reiterate our priorities. Our highest priority clearly remains organic growth. As Jon asked about in the previous question, we've ramped both our commercial and new product investments over the past several quarters. And we still see the highest risk-adjusted return on any marginal dollar to be a good organic program. So that tops the list. We come on to the second half of your question, our second priority being accretive M&A. We have done 3 small deals in the last year or so. Maybe I'll say just a bit more about each in a minute here.

But all were accretive in terms of purchase multiple and financial contribution. So we like those. And then, again, embedded in your question, our third priority is returning surplus cash to shareholders that the incremental $300 million authorization that we announced today, and then we initiated Envista's first-ever repurchase program in Q1 of last year. So now specific to acquisitions, of course, we have a very experienced M&A team over the last 25 years as Envista has been put together that had a big M&A component to it.

And so we're well networked across the global dental space. And we continue to see a steady stream of opportunities across the portfolio. So for us, we're remaining highly disciplined. We're focused on those strategically aligned targets that offer the accretive economics that I just mentioned. So let me just kind of walk it through the 3 deals we did. We like bolt-on acquisitions in areas of existing strength. The Versah deal that we talked about previously is a great example of that.

We're working to better balance our overall implant weighting by increasing our challenger penetration. One of the small deals we did last year nicely fits that description. And then a third area that we're spending time on is further strengthening our presence in targeted international markets. So one of the small deals we did last year was in Turkey, and that's a good example of that third category.

In totality, you see plenty of additional runway for us on organically led value creation. But we do have a good M&A capability. And so we view acquisitions as a supplementary arrow in our quiver.

Okay. Great. And then on Spark on ortho, just can you talk about -- a little bit about kind of the strategy there where it stands today, Brackets & Wires and Spark. How -- what's the go-to-market strategy? How has it evolved? And any changes that you're seeing from a competitive landscape standpoint on that front?

Yes. So with ortho start at the highest level, it remains a highly underpenetrated category. Something like 5% of all clinically appropriate cases where the patient has the wherewithal to pay, get treated in any given year. So it's a hugely underpenetrated category. Kind of one click down, roughly 3/4 of all cases get treated with Brackets & Wires, about 1/4 get treated with clear aligners. That mix has been largely stable over the past couple of years. It moves a little bit quarter-by-quarter, but that mix is relatively stable.

And our competitive advantage is that we're the only scaled player who has a decent sized offering in both. We're clearly the market leader on the traditional fixed orthodontic side and now serving orthodontists. We're a strong #2 in the clear aligner segment. And having spent a lot of time in orthodontists offices, I know they value 2 things in particular, from Ormco. The first is that you've been there for 60 years, been a market leader. And the second is that we don't tell them how to treat. We know that they're the experts. We give them the tools, whether they be Brackets & Wires or clear aligners to treat a particular patient in a particular case in the way that they know how. And I think that is why we continually outgrow the market and have captured share certainly 6 straight years, if not 20-something straight quarters.

Your next question comes from Glen with Barclays.

Eric, I just had a quick sort of financial question. I was sort of hoping we could dig into that core growth number of 9.5%. And looking back to last year, obviously, you raised prices due to the tariffs. And I'm trying to parse out how meaningful of an impact that was on a year-over-year basis because sort of looking at the cadence of your guidance. I'm trying to figure out how big of a headwind that will be in 3Q this year. And then ultimately, in 4Q, you have that headwind as well as sort of the days issue that you're benefiting from this quarter. So I just want to make sure I understand the cadence of 2Q, 3Q and 4Q correctly.

Yes, perfect. Let me try to hit all that, Glen. So maybe just to start off with the growth in Q1, if you just look at the bridge that we provided. Effectively, what we're telling you is 9.5% reported core growth, take the billing days out, take a little bit of the deferral gain out, our normalized growth was about 4%. So that's just the piece on Q1. I think coincidentally, if you were to look at our same breakdown of growth last year, our published core growth results, 6.5%. We also said it normalized to about 4% and that was mostly with a little bit of distribution and channel in there and then Spark deferral.

So I think that's maybe the first way just to think about the business as we're on this relatively close normalized 4% core growth. As you think about the cadence for the next couple of quarters, I would say our guidance range, 2% to 4% for the year is a good way to think about Q2 and Q3. And then the data that we effectively gave you on the 4.5% impact in Q1 relative to billing days is something you should be taking out of Q4, if you will. That means Q4 could be low to mid-single-digit negative, with the underlying business still performing well.

And then if I caught it right on price, I mean, I wouldn't differentiate price in there. The prices that we put in place last year around mid-year, we're going to continue to see in our growth rate as we go through second quarter. And we've talked about, I think, in our Q4 call is that pricing would resume to be sort of more in the normal range ex the impact of China.

Okay. I appreciate all that. And I guess only one of the reasons I was asking because the way you worded the press release, you sort of suggested 2Q and 3Q should sort of be in that published range. But if you're anniversarying those price increases that you put in place in the middle of the year, wouldn't 3Q theoretically grow slower than 2Q, all other things being equal?

I mean, all other things being equal, yes. But of course, we've got a business portfolio and a bunch of other dynamics. So think about it as being midpoint of our guidance range within our guidance range as the right instructive view of Q2 and Q3.

Your next question comes from Jason with Piper Sandler.

Apologies for any background noise, I'm at the airport here. But I wanted to ask first on Spark. I think it's been a little while since you updated I think where you stand with the percentage of your Ormco accounts that are currently using Spark. Just any details you could provide there just to have a sense of kind of the runway in front of you?

You're testing my memory here, Jason, on what those figures are. I don't have them to mind, but the general takeaway is that there's still quite a bit of runway left in terms of our core Bracket & Wire users converting across and that's true both in individual clinics. It's especially true in DSOs. You heard one of our peers report. They do quite well with DSOs, and so we have a big opportunity there to gain share.

And then the second thing I would say is that now Spark is a big enough business that it's no longer focused just on the core Ormco users as it was when we first started out, and I was calling on all orthodontists. And although we had the leading market share in orthodontics, of course, we don't have 100% share. So the takeaway would be plenty of room to run still in orthodontics.

Okay. All right. Fair enough. Totally appreciate that. Now Paul, I'll ask a bigger picture follow-up. And look, you guys have navigated the last couple of years since you've been at Envista extremely, extremely well, taking some share, turned the business around, you deserve a lot of credit. Just maybe on a go-forward basis, trying to think about how do you still win with your pricing spread or how you think about your innovation and pricing strategy, knowing that these secular headwinds in dental aren't going away.

It seems like inflation and some of the things we're looking at with fuel or we're hearing more about driving the private label and lower priced equipment, lower price consumables. So I guess how do you think about, again, wrapping this all together with your innovation and pricing strategy, how do you think about Envista going forward in that landscape?

Yes. I mean that's what's great about dental. It's a global market. Unlike every other health care category on the planet, every single person is a potential patient, so there is no end to the opportunity in the category, and it has persistent excess demand over supply. So that's just what propels dental as a category to outgrow the broader market essentially every single year. So we're a beneficiary of that. As you know, our strategy is mostly to take advantage of that rising tide to execute well and to try to bring our performance up in line with the potential that the market and this collection of businesses offers. Over time, Eric and I have been in dental now for 20-something years if you take care of your customers, you take care of your colleagues, the rest pretty well takes care of itself over time.

Your next question comes from Daniel with Citi.

I want to focus a little bit on EBITDA margin cadence for the remainder of the year. Obviously, a good result this quarter, even with that step up in growth investments. As we think about the remainder of the year, how are you looking to pace growth investments, particularly given the headwind you'll face from fewer selling days in 4Q and I guess, in tandem with that, how are you thinking about realizing productivity benefits for the remainder of the year across both the manufacturing productivity and G&A productivity?

Yes, Excellent. Daniel, welcome to dental and Envista. Look forward to meeting you in the next couple of hours here. So I think a couple of questions within there. The first one I would say on the growth investment piece, you should think about our bridge that we provided this quarter and the significant margin impact from growth investments, which Paul well described as fueling our R&D and future growth as primarily being investments that we put in the business in 2025 and Q1 is really comping against a lower investment quarter last year. That just means that the ramp, if you will, isn't as significant as we see things moving sequentially.

So I think that's one important point to consider. To the point of your margin rate question, I would think about Q2 and Q3 being at a roughly similar margin rate than we just printed in Q1. And because we have better revenue dollars, little bit of cyclicality in Q4, that's where we'll see slightly better margin rates that get us to the roughly midpoint of our 7% to 13% adjusted EBITDA growth.

And then I think on the productivity side of the equation, I would just say our playbook and the contribution to margins is really pretty similar, right? We're going to cadence our growth investments to be sort of in line with how we're going to grow, but we will continue to use G&A as we have in the past to be able to help create margin opportunities and fund sales, marketing and R&D. So hopefully, that gets you a home. If you need more detail, we can get you offline.

Thank you so much, everyone. It is now time to the end of the meeting. There are no further questions that will be taken. I will move the call over to Paul Keel. Please go ahead.

All right. Hey, thanks, everybody, for tuning in and for the thoughtful questions. It really is a pleasure to work with a group of investors who know the market and the players so well, at least for a very kind of rich and helpful discussion. I'll briefly underline just a couple of thoughts by way of wrap up on the quarter. First, Q1 was another solid step forward for Envista. We had double-digit sales, adjusted EBITDA and EPS growth.

Secondly, our performance is broad-based. All our major businesses and most geographies posted strong performance. And we had good contribution again from volume, price and new products. Thirdly, we continue to focus on executing our value creation plan. And I think we have demonstrated ongoing progress on all 3 of our growth operations and people priorities. And then fourth, today, we announced an incremental $300 million share repurchase authorization and reaffirmed our 2026 full year guidance. So I think I'll leave it there for now. Have a good day and a great week, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Hello. My name is Vanessa, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Envista Holdings Corporation's Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions]

I will now turn the call over to Mr. Jim Gustafson, Vice President of Investor Relations at Envista Holdings. Mr. Gustafson, you may begin your conference call.

Good afternoon. Thanks for joining Envista's Fourth Quarter 2025 Earnings Call. We appreciate your interest in our company. With me today are Paul Keel, our President and Chief Executive Officer; and Eric Hammes, our Chief Financial Officer.

Before we begin, 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 Investors section of our website, www.envistaco.com.

The audio portion of this call will be archived in the Investors section of our website later today under the heading Events and Presentations. 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 our results. Unless otherwise noted, references in these remarks to company-specific financial metrics relate to the fourth quarter of 2025 and references to period-to-period increases and decreases in financial metrics are year-over-year.

During the call, we may describe certain products and solutions 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 and 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, and actual results may 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 as required by law.

With that, I'll turn the call over to Paul.

Thanks, Jim. Good afternoon, and welcome, everyone. On today's call, I'll kick us off with some opening thoughts on our Q4 and 2025 performance, our progress implementing the value creation plan that we communicated in March of last year and our guidance for 2026. Eric will then take us through the numbers in more detail, and I'll wrap up with some closing thoughts before we open it up for Q&A.

Let's start with the value creation plan that we shared at our Capital Markets Day early last year. In our view, a good plan should be both achievable and aspirational, timely as well as timeless. A good plan should authentically describe who you are today and who you're striving to be tomorrow. Centered on the 4 foundational components that you see here, we think our plan does exactly this.

We're guided by our purpose of partnering with dental professionals to improve patient lives. We're centered on our circle values of customer centricity, innovation, respect, leadership and continuous improvement. We're focused on our 3 key priorities of growth, operations and people. And our plan is framed by our medium-term financial objectives of 2% to 4% core growth, driving 4% to 7% EBITDA and 7% to 10% EPS growth, all underpinned by free cash flow conversion of 100% or better.

Today, I'll focus on the strategic and operational progress that we're making in implementing this plan as well as our financial performance relative to our medium-term objectives. Let's begin with Q4 and 2025 progress on the next slide.

Slide 5 is organized by the 3 priorities that I just mentioned. Beginning with growth on the left side of the chart, ours was widespread. All businesses posted positive growth for the quarter and year and all outgrew their respective markets in Q4, resulting in continued share gains across the portfolio.

Consistent with what we've discussed on previous calls, increased new product activity and clinical training are contributing meaningfully to our accelerating growth. We trained 30% more customers in 2025, and we generated close to $100 million in revenues from products introduced in just the last 12 months. I'll touch on a few of these new products on the next slide. And looking to build on this momentum in 2026 and beyond, Q4 marked another quarter of double-digit increases in R&D investment.

On the operations front, we continue to enjoy strong contributions from EBS, our continuous improvement methodology that is central to how we deliver results, develop our people and advance our culture.

We reduced G&A spending by over $35 million last year or about 10% while maintaining our world-class safety, quality and customer service levels. We took action in 2025 that we expect will result in roughly a 4-point tax rate reduction in 2026. And supported by strong cash flows, we put in place a $250 million share repurchase program in early '25, a first for Envista and returned over $160 million to shareholders across the year.

Finally, with respect to people, we're working to advance our high-performing continuous improvement culture. We refreshed our management team in mid-2024, bringing in new leaders from the outside to supplement a strong core team that was already in place. 18 months in, we're working very well together and stability and collaboration at the senior ranks have cascaded across our organization.

We saw record participation in our 2025 employee survey with broad-based increases in employee engagement. We've redoubled our commitment to talent development with better than half of all management promotions going to existing employees last year, a 40-point increase over 2024.

And in addition to taking care of our customers, colleagues and shareholders, we've also stepped up support of our communities by reaching more than 19,000 underserved patients last year and donating over $2 million to charitable causes through our Envista Smile Project. New product innovation has long been the lifeblood of Envista.

Having served dentists now for over 130 years and with more than 1,500 patents to our name, we've had a hand in several of the most important dental innovations over time, including the invention of dental implants, the introduction of both self-ligated and conventional orthodontic bracket systems, the first panoramic radiograph and the now ubiquitous endodontic K-file.

We built on this strong heritage in 2025 with key new product launches in all major businesses, and you see some of those listed here. Four major new product introductions in Spark last year supported that business' robust growth. New platforms in both premium and challenger contributed to multiple consecutive quarters of growth for our implants franchise and our fastest full year performance since 2022.

In consumables, launches like OptiBond 360, SimpliCore Composite and CaviCide HP helped propel above-market growth for that business. And we enjoyed another strong year of new product launches in diagnostics with an entirely new intraoral scanning platform as well as novel cloud and AI features for our market-leading DTX Studio suite of solutions. We have another strong wave of launches lined up for 2026, and we look forward to sharing more about these as they come to market.

Now having given you a flavor for where we're investing our time, attention and resources, let's turn to the output from all this work. We'll begin with Q4 results on the left side of the slide. We posted another strong quarter, delivering good revenue, EBITDA and EPS growth. Core growth came in around 11% or something closer to the mid-single digits, excluding certain factors that Eric will explain shortly. Strong core growth converted to even stronger EBITDA growth of 22%, driven by Spark turning profitable in Q3 and continued good execution on price, tariff mitigation and G&A productivity. Adjusted EPS was $0.38, up more than 50% from Q4 '24, supported by strong operating profits, share repurchases and a lower tax rate.

Moving to full year performance in the center of the slide. Core growth for 2025 was 6.5%, again, broad-based across the portfolio. Adjusted EBITDA was up 26%, resulting in a margin of around 14% or a 2-point improvement over 2024. And EPS was up over 60%, aided by many of the same drivers as Q4. All of this contributed to strong free cash flow conversion for 2025 of 114%.

Rounding out the slide, you'll see our 2026 guidance in the column on the right. This year, we expect core revenue growth of 2% to 4% and free cash flow conversion around 100%, both directly in line with our value creation plan. We're guiding to adjusted EBITDA growth of 7% to 13% and adjusted EPS growth of 13% to 22%, both above our medium-term objectives.

To summarize my introductory comments, Q4 capped a strong year of progress and performance for Envista, positioning us well for continued improvement here in 2026.

And with that, I'll turn it over to Eric to cover the financials in more detail.

Thanks, Paul. In the fourth quarter, we delivered sales of $751 million. Core sales in the quarter increased 10.8% and FX added nearly 400 basis points.

As Paul mentioned, Q4 was another strong quarter for Envista with broad-based growth. It is worth noting upfront that our Q4 growth benefited from several items, which we do not expect to recur over the long term, namely Spark deferral and lower 2024 comparables, which I'll say more about in just a moment. Excluding some of these items, our Q4 core growth was closer to the mid-single-digit range.

Q4 adjusted gross margin was 55%, a decrease of 220 basis points versus the prior year due to a significant FX transaction benefit in Q4 of 2024. Our adjusted EBITDA margin for the quarter was 14.8%, which was 90 basis points better than the prior year as benefits from volume, price and productivity were partially offset by investments and the prior year FX impact just mentioned. Adjusted EPS for the quarter was $0.38, up $0.14 compared to the same quarter of last year.

Our non-GAAP tax rate for the quarter was 30.3%, slightly better than our expectations. We saw a beneficial trend throughout 2025 in our non-GAAP tax rate as a result of our strong business performance in the United States. As we've discussed previously, U.S. GAAP limits the amount of interest expense that companies can deduct to a portion of their taxable income.

Our U.S. earnings have improved on several fronts, namely growth, Spark profit and G&A, all enabling higher deductibility of our third-party and intercompany interest expense. This drove the lower effective tax rate in 2025.

Rounding out Slide 8. In Q4, we generated $92 million of free cash flow, down slightly from last year. The year-on-year cash flow decline in Q4 was primarily the result of a working capital improvement in Q4 of last year. Our absolute levels of free cash generation and conversion were strong in Q4 2025.

Now I'll take you through our full year financials. In 2025, we delivered sales of $2.7 billion with core sales for the year increasing 6.5% over 2024. Similar to our trends in Q4, the business performed well throughout 2025. Our core growth was aided in part by the Spark deferral change and softer 2024 comparables, all netting to an underlying core growth of around 4%, in line with both our revised 2025 guidance and the medium-term objectives Paul covered earlier.

2025 adjusted gross margin was 55.1%, a slight decline year-over-year due to the impact of transactional FX penalties in the first half.

Our adjusted EBITDA margin for the year was 13.7%, a 190 basis point improvement over 2024, with volume, price and productivity all delivering well throughout 2025.

Adjusted EPS for the year was $1.19, up $0.46 compared to the prior year as our growth and profit improvements were aided by a reduced tax rate and the share repurchase program we started in Q1 2025.

Now let's turn to 2 bridges to help break down our fourth quarter year-over-year results, beginning with sales. Core revenues grew 10.8% in the quarter with positive growth in all businesses. We had good performance in both volume and price with a small tailwind from the Spark deferral change.

Adding in the benefit of FX, a $25 million tailwind and 2 small acquisitions that contributed around $2 million, reported growth came in at 15%.

As I mentioned previously, Q4 growth did benefit from 2 notable items we do not expect to repeat over the long term. The tariff price increases of 2025 are the first. We generated about 3 points of price in Q4 with tariff-related increases accounting for approximately 2/3 of this amount.

Favorable comps are the second. As you recall, our China business experienced a high double-digit contraction in Q4 of 2024 due to VBP preparations and other market-specific factors. In addition, our Diagnostics business was down high single digits globally in Q4 2024. All in, prior year comps yielded about a 3-point benefit in Q4 2025.

Turning to the adjusted EBITDA margin bridge on Slide 11. Volume, mix and the Spark deferral benefit combined to deliver a 330 basis point improvement. The previously mentioned price actions helped margins by 260 basis points. We had a net gain of 100 basis points from improved productivity with continued strong performance within our supply chains as well as year-over-year reductions in G&A. Partially offsetting these gains, gross tariff expense was about $10 million in the quarter or roughly 160 basis points.

We continue to reinvest a portion of our productivity gains back into sales, marketing and R&D to support future growth, which amounted to 170 basis points in the quarter. And as mentioned before, year-on-year FX was a headwind to margins of 270 basis points as a result of the FX transaction gain in Q4 2024.

Turning to segment performance. Revenue in Specialty Products & Technologies grew nearly 16% year-on-year with core sales up 10.9%. In our orthodontics business, Spark was up high single digits before the additional benefit from the net deferral change. Brackets & Wires were up double digits year-on-year, aided by the low China comparable in Q4 last year that I mentioned previously. Excluding this, Brackets & Wires were up low single digits. Our ortho business continues to capture share as having leading offerings in both Brackets & Wires and clear aligners provides us a distinct portfolio advantage.

On the implant side, we grew mid-single digits globally, led by above-market performance in several geographies, including North America. Growth was especially strong in both the digital and regenerative segments of this business. Customers are looking for solutions that support both clinical efficacy as well as practice efficiency, and our products are helping meet these needs.

In Q4, Specialty Products & Technologies posted an adjusted operating margin of 16.2%, up 470 basis points, driven by good growth as well as the year-over-year impact of Spark profitability. Volume, price and net productivity were all positive in this segment and consistent with prior comments, a portion of the gains were reinvested into commercial and new product development activities.

Moving to our Equipment & Consumables segment. Core sales in the quarter increased 10.7% versus prior year, including high single-digit growth in consumables, where we delivered broad-based growth across the portfolio, including solid price performance.

Diagnostic core sales was up double digits globally with high single-digit growth in North America. While our Diagnostics business did benefit from a soft Q4 2024 comparable, Q4 of 2025 was our third consecutive quarter of Diagnostics growth, driven by strong commercial execution, new product introductions and improving trends in the North America market in the second half of 2025.

Adjusted operating profit margin for the segment was down 510 basis points, driven by continued investment for future growth and the prior year FX transaction benefit that I noted earlier.

Now let's turn to cash flow. Q4 free cash flow was $92 million, a decrease of about $32 million when compared to the fourth quarter of last year, driven by very strong working capital results at the end of 2024 and higher CapEx in Q4 of 2025. For the full year, we delivered $231 million of free cash flow with a conversion of 114%. Free cash flow dollars were down year-over-year, primarily as a result of lower incentive bonus payments in 2024 related to 2023 performance and higher CapEx in 2025.

Our balance sheet remains strong with net debt to adjusted EBITDA of approximately 0.6x, providing welcome stability in the current environment. In Q4, we deployed approximately $24 million in cash to repurchase 1.2 million shares of stock.

On a full year basis, we repurchased $166 million or a total of more than 9 million shares at an average price of around $18 per share, making strong progress against our $250 million 2-year repurchase authorization.

As Paul mentioned, today, we're providing guidance for 2026 using the same measures we introduced at the 2025 Capital Markets Day. Core sales growth of 2% to 4%, adjusted EBITDA dollar growth of 7% to 13%, adjusted EPS of $1.35 to $1.45 and free cash conversion of approximately 100%. Slide 16 provides additional detail on key assumptions underlying this guidance.

First, we expect the dental market in 2026 to be similar to what we've seen this past year, continued stability with the potential for modest improvement across the year. Quarterly sales in 2026 will cadence a bit differently than last year and that we have 4 more selling days in Q1 and 4 fewer in Q4 relative to 2025.

Specific to this effect, we expect stronger Q1 core growth and slower Q4 growth. The straight math on the days would imply a 6- to 7-point shift in growth, although with about 1/3 of our business going through distribution, we expect this to be closer to 4 to 5 points of additional growth in Q1 2026. We will update you throughout the year on how we see the progression playing out.

We're assuming December ending exchange rates for our guidance. With the dollar ending 2025 at EUR 1 to USD 1.17, this would imply a 1.5% revenue benefit from foreign exchange in full year 2026.

The impact of the 2024 change in the Spark deferral will continue to subside with about $15 million of remaining tailwind landing in the first half of 2026. We expect pricing to moderate across the year as we lap the tariff-related price increases implemented in Q2 of 2025. As the tariff environment has proven to be difficult to forecast, we have not modeled any material changes to tariffs in 2026.

We incurred about a $30 million tariff headwind in 2025, and we expect around $40 million from tariffs currently in effect in 2026 due to annualization. We were able to offset tariff impacts in 2025 from a combination of price increases, cost reductions and supply chain adjustments and expect to cover tariffs currently in effect again in 2026.

And finally, on the tax rate, as a result of improving U.S. profitability and the resolution of the intercompany loan that we discussed last quarter, we expect our 2026 non-GAAP tax rate to be approximately 28% of adjusted pretax income.

Now back to you, Paul, to wrap things up.

Thanks, Eric. I'll start by circling back to our value creation plan. While we're still in the early days of unlocking the vast potential of our company, our first year executing the plan has us pointed in the right direction as we delivered above-target performance on all 4 of our medium-term financial objectives in 2025. As noted earlier, we're guiding to continued progress in 2026 with core growth, EBITDA, EPS and free cash flow conversion all at or above medium-term targeted levels.

A few closing thoughts as we put a cap on 2025 and turn our full attention to 2026 and beyond. First, across most of last year, we described the dental market as slow but stable. On balance, that's still the best descriptor, although we are beginning to see some signs of market improvement. For example, the North American diagnostic market returned to growth in H2 and Q4 was the third straight quarter where all of our businesses posted positive growth. As we're a top 3 player in all of our categories, the breadth and consistency of our performance should be a positive signal for the broader market as well.

Second, we feel good about the progress we're making in implementing the value creation plan that we shared with all of you last year. Underlying growth in 2025 was consistent with our medium-term plan, converting to even stronger earnings and EPS gains.

Third, the full year guidance that we shared today reflects our confidence in building on this momentum here in 2026. Guidance for core growth and free cash flow conversion are right in line with our medium-term objectives, and EBITDA and EPS guidance are above the medium-term plan.

Importantly, I'll close by noting that all this progress is made possible by the commitment, collaboration and deep capability of our global Envista team. We accomplished a great deal together in 2025, and we've only scratched the surface of what's possible. We're excited to build on this momentum here in 2026.

That completes our prepared remarks for today, and we'll now open it up for Q&A.

[Operator Instructions] We have our first question from Brandon Vazquez with William Blair.

On a nice end of the year here. Can you -- maybe let's start at a high level, just talk to us a little bit about guidance. What are the potential upsides here? What are the risks to guidance, especially as we look at the top line and the bottom line, especially in the context of what is some pretty good momentum, I think, even when you back out some of these moving pieces exiting the year?

Thanks for the question, Brandon. Why don't I cover the growth part of your question, and then I'll ask Eric to cover the profitability component.

Maybe I'll just begin by reframing core guidance for the year, 2% to 4% for 2026. And a reminder that this range is directly in line with the medium-term financial objectives that we communicated last year. And the high end of the 2026 range maps well to the roughly 4% underlying growth that we just delivered.

I guess I would also say in terms of context that since we've not observed any material change in the underlying dental market, 2% to 4% feels like a good jumping off point for 2026. Again, noting that we expect relatively faster Q1 and slower Q4 growth due to the billing day effect that we just mentioned.

Now having set the frame, let me answer your question, a couple of upsides and then maybe a few risks. I'd say there's 3 upsides worth noting consistent with your question. I guess I'd have to start with our momentum. Not only did we have positive growth across all the businesses, we had accelerating sequential growth across the 4 quarters. So carrying that momentum into '26 is naturally helpful.

And related to this, with all of the businesses positive and generally accelerating, there's 2 businesses in particular that we don't typically say a lot about that I think do have upside this year. The first is diagnostics. The overall diagnostics market, as we mentioned, turned positive in the second half of '25 after 3 years of contraction. We're a large player both in North America and globally. And while it's still far too early to say with confidence that, that market has turned, if indeed it does, that would naturally be upside for us.

The second market that we don't say much about is our consumables franchise. It was up high single digits in '25 behind some really good work by the team on fundamental things like price, new product introductions, DSO penetration, et cetera. We have been intentionally investing more in our consumables business of late, which could yield some upside.

Let's see maybe the third upside I'd mention, Brandon, would be price. As we said in our prepared remarks, our guidance assumes that we return to more normal pricing levels, call it, 1 point or so per annum once we lap the tariff-related increases that we took mid last year. There's just too many moving pieces to put it in our guidance, but it's not hard to envision scenarios where inflation, both general to the economy and specific to dental, continue at elevated levels here in '26. We've been working hard at improving our price execution. And so if inflation stays at higher levels, I think we'd be positioned to take advantage of that.

Now giving you a balanced response on the growth side before I turn it over to Eric for profitability. I think 2 risks warrant mention. The first, of course, you'd have to start with macro volatility. No one gives a confidence interval along with their guidance. But if we did, you'd have to expect that it'd be unusually wide for this year for the reasons we all know well.

Factors like tariffs and interest rates, consumer confidence, et cetera, all impact dental demand. And as we saw pretty clearly in '25, there's a real possibility of some or all of those recurring here in '26, which brings me on to a second risk worth noting, that being China.

China now represents about 7% of our total sales. While VBP and ortho and implants are very likely in 2026, the specific timing is difficult to forecast. There's been a number of delays. Based on prior experience, we feel like we generally have our arms around the impact of VBP across a 12- or 18-month horizon, but the specific quarter-by-quarter effects can vary quite a bit depending upon government timing.

So in sum, 2% to 4% for the year. I would say -- I would shade the upsides a little bit above the risks, but there's plenty out in the world right now to keep us cautious.

Eric, do you want to say same on the EBITDA side?

Yes. Excellent. Thanks, Paul. Brandon, thanks for the question, a good forward lean for us to talk through.

So maybe just before the headwinds, tailwinds, what I would just start with is the fact that our profit improvement and our margin improvement in 2025 was pretty solid, double-digit growth in profit, almost 200 points in year-over-year improvement in margin. And I think if you just follow our bridges as we provided through each quarter and now fourth quarter, what you saw in 2025 is good growth in productivity, more than offsetting tariffs and FX, all while being able to invest for future growth, which you saw more predominantly in Q3 and Q4. So a good year for us, good equation in total.

Just as Paul said, just a reinforcement on guidance, we're guiding to 7% to 13% EBITDA growth in 2026, so slightly better than our Capital Markets Day guide or outlook, which was intended to be an average year.

We do think it's important to focus on the dollar growth versus the margin percentage, although, of course, we manage both. We think the dollar growth aligns better with value creation. We know our investors like to see that, and it allows us a little bit of flexibility on trade-offs between growth and margin. That said, if you take our guide and you back into margins, you'll get a guidance that implies about 50 to 100 bps in margin improvement in 2026.

Tailwinds, I would say, would be core growth. So margin improvement based on the strong gross margins that we get. Paul talked about the fact that we've got a good momentum right now in terms of growth heading into 2026, and we see that as a tailwind for margin rate.

Productivity, just like 2025, we'll continue to drive productivity. Factory productivity, G&A discipline, we'll just put another focus on that this year like we did last year. We've got good momentum in Spark, both in terms of growth and profitability. And I think we can expect more of that in 2026.

And then FX, while certainly less predictable as a forward projection, we do think FX is a year-on-year tailwind to our margins. That's mostly because we took losses on what we call transaction balance sheet revaluation in the first half of last year. We have a hedging program in place, and that's why you've seen sort of a settling and more of a neutral inter-quarter view of that in the second half.

And then if we just flip for a moment to headwinds, I think we gave a pretty instructive view of tariffs in our guide assumptions. About $10 million per quarter is the run rate that we've been at in second half. If you just annualize that, it means we've got about a $10 million headwind next year. We'll continue to offset that with the actions that we've had thus far.

China. Paul mentioned sort of the uncertainty of China. He mentioned the 7% of our revenues. But I think in general, you should see China as a margin rate headwind, maybe a slight profit dollar headwind just based on how we expect China to play out in terms of growth and profitability.

And then lastly, I would just say investments, just as we saw in 2025, we'll continue to invest in R&D, sales and marketing. That will certainly be at the pace of our business performance, right, how well we grow and how well we fund that investment by delivering on productivity. You kind of take all that together and the cadence for the year probably looks like slightly lower margins first half, slightly higher second half, most of that just being defined by the revenue profile of our business.

Got it. And that's super helpful, very comprehensive. So maybe I'll ask a quick modeling touch-up on so some others can get in the queue here. But Eric, as you think of the tax rate, you guys have clearly done some good work there. Is there more work to be done? What's kind of the expectations of tax rates to go lower?

Yes. Great question, Brandon. So I mean just kind of taking everybody back, we finished the year just under 32%. We put in our guidance assumptions, just to give you the sort of the answer on our EPS equation. We expect tax to be this year, 2026, around 28%. That's fully inclusive of the resolution of the intercompany loan that we've talked about. That is the majority of our 4-point tax rate reduction.

Future benefits, I would say, would primarily come from one of three things: continued U.S. profit improvement. We still pay third-party interest, that's interest on our debt, and we have a little bit of a deductibility cap that we still have there, which pressures our tax rate. Continued U.S. income improvement will just help to absorb that effectively.

The second would be any kind of paydown in debt. So if we choose to capitally deploy our balance sheet towards debt paydown, that may help our tax rate. That's also linked to that interest expense just mentioned.

And then the last would just be if we have any geo mix benefits and the ability to improve profits in lower tax jurisdictions. But I would say the 28% is a good view. It's obviously showing a lot of year-on-year improvement. And most of the mentioned items on favorability would be minor at this point in time.

We have our next question from John Block with Stifel.

Great color on '25 and the '26 outlook. I think the only thing that I was a little bit unclear on and sorry if I missed it, but just the detail or assumptions on VBP for ortho and/or implants. In other words, sort of what's embedded in the '26 guidance regarding those variables? Is it one? Is it the other? A stub? Again, I know it's a moving part -- or moving parts to it, but just curious on how you guys are thinking about that going into the year.

Jon, thanks for the question. Yes, we didn't say much about VBP because there's really not too much new news to report, but let me recap what we do know. We continue to expect a first round VBP for ortho and a second round VBP for implants sometime in 2026, but specific timing has proven to be difficult. In our guidance, we assume a second implant VBP to occur likely in Q2 and the most probable timing for the Ortho 1.0 VBP would be the second half.

Just to give you guys a little bit of a context for why the timing is so uncertain here. Recall that there are dozens of medical VBPs currently underway across China. To increase the complexity, some of these are specific to one province, some are cross provincial, some are national. And most of the large hospitals participate in multiple VBPs. All big hospitals have an orthopedic department, a urology department, cardiovascular, dental, et cetera. So it is a complex thing for Chinese authorities to manage and why continued shifts in timing are certainly possible. But hopefully, that gives you a flavor for the timing piece.

Just as a reminder, the way this typically plays out is we see a quarter or 2 of negative order growth in advance of a VBP go-live as the channel draws down inventory to avoid a restatement penalty. And then you get the opposite of that once the VBP gets announced, you get a quarter or 2 of order acceleration as the channel replaces that drawn down inventory at the new price level. Hopefully, that gets to what you're asking.

No, it certainly does, Paul. That was very helpful. And the second one, I don't know, I feel like you guys are almost being a little modest. I mean, look, I get the 10.8% core is not the new run rate. Hopefully, none of us are going to go ahead and plug that in the model and we get it. It had some benefits like you mentioned an easy comp. But you guys knew about the easy comp. Your '25 guidance was 4% top line and it implied, I believe, around 2% core for the fourth quarter of '25. And again, you knew the easy comp. You probably knew most of the stuff around price. So where I'm just going with this is like what deviated to the upside for you guys, for the company in the last 3 months of the quarter to put up that close to 11% versus the implied 2%. And again, I get the variables that you are calling out going forward. But it still seems like a notable step function from where your heads were at 3 months ago.

Well, Jon, both Eric and I grew up in Minnesota. So we think of modest as a complement. The 2% to 4%, I think you understand why we see that as the proper jumping off point for 2026, lines up exactly with the medium-term guidance that we gave roughly a year ago and lines up pretty well with the underlying growth.

Embedded in your question, we certainly wouldn't want anyone on this call coming off feeling like we're signaling that Envista expects a slowdown in our underlying performance or that we've come anywhere close to realizing the full potential of this business. We've now posted 5 consecutive quarters of generally accelerating growth. And today, we indicated that we expect to build on that momentum in 2026.

We're committed to rebuilding our track record of consistent delivery. I think this is now my seventh earnings call, and it's probably Eric sixth. And hopefully, you're seeing a pattern develop both of steadily improving performance but also credible transparent reporting. And that's what we're aiming to build on here in 2026.

Jon, I'd give you just a couple of other points maybe to consider. So we look at the full year 2025. So fourth quarter was good. I take your point fully. For the full year, our sort of normalized growth rate is about 4%. Any quarter could be a little bit more dynamic.

Two things did stand out in our fourth quarter growth, maybe differentiated from what we saw going into the quarter. One was the shift in the China ortho VBP. So remember, we were talking sort of going into that call about a December VBP implementation. That meant that the ortho bracket and wire market for us and generally the channel was just stronger, material enough to move our growth by a point or so.

And then we had a very good growth result in implants. We saw mid-single-digit plus growth, very, very strong in the sort of the broad digital portfolio that we have. That's everything from our prosthetic from treatment planning before that to some of our equipment and guided surgery. I wouldn't call it a surprise. Our teams have been out there. We've been investing in it, but it was certainly a better growth for us than we anticipated at least midway through the quarter.

Our next question is from Kevin Caliendo with UBS.

In the fourth quarter, implants were up mid-single digit in both premium and value. Do you think -- how do you think that was compared to the market? And just kind to get a sense of how much you think your new products actually contributed to your growth, meaning was it Envista's new products? Was it the market? Was it your positioning already, you're capturing more share? I'm just trying to get a sense because we have new products again coming next year, and I'm trying to also gauge how much of your top line growth might be coming -- or you think might be coming from your new product launches?

Yes. Thanks for the question, Kevin. We think that global implant market is growing mid-single digits, call it, 5%. We were a little bit north of that in Q4, which was good for us. that's the first quarter since I've been here where I think we did outgrow the market in implants in total. So that's also now 5 straight quarters for premium growth and generally accelerating quarter sequentially. So building good momentum in implants.

Maybe two parts of your question you asked, what do I think is going on with the -- what do we think is going on with the market and then how do new products play into that. The market, I would say we don't yet see any credible evidence that the market has changed. We'll learn more in the coming weeks as our peers report, but we don't think market acceleration was a driver of our acceleration.

We think a couple of things played into our advantage. The first is, again, we made a significant investment in this business in 2024. Put $25 million in to the commercial front end to customer training and then into new products. Now a year or so past that investment, we certainly see a return on the commercial front end of that and on the customer training. I made some mention of that in my prepared remarks. I don't think we yet see the new product impact of that. We have a number of products we've now advanced through our pipeline that will launch in 2026, and we'll tell you guys more about those as they come to market. But I don't think that new product piece was in the 2025 result.

The other piece I would point to, consistent with the broader Envista is that we did take price in 2025 and the tariff environment aided that. So I think we were advantaged in 2025 by a little bit of extra tariff price.

And that you don't expect to continue. Is that -- that's sort of what you're saying, right? There isn't necessarily any of that built into the 2% to 4%?

Correct. Our guidance for this year assumes that the midyear increases from last year carry forward for the first 2 quarters, then we lap them. And without any further information on tariffs, we've assumed that market dental inflation returns to kind of that what I consider more normal point to 1.5 points in the second half. So I think it was Brandon's question to kick us off. We do see pricing as an upside, but it's not in the guide.

Our next question is from Jeff Johnson with Baird.

Can you hear me okay?

Yes, Jeff.

All right. Sorry about that. I'm driving. So if you hear any crashes or anything, just ignore it, I'll put you on mute. But -- so just a question on Spark. This quarter, the high single-digit growth. Obviously, it's still going to be above market. But I think last quarter, pre-deferrals, you were up high teens. Just any change in competitive positioning and/or market trends in the quarter?

And then, Eric, maybe you can help us just understand, last quarter was the first quarter you swung the profitability on the Spark side. Did we see further improvements on top of that in Q4? And how should we think about the gating over the next 3 to 6 to 8 quarters or something like that on how we get to that fleet average that you've talked about someday getting to on the Spark side?

All right. I'll take growth. Eric will take profitability. Yes, we think we outgrew the market again, that's many, many consecutive quarters now that we've done that.

Now with the 2 biggest players on the ortho side having reported pretty decent numbers, maybe that suggests that the clear aligner market is getting a little bit of a boost. Maybe that helped a bit. And we did have a very big new product year in 2025, and we had 4 real new product introductions and several of those were completely incremental growth. So our retainer offering, for example, that's all incremental, no replacement. So I think all of those things really helped us.

I haven't seen or we haven't seen any material change in the competitive landscape. In the orthodontic segment where we compete, there's 3 main players. All of them are good. All of them are competing aggressively, and I think that's good for customers and ultimately good for the market.

Eric, do you want to talk about the profitability side?

Yes. Just a couple of points, Jeff. So I mean we talked last quarter about turning profitable. We won't give you kind of specifics on the call here, but we were certainly profitable again in fourth quarter at consistent levels with where we were in third quarter. So nothing of a dramatic departure.

And in part, it's because now we're sort of getting into this period where every quarter sequentially will depend really on underlying Spark profitability improvement, operations, unit costs, design and less, of course, about the roll-through of the deferral, although both have contributed to the profitability path over the last year.

We were down year-over-year in unit costs. So we've, I think, given sort of a view in past calls about how much did we have our cost per aligner down year-over-year. We were down mid-teens year-over-year. We were modestly down sequentially. So a little improvement quarter-to-quarter, but mostly year-over-year.

And then as we see the cadence for the business going forward, I'd say you can depend on 2 things. One would be just the annualization, if you will, into 2026. So the business sort of reaching profitability. We've told you that third quarter, fourth quarter was a good like absolute level of business to depend on. But that means that next year, we've got just a nice carryover from that improvement trend.

And then fleet average is still the best way to think about it on an operating level, and our improvement will come from really sort of the four things we've mentioned, right? Continued focus on automation and manufacturing cost out. Growth will be a portion of it, but it's not fully dependable on it or dependent on it. Portfolio, as Paul just talked about, we've been very focused on new products and making sure that we have the best play both for customers but also for profit levels.

And then design costs. We've been bringing our design costs down consistently. That's aided actually by one of the products that Paul mentioned or had on the slide rather in the earnings call, which we call StageRx. That simply helps us translate efficiencies from the front end at the clinician level into our treatment planning and design and then ultimately into manufacturing.

And Jeff, we'll send you a transcript. So hopefully, you're not taking notes driving.

Our next question is from Elizabeth Anderson with Evercore.

I was wondering if, Paul, as you said, this is your seventh call. And I think there are obviously a lot of immediately like fires that have to be put out and then you sort of -- and then you did a great job stabilizing the business and sort of getting it to where we are now. As we kind of think about the business and the market maybe being a little bit stable, I know you've talked about some new products and things that you're excited about rolling out as we think about 2026 and beyond. How do you kind of think about like where your focus areas are like heretofore? Is it sort of continuing to refine sort of things that you've talked about for? Is it new vectors of growth in terms of maybe either organic or M&A driven? Maybe just sort of at a high level, help us think through that as things are moving -- everything moving in the right direction and you're kind of thinking about the next leg.

Yes. Thanks, Elizabeth. Both Eric and I grew up in dental. We were pretty familiar with the Envista portfolio before we joined. We had bid against the assets when we were at 3M and then we competed against the business. And so we had a pretty good understanding of what a strong fundamental business it was.

And as I think we've talked about on previous calls, there were a couple of pieces that were disrupted in that kind of '23 and '24 time period. And I put them into 3 buckets. The first is I felt we had inappropriate guidance in the market. And being a highly accountable company, we did what good companies do when they miss, which is anything they can to not miss again. So we were chasing the quarter, which caused us to cut back on investments, which then gets you on that kind of downward spiral in a high-margin business like this. If you don't invest in growth, you lose growth and then you lose gross margin and then you lose ability to fund future growth.

So the first thing we needed to do was get the flywheel turning back in the right direction and the $25 million investment that we made in 2024 in retrospect looks like it did that.

The second thing related to that is we're a 130-year-old company. And if you go back over time, every period of sustained growth was because we had a heavy focus on new products, not just development but also commercialization. And so we've been very intentional, not just in Q4, not just in 2025, but I think every quarter that Eric and I have been here to make an aggressive but measured investment in new product development. Some of that has already hit. We talked about the Spark piece of that. Many of those programs were underway before we arrived. But we have more in the pipe that I think you guys are going to hear about in '26 and beyond that should be encouraging.

And then the third, Elizabeth, was organizationally. There was a lot of turnover at the higher ranks in the business, and that cascaded down through the organization. So at the same time that we're hopefully rebuilding confidence with the investors, job 1 for us is to rebuild confidence with our employees. Fortunately, these are good, high-quality products, and we never lost the confidence with our customers. So we had that stakeholder in decent shape. But I think over the last several quarters, we've rebuilt that confidence in our employee base. You can see engagement going up, and you can feel the energy around here.

And so looking forward to what are we focused on now, we just put out the new plan a year ago. So we're squarely focused on executing against that. The 3 priorities of growth, operations and people. And we now have a building sample set of when we deliver against those priorities, it's reflected in the financial output. So the plan seems to be working. And as they say, we'll keep working the plan.

We have our next question from Steven Valiquette with Mizuho Securities.

Sorry, on there. A couple of questions here. I guess, just first on really more of a geographic question. I guess really across kind of global dental orthodontic market, some of your competitors are highlighting better end markets in Europe and APAC, but still suggesting challenging end markets in North America and various product categories. But you guys seem to be posting pretty strong growth in North America really across all your key product categories.

So I guess I'm just curious, how you think about this way or not, but is there a key variable you can point to in your go-to-market strategy in North America that's leading to these results, whether it's DSO relationships or something else? Or is it just strong execution across each key product area that's just adding up to overall North American results? Just any color if you think about it that way might be helpful.

Yes. Steven, if I understood the question correctly, it's about any geographic differences. So let me answer the question for Q4 and for 2025.

In Q4, no, we did not see any major differences by geography. We had strong growth in North America, in West Europe and in emerging markets. And then I think Eric mentioned, we had extra high growth in China because of that comp from Ortho VBP preparation in Q4 '24. So 2025, Q4, we saw strength across all regions. The answer is about the same for 2025. We weren't as strong on a full year basis in China, but North America and Europe were very similar. And then a couple of emerging markets were double digits as well. You're on mute.

Our next question comes from Lily Lozada with JPMorgan.

One on margins, you showed a lot of SG&A leverage. So can you talk through some of the sources of leverage you saw there in the quarter and how you're thinking about SG&A as a driver of margin expansion in 2026? And on R&D, that's been pretty consistently increasing as a percentage of sales. And so should we think about that continuing to outpace revenue growth in 2026?

Yes, I can take that, Lily. Appreciate it. So the first part, if you look at our adjusted EBITDA margin bridge, I'll just give you the high points on that one again. So overall margins improving in the quarter. I would say the quarter was fairly indicative of what we've seen in each quarter this year or most quarters this year and then for full year 2025. So volume benefits, price benefits. We delivered good productivity across most of our businesses. Our Spark margin improvement year-over-year was significant for us.

And then as you mentioned, within kind of the bundling of SG&A, G&A, in particular, was strong for us in the quarter as it was for the full year, where for the full year 2025, we were down 11%. All of that effectively is helping us to offset tariffs and a little bit of FX penalty and then reinvest in the business. And I would say, if you sort of go back to the first question that was asked post-prepared remarks, our guide for next year is not too dissimilar. We'll continue to get margin expansion from growth and productivity. We'll continue to use that to invest in the business at the pace of our performance. And maybe the only difference into 2026 is that we expect FX to be a benefit just given the first half transaction costs that we had.

And then sort of the third part of your question on sales and marketing, R&D, I would say, expect us to continue to invest in R&D at a not too dissimilar pace, improving each year and likely improving at a rate higher than growth so long as we can generate productivity, obviously, to be able to do that.

Sales and marketing, probably more flat to maybe modestly increasing as an intensity. That's a nod to percent of sales, but certainly less so than R&D.

Great. That's really helpful. And then just another follow-up on VBP. I appreciate it's kind of tricky to call the timing, but I was hoping we could get a bit more color on how you're thinking about the impact when it does eventually come. I think last time you framed it as a net positive to revenues for implants. And so how would you characterize it this time around? Any color on the size of the business is being impacted, the magnitude of the potential impact and whether you're seeing it being a net headwind or tailwind after taking into account the potential volume impacts would be helpful.

Sure. Why don't I take that one? So again, there's 2 VBPs that we anticipate, the first VBP in ortho and then the second VBP in implants. So let me just comment on each in turn.

So for VBP ortho, we expect it to look a lot like VBP 1 for implant. What we saw there was kind of a 40% to 45% price decrease that was then met with an equal inverse volume increase. So 100% volume increase to offset the 40% to 45% price increase. And for us, it was a net benefit to total revenues.

So we expect something similar in ortho. Of course, there are nuances to ortho, and I'd mention two. The first is -- in implants, it's easier for the market to expand volume. It's a faster procedure and easier -- easy for me to say anyway, easier to train a dentist to do it. So we saw a more rapid expansion in the patient demand. I think we're going to see less of that on the orthodontic side. It's typically an 18-month procedure treatment, so a little bit harder to expand. And certainly, on the traditional bracket and wire side, harder to expand that available supply through orthodontists as quickly.

The other nuance worth mentioning is specific to us, there's both the traditional and the clear aligner VBP. We're a large player on the traditional side in China. We're smaller on the clear aligner side. So the clear aligner question is going to impact some of our peers greater in China.

Coming on to the anticipated second VBP for implants, it will be much smaller, we think, maybe in the 10% to 20% price decrease level. It benefited us greatly in VBP 1. Because those with large market shares going in tend to get even larger market shares coming out because in the case of premium to challenger implants, that price differential was compressed. And when the difference is smaller, we found more clinicians just trading up to premium. So we were a benefactor of that. Hopefully, that gives you a little flavor, Lily, of the 2 VBPs that should be coming here in '26.

Our next question is from Allen Lutz with Bank of America.

This is Dev on for Alan. I just want to maybe double-click on the diagnostic and equipment growth in the quarter and just looking at what that looks into next year. Granted this may be a tough one to parse out even in your seat. But just curious how you think about underlying growth for equipment, call it, versus more onetime-ish benefits. I'm thinking here sort of pent-up demand, maybe an impetus from the advantageous tax code recently or level of inventory in the channel. How do you see underlying equipment diagnostic market volume growth in '26 and then maybe Envista specifically?

So diagnostics, I'll talk in general. So equipment is a bigger category. Equipment includes chairs, handpieces, et cetera. We exited that part of the business previously. So we participate in 3 categories within diagnostics. We participate in 2D and 3D imaging. You're familiar with that. You sit in the chair, they take a picture of your anatomy. We participate in intraoral scanning, IOS, which is a different image capture technology.

And then we participate in the software piece, the treatment planning as well as the image management piece. Those 3 categories tend to be the faster-growing part of the broader equipment. We had double-digit growth in our Diagnostics business in Q4, but that was aided by the easy comp from Q4 '24 that Eric mentioned.

I think right now, I would call it a low single-digit growing category, and we have outpaced the market for the last couple of quarters. I would expect something similar in the first half of 2026, low single-digit growth, us doing a little bit better than that. And then we'll just have to see how that -- whether that growth catches and the market moves to more sustainable growth. So I'm going to hold off forecasting market growth in the second half for now.

That is all the time that we have for questions today. I will now turn the call over to Paul Keel, CEO, for closing remarks.

Okay. Thanks, Vanessa, and thanks, everyone, for tuning in. Maybe I'll just quickly underline a couple of quick thoughts to put a wrap around the quarter and the year. First, Q4 was another encouraging step forward for Envista with double-digit sales, adjusted EBITDA and EPS growth, and that capped off a strong 2025 with 6.5% core growth also converting to double-digit EBITDA and EPS growth for the full year.

Second comment is that our performance was broad-based with all major geographies and businesses once again in positive territory and a good contribution from volume, price and new products. We also drove 2 points of margin expansion and returned over $160 million to shareholders.

Third, we continue to focus on executing the value creation plan that we shared at our Capital Markets Day last March. And I think we are seeing encouraging progress on all 3 of our main priorities: growth, operations and people, which brings me to 2026. Our guidance for this year reflects our confidence in building on this momentum. Guidance for core growth and free cash flow conversion are right in line with our medium-term objectives and guidance for EBITDA and EPS are above that medium-term plan.

I think that pretty much covers it for today. Thanks, everyone. Have a great day and a great remainder of the week.

Thank you, ladies and gentlemen. This concludes today's conference call. We thank you for your participation. You may now disconnect.

Great. Hi, everyone. Thanks for joining. I'm Lili Lozada. I'm part of the med tech team here at JPMorgan. Very happy to have the Investa management team with us here today. I'll pass it over to CEO, Paul Keel for our presentation, and then we'll do some Q&A.

Okay. Thanks, Loe. You know who I am because Lilly just told you sharing the stage with me is our CFO, Eric Hammes, Quick reminder that the presentation will be on our website later. You can find it in the Investor Relations section. It contains some forward-looking statements and some non-GAAP measures. Let's see, in terms of today's agenda, we'll cover 4 points. Many of you will be familiar with dental. So you'll know that it has a number of structurally attractive growth drivers related to it. .

Those of you who do follow our industry know that Envista has been a leader in it for better than 100 years now. But there are some new faces in the audience. So I'll start with a quick primer on the market and our company. We'll then get into the meat of the presentation. In Q1 of last year, we had a capital markets event, we laid out a new value creation plan for Envista. So I'll recap that plan for all of you. And then we'll give you an update on how progress is going. As a preview of all that, the plan centers on 3 priority areas: growth, operations and people.

With respect to growth, year-to-date through Q3 of '25, which is our last reported quarter, the company was growing organically 5%. And we had all of our major businesses reporting 2 consecutive quarters of positive growth. Our operations priority center around the Envista business system, that's our continuous improvement methodology. We focus on a number of operational priorities around safety, quality, customer service, also keep a keen eye on productivity and capital efficiency.

With respect to people, Eric and I joined the company in the summer of 2024 and our people priorities focus on talent development, employee engagement and building strong collaborative teams. All of this work has contributed to early but encouraging financial performance. In addition to the 5% organic growth that I mentioned through the first 3 quarters, we have strong double-digit growth in EBITDA and in EPS. Okay, with the agenda out of the way, let's talk a bit about the market. As I mentioned, Dental is structurally attractive across the full landscape from patients to clinicians to suppliers, it's about $400 billion in annual spend, making it one of the bigger health care categories. I'm going to highlight 3 things from this page. The first is that, curiously, in dental over time, demand is not the primary limiter of long-term market growth. dental demand is everywhere. Of course, every person on the planet is a potential patient and customer to bring that into maybe a little more focus, as you can tell from the left side of the page, Roughly 2/3 of the people on the planet suffer from some form of malocclusion or misaligned teeth. And to further illustrate the point for all of us in the room, on average, 1 of us will lose at least one tooth by the time we reach the age of 60 and an unlucky 20% of us will lose all our teeth. So you add to that, other drivers like aging populations, ever-increasing demand for aesthetics, rising middle class, et cetera. and you can understand why dental tends to be a very consistent grower over time.

Now I mentioned that demand wasn't the primary long-term constraint. Supply is, it's the number of licensed clinicians or registered products in any given market available to treat the various forms of patient needs. And that brings me on to our second point, like other med tech categories, the manufacturing community works with the clinicians to increase available supply.

You can do that through product innovation or digitization allowing clinicians to treat more patients with their available chair time. You can also do it through supplier-led education programs, teaching new procedures to clinicians. For example, today, maybe a 1/4 of all orthodontic cases are treated by general dentists. That's up from less than 5% 20 years ago. And about 1/3 of all general dentists today now place at least one dental implant. That's up from a little under 10% also 20 years ago. Third point to note on this slide is that unlike some other categories in health care, where there'll be structural pressures to various parts of the value chain than hospital systems on the medical side. In dental, all of the participants have the opportunity for pretty good economics. Dentist, as a group, do pretty well, specialists do even better. The well-run multisite operators, the DSOs, all do pretty well. Dental manufacturers as a group do pretty well. And in the 1/3 or so of the industry that goes through distribution relative to medical distributors, the dental distributors also do pretty well. All of this underpins that stable, long-term kind of prosperous nature of the category. For those of you who are newer to our story, Envista is a global leader in dental. We report through 2 segments: Specialty Products & Technologies represents about 2/3 of our revenue. Our equipment and consumables business is the remaining third. We have earned a top 3 position in every major category in which we compete. Some of our brands like Nobel, Ormco or Kur have nearly 100% awareness in their respective clinical segments. We operate in over 130 countries. Roughly half our sales come from the U.S., which is the world's largest dental market and the balance is pretty equally spread across Europe and developing markets. New products have long been central to Envista's growth strategy. And we've now served dentist for more than 130 years, and we have more than 1,500 patents to our name. Many of the more interesting inventions across all of dentistry Envista has had a hand in. We invented the endodontic file. We invented dental implants, invented panoramic x-rays, self-ligating brackets and custom orthodontics.

Now while all of Dental is a pretty good industry to participate in, there are some parts that are more attractive, and we try to focus on those. We've been in and out of different parts of dental over the years, and we like the 4 that you see on the left side of the slide for a couple of reasons. The first is that there is a continuum of care that exists across dental.

Nearly every dental procedure has the same 3 steps. There's an upfront diagnostic step where the anatomy is captured and the care is designed. There's a treatment planning step in the middle where you design the case. And then there's a therapeutic at the step at the end where you actually treat the patient. Now it's difficult to serve customers across that full continuum of care. But for the small handful of suppliers who can do it, there are certain clinical, financial and operational benefits that accrue. So we are 1 of just a small handful of folks who do this on a global scale. Second thing we like about specialty categories, in particular, is that they're typically sold directly to clinicians, meaning there isn't a distribution layer in between so the margins and growth rate for specialty categories tend to be a bit better. And we participate in consumables in diagnostics because while they do go through distribution in most cases, there are also products consumed by nearly all clinicians around the world. So if you want to serve that full continued move care, you have to be in consumables and diagnostics, and we're leaders in both and we think we generate competitive advantage because of that full portfolio. Okay. Last slide here on the market. You can pick pretty much any 5-, 10-, 15-year period that you like. You'll get the same CAGR for the global dental market. It's about 3% to 5%. And you'll notice a couple of things from the chart on the left. This is U.S. data. So dental spend is in orange and GDP is in blue. The first thing you'll note is that the orange line is above the blue line every year pre-Covid. Dental always outgrows the broader market. That's true in times of economic softness, the last 3 recessions are noted in gray. That's because about 2/3 of all dental is covered by insurance. So even in soft periods, dental still does relatively well and about 1/3 in the market has some consumer influence to it or it's a discretionary purpose -- discretionary purchase. And so in expansionary economic period, it also tends to outgrow. I think clear aligners as an example of that. Now as we all know, you see a big disruption in the right 1/3 of the chart, that's COVID.

The market had the largest ever 1-year contraction in 2020, followed by the largest 1-year expansion in 2021. And then in retrospect, very predictable couple of years of below trend growth while the market worked through that distribution. You'll note that while there's a pretty big gap between the orange in the blue line pre-COVID for the first couple of years post COVID, they're almost on top of each other. That's when dental and GDP grew about at the same rate and only recently now are the 2 lines beginning to diverge again with dental moving back out in front.

So most people who follow the industry believe that Dental will return to that decades long, consistent 3% to 5% growth. Nothing has structurally changed in dental in the 2 or 3 years post COVID. But there's quite a bit of debate on when the timing of that inflection will happen with all of the macro volatility remaining high. I don't pretend to know when that will happen myself, but I can point to a couple of green shoots that give leading indicators. Patient demand now has stabilized and clinics are once again opening new sites. Low unemployment and lowering interest rates are both supportive of dental market growth.

We saw a sharp increase in private equity interest in dental in the last 2 years. The last quarter of available market data had U.S. clinic revenues increasing mid-single digits in Q3. Nearly all the public players also reported positive growth in Q3. And you put all that together, and we think there's good reason to believe that the building momentum in Dental here will continue in 2026. Okay. Having covered the market and our position in it. Let me say a little bit about our value creation plan. This is a slide we showed in Q1 of last year that capital markets event that I mentioned. As you can see, the plan is grounded in 4 components. It's guided by our purpose. It's centered on our values.

We focus on those 3 priorities I mentioned, growth, operations and people. And then it's framed by our medium-term financial objectives, 2% to 4% organic revenue growth over time, what we call core growth, converting to 4% to 7% EBITDA growth and 7% to 10% EPS growth. And all of that is underpinned by a 100% or better free cash flow conversion. Now we're only going to have time today to go through the right side of the slide, so let me just say a bit more about our priorities here on the next slide. As mentioned, we're focused on the 3 areas you see here on the chart.

With respect to growth in blue, laser-focused on customers. We leverage our global reach to serve individual clinicians around the world, and then we also take advantage of that full portfolio to serve multisite operators like a DSO or a university, a hospital or a government network. Very focused on commercial execution, in particular for our 2 largest businesses, implants and orthodontics. And we keep innovation and portfolio highly visible and well resourced. With respect to operations, our attention and resources are centered on manufacturing and service excellence and capital efficiency. With respect to the former, we're committed to maintaining our industry-leading levels for safety, quality and customer service.

And with respect to capital efficiency, that's a pretty capital -- cash generative business, CAPEX in, our business runs a bit under 3% of sales and working capital turns typically run above [ 5% ]. Very proud of our people. They make all of this progress possible. We pay particular attention to talent development in order to drive employee engagement and high-performing teams. As you can see from the chart, all of these priorities are enabled through our Envista business system and everything we do is underpinned by our circle values.

Okay. That's the plan, let me say a little bit about how we're doing implementing it, beginning again with growth at the top. I already mentioned the 5% organic growth through the first 3 quarters of last year. All of that was propelled by double-digit increases in both R&D and sales and marketing investment to ensure that the good momentum continues and it accelerates further in '26 and beyond. All of our businesses, of course, benefit from that investment, but our implant business, in particular, has after contracting in 2023 and the first half of 2024, it's now had 4 straight quarters of positive growth.

Spark is the name we use for our clear aligner business. It has delivered many consecutive quarters of positive growth and market share gains. It's now at a scale, it's about a $300 million business that it also has turned profitable a lot of that profitability expansion has been driven by the use of AI and automation in our manufacturing. It's a material contributor now to earnings growth in Envista. It was a consumer of cash for the previous 5 years. Now turning profitable. It should be material at the enterprise level.

As I mentioned, we invest aggressively in R&D, starting to see good returns on that. We had major product launches in each of our key businesses last year. With respect to operations, we reduced G&A spending by 12% in the first quarter of last year. We fully offset all tariff impacts through our price actions and through supply chain agility. As I mentioned, it's a highly cash-generative business. It generates more cash than it consumes.

So our Board gave us authorization for a $250 million share purchase program that we started at the beginning of last year. We deployed just over half that amount in the first 3 quarters of last year. And we're making good progress on reducing our effective tax rate. In terms of people, we saw an uptick in employee engagement in 2025. We saw it against all major employee groups, the management ranks, the salaried group and the production employees.

With respect to talent development, we renewed our focus on promoting from within. Last year, a little better than half of the management promotions were given to existing colleagues that's up from just under 10% the year prior. In addition to taking care of our customers, colleagues and shareholders, we stepped up our investment in communities last year. We have a charitable arm called the Envista Smile project touch 19,000 underserved patients and donated a little over $2 million last year. That's a big part of what we try to do. Now as you would hope to find the impact of all this activity is also showing up in the financials, in addition to the 5% year-to-date growth. You can see there's 4 straight quarters of generally accelerating growth.

Below that, you have EPS strong double-digit growth in EPS, not shown as EBITDA but also double-digit growth on the EBITDA line. These are the four -- same four medium-term financial objectives that I showed on the value creation plan. Beneath each, you can see our year-to-date Q3 performance against it, the 5% core growth a bit above our 2% to 4% target range. The strong double-digit performance in both EBITDA and EPS that I just mentioned.

And then cash flow conversion right on plan at about 100%. And still early days, of course, but we're encouraged by our early progress. We'll announce full year 2025 results on our earnings call on February 5. So we hope you guys will tune in for that.

By way of wrap up, I'll quickly just touch on the same main themes that I've already shared. First, Envista is a leader in the structurally attractive global dental market. Second, after a couple of years of below trend growth, we think the dental market shows signs of returning to that long-term consistent 3% to 5% rate that I illustrated. We're making good progress against the value creation plan. We communicated at our Capital Markets Day at the beginning of last year. And our early financial performance in executing that plan is encouraging. With that, I will thank you for your kind attention and ask Lilly to take us through the Q&A. Thanks, everyone.

Maybe we can start with a state of the union on the dental market. I think the way that you've been characterizing it the past few quarters is soft, but stable. So is that still a fair way to characterize the market? And any color on what you saw exiting 2025?

Yes. I think that's still the right way to think about the market. Maybe I'd be a touch more optimistic than we were on our Q3 call for the reasons that I mentioned. If we spin through our portfolio, as I mentioned, we've had now 2 straight quarters of growth across all 4 of the businesses. We tend to have pretty good positions in these categories. So if we're growing consistently, chances are that the market is improving as well. So we see signs of momentum building. Interestingly, this time last year at this conference, most people thought 2025 was the year that dental was going to return to that 3% to 5%, many of the same trends we're observing now were evident. All of the publicly traded players had a good Q1.

We were kind of off to the races than we had Liberation Day and the disruption from that, but it seems the market has kind of digested that and we're back on that improving kind of trajectory, catching some traction.

Maybe we can dig a little bit deeper in the capital. This is where you've been most impacted. But do you think this is a segment where we could start to see things pick up even before we see a broader change in consumer sentiment, just given the fact that some of these products do need to be replaced eventually and have lowering interest rates had an impact at all on purchases?

Yes. So let me answer it by category, but also by geography. So true in the U.S., consumer confidence is low. But in other parts of the world, other than China, consumer confidence pretty good. Europe, Japan, Southeast Asia, in particular, consumer confidence is at a good level, and that seems to be helping the global dental market. Now specifically to the categories that we mentioned, you asked about interest rates. Interest rates impact dental in 3 ways. It impacts multisite operators. Typically, that's how they finance the expansion for DSO. It impacts an individual clinician in terms of equipment purchases, CVCT, call it, $50,000 to $60,000 that typically gets financed. And then for those elective categories that I mentioned like clear aligners, usually, there'll be consumer finance that plays in.

So yes, as rates continue to come down, it's supportive across all 3 categories and diagnostics, the equipment category has been kind of the hardest hit over the past couple of years. That category declined for 3 straight years and now in the second half of last year, the last available category data show that diagnostics was returning to growth. So another green shoot that maybe the market here recovering.

Aside from interest rates, any other leading indicators we should be keeping an eye on that could point to a broader turnaround?

Yes. I mean aside from GDP, of course, which all categories look at, there's 2 other macro indicators people follow for dental. They look at unemployment rates, look at interest rates and look at consumer confidence. We talked about consumer confidence and interest rates and of course, unemployment levels, although there's a lot of noise in the system, they're still at historically low rates. So all that is good news for dental.

Maybe I can shift gears a little bit and talk about Spark. Revenue recognition changes the last few years made it a bit tricky to get a pulse on what underlying trends look like. So revenue aside, can you talk a little bit about what you've been seeing on a volume basis for Spark there 2025 and how we should be thinking about this business this year.

Just Perkin you say revenue recognition I'll let him answer that one.

Yes. So let me hit the aligner, the underlying primary case growth piece first and then maybe just to settle everybody up on the impact of revenue recognition, which is materially important. So if you just strip everything away and look at primary case growth, that's our best underlying indicator of how we're performing.

And of course, how the market is performing. We have gained share for the last many, many years, probably since the inception of Spark, we've gained share far as we can tell for every quarter since the inception of Spark. And our underlying primary case start growth is around mid-single digits to high single digits. That's also how we see the business going forward. Back this year. So if you just listen back to a few of our last earnings calls, we've had a really, really good flow of new product introductions.

We can name many of them here today. That's part of the yield from us putting some of the benefits we're getting in areas like G&A into R&D in helping to launch a good pipeline of new products. And again, mid-single digit, high single-digit growth. It's how we see our Spark primary business going forward. That's sort of different from what we report on a revenue basis.

If we just talk revenue recognition and deferred revenue, we made a significant change back in Q2 of 2024. That was basically to defer a higher amount of our initial upfront revenue for our Spark business, cost us about $45 million in revenue in 2024. We've unwound about 2/3 of that in 2025, that leaves a small amount still to come in 2026. And that's why we're also seeing a little bit more robust growth as we see on a reported basis year-to-date.

And when do you think we can have that $15 million behind us and have revenues track more closely.

Yes. So first 2 quarters of 2026. So we're getting down to the -- maybe not immaterial, but let's say, smaller level of material by the time we're through Q2 of 2026, you won't likely hear us talking about it and putting in all of our quarterly breaches. .

Spark reaching profitability was a big milestone for you. How do we think about the trajectory of further profitability expansion from here? And what are the levers that continue to drive smart profitability?

Yes. So we've communicated that we expect Spark to continue to expand margins until it reaches about fleet average for Envista, which for this year, we've guided for '25, we guided to around 14%. The primary driver margin expansion for Spark has been factory automation.

We have factories in 3 different parts of the world, and we have a pilot plant near our headquarters in Southern California where we design all the lines and step-by-step in a very organized fashion, identify the next step in the process that would benefit the most from AI or automation. We implemented in 1 of the lines in our Mexico facility, migrated across the plant go to the Czech Republic, go to China. So that very consistent quarter-over-quarter reduction in our unit cost has been driven in a very price fashion. We expect that to continue.

How would you characterize the state of your implants business today. We've seen some nice traction in recent quarters as put more focus and investment on this segment. So how satisfied are you with what the implant business looks like today? And do you think there's any other gaps or room for improvement in this portfolio?

Yes. I mean, I guess, I'd say we're pleased with our progress, but far from satisfied after I think it was 6 quarters of contraction, job 1 was to get it back to positive growth. And we're now have 4 quarters of positive growth and are basically growing at the market. Now in that period of contraction, we donated a lot of share to Straumann until next job here is to grow a little bit quicker than the market or at least quicker than our peers and claw back some of that share.

Our focus on doing that basically sits in 3 buckets. First was around commercial execution. We put about $25 million into our implants business in 2024. About half of that went into sales coverage marketing programs. About 1/4 of it went into re-upping our customer education and about 1/4 of it went into new products. We saw an immediate benefit on the commercial execution side. We're starting to see traction from the customer education.

And then we have a number of launches lined up for 2026 that we're hopeful will make an impact.

And when we're talking specific products, I feel like implants and Spark get a lot of the attention. But is there anything else that you'd call out as a key driver for 2026 or anything that you think is underappreciated in the portfolio.

Yes. Well, the tallest man in the room, the tallest man in our company here is in the second row. He runs our Diagnostics business. So I'll take this opportunity to applaud Robert and his team, they had a full relaunch next generation of their industry-leading CBCT platform at the end of 2024. That's called OP3D, getting great traction in the market and then not to be outdone they launched a new version of their intraoral scanner called Dexus -- in Prebo in Q4 of last year. That has a different architecture for how it processes images. It's about a 4x increment in speed of capture, and that's off to a really good start.

So I would point to that. And then I would also say our consumables business is pretty active. They have an infection prevention business, that launched a hydrogen peroxide-based antimicrobial last year, and that's growing very, very quickly.

So as I mentioned in our prepared comments, we had big launches across all of the major businesses.

There's been some chatter around further rounds of VBP in 2026. So can you share the latest on if and when this is coming and how impactful this can be relative to pass routes.

Yes. I think most people will be familiar with VBP, value-based pricing, it's the health care reform in China. It's gone through many, many health care categories over the past couple of years. It started in dental 2 years ago with implants. And so it has 2 pricing steps to it. The first is the Chinese government lowers the price that the government hospitals can charge a patient for that procedure with the idea of expanding care in China. In the case of implants, they lowered the procedure price to patients about 50%, which led to a doubling of the number of patients in China who demanded or wanted a dental implant.

The second step in the process that is they let suppliers bid on that increased volume. And for the large market share players, like ourselves, that's a big opportunity to grow your unit volume meaningfully. We basically doubled the number of units we sold in China a result of that.

The government now is talking about the second category for VBP, which would be orthodontics. They had originally communicated that, that would take place last year, and it has gone through series of delays. The current communication is that it's likely to occur in the first half of this year and that they'll then do a second pricing round on implants, a smaller dramatic reduction in implant pricing. That is expected to happen later in '26. That's the latest on VBP.

I guess outside of VBP, price has been a tailwind for Envista in 2025, which is sort of in contrast to other parts of medtech where we've seen those pricing tailwinds start to moderate a bit. So what's your thinking on price as a contributor to growth in 2026? And is there more room for price taking given the still soft end market dynamics?

Yes. And the data we showed in our prepared remarks you saw that Dental always outgrow GDP. A portion of that is that dental historically has always been a pretty price accepting category. Clinicians on average, would raise procedure price about 3%, reimbursement from insurance always had been around 3%, and then the suppliers would come under that ceiling 1, 1.5 points would be typical for many years in dental. That changed in that period post COVID, where the market had below-trend growth, our clinicians were more reluctant to raise price suppliers. We're more reluctant, so when Eric and I joined 1.5 years ago, we started to rebuild that muscle for capturing price and Envista all the blocking and tackling, you'd expect to do that. You put price on the P&L, put pricing people's objectives, make sure your ERPs are configured to calculate price, et cetera, et cetera.

And we started to get price at the beginning of last year. Then with tariff activity picking up, we took another round of price increase in the middle of the year. And as far as we can tell, most of our peers have done the same. So right now, pricing is a tailwind for most of dental. The last numbers I saw in procedure price increases is that they've now returned to that same sort of 3% to 4% increase and so we'll see. I wouldn't expect 2026 to be as supportive to price as '25 unless the tariff activity heats up again, but I think it will above that lower pricing level that we saw in that kind of '23 to '24 period.

Be elsewhere in the P&L, R&D expense has increased pretty meaningfully in the last few years. So where have those dollars been going in the portfolio? And how should we be thinking about R&D spend moving forward, either on a growth rate basis or [indiscernible] sales?

Yes. I mean this is a kind of a classic medtech business, high gross margin business. And if you can accelerate the growth, you can't spend the extra gross margin dollars that get off. For us, across our careers, the 2 mechanisms to best accelerate growth in med tech businesses, our R&D and customer education. So we've had double-digit increases in both of those.

And we think that's probably the single biggest contributor to the accelerating growth that we showed on that chart. We'll continue to do that moving forward -- it's that kind of self-driving cycle let everybody wants. You get the growth, you get the extra gross margin dollars, you make the more investment, you have left over dollars for returning to shareholders, doing more investment, et cetera, et cetera. And that's kind of the momentum you want to get. We're early into that. But as you saw from the slides, there's some evidence that it's working.

Last year, you announced a restructuring program focused on cost savings. So can you tell us a little bit more about where you stand in that process? What changes have you made so far? And where still room to go?

Yes, I can take that. So fourth quarter 2024, I guess, we got to reorient ourselves of what last year means at this point. So fourth quarter 2024, we announced a restructuring. It was like a mid-teen charge that we took in the quarter. And at that point in time, we're committed to about $20 million on an annualized basis to get out of the business to help bottom line to help 2025 earnings.

I think at the time, we said about 3/4 of that would yield benefit in 2025 and that's what we've seen happen. If you just look at our third quarter year-to-date results were down about 12% in G&A.

That will continue to be a tailwind for us as we go through the of Q4. And we expect a little bit of benefit still to finish as we go into 2026. I think that's important because that showed sort of our first ability to be able to do multiple things. One was to be able to leverage our service centers around the world to sort of rebuild capability centers in part for our back office. Paul just mentioned R&D. It was 1 of the reasons we were able in 2025 to be able to invest in R&D. And as we were a little ahead of schedule on our program, we invested even a little bit more as we came through the fourth quarter of 2026.

And as you refer to sort of that cycle, that's something continue to work on basically turning continuous improvement in the reinvestment in the business for what we know will be increased organic growth.

Maybe just 1 last question in the minute that we have left, you've talked about line of sight to tax improving in 2026. You eliminated the intercompany loan that was putting some pressure on that tax rate and improved profitability. What are the pieces that get you to a more normalized tax rate moving forward? And what does a more normalized tax rate look like for Envista?

Yes. So we -- just kind of orient we talked about 2 things very specifically in our third quarter earnings relative to tax. One was that we gave an updated guide for full year 2025, a tax rate of around [ 32% ], that was about 4.5% from how we originally saw the year.

And most of that came from improved U.S. profits. And then the second that we talked about was the resolution of an intercompany loan. We had a very significant intercompany loan between Europe and the U.S.

We pay interest on that loan. And per U.S. GAAP, there's a deductibility cap relative to U.S. interest relative to U.S. earnings. So 2 things happened. We resolved that loan. That means we restructured and eliminated that position. But we've also got the improving U.S. earnings that's helping to improve it. We'll talk about it very specifically as we get into 2026 earnings, but it's a meaningful reduction for us next year and as we go forward.

And then we'll also talk about a little bit of the sort of finality to get back to a tax rate that's in sort of the mid-20-ish percentile.

Great. With that, I think we're out of time. So thanks, Paul and Eric, for joining, and thanks, everyone, for listening in.

Thanks, all.

We will get started. I'm Elizabeth Anderson. I'm Evercore's health care services and dental analyst. Very pleased to be joined by Eric Hammes and Jim Gustafson from Envista this morning, CFO and VP IR, respectively. As we sort of sit here in December of 2025, we've gotten different signals from different dental participants. And maybe that's a true -- maybe doesn't even -- that's not even true of December 2025, it's been true this whole year. So how do we think about the overall dental market and sort of the performance Envista has been seeing volume-wise?

Yes. I think let me maybe just start with the market, and I'll take it from the vantage point of like the whole dental market, a little bit by segment and then geo. And then let me try to kind of wrap it up by just giving a perspective on what we're seeing then internally in terms of Envista performance. So I would say for starters, we see the market in aggregate as being relatively similar to the way we've seen it maybe for the last 4 quarters or so. By our records according to our portfolio, the market has been growing. I think we sort of coined the term soft but stable. Maybe that's code for like low single-digit growth, but a relatively stable and predictable growth.

Sitting here in December, looking at fourth quarter, we see sort of that level of consistency. So I think that's probably point number one. If we look at it by portfolio, consumables for our business and the consumables market, I would say that's the one market that we've seen sort of the most amount of consistency over the last year or so, a low single-digit market generally across the broad portfolios of consumables.

Orthodontics, also a good growing market, a little bit of a slower aligner market growth trend as we've come through this year, but still, call it, a low to mid-single-digit growing market and brackets and wires performing well as a market segment within orthodontics.

Implants, I think, again, if you sort of divide implants a little bit into 2, a lot of excitement. We saw this week actually at the Greater New York Dental Show around the digitization of dental and the digitization within implants specifically. And I would say we see that in sort of our own patterns of equipment selling and just the setup of digitization in the dental offices and then to bring it back maybe to the core implant abutments, prosthetics, maybe a low single digit, but consistently growing market.

And then Diagnostics is the one that I think in the -- maybe the last few months to quarters is getting a little bit more attention. I think we'd characterize it as a negative low single-digit market this year, year-to-date, but things have been on a modestly improving trend, right? Signals that interest rate reductions are starting to create a little bit of maybe optimism or buying momentum. I think what's also true is that we are now many quarters, actually many years removed from sort of the heightened buying cycle of Diagnostics back in the 2022 time frame.

And that can only go along so long, especially as you have a relatively stable dental market and generally improving trends in some of the spaces of de novo and office builds. So maybe a little bit of optimism, albeit for Diagnostics, that's coming off of a high negative single-digit growing market last year.

And then if you were to cut it a little bit by geo, North America, we see as a positive growing market recovering a little more in the developed space. Europe continues to perform well. That's been a market based on having lower interest rates and higher reimbursement levels that didn't quite see some of the sort of the slowdown that we saw in North America. So Europe is a good growing market. China is still with a lot of questions mark -- question mark over it, I know we'll eventually get to the topic of VBP.

And then just if I could, on the kind of the Envista performance. So maybe 2 sort of buckets for Envista. So we've grown step way back about 5% on a year-to-date basis. If you strip out a few of the things that we talk about within our earnings calls, primarily Spark deferral gains and a little bit of consumable low comparables, slightly lower than 5%, but still really good growth.

And quarter-to-date, we're seeing those trends continue. So a lot of the trends that we've seen throughout the year, both in terms of portfolio and overall core growth trend, I would say we're seeing consistent on a quarter-to-date basis. December is a big month. It's always a big buying month, but we believe that we'll have a strong finish to the year.

Well, I think that's a good place to start. I think there's a lot to unpack there. Maybe starting with Spark. Where do you see as we like as we're going through '25, the market, as you pointed out, has been still growing, but maybe not from what we saw before. I don't know if you have any comments on sort of the dynamics there. And then how have you been able to drive Spark growth within this market in 2025? And then sort of how do you see that evolving as we get through the end of the year?

Yes. So I think stepping way back, I would say that we don't see the aligner market having changed dramatically throughout the year, mid-single-digit growing market, maybe within an individual quarter, you could argue it's a little lighter than that, a little heavier than that, just depending on where we've been within the year. But I would say kind of big picture, it's a relatively consistent global aligner market, following some of the dynamics that I mentioned geographically. Europe a little bit stronger. North America, maybe a little bit lighter, but also in a recovery mode.

In terms of performance for our business, I would start with the product itself and our digital treatment planning solution. We know we have a very solid product, product performance that's both clarity, fit, comfort and the treatment planning software of our business is a strong treatment planning software that we get good feedback on for clinicians. So I think kind of the -- like the solid foundation of product and portfolio is in good shape as it has since the launch of our Spark business.

Second point would be that we have focused a lot in the last 12 months on making sure that we're selling the full solution to orthodontists, right? So we are the largest player at global scale that has both an aligner business and a brackets and wires business and a combination treatment solution. That's important to us as we primarily focus on the orthodontists and the orthodontist market. It's where we built our brand over the last many decades, primarily with Ormco and Damon brackets and wires and self ligation.

It's where orthodontists know us and understand us, but it's also our selling philosophy, our go-to-market model philosophy, right, bring the full solution portfolio, allow orthodontists to think about treatment planning the way they know best, whether that's with a clear aligner or with a bracket and wire or with a combination of both. We think that's the best strategy and winning strategy overall.

If you kind of dig within our results this year and listen back just to our earnings calls in Q2 and Q3, we've had a good extension of new products. That's also helping us in our -- in the growth of our business. Last year, we announced the addition to our portfolio, which we call Spark on Demand. That's the ability of a clinician to choose the number of aligners without having a sort of a lengthy refinement process and procedure to be able to treat a case with less aligners at a slightly lower price.

And then this year, we've also announced the launch of retainers, so sort of the sustaining component to a clear aligner case. We announced the launch in Q2 of BiteSync. That's to be able to correct Class II malocclusions, call it the more difficult to correct aligner cases. StageRx. This quarter, we talked about StageRx, which is the next version, if you will, of our treatment planning software. That's to be able to make it easier for the clinician, but it also streamlines the design process for us. So you kind of take all those things combined, and I would just say that the full solution portfolio plus the significant introduction of new products this year is helping us to grow above market share, and we think that's a continued trend that we'll likely see in the business.

Got it. I like how it's also been sort of a driver of sort of like lots of little innovation. It's not reliant on sort of one strategy. I mean, I guess it's part of the whole same strategy, but it's not like a one-trick pony in terms of, oh, we just launched this, and therefore, we got a bump from this or something like that as well on a core basis.

Yes. I think -- I mean, in general, that's the goal of all of our portfolios, right, to make sure that we have continuous innovation. Within there, you might have something that feels and looks a little bit more like a line extension or a near adjacency of the current portfolio. And from time to time, of course, our goal is to also launch products that become either new products, new markets and can ultimately bring in a new client or in this case, clinician or end consumer.

That makes sense. And can we put one accounting issue to bed? I know you said this very clearly on the 3Q call, but I still feel like it's a little bit of a question in some people's minds. Is the deferral -- how is the deferral benefit from this year, not a headwind to next year's growth?

Yes. So let me just kind of step through the journey that we've taken investors and coverage analysts through. So I apologize for that upfront because I know we're now going on quarter #4. So last year, we talked about a larger upfront deferral of our Spark business. Importantly, it had no bearing on the cash flow of the business. So we still bill upfront, we still collect upfront. It's actually part of the reason why we have a very strong free cash flow generation as a business.

With that change, we had about a $45 million headwind to revenues last year. At the end of last year, we talked about having about 2/3 of that coming back. So let's just say, unwinding from the balance sheet as a deferral benefit this year, revenue and deferral benefit. And that leaves about, call it, 1/3 to go. That's going to happen over the course of the next 2 quarters. It's a small amount relative to kind of where we've come from the $45 million last year, the $30 million roughly to date this year. We'll keep it prominent and transparent in our bridges.

But importantly, because of the large deferral gain we've taken year-to-date this year and a lot of that in Q4, the way you can think about the Spark business, if you're modeling it, is the absolute revenue dollars and the absolute profit dollars are a good foundation, a good jumping off point to think about the business going forward, right?

Said another way, the deferral gain in Q3 this year, year-over-year, it doesn't create a headwind next year. That's kind of a common question that we got is, hey, is this benefit that you saw in Q3 2025 going to create a headwind next year? The answer to that is no, right? The jumping off point of the dollars for Spark are on a very good foundation, including now a business that's in a profitable state.

And just to maybe put a final bow on that, like you had that $45 million, $30 million, so sort of implies, as you just said, $15 million further go forward. But then you've also -- and maybe that had a little bit of a bolus in it because of the way it started up. But as we get in, you accrued more deferrals for the growth that you saw in '25 that should also manifest themselves in '26. Is that...

You can think about the deferral, which is now about 50% upfront, 50% to be recognized as we go throughout the case to not have a growth effect. So a revenue growth effect going forward. So it's just the remaining $15 million that we'll keep transparent externally and that you can think about as being a little bit of a tailwind as we go through the next few quarters.

Okay. That's helpful. Thinking through the margin opportunity, can you talk about, as we sit here in the fourth quarter, what are the main levers to continue to drive those Spark margins to the corporate average?

Yes. So I would say the playbook that we've had for the last 12 to 24 months is still largely the playbook, although maybe the impact, the kind of size and magnitude might be a little different going forward, but very similar playbook. So kind of most important point number one is we have a global manufacturing footprint. We manufacture in 3 continents around the world, and we have a relatively same, similar work cell focused factory operating lines globally.

And the work that we've been doing in the last 12 months has been rolling out automation in addition to having in-line changes in our factory to bring down the unit cost of the product, right, the cost per aligner. 20% year-over-year cost reduction. That's what we've seen in the recent quarters year-over-year. Obviously, that shows a good track record of the ability to take the fully automated lines that we have within our manufacturing technology center.

That's a pilot plant in Southern California. Moving that out, it means investment in CapEx, but it also means reduction in aligner cost and labor cost around the world. That's still very much a part of our playbook. We have automation rolling out, but we still have further to go in our Mexican operation, a little further to go in our Czech Republic operation and to a lesser degree, an opportunity in our China operation. So that's something that will continue to drive cost reduction.

The second would be design cost. So I mentioned in our new product introduction, not so much in the aligner, but in the treatment part of the process. We just launched something called StageRx. That's to give clinicians sort of a faster, more efficient persona-based way to design and create treatment planning for cases, but it's also more efficient for our design center.

Our design center sits effectively between treatment planning, that's at the clinician level and manufacturing. So the more automated we can get there, the more leverage we can use of artificial intelligence and the more efficient that StageRx platform is, that can also be a reduction in our design cycle time, which can help us to reduce design cost.

And then the third piece I would just say in general is growth. So as we continue to grow the business, we're very focused, whether it's in the orthodontist office with a combined sales force, with the NPIs that we talked about, all of that growth will naturally help us to leverage a fixed cost base to be able to improve our margins. I think we're on record a few times saying that the journey for Spark looks something like a fleet average margin over time, call it, the next couple of years after we got to the milestone that we communicated prospectively for now a year of being profitable in our Spark business at an operating level in Q3 of 2025.

Are there any -- are those sort of thoughts that you were just giving sort of net of any investments that you had to put in to continue to grow that?

Yes. I think you'll see us continue to invest in the front end. So sales, marketing, commercial, more of that is likely to go towards introduction of Spark into new markets. So kind of back on the growth theme this year, we received registration approval in Japan as an example, a big market globally, a big market in dental, a big oral care market, but a market that we hadn't been registered in and actively, of course, selling in. That will be an example of one where the investment cycle will be a little bit ahead of the revenue cycle. We're right in sort of the middle of that, but a good opportunity for us in a very mature market.

R&D, I would say R&D will continue to be as it is for Envista, the first place where we likely make investments to continue to drive organic growth. We aspire for most of that to come through our own productivity. So in the case of Spark, it's reducing unit cost and improving in design cost. Elsewhere in Envista, it's things like the G&A reduction that we've driven year-to-date that we're using to reinvest in the business.

Got it. Maybe switching over to implants a little bit. How do you think about the portfolio of product mix that Envista currently have? Do you have the right products within the implants? And sort of how do you think about the R&D focus there in the sort of short to medium term?

Yes. So I think for starters, I would say if you think about kind of the totality of an implant procedure and all of the product and treatment planning that it takes upfront to have a Premium brand or to be successful as an implant company, I would rate us with high marks on sort of the full breadth of that portfolio. So right upfront, that's diagnostics or imaging, that's our DEXIS brand, significant market share globally, a leader in North America. And if you look at sort of the recent trend of products and product launches and innovation, I think we've been a very strong player there.

Part of that solution is a treatment planning solution. We call it DTX Studio. That's what's used upfront between the image and ultimately the procedure for a practitioner. Then you get to implants, prosthetics, digital equipment, guided surgeries. Again, I would say across sort of the totality of that portfolio, we have a lot of strength. The breadth of our implants portfolio is where most of our R&D is going.

Last year, we invested about $25 million in implants. We invested most of that in Nobel in North America. That's our Premium business. A lot of that went to commercial, some of it went to clinical and some of it went to R&D. I think our 4-quarter positive growth trend in implants is showing the benefits of that, but we still expect to get benefit coming out of the R&D portion of that, which is primarily in that core implant portfolio, call it the implant and the abutment.

But I think importantly, the full breadth of either portfolio or solutioning that it takes to be successful in the implant business, we feel we have a very good broad portfolio, whether it's imaging, product or guided surgeries, including things like regenerative biomaterials.

That makes sense. And given the Nobel heritage, you've had a focus on improving the performance of the Premium portfolio. Where are you in this performance improvement process? And what are the next leg of opportunities?

Yes. So I think just kind of picking up on the last point. Last year, our investment to be able to improve the growth trajectory of Premium primarily, but I would say implants in total because it's true of both our Challenger business and our Premium business went into sort of those 3 phases. So again, commercial, clinical, which is primarily education and training and then R&D.

I think we're pretty well funded on the commercial side. We spent a lot of last year with the blocking and tackling, if you will, of filling sales territories, but also standing up, for example, a digital sales force that could help in that end-to-end solutioning of a clinician's office or a DSO to be able to create the digital foundation ultimately on top of just the implant solutioning.

The R&D portion, as mentioned, I think we still have a little ways to go. And then if you get a little bit on to the organic side of the equation, we know that we're a little bit light on the Challenger mix side of the equation. We're about $1 billion implant business, big numbers, about 15% of that roughly is Challenger. We have 2 strong brands. So we have ABT, that's Alpha-Bio Technologies manufactured out of Europe, selling in Europe, also servicing APAC and Latin America. We have Implant Direct out of the United States. But relative to the 50-50 share that is the global mix of Challenger businesses versus Premium businesses, we know we're a little under-indexed on the challenger side.

So maybe 2 follow-up questions from there. One, if you -- you pointed out sort of the under-indexing on the Challenger side. Is that something that you would look to do like an acquisition? Is this something you think you can sort of grow into organically? And then secondly, I think at Straumann's Capital Market Day, they actually said they're seeing Premium implants do a bit better of late versus some of their challenger brands. So that seemingly would offer you guys a nice opportunity as we get into 2026.

Yes. So I think if you maybe start with the inorganic, smaller, but this year, we announced 2 acquisitions, both -- which both were dinging the bell on both the Challenger implant or implant space in total as well as geographic penetration. So 2 acquisitions in Europe, both relative to distribution, being able to gain geographic -- a little bit of geographic scale. One in the Challenger space, the other in the Premium space.

I think that's just an example of how we can access accretive M&A, be able to expand geographically, be able to help pull through the portfolio that we have already on both sides, if you will, of the implant portfolio. But we'll also look at there's good local Challenger implant players to potentially help both in the mix of our business as well as the geographic penetration of the business.

Maybe just to the point on value or Challenger versus Premium, we'll see how it plays out. I think over a longer-term horizon, certainly the last few years, Challenger businesses have generally grown at a faster pace than Premium. We do see as interest rates eventually come down that some of the higher acuity procedures like a full arch implant or full arch case, which is typically done more in the Premium space, will likely benefit. And maybe for that reason, you'll see a little better growth in Premium over a shortened horizon. Long term, I would still say sort of odds on favor are that Challengers overall will grow at an equal or better rate than Premium.

Okay. And then sort of given how the market has shifted and maybe to a broader question related to what you just said, like we're seeing better growth maybe at GP practices and with DSOs. So how do you focus on those markets and the opportunity there versus what's been your historical sweet spot with some of the specialists?

Yes. I would say it primarily goes back to my mention of having the full solution portfolio on implants and importantly, everything from the image to guided surgery, right? Think through sort of the lens of a general practitioner. They're not as expert, if you will, as an oral surgeon is in the space of implants. That means there's a lean towards guided surgery or a digital offering.

And so our digital sales force approach, encouraging sort of the setup of the digital workflow from imaging all the way through guided surgery is part of our strategy to make sure that not only do we benefit from, as you said, the heritage of having high market share and brand awareness with specialists, but also building that same brand awareness with a general practitioner.

DSOs are interested in a very similar way, right? They're looking for scale. They're looking for efficiency. On some level, they're also looking for companies or a company that can help them with the sort of the thinking of that totality. And I think that's where the breadth of our portfolio, but also partnerships with other digital players is helping us in the go-to-market model to be able to be more relevant, if you will, than maybe what would have been known or understood as a selling philosophy in the past.

Okay. And does that also help you with sort of like the channel -- potential for channel conflicts between Premium and value as well?

Yes, I think it does. Maybe a couple of points of reinforcement. So one, our brands and our go-to-market model specific to field sales is still largely aligned with the 3 brands that I mentioned, right? Nobel, Premium, Alpha-Bio, Challenger and Implant Direct Challenger. But there's opportunities, think about a Venn diagram, right, maybe like 3 circles with some overlapping sort of concentric circle within there. There are opportunities. Our digital sales force in premium, Nobel that's had success over the last year can be used in a similar way without -- while being brand agnostic in the Challenger space, as an example.

Account leads. There are accounts globally that maybe lean towards being more challenger-based accounts. There are others that lean more towards being a premium-based account. As we run our sales teams and as we continue to find points of integration, naturally, you have a lead, but then you have a follow, right, in the case where a clinician wants to move from Premium to Challenger or Challenger to Premium, and you do a good job of having a lead organization and call it the second organization coming in, the more coordinated your effort there, the better. Implementation and leverage of things like CRM is helping us in that space.

Okay. That makes sense. And then how do we think -- if you have -- you've obviously been in the specialty segment, both orthodontics and generally, particularly Spark, implants, very, very nice growers. How do you think about the importance, given the sort of growth dynamics of that business? How do you think about the importance of having such a broad consumables portfolio under the same Envista umbrella?

Yes. So I think for starters, as you follow and it's sort of in the first question that you asked, Elizabeth, as you follow the dental market over the last, call it, 2 quarters to maybe half a year to 2 years, the stability of consumables has been at a higher rate and the stability of implants or certainly a market like Diagnostics. So for us, that's a positive, right? Having a business that has a level of stability, a level of consistency, operates maybe in a slightly lower growth profile, but nonetheless, is predictable. And our business happens to be one that runs slightly above market. I'll come to that in a moment and has a very attractive margin profile mix-wise as well.

Second point would be our portfolio in consumables. So we don't get into it in a lot of depth. A lot of questions go to Spark and ortho and implants.

So much to ask about.

So much to ask about. And when not, it's Diagnostics, right? But we have a nice portfolio in Resto Endo also within a very attractive business in infection prevention. Our business is named, Metrex, one of our strong brands is CaviWipes. We sell both into the medical channel as well as the dental channel. It's a business for us that's been growing above Envista average, above market average. It has pricing power. It has a good innovative platform. And so that's a good example for us of an outperforming business in sort of the broader spans of consumables and maybe as an example of where inorganically, there's opportunities out there even with sort of a slower growing part of the market space to outperform.

And then a business that we report in specialty and technologies, but we operate internally within consumables is a business we call Orascoptic. That's loupes, that's lenses. That's what you see on the kind of the dental professionals, primarily the specialists. And it's another example of a business for us that's got a strong NPI pipeline, very strong brand presence, has good pricing power and is growing well above market. So you kind of add all that up, and that's part of the reason why our consumables business this year has been performing as well as it is and gives us good confidence in a sort of a growth trend going forward.

That's good to hear. If we think about the Diagnostics business and the factors that are sort of driving growth there, how would you rank share gains, practice openings, AI-driven improvements and sort of product cycles in terms of contributors to the growth. And I know that the growth hasn't always been consistent. So maybe talk about how things sort of stand now or are shifting.

Yes. So I think hard to get away, number one, from market, the Diagnostics market being the sort of the #1 indicator of growth in the market. We're coming off of last year, the Diagnostics market being down, call it, high single digits globally. That's inclusive of everything that we see in Diagnostics, right? CBCTs, 2D, handheld scanners, sensors, et cetera. This year, I think I mentioned we estimate it's down low single digits. So the market is coming back, and we expect it to be a modestly growing market should interest rates and consumer confidence and the macro give it a little bit of a room to heal.

So I think singularly, that is the biggest driver of Diagnostics, at least as a market and our participation typically being a market overperformer growing. Then I would point to new products. So we just came -- Jim and I just came off of the Greater New York Dental Show. Last year at that same show, we were able to talk about 2 major new product launches. It's in our space of CBCT, that's cone beam scanning. We call them OP 3D EX and OP 3D LX. You can simply think about it as sort of a light version of a CBCT and a larger aperture, more specialist version of a CBCT.

That's been helping us certainly to be able to grow above market, good penetration in North America, good penetration in Europe. We just announced the launch in -- at IDS this year of our Imprevo iOS scanner. That's our first branded DEXIS scanner since the acquisition of Carestream, started selling it in September, and we see really good momentum here in fourth quarter. So good indication for us. I think the punchline here is that new products and new product pipeline is certainly how we think about growing an electronics business, maybe not unlike any broader consumer electronics space. you got to continue to innovate and you got to continue to find cost out. That's ultimately the best formula for success.

Got it. And maybe piggybacking off of that slightly. Where -- I mean, I would just say where are we in the AI adoption curve of diagnostics. But the answer is early, like I can almost answer that there. But who is adopting it now? Where are you seeing the interest? And sort of how do we think about the rollout of that globally across your diagnostics products?

Yes. Yes. So maybe similarly, the last 2 days, 3 days at Greater New York Dental, I think AI in diagnostics is probably the headline, if not one of the key headlines. We spent time with 8 different research analyst firms and probably 30 different investors, and we spent it primarily in our booth on DTX Studio. That's our treatment planning software that sits between imaging and product placement, and basically did a walk through all of our different AI algorithms that have helped the treatment planning process, in this case for, call it, like a general implant placement, go from something around 60 minutes to something closer to 5 minutes, right?

This has been a journey for us over the past couple of years. But much like a lot of software deployment, 2.0, 3.0, 4.0, 5.0, we're continuing to see major strides in that, both in accuracy that helps us move along that curve that you mentioned. So how do you go from being more focused on the specialist to enabling the general practitioner. That's certainly one of the helps. And then it also helps us to broaden how our imaging system, that is our DEXIS products and things like CBCTs can play a role in restorative and endodontics in addition to just implants. But ultimately, it's helping with prediction and efficiency in the clinician's office.

Got it. That makes sense. We've talked a lot about revenues, and that's obviously in products. That's obviously a very, very important part of the story. But how do we think about what the 2026 opportunities are that are not driven revenue driven in terms of expanding margins?

Yes. So I would say a large part, it's a continuation of the playbook we've been on. I think we talked about Spark. So I would sort of call that margin opportunity number one, right? This year, it's about growth. We're getting benefit from the deferral tailwind, but we also have good solid operational performance with the sort of the mentioned 20% cost down per aligner year-over-year. That will be a bit heavy going forward, right?

We don't expect to see 20% year-over-year every year. But we do expect to see, as mentioned, that automation rollout to our factories globally in addition to just everyday continuous improvement through our Envista business system, that's EBS continuing to play a role. G&A. This year, we're down 12% by memory, year-to-date on G&A. We expect G&A to be flat going forward. That takes productivity.

Well, on dollars or a percentage?

In dollars. That takes productivity because, of course, you've got merit and sort of general inflation in there. We're leveraging things like back-office consolidation, outsource and offshore in addition to just sort of classic EBS for process improvement. So that will be a continuation. And then to the degree that we can outgrow the market, I think we've talked about reinvestment in R&D and sales and marketing, but we'll try to get efficiency out of that as well.

Makes sense. The tax rate has obviously been something you inherited. So could you give us an update on where we are in that improvement plan?

Yes. So this year, we started the year with a guide of 37%. I know everybody is like looking up at me going, wow, 37%, that's a lot, right? So we just updated our guidance midyear to 33%. And then we talked about something I'll get on to in just a moment relative to the tax rate going forward. So 2 big factors in our tax rate. One is that we've talked openly publicly about having a large intercompany loan between international and the U.S. We pay interest on that loan. And based on your U.S. profits, you're allowed to deduct a certain amount of that interest.

Because of the high level of interest dollars and because of our lower U.S. profits historically, we've had a lack of deductibility. That's driven the tax rate higher. In addition to that, our profits as a company as they came down from 2023 created a lower level of deductibility. Two things have happened this year that are important. One is our profits as a company are improving and our U.S. profits have been improving. That's helped the tax rate to come down.

And then in third quarter, we talked in our preread remarks about the resolution of that intercompany loan. So the elimination of that loan, which will eliminate the interest, which will eliminate the tax deductibility sort of gap or cap. And by the time we get around to our 2026 guide, we'll give you sort of the full view of what that means. But it will be a tailwind to our tax rate in 2026, much below that 33%. We'll give you the detail on that as we go forward. And then as we continue to improve profits in the U.S., we still have a little bit of third-party interest expense that pressures our tax rate. That's sort of our last remaining item to get back to a more normalized tax rate.

Great. And then maybe in our last couple of minutes, what are you -- how are you thinking about capital deployment priorities? Obviously, you have a nice -- it's a nice problem to have in terms of your cash generation and cash positions. But how do we think about what the priorities are for that as we head into the next year?

Yes. So I think maybe 2 starting points. So one, at our Capital Markets Day, we brought forward, underscored, tried to elevate, if you will, the strength of the free cash flow of the business. Historically, we've ran at or around 100%. We believe we can be at or around 100%, maybe slightly better going forward. So I think point number one is it's a very capitally efficient business, good revenue growth, good margin, reasonably low CapEx, not very intense. And for that reason, generating good free cash flow.

Second point I think I would make is that the overall balance sheet strength of the business is good. We operate at slightly less than 1x net debt to EBITDA, about $1.4 billion in debt, slightly over $1 billion in cash. That's another good foundation for us. We have a strong capital structure. And should we be able to continue on this trend of growth and earnings, it gives us a lot of flexibility for capital deployment.

Organic will continue to be our #1 opportunity for capital deployment. I think that's embedded in our discussion today about growth, sales and marketing, R&D. M&A will be a priority for us, accretive M&A. So we'll continue to look for opportunities for geographic expansion in addition to portfolio sort of fillers like Challenger implants, maybe good growing aspects of consumables, et cetera.

And then we've recently added returning cash to shareholders as a third leg of our capital deployment playbook. This year -- early this year, we announced that our Board approved $250 million in share repurchase over 2 years. We got active on that in the first half of this year as our stock price was low, as the markets kind of were being a little dislocated from the Trump tariffs and sort of global geopolitics, and we'll continue on that trend as we go forward.

Nice. And maybe one last one to finish up on. As we're sitting on the stage in December 2026, what are you going to be most excited that you did across the course of the year and looking forward to for 2027?

Yes. I think probably it would be the changes embedded last year. So taking a swing last year at reestablishing what the right business growth external expectations were for the business, reinvesting in the business, right? Takes risk, right? It doesn't come without risk, but seeing a lot of the fruit sort of bear from that this year.

A good growing Spark business in R&D pipeline and new product commercialization coming out of Ormco, 4 consecutive quarters of implant growth, which is really on the back of that reinvestment last year and even some regeneration, if you will, in growth in businesses like consumables and diagnostics. So it's a continued story, right? It doesn't happen all in the course of one quarter. I think a lot of it came from the reinvestment in the business last year and then the sort of the rebuilding of some of our core business processes like EBS, people, culture, talent development. From my vantage point, 2025 is a good year where everything is sort of showing the benefits of good management over the course of the last 18 months.

Great. Well, that's a perfect place to leave it. Thank you so much.

Yes. Thank you.

Hello. My name is Sergio, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Envista Holdings Corporation Third Quarter 2025 Earnings Results Conference Call.

[Operator Instructions]

I will now turn the call over to Mr. Jim Gustafson, Vice President of Investor Relations at Envista Holdings. Mr. Gustafson, you may begin your conference call.

Good afternoon. Thanks for joining Envista's Third Quarter 2025 Earnings Call.

We appreciate your interest in our company. With me today are Paul Keel, our President and Chief Executive Officer; and Eric Hammes, our Chief Financial Officer.

Before we begin, I want to point out that our earnings release, the slide presentation supplementing today's call and 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 Investors section of our website, www.envistaco.com.

The audio portion of this call will be archived in the Investors section of our website later today under the heading Events and Presentations.

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 our results.

Unless otherwise noted, references to these remarks to company-specific financial metrics relate to the third quarter of 2025 and references to period-to-period increases and decreases in financial metrics are year-over-year.

During the call, we may describe certain products and solutions 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 and 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, and actual results may 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 as required by law.

With that, I'll turn the call over to Paul.

Thank you, Jim. Good afternoon, and welcome, everyone. On today's call, I'll kick us off with some opening thoughts on our Q3 and year-to-date performance as well as a brief strategic and operational update.

Eric will then take us through the financials in more detail. I'll wrap things up with some closing thoughts. And then as always, we'll open it up for your questions.

Slide 4 summarizes 3 things. Q3 results; year-to-date performance; and another update to our full year 2025 guidance. Let's begin on the left with Q3 results.

We posted another solid quarter, delivering strong revenue and earnings growth and good margin expansion. Core growth came in at 9%, aided by the expected Spark deferral benefit. Excluding this, core growth in the quarter was around 5% with all major businesses once again in positive territory. Adjusted EBITDA margin was 14.5%, up more than 500 basis points from Q3 of '24, supported by good growth and productivity. Adjusted EPS was $0.32, more than twice the Q3 '24 result.

Moving to year-to-date performance. Core growth came in around 3% after normalizing for last year's changes in Spark deferral and dealer inventory levels. Year-to-date adjusted EBITDA margin is around 13%, showing progress in Q3 over H1. Rounding out the column, through 3 quarters, we've delivered $0.82 of adjusted EPS, a 67% increase over the same period last year.

Moving to the column on the right. Given our good year-to-date performance and strong momentum, we are again raising our full year 2025 guidance. We now expect core revenue growth of approximately 4%, up from 3% to 4% previously, and adjusted EPS of $1.10 to $1.15 versus $1.05 to $1.15 previously. EBITDA margin guidance for the year is unchanged at approximately 14%.

Let's now turn to progress we made in the quarter in support of our 3 core priorities of growth, operations and people. Beginning with growth on the left side of the chart, ours was well balanced between volume and price and broad-based across the portfolio as ortho, consumables, diagnostics and implants all delivered growth.

We again held share in implants while gaining share in all other major businesses. Our strong performance funded another quarter of double-digit increases in strategic R&D and sales and marketing investment.

We're seeing good returns from these investments, evidenced by several major new product launches in the quarter, including Spark Jr., a comprehensive aligner solution for younger patients; Spark StageRx, a digital workflow platform for enhanced clinician support; Orascoptic Ergo Zoom, a novel loupe system that combines superior ergonomics with adjustable magnification; and DEXIS Imprevo IOS, a significant leap forward in terms of intraoral scanning speed, precision and versatility.

We're also seeing good market traction from previously launched new products such as Spark on Demand, Spark Retainers and BiteSync Class II Corrector; as well as Nobel Biocare's new multiunit abutment, which integrates our novel surface treatment with a slimmer emergence profile.

The solution is designed to promote soft tissue healing and supports a stronger biologic seal for long-term stability.

In terms of customer education, this quarter, we trained more than 15,000 clinicians, including hosting several high-impact events, balanced across all geographies and businesses. Examples include well-attended Kerr and Ormco forums in Europe and a major Nobel and DEXIS symposium in Japan.

On the operations front, we continue to enjoy strong contributions from EBS, our continuous improvement methodology that is central to how we deliver results, develop our people and advance our culture. In addition, we delivered further year-on-year G&A reductions while maintaining high customer service levels.

Last quarter, we announced a new R&D and manufacturing facility in China. And in Q3, we broke ground on a new multipurpose diagnostic center just down the road from our existing facility in Finland, which has long been a hub for innovation in dental imaging.

Finally, with respect to people, we continue to advance our high-performing continuous improvement culture, seeing growing momentum in engagement and talent development.

This week, we published our 2024 sustainability report. Available on our website, the report details the many initiatives that are underway across key focus areas like expanding access to dental care for underserved populations, investing in our colleagues and communities, being good stewards of the environment and building on our century-plus rock-solid foundation of doing business the right way.

Before I turn the call over to Eric, I'll mention some important milestones for our Spark aligner business in Q3.

On the growth front, we shipped our 1 millionth case since launching the business in 2019. We're pleased to have gone from 0 to nearly $300 million in revenue in under 6 years, funded entirely by operating profits generated elsewhere in our portfolio.

We are the only orthodontic provider with leading positions in both fixed and aligner therapy, operating in all major geographies and with a global supply chain that allows us to respond seamlessly to macro and market conditions.

This global scale brings me to the second milestone we crossed in the quarter. Last year, we committed to positive operating profit for Spark sometime in the second half of this year, and we reached that level in Q3.

Behind this strong momentum, we expect continued margin and market share gains moving forward. These milestones were several years in the making, and we applaud the many contributions from our colleagues, partners and customers that both got us here and continue to propel us forward.

With that, I'll turn the call over to Eric to walk us through the numbers.

Thanks, Paul. In the third quarter, we delivered sales of $670 million. Core sales in the quarter increased 9.4%, and FX added another 200 basis points.

Our Q3 growth benefited from last year's change in Spark deferral, which I'll say more about in just a moment. Excluding this effect as well as dealer inventory realignment that we discussed on prior calls, year-to-date growth was around 3%.

Our underlying core growth in the quarter was another positive step for Envista. This reflects the changes we've made in 2024 and 2025 to improve our growth potential.

Q3 adjusted gross margin was 56.1%, an increase of 330 basis points versus the prior year. Volume, price, improvements in our global supply chain and the expanding Spark margins that Paul just mentioned, all contributed to the gains.

Our adjusted EBITDA margin for the quarter was 14.5%, which was 540 basis points better than the prior year. Margins were helped by the previously mentioned gains in gross margins as well as continued strong G&A productivity.

Adjusted EPS in the quarter was $0.32, up $0.20 compared to the same quarter of last year.

Our non-GAAP tax rate for the quarter was 31.2%, slightly better than our expectations. We continue to see a beneficial trend in our non-GAAP tax rate as a result of our strong business performance in the United States, which increases our level of interest deductibility related to third-party and intercompany interest expense.

Also, you'll notice in our Q3 filing a onetime GAAP charge related to a discrete tax adjustment. This relates to the elimination of a significant intercompany loan, which had been a headwind to our global tax rate.

While settling the loan resulted in a onetime charge in our Q3 GAAP results, this does not impact our full year 2025 non-GAAP rate.

And most importantly, there is a near 0 net cash impact from the restructuring. While our estimated non-GAAP tax rate for 2025 is unchanged, over time, we do anticipate future tax benefit as a result of this action, both on a reported and cash basis, and we'll provide more details on this in the coming quarters.

Rounding out Slide 7. In Q3, we generated $68 million of free cash flow, up slightly from last year, principally driven by our improved profitability.

Now let's turn to 2 bridges to help break down our year-over-year results, beginning with sales. Core revenues grew 9.4% in the quarter with positive growth in all major businesses.

Combined, volume and price contributed about 500 basis points. Q3 growth was also helped by Spark tailwinds, both primary case growth and deferral benefits as well as favorable prior year comparables.

Q3 was another solid quarter of growth for Envista.

Foreign exchange contributed roughly $11 million of sales or about 200 basis points, reflecting the weaker U.S. dollar.

And finally, we had a minor benefit from the 2 acquisitions mentioned on the Q2 call, both of which support implants growth in prioritized markets.

Turning to the adjusted EBITDA margin bridge on Slide 9. The change in Spark deferrals delivered about 390 basis points of growth this quarter. It's worth noting that while the change has resulted in a year-over-year benefit, absolute revenues and profit delivered in Q3 are a good baseline for modeling the business going forward.

Volume, mix and price combined to deliver a 240 basis point improvement. As mentioned, we saw broad-based performance across the portfolio on these dimensions.

We had a net gain of 80 basis points from improved productivity with G&A down more than 12% year-to-date.

As Paul noted earlier, we continue to reinvest a portion of our productivity gains back into sales, marketing and R&D to support future growth, which amounted to 130 basis points in the quarter. Increased tariff costs compressed margins by about 140 basis points.

On the Q2 call, we committed to offsetting full year tariff costs, and we're still tracking to do so. It goes without saying that the tariff landscape remains fluid, and we'll continue to update you as matters evolve.

Turning to segment performance. Revenue in Specialty Products and Technology grew 13% year-on-year with core sales up 10.6%. In our orthodontics business, Spark was up high teens before the additional benefit from the net deferral change.

The strong pipeline of product launches that Paul touched on earlier are all adding to our momentum. Brackets & Wires was flat year-on-year as underlying growth in several markets was offset by continued VBP preparations in China.

The Q2 buy ahead that we discussed last quarter also played a role. On the implant side, we delivered a fourth consecutive quarter of positive growth globally, led by above-market performance in North America.

Our prosthetics and digital solutions portfolio had another strong quarter as did our regenerative biomaterials business.

In Q3, Specialty Products and Technologies posted an adjusted operating margin of 15.5%, up 850 basis points, driven by good growth as well as the year-over-year impact of Spark turning profitable.

Volume, price and net productivity were all positive in this segment. And consistent with prior comments, a portion of the gains were reinvested in commercial and new product development activities.

Moving to our Equipment and Consumables segment. Core sales in the quarter increased 7.3% versus prior year, including double-digit growth in consumables, where we delivered broad-based growth across the portfolio, including solid price performance.

Diagnostics core sales growth was up modestly for a second consecutive quarter, with North America and Europe, both delivering a positive result.

Similar to SP&T, new products are an important part of our Diagnostics playbook. Innovative launches like a new CBCT platform last year and a new IOS last quarter are striking a chord with customers.

Adjusted operating profit margin was roughly flat year-over-year at around 20%, while profit dollars were up about 9%.

Let's now turn to cash flow. Q3 free cash flow was $68 million, an increase of about $5 million when compared to the third quarter of last year as improved sales and margins were partially offset by increases in inventory and increased growth CapEx.

Year-to-date free cash conversion of 100% is in line with the outlook we provided at our March Capital Markets Day.

Free cash flow dollars are down year-to-date as relative performance in 2023 warranted a lower incentive bonus payment in 2024. Our balance sheet remains strong and stable with a net debt to adjusted EBITDA of approximately 1x, providing welcome stability in the current environment.

In Q3, we deployed approximately $40 million in cash to repurchase 2.1 million shares of stock. On a year-to-date basis, we repurchased over $140 million or a total of 8 million shares as we continue to execute our $250 million 2-year repurchase authorization.

I'll now say a few more words about the updated guidance that Paul introduced earlier. Slide 13 summarizes the changes. A core sales growth of approximately 4% versus 3% to 4% previously, building on the 3% year-to-date underlying performance that Paul mentioned earlier.

We estimate EPS of $1.10 to $1.15 versus $1.05 to $1.15 previously. Finally, our full year adjusted EBITDA margin estimate is unchanged at approximately 14% as we expect Q4 to build on the year-to-date performance levels while reflecting continued investment in the business.

Back to you, Paul, to wrap things up.

Thanks, Eric. A few closing thoughts on the quarter. First, we haven't said much about the dental market on this call because things really haven't changed much from Q2.

On balance, underlying patient demand remains stable, albeit still below typical longer-term levels for the market. Macro uncertainty remains high, which continues to impact some of the more discretionary procedure segments.

Second, our momentum continues to build with core growth of roughly 5% in the quarter and 3% year-to-date after adjusting for Spark deferral and dealer inventory realignment.

This growth converted well to cash, margins and EPS. We are again updating full year guidance with core growth and EPS, both moving to the top end of the ranges that we shared on our Q2 call.

Importantly, I'll close by noting that this progress is made possible by the wonderful talent and commitment of our global Envista team.

Please know how much we appreciate all you do in the service of our stakeholders. In the same way, we're grateful for the support we receive from our customers, partners and shareholders.

And that completes our prepared remarks. We'll now open it up for Q&A.

[Operator Instructions]

Your first question comes from Allen Lutz from Bank of America.

Congrats on a really nice quarter. Paul, one for you. It's nice to see Spark turn profitable in the third quarter. And so now that, that business is profitable, how should we think about the trajectory of margins from here?

And then separately, can you talk a little bit about the market share of that business? Where are we today? And where do you think that business can go?

Allen, thanks for the question. Yes, getting Spark profitable is an important milestone for us. It was 6 years in the making and grounded in a lot of really good work on both the cost and the growth front. So maybe I'll take the 2 parts of your question in turn.

With respect to the margin part of your question, we said previously that we expect Spark margins to eventually reach fleet average.

And based on the steady progression that we've seen now over the past many quarters, we continue to believe that's an appropriate objective.

Maybe a bit more color on that. In addition to the consistent unit cost progress that we've spoken about previously, our margins are also helped by improvements that we're making in setup and design times as well as changes to the portfolio mix and the commercial efficiencies that come from providing, both a fixed and aligner solution to customers.

So of course, we get scale economies from this, one sales force selling both solutions. But equally important, it's also, we think, a much more credible position from which to approach customers.

The doctors, of course, know how to best treat patients. We simply provide a full portfolio to help them do that.

Now in the same way, we also get broader efficiencies with DSOs. So in that case, we not only provide a full ortho portfolio, but we also provide complete implant consumables and diagnostics offerings as well. So that also helps on the economics.

Now with respect to market share, Spark has outgrown the global aligner category every year and essentially every quarter since it launched.

And even now that it's at a much larger scale, we mentioned it's approaching $300 million in sales, Spark still grew high teens in Q3 before deferral. And we think that's quite a bit better than the market, which we think was probably low single digits in Q3.

And all that is because we feel we have a compelling competitive business here.

Like the full portfolio I mentioned, we also have deep, in some cases, 50-plus year positions in key geographies around the world. And very important today, we have a global supply chain with flexible manufacturing on 3 continents. So as you can pick up from my voice, we're pretty excited about the future for this business.

Thanks Paul. And then one for Eric. If we go to Slide 9 on the volume mix price added 2.4% to EBITDA, based on our math, it looks like price is a good portion of that.

Is there any way you can unpack the contributions within volume, mix and price? And then how should we think about what's embedded within that into 4Q?

Yes. Yes, I'll take that, Allen. So I mean, just in terms of unpacking, I think you're on -- let me just repeat, Slide 9, the 240 bps between volume, mix and price, we grew price in the quarter by a little over 200 basis points.

And the majority, of course, of the rest of our revenue growth was volume-based. And so you can sort of back into the impact of that from a margin standpoint.

That means slightly better margin accretion in that box from price and slightly less from volume. And then we had a little bit of an offset in mix as we have good gross margin portfolios, but some of them are slightly dilutive to the Envista average.

And then the way you should think about margins going forward, I'll just sort of take it from the guidance frame. And so we have stuck with our adjusted EBITDA margin guide for the year, that's 14%. That's within the revised guidance that Paul and I both mentioned in the preread remarks.

And if you do the back math on that, that means that Q4 will be, I would say, on the level of that same 14%. Admittedly, we're probably rounding up to 14% margin for the full year. And the best way to really work the P&L, I would say, is to anchor on the EPS range that we gave, which is the $1.10 to $1.15.

Your next question comes from Elizabeth Anderson from Evercore.

Congrats on the quarter. Paul, I appreciate your comments on the stability of the dental market overall. I was wondering if you could just maybe comment a little bit more about China. We've heard from some competitors that there's been an impact from VBP of people pausing buying. The consumer environment obviously remains choppy there. So it'd just be helpful if maybe you could unpack that a little bit more.

Sure. Thanks, Elizabeth. So as you all know, there are 2 VBPs that have been discussed in China. One is underway, that's for orthodontics. That's well progressed.

We still expect to hear something here in calendar 2025. But as we've seen from other VBPs, both in dental and health care more broadly, those things do slip on occasion. So if that rolled into Q1 or the first half of '26, I don't think any of us should be too surprised.

But that's proceeding generally according to expectations. And then the second one that people are now starting to talk more about is VBP 2.0 for implants.

We're in pretty close contact our government affairs team in China with the provincial leaders. And we're also, of course, in regular conversations with the clinicians and department chairs at the public hospitals.

So we expect that is coming, although we don't have any official communication from either the provincial or the central government on the details.

And maybe one for you, Eric, as well. Obviously, you had sort of a very nice margin expansion this quarter despite the fact that tariffs were a bigger headwind. I mean obviously, this is a fluctuating situation, but do you think that the sort of level of tariffs you experienced in the third quarter is sort of the way to think about maybe the fourth quarter as well and sort of going forward? Or would you call out any notable differences there?

Yes. Let me just give you a little bit of the -- by the numbers, Elizabeth. So last quarter, within the margin bridge, if you did sort of the back math on our margin rate, we had about $4 million in tariff costs within the quarter. This quarter, it's a number, call it, $8 million to $9 million.

And I would say that's a good basis, both as we think about Q4 and then a little bit cloudy, but our view of full year 2026 on a run rate basis.

So let's call it, $10 million in tariffs per quarter as we look forward. Obviously, that can be impacted by either tariff rate reductions or maybe a little bit of better execution on our end on the supply chain mitigation. But right now, that's the best view that we have.

And then I'll just reinforce something that we said in our pre-read remarks, which is our objective going now back 2 quarters was to offset this on a dollar basis for the full year.

We're on track to do that, and we were there as we sort of cross the finish line in Q3. So all in all, I'd say tariffs are sort of a minimal amount of noise for us going forward using Q3 as a base on a dollar basis of tariffs.

Your next question comes from Michael Cherny from Leerink Partners.

Maybe if we can dig a little bit more into implants, and this has obviously been an improving trajectory, Paul, since you came in. As you think...

Michael, we're having a little trouble hearing you. Are you able to turn up the volume?

Is this any better?

Yes, at the end there, you were coming in.

I just want to -- I'll ask it quickly. Where do you feel best about your positioning on implants right now? And as you think about your R&D and sales expansion efforts, where are the biggest opportunities you have to potentially push harder?

So I would say, in total, we feel good about our implants position. We've had now, in total, 4 straight quarters of positive growth. We think we were above market growth in North America in the last quarter.

And we have good growth balance for the most part across Premium and Challenger, albeit our Premium business being significantly larger.

In terms of new product activity, we've also had a couple of good launches recently. We have a new multiunit abutment that launched earlier this year, which is having good impact.

And we have a new zirconia highly translucent bridge that came out of our Procera business. So we think we're making headway there on the new products front as well.

Maybe balancing my comments. Like everyone, we're keeping a close eye on China. We had a good result in VBP 1, albeit there was a margin impact traded off by an increase in volume. We'll have to see how that plays out here with VBP 2. But on balance, we're clearly making headway on our implants business here.

Your next question comes from Jeff Johnson from Baird.

Eric, I wanted to just focus on the organic growth adjustments in 3Q is my first question here.

You're talking about 5% if we adjust for the Spark deferred. And that, I think, is pretty easy math to get to and makes sense. The $10 million pull forward that was mostly in Brackets & Wires last quarter that helped in 2Q, did that $10 million fully reverse mostly in Brackets & Wires this quarter?

And would that 5% core growth that you're saying on an adjusted basis this quarter then be closer to maybe 6%, 6.5%, if I adjust for that? Just anything else that I should adjust for to get to kind of a cleaner core number for the quarter?

Yes. No, Jeff, I think you got the numbers. So the Spark deferral obviously is pretty easy to pick up off of the year-on-year revenue bridge. And then I would just confirm that we believe, to the best of our data, and our data is pretty solid, that we're not exiting.

We did not exit Q3 with any kind of price buy ahead sort of still in the system, that's to say that it all reversed out in Q3. And for the most part, I think we talked about it on the last quarter call as well as follow-ups that about half of that was in our Specialty and Technologies segment, and quite a bit of that was in Brackets & Wires.

I think we said it within our pre-read remarks, Brackets & Wires was flat. That's part of the reason for that. So you're correct.

And then back to sort of your question on underlying growth, I would just say that our underlying growth in Q3 was in that 5% to 6% range, if you want to take the buy ahead reversal out.

And I simply range it because I do think there's a little bit of variation around how much of that $10 million was in Q2 or Q3. It's our best estimate, but it's not precise.

All right. Fair enough. And then, Paul, just on the VBP comments you had, one of your competitors is talking about starting to see in 3Q a little bit of inventory drawdown on the implant side, expecting a larger drawdown in Q4 and Q1 before then benefits start to flow in later in the year.

I mean that's a pretty standard pattern of 2 or 3 quarters of inventory reductions, then you pause and you start to get the volume recovery and maybe even demand recovery a quarter or 2 after the VBP.

Should we be modeling -- I think you're at about $100 million annualized in implant revenue in China. Should we take that same kind of pattern into account as we model even if we don't yet know full details on implant VBP there? Just any guidance you would give us over the next few quarters on that $100 million business line?

Yes. I guess I'd say 3 things about the expected implant VBP 2.0. The first thing I'd say again is it's expected, but hasn't been communicated. The second thing I would say is your general expectation in regards to the de-stocking followed by the new price level and then a restocking impact, which magnifies the growth in the bounce back quarters is what we expect. So I think you're right on with that.

The third reminder I would give is we expect VBP 2 to be smaller than VBP 1. So smaller in terms of the price decline and smaller in terms of the inventory impact.

The market also is smarter this time around having gone through it first with implants and now currently with ortho. But I think you've described the general trends correctly, Jeff.

Your next question comes from Erin Wright from Morgan Stanley.

This is Linda Bolduc on for Erin Wright. So given the latest quarterly results in SP&T, what are you seeing in terms of the balance around Brackets & Wires and clear aligners? Do you think clear aligners are back to taking share?

Yes. We got this question on the Q2 call as well. We don't see a material shift between use of Brackets & Wires and clear aligners. We focus on the Orthodontic segment for our clear aligner business. And of course, we focus exclusively on the Orthodontic segment for Brackets & Wires.

And our communications with doctors, they make a judgment on which therapy is best for a particular case based on the age of the patient, the expected compliance of the patient, the severity of the case, et cetera.

And then we just provide them what we think are 2 very good solutions, either for fixed appliance treatment or clear aligners. But we don't see any structural shift between the 2.

Your next question comes from Jonathan Block from Stifel.

Maybe I'll just start on the consumables side. And hope I didn't miss anything, but Paul, I thought you said think about it as a stable market, but consumables were up double digits.

So if you can talk to what drove the outperformance, clearly above market, I would think. And then any thoughts on, call it, sustainable share gains there going forward?

Yes, it's a good question, John. Our consumables business has 4 pieces to it. It has the composites, the restorative business. It has an endo piece. It has an infection prevention piece and then let's call it all other. And we're seeing decent growth across all those components. We had particularly strong growth in the infection prevention piece. So that might be playing a role.

We also had very good performance with DSOs in the first half and in particular, Q3. So maybe that's also playing a role.

In general, having followed the category for so long, in times where consumer confidence is impacted, like it is right now in the U.S. in particular, the consumables business tends to do relatively better because it's typically covered by insurance and typically isn't impacted as much by any changes in consumer confidence.

So I think that's going on. There's this ongoing refrain for decades in the industry that the branded consumables players would be displaced by private label. We just don't see that in our results.

Very helpful. And I'll sort of shift gears for the second one. This is a little bit of a tedious one. But Eric, if you can just help us the Spark deferral, like what's left in 4Q, if anything? I thought you might have said $30 million, 2H and then $27 million.

So is it that stub? But also, if you can remind us maybe like full year '25, full year '26, where that may land? And then anything that we should take into account from a margin perspective because obviously, this is a pretty high drop-through when we start to shape and inform our EBITDA margins for '26.

Yes. Excellent, John, thanks for the question. So let me just walk from our original guide, which obviously gives you the numbers going all the way back to '24 to '25 and then just bring it forward to 2026. So bear with me.

So we entered the year during our guidance, we talked about the fact that for 2025, we expected 2/3 of the 2024 headwind to turn into a tailwind. And that tailwind in 2024 was about $45 million. So call it, $30 million for this year.

First half was a very small net number. It was a little bit of a tailwind because Q1 was a little heavy. You guys saw the big number, obviously, in Q3. We've been estimating and projecting and forecasting that, telegraphing it for the full year. And so that leaves, call it, a small impact, low to mid-single digits in Q4 that will be a remaining tailwind year-over-year to get us to around $30 million for the full year.

You can then do the math on the balance that we would expect to get for 2026. So there is a little tailwind still left. It's certainly not as material as what we saw in Q3, and it's certainly not as material as the full year 2025.

And then the other thing I just want to communicate because I know several of our sell-side analysts are kind of tussling with this. I think the best way to think about Envista going forward and the Spark business going forward is that the absolute revenues and the absolute profit that we just reached in Q3, and I know you're sort of modeling it, that is the right basis for taking the business going forward.

Said another way, the tailwind that we got this quarter is not a headwind as we get into 2026. We don't have a comparable problem, right? And I mentioned that because I know there's a few analysts that are out there sort of dealing with that.

And then in terms of profitability, I'll just go back to what Paul mentioned right at the top, whether it's continued growth in the business, continued case start improvements, a trend, a good trend that we have going on in terms of unit cost down and then portfolio and even some of the design cost changes, we do expect to make further improvements on the profitability of the business.

But this is also a business that is becoming more and more integrated, if you will, around the Ormco platform and with Brackets & Wires. And so we probably won't talk as much about sort of the pure profitability as we roll forward. But I think an important point in all of that is the dollars of revenue and the dollars of profit in Q3 are a good basis going forward given the fact that the vast majority of our deferral tailwind is now behind us.

Your next question comes from Steve Valiquette from Mizuho Securities.

I guess somewhat building off your comments from just a second ago. We've seen just around clear aligners, 1 or 2 of your competitors this quarter actually talking about getting better ROI on Clear Aligner marketing spend, both towards practitioners and consumers to drive better clear aligner volume trends.

So I guess, in your journey on getting to this positive operating profit, just remind us whether or not you think your current level of marketing spend related to Spark franchise is adequate in that context? And is there any color just on where does annual marketing spend directionally go from here for Spark either on an absolute dollar basis or a percent of revenue basis, if you think about it in that context?

Yes. I think short answer is we do feel like the business is appropriately supported at present. There are a few markets left to enter, geographic markets. So that would be a marginal increase in spend as we enter those. But for the most part, it's a $300 million business right now. It's at scale.

Your next question comes from Michael Sarcone from Jefferies.

I guess maybe just on diagnostics, can you elaborate on what you're seeing in the recent trends and maybe give us some color on your outlook for growth going forward?

Yes. Good question. I mean it's good to get a diagnostics and a consumables question in the quarter. So grateful for that. So diagnostics, maybe to set the table, it's been a couple of year contraction for the category.

And most of the players have reported something similar. For us, it's been several quarters of contraction until Q2 of this year, where it turned positive.

And then we were pleased to see a second successive quarter of positive growth for our diagnostics business here in Q3.

And that was helped by an important launch we had in our IOS business, which sits in our diagnostics platform. That's our Imprevo IOS.

When people think about what has caused the preceding contraction of the category, they report to -- or they point to a couple of macro factors.

One is directly related to interest rates, and interest rates impact the business in 2 ways. First, interest rates impact how fast either individual clinicians or DSOs open new sites. When you open new sites, you have to add diagnostic equipment.

We have the largest installed base globally and are the market leader in North America. So when site additions slow, that impacts us.

The second way that interest rates play out, of course, is for an individual clinician, they finance the purchase. So higher interest rates make them less likely to update their equipment.

As interest rates start to come down, that's helpful. And we're starting to see DSOs and individual clinicians on the margin start to open new sites again. So both of those are supportive for the diagnostic category. Far too early to call a change here. We're, like you, excited to hear how other participants in the market performed in Q3. But for us, at least, we have 2 positive data points now and the underlying what we can control investment and performance of the business is pretty good.

Your next question comes from Brandon Vazquez from William Blair & Company.

This is Russell on for Brandon. Just one for me. You guys touched on it a little earlier, but an interesting topic right now is DSOs. Could you maybe comment more on any particular strength in the DSO market today given the current environment and maybe your competitive positioning and key drivers of opportunity in the market?

Sure. As is the case for most of the bigger suppliers, DSOs are a very important segment for us. When I joined Envista, maybe 1.5 years ago, I moved our North American key account team to report directly to me, reflecting the importance of that customer segment.

And I think the increased focus is starting to yield benefits. In North America, we had double-digit growth for our imaging business across our top 20 or so partnerships. Our CBCT platform, for example, is now installed in all 1,000-plus locations of one of the largest U.S. DSOs.

We had high single-digit growth for both Nobel and Ormco in Q3, again, in North America. We had double-digit growth in our consumables business. In Europe, we're also seeing good performance for DSOs. Ormco was up double digits, and we had high single digits in Brackets & Wires, strong double-digit growth in Spark.

And then even in China, DSOs are a bright spot for us. Our Nobel business had high single-digit growth in Q3. Ormco had positive growth despite the destocking in preparation for VBP that was mentioned in an earlier question. So we're focused on DSOs, and that focus is paying off.

Your next question comes from David Saxon from Needham.

Paul and Eric, congrats on the quarter. So maybe I'll start with Eric. So in a couple of earlier questions, you talked about guidance is kind of rounding up to 14% for the EBITDA margin.

I think the Capital Markets Day targets kind of implied around 50 basis points of improvement per year.

You also talked about offsetting tariffs, I believe, earlier in the call. So if we kind of take those comments, it seems like you're tracking to where consensus is in the low 14% range for next year.

But then you just talked about how third quarter's margin performance is a good basis for going forward, which would, I think, puts you closer to 15%.

So can you just help kind of parse through all that? Like where do you think margins could go high level at this point for next year?

Yes. Yes, absolutely, David. I appreciate it. So I mean, I would just start with second half 2025, inclusive of the kind of the calculated margins for Q4 based on our approximate 14%, that's a good way to think about our margins as we go forward. And then much too early for 2026, but we still very much see next year being a proxy, if you will, of the algorithm or the financial framework that we laid out in Capital Markets Day, right, which was having a core growth rate kind of midpoint of our range around 3% and then leverage, right?

So think adjusted EBITDA growth, adjusted EPS growth. And what basically that formulary said is that we have the ability to get leverage as we work from growth down through the bottom lines of the P&L.

Some of that is going to come from a few of the trends that we're seeing, and I would just say, improvements that are happening in 2025.

So continued good core growth with good gross margins; continued improvements in Spark based on, again, some of the earlier comments.

We put a lot of focus this year into G&A. We'll make progress next year, probably not at the same rate, but we have levers to use to really operate within that Capital Markets Day framework where we do expect to get leverage on top of the growth.

So all in all, I think aligned with what we said not just 9 months ago.

Your next question comes from Kevin Caliendo from UBS.

This is Dylan Finley on for Kevin. Congrats on the results, guys. If I could just circle back to Spark. If we could break down the high teens core growth that you guys saw, how would you compartmentalize that between same-store sales versus new geographies or new offices that you've kind of gotten into?

And one of your competitors recently called out some pressure in U.S. of the retail doc segment, the non-DSO part of the market. Curious about your experience there. Any divergence in behavior or order patterns between types of docs here in the U.S.

Yes. So let's see, 2 parts to your question, trying to break down the Spark growth, does it differ by geography? And then does it differ between individual clinicians or what some people call retail and DSOs. I can talk about our business specifically.

We had high single-digit growth in North America. We had double-digit growth in all other major geographies, except for China. So we have good growth pretty much across all geographies.

With respect to DSOs versus individual clinicians for our Spark business, we tend to do, on a relative basis, even better with individual clinicians. And that's because, again, remember, we focus on orthodontists, and DSOs typically over-index to GPs. So when we call on a pure-play orthodontist, we are, we think, competitively advantaged. We don't go as aggressively to DSOs with Spark, again, because we focus on specialists, and they tend to be mostly GPs. So maybe that gives some useful color.

That's very helpful. And then just one clarification question. One of my colleagues asked about China VBP, China implants maybe being around $100 million annually in sales. That's kind of what where we got around to.

Does your current year guidance contemplate any fourth quarter destocking phenomena similar to what you saw in VBP 1.0? Or do you think at this stage, it's not necessarily likely that that's even going to happen?

Yes. Good question. So short answer is yes. Our guidance does contemplate what we believe will happen with VBP. And for us, it's a little bit of a 2-part scenario.

So because we have an orthodontic bracket and wire business, there's still some remaining question on how things play out in Q4, but that will likely be a good grower for us in fourth quarter because 1 year ago, we were seeing the preparation for VBP happening, which is to say that our business was a slightly lower base.

And we also believe there will be some impact, as you're alluding to, in implants where whether it's channel or whether it's broader market, we'll see a little bit of contraction. And our estimates, as you mentioned, do contemplate that. So we think it's likely, and it's within our guidance we gave.

Your next question comes from Jason Bednar from Piper Sandler.

Sorry if I missed it, busy afternoon. I've been bouncing around some calls. And apologies if this has been asked, you can tell me just to go check the transcript.

It was good to see the growth durability in implants, I think low single digits. Can you break out the growth between Challenger and Premium during the quarter within that total LSD growth? And then can you speak to the confidence of taking a step forward with implant growth from where you're at, knowing that comps turn a bit tougher and the broader market still is fairly stable here?

Yes. Yes, sounds good, Jason. So within the quarter, you mentioned low single digits for implants. I would just say we had a strong premium result within there, and then Challenger was closer to flat within the quarter.

We have a little bit of variability in our Challenger results just based on it being, number one, a small business and then some of the geos that we participate in.

We expect our Challenger business to grow on a full year basis. And we think that our print, if you will, or level of performance for premium in the quarter is a good baseline for us, at least in the near term.

It's been a solid performing business for us this year. Total implants grew for the fourth straight consecutive quarter. And I would say, in total, that's a good way to think about the business, at least in the near-term forward view.

Thank you. There are no further questions at this time. I will now turn the call over to Paul Keel for closing remarks. Please go ahead.

All right. Thanks, everyone, for tuning in. I'll just quickly underline a couple of thoughts to put a wrap around the quarter.

First, as you saw from the results, Q3 was another step forward for Envista. We had good core revenue growth converting into double-digit adjusted EBITDA and EPS growth.

Similarly encouraging, our performance was generally broad-based with all major businesses again delivering positive growth. And underlying all that, we continue to focus on executing the plan that we shared at our Capital Markets Day in March, showing ongoing progress in our growth, operations and people priorities.

So I think that well covers it for the day. Thank you again for tuning in and wish everyone a good afternoon and remainder of the week. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.