Envista Holdings Corporation (NYSE:NVST) Q4 2022 Earnings Call Transcript

Jon Block: Thanks, guys. Good afternoon. Howard, maybe I’ll just start with a rough bridge on some of the moving parts. So, for Spark, we’re talking about a 300 basis point contribution to revenue growth in 2022. Maybe if you want to comment on that, but more importantly, is that a good assumption for 2023, maybe 250 bps to 300 bps to revenue growth? Maybe you could talk about the contribution from price this year, Amir, based on your comments just to Jeff’s question, maybe that lands around 100 bps? And then the offsets, right, VBP, is that 100 bps the other way, imaging is that 100 bps the other way? Maybe if you could just talk around some of those major categories, the headwinds, the tailwinds, and anything else that I’m not supposedly calling out to, sort of arrive with the low-single-digit core revenue growth, please?

Howard Yu: Yes. No problem, Jon. As it relates to Spark, what we called out was that our innovation Spark being included in there would generate in excess of 200 basis points. I think that we’ve done well ahead of that in 2022. In 2023, we anticipate Spark, as well as some other innovation to help drive over 250 basis points of that growth top line. Keep in mind that when we talk about margin headwinds and things like that, that Spark is again currently dilutive to our fleet average as it relates to margins. And so, we continue to work through that, but long-term, we expect that to be north of the fleet average. And so, there is a little bit of a counter impact there. As it relates to pricing this year, we had in excess of 150 basis points for the full-year of pricing.

A lot of that coming as Jeff had asked earlier coming by way of the equipment and consumables business. And so, we think that there will continue to be a tailwind associated with pricing broadly. Now, of course, that’s before VBP and as we indicated earlier, we think that VBP can be upwards of $20 million of impact that obviously would be both the top line and a margin impact. And so that probably is about 70 basis points going the other way as well. And so, hopefully that provides a little bit of the math and the modeling for you.

Jon Block: Yes, that’s great. And maybe just a quick tack on to that, Howard, that was great color, when we think VBP going into obviously that sort of normalizes, what about imaging? Is your imaging business you’re going to focus on, call it some core opportunities, you sort of reset the base maybe 2H 2023 is a good way of thinking about it where the drag, sort of diminishes at that point in time, the back half of 2023, maybe that’s a component of the accelerating revenue growth throughout the year and I just got a quicker question?

Howard Yu: Yes, Jon, you’re absolutely correct. So, we took some very specific action that has started in Q2 of 2021. We decided that we are just going to participate in areas that we really are differentiated and we can ask for price premium and also it was more of an integrated to the overall offering that we have rather than competing on a point solution. So, we have continued through that process in Q3 and Q4, and we think that you have seen the performance and the margin out of consumable and equipment side, a good part of that is attributed to the changes that we have done and redirecting investment, redirecting our resources to areas that it has higher growth, higher margin over time. But your assumption is correct that we expect this business to, kind of normalize in second half of this year and new base and new starting point in 2024, but I want to add us to €“ I mentioned that before that one-third of this business is services and annuity business.