Envista Earnings Show Dental Market Macro Headwinds; Clear Aligner Strength a Bright Spot

11-2-23 (by: Scott Gleason) Envista Holdings Corporation has reported its financial results for the third quarter of 2023 with reported sales of $631.3 million a 0.8% increase compared to the corresponding quarter in 2022. Street forecasts had called for total revenue of $649.5 million. Management noted that patient demand remained relatively steady in the third quarter but that there was a slowdown in higher end dental procedures. The company also noted that interest rates were weighing on capital equipment demand. The North American business declined in the low single digits in the quarter. There were some bright spots from a growth perspective. Orthodontics sales including the company’s clear aligner brand Spark increased at a double-digit rate showing that competition along with macro headwinds could be impacting competitor Align Technology. The company has a goal of tripling their business in clear aligners by the end of 2024 and stated they were on track. Management also highlighted its recently launched DEXassist solution, which helps practitioners detect six pathologies in 2D Intraoral X-rays including carriers calculus bone loss, radio lucency, root canal, filling deficiencies, and discrepancies at the margin of existing restoration, as a future growth driver.

Adjusted net income for the same period was $75.5 million or $0.43 per diluted share. This adjusted net income compares to $82.5 million or $0.47 per diluted share in the third quarter of 2022. Consensus estimates called for adjusted EPS of $0.46. Adjusted EBITDA for the quarter reached $123.5 million, slightly down from $127.6 million in the third quarter of 2022.

Envista adjusted its 2023 guidance. Due to the macroeconomic uncertainties, volatility in the North American distribution channel, and the company’s ongoing investments in long-term growth initiatives, Envista now anticipates that full-year core sales will be slightly down and that adjusted EBITDA margin will be in the range of 18% to 19%.

Amir Aghdaei, Chief Executive Officer of Envista, expressed his thoughts on the third-quarter results, stating, “In the third quarter, we delivered positive core growth and an adjusted EBITDA margin of 19.6%. Our Specialty Product & Technology Segment delivered low-single digit core growth as Spark outperformed, overcoming the negative impact of both Russia and the continued weakness of higher-end specialty procedures in developed markets. Our Equipment & Consumables segment declined low-single digit, as solid core growth in consumables was offset by the planned rationalization of our traditional imaging portfolio. We continue to utilize the Envista Business System (EBS) to streamline our operations and improve our cost position, delivering 50 bps of sequential margin improvement in the quarter.”