My name is Stephanie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Envista Holdings Corporation Second Quarter 2020 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. I will now turn the conference over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Thanks, Stephanie. Hello, everyone, and thanks for joining us on the call. With us today are Amir Aghdaei, our President and Chief Executive Officer, and Howard Yu, our Chief Financial Officer. I would like 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 on the Investors section of our website later today under the heading Events and Presentations, and will remain archived until our next quarterly call. A replay of this call will also be available. 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 year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to the company's specific financial metrics relate to the second quarter of 2020 and all references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will 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 might 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'd like to turn the call over to Amir.

Thanks, John, and welcome everyone to Envista’s second quarter 2020 earnings call. Before we begin the call, I would like to express my gratitude for our employees’ tremendous work in the first half of the year. While it has been a challenging operating environment, I'm grateful for the efforts put forth and humbled to be leading such a customer-centric, hardworking, and committed team. Thank you for all that you do for Envista, our customers, and our key stakeholders. Additionally, in support of the social reform movements that are occurring globally, we affirm our commitment to create an environment for our employees to work as their authentic selves and continue making diversity and inclusion a priority for our business. We encourage the patient recovery and the goal of dental markets, which had steady progress during the quarter. As a result of dental offices and businesses beginning to reopen, our core growth, which declined over 60% in April, accelerated through June and has continued to improve in July. We experienced the most visible improvement in our orthodontic and implant businesses, and we continue to have record demand for our infection prevention products. When we began the second quarter, we redefined our near-term priorities to focus on the safety of our employees, providing exceptional service to our customers, and preserving Envista’s financial strength. Safety is at the top of the mind every day, and we are taking a thoughtful approach, focusing on our employees’ health. Our workforce has been incredibly agile, and those who are able to work remotely will continue to do so in areas of the world where returning to an office is unsafe. While manufacturing and distribution centers continue to undergo daily sanitation procedures, employees are following appropriate protocols, which has allowed us to minimize disruption within our business. We place our customers at the forefront of everything we do. We're embracing and adapting to the new environment and making it a priority to move our training and education programs to a virtual platform. During the first half of the year, we completed several hundred educational courses and trained more than 250,000 professionals. These trainings generated thousands of new leads for our sales force, which are now converting into new customers. We're beginning to see the results, particularly in our mobile business, where we experienced double-digit growth for our DSO customers in June. This acceleration was due in part to our successful efforts to help customers accelerate education during the COVID-19 shutdown. With the infection prevention procedures differing across the world, our metrics team provided customers with guidance and recommendations on sanitation procedures to help ensure they have the resources needed to restart their businesses. We also developed, in collaboration with our partners, the practice recovery program, offering packages to support dental practice recovery. The feedback from our customers and our partners has been extremely positive with hundreds of new customer leads generated for our partners and their ability to cross-promote other consumable products. We took significant actions to preserve our financial strength, which has enabled us to maintain our strategic investments. We exceeded a temporary cost reduction target and reduced operating expenses, excluding restructuring and other exceptional charges, by approximately $110 million, or 35% year over year. This was driven by a combination of temporary and permanent initiatives, including furloughs, compensation reductions, and strong discretionary spending restrictions. These efforts, combined with aggressive working capital management, helped improve our liquidity position while generating positive operating cash flow in the quarter. Our near-term priorities are essential to ensure that we're able to advance our strategic growth priorities, reduce structural costs, and reshape the portfolio. During the quarter, we advanced these long-term objectives, which will lead to a stronger Envista over time. Starting with our growth investments in China, we maintained our investment through the outbreak to align our team to implement a targeted program to train and onboard new orthodontic and implant customers in the private sector. The private sector is approximately half of our overall China business. As a result, our orthodontic business grew at a double-digit rate in the second quarter, including more than 25% growth in the private sector, which we believe outpaced the market. Our implant business is beginning to build positive momentum and grow at a mid-single-digit rate in the month of June. In our infection prevention business, we completed installation of two new production lines for our CaviCide branded disinfectant in late June, which will increase production capacity by 25%. Our infection business grew at double-digit rates in the first half of the year, and we anticipate that other lines will help drive more than 30% growth in the second half of the year, which is approximately 200 basis points of revenue growth for Envista. We will continue to add additional production capacity and expect demand to continue as customers adapt to more stringent procedures designed to mitigate widespread COVID-19 globally. Our CaviWipes and CaviCide solutions received registration by the EPA confirming their use against disinfection of COVID-19. In June, we delivered our innovative N1 implant system to 10 of our key experts in Europe. This is a major milestone for the Nobel Biocare team after more than 35 years of product development. Customers can look forward to an innovative implant workflow from planting to perspective delivery, including new techniques like Osseo Shaper, a treatment protocol that allows clinicians to treat patients with two easier-to-use lower speed instruments, which ultimately results in less discomfort and faster healing time for patients. We will continue to roll out N1 to select customers as we move into the second half of the year. Similarly, our Spark Clear Aligners continue to be well received by customers, including one key expert who has now treated over 600 cases, with more than 25 other customers who have completed more than 100 cases each. Customers value the excellent clinical outcomes, clarity, stain resistance, and softer workflow that the product offers. During the COVID-19 shutdown, we made a substantial effort to train new providers and install several new manufacturing lines, which will increase our case capacity moving into the second half of the year. We are pleased by the rebound in case submission rates, which are now exceeding pre-COVID levels. Plans are in place to double the current customer base by the end of the year. Collectively, we anticipate that Spark and N1 will contribute more than 1% of growth in Envista in the second half of 2020. Normally, in 2021, we expect both products will make meaningful contributions to Envista’s growth. We also made substantial progress on the structural cost actions we outlined in Q1, which are targeted to generate permanent savings of more than $100 million on an annualized basis and substantially improve our operating margins. Today, we have completed planned headcount reduction actions, which will secure more than $70 million of the targeted savings. We will continue consolidation and simplification of our footprint and anticipate the remainder of the permanent cost reduction program will be completed by the end of the fourth quarter. We're actively managing the portfolio. In the second quarter, we announced our intention to exit the treatment unit business in Brazil and Pelton & Crane in North America. This together represented approximately 4% of our total 2019 revenue. Last orders were taken in the second quarter, and we anticipate exiting from these businesses by the end of the third quarter. These businesses had near breakeven EBITDA margins and were declining prior to the COVID-19 outbreak. Finally, Gail Shepherd, a seasoned executive with extensive experience, joined our Board of Directors, adding a broad set of capabilities and expertise to the board. While the last three months have been challenging, our continuous improvement mindset and process discipline, both hallmarks of the Envista business system, have helped us successfully navigate and exceed our commitments while furthering our strategic priorities. I will now turn it over to Howard, who will provide further details on the quarter.

Thanks, Amir. In the second quarter, sales declined 49.2% to $362 million. Sales were adversely impacted by 1.6% from discontinued products and 1.7% from foreign currency and positively impacted by 0.3% from acquisitions and 50 basis points from pricing. Core sales decreased approximately 46.2%, primarily due to lower demand in most major geographies due to the COVID-19 pandemic. Geographically, sales in developed markets were down approximately 50%, with both Western Europe and the U.S. declining at a similar rate. The U.S. improved through the quarter as we saw more favorable conditions within our specialty businesses. Within Western Europe, demand also improved within the quarter, but at a slower rate than the U.S., as southern Europe and the UK remained under lockdown for a longer period. Turning to emerging markets, China sales declined at a mid-single-digit rate, which is an improvement from the first quarter performance, which was down more than 35%. This improvement was led by our orthodontic business, which grew at a double-digit rate, and our consumables business, which grew at a mid-single-digit rate. Emerging markets outside of China were most impacted by the COVID-19 related office shutdowns, with India and the Middle East sales down more than 70%. We finished breakeven on adjusted EBITDA as the cost actions we implemented in the quarter helped to partially mitigate the impact of the decline in volume. Our adjusted gross margin and adjusted operating profit margin also declined during the quarter due to these factors, and our second quarter adjusted diluted EPS was negative $0.10. Given the substantial progress on our permanent cost savings initiatives and the improving environment, we anticipate being able to reduce some of our temporary cost measures, yet still achieve a meaningful reduction in operating expenses in Q3, inclusive of incremental public company spending. We spent $60 million on restructuring during the quarter, which is focused on reducing our structural costs and reshaping the portfolio. Approximately $20 million of these charges are related to non-cash items, including asset impairment and inventory adjustments related to the exit of our Pelton & Crane and Brazilian treatment unit businesses. Cash management was our principal focus coming into the quarter, and the team did an excellent job minimizing our cash burn rate and preserving liquidity. Working capital was a positive benefit of $14 million, and in combination with the strong spending controls, we were able to generate positive operating cash flow of $5 million. Our strong cash management, combined with $503 million in net proceeds from the convertible debt issuance, helped to improve our cash position to $822 million by the end of Q2. As we move through the second half of the year and into 2021, we believe we are in a good position to consider deleveraging while maintaining flexibility to fund our strategic growth and cost initiatives. Turning now to our two business segments, our Specialty Products & Technologies segment sales were down 46.8%, while core revenue declined 45.6% due to the impact of COVID-19. Of our major businesses, orthodontics and implant have seen the most significant improvement in demand from April to June, due in part to treatments that were delayed during the initial phases of the pandemic. During the quarter, our Ormco business introduced our highly successful DQ2 bracket system into the China market. While the pandemic forced the cancellation of the planned live launch, the China team hosted a virtual product introduction attended by more than 2,000 doctors. This is a great example of how our teams have successfully adapted to the new operating environment and furthers Ormco’s cadence of new product introductions, which helped improve our new products as a share of revenue to nearly 20%, up meaningfully since 2018. Our implant product portfolio is well positioned to help clinicians in the current operating environment, where efficiency and same-day restoration are increasingly important due to the more time-consuming infection prevention protocols. The NobelActive implant system is a leading solution and a pioneer in immediate loading implants that allow patients to have both an implant and a temporary prosthetic placed in the same visit. Clinicians can be even more efficient when using our implant planning software, DTX implant and ex-guide navigated surgery solution, which saves time by providing more consistent implant placement. With these solutions, our customers can offer their patients same-day implant placement, which improves efficiency by reducing the number of office visits. Specialty Products and Technologies adjusted operating profit margin declined to 6.2% due to lower revenue, which was only partially offset by our cost reduction efforts. In our Equipment and Consumables segment, sales decreased 51.4%, while our core sales decreased 46.9%. Core sales in both our equipment and consumables had similar performance in the quarter. Discontinued products adversely impacted sales by 2.6%, and we anticipate discontinued products will have an adverse impact of approximately 8% of segment sales in the second half of 2020. We think consumables in our infection prevention business grew at a double-digit rate in the first half of the year, and we anticipate our investment and capacity will help deliver more than 30% growth in the second half of the year. We exited the quarter with a record backlog of more than 25 million as the demand for our wipes and disinfecting solutions for medical and dental professionals far exceeded supply. We were also encouraged by the sequential improvement in end-user demand from April to June for restorative products in North America and Western Europe. In our equipment business, imaging has been more resilient than expected, due in part to maintenance revenue as well as increased demand for solutions designed to improve connectivity and workflow. This is particularly true in our DTX workflow software, which streamlines image acquisition, diagnostics, treatment planning, and treatment execution in one easy-to-use system, replacing the need to have several imaging and clinical operating systems. Since our commercial launch in the U.S. in March, we have seen early success in bundling imaging products and workflow software together as streamlined solutions. Equipment and consumables adjusted operating profit margin decreased to negative 2.6% due to lower revenue, which was only partially offset by our cost reduction efforts. I'll now turn it back to Amir, who will walk you through some details for the current operating environment.

Thanks, Howard. Similar to last quarter, we're not issuing formal guidance given the uncertainty created by the pandemic. I want to provide some additional commentary on current business trends and our expectations for the business as we move into the third quarter. Let me begin with what we see as the most important factors impacting the rate of market growth. I will then move to our sales trends and outlook. The first factor we're watching closely is the increasing infection rate, especially in the U.S. and the response of federal, state, and local governments. Encouragingly, in areas that have seen COVID-19 infections rise in the U.S., dental practices have not been forced to close for elective procedures, nor have we yet to see significant changes in demand. But this remains an area of concern with recovery. We're monitoring the velocity of patients returning to the offices, as well as the maximum number of patients each office can see, given the additional time needed for infection prevention protocols. While it's clear these conditions have caused a reduction in the number of patient appointments available per day, we started to see doctors take actions to counteract this impact, including extending hours and using teledentistry to supplement office visits. Clinicians, especially DSO customers, have also been more focused on maximizing patient procedures per visit, which is a trend that may help counteract revenue recovery versus the maximum number of patient visits per day in the near term. Finally, while our results have been steadily improving from Q2 into Q3, we are monitoring the sustainability of this recovery. We are analyzing our partners' inventory positions, pent-up demand as offices reopen, the long-term effect of the economic shock that occurred in the first half, and patients' willingness to return to dental offices. Let me now comment on the current market trends focusing on our largest two regions, North America, Europe, and China. As we mentioned earlier, sales have trended positively through the quarter, which has continued in the month of July. China, approximately 9% of our business, was the best-performing region in the second quarter, with patient volumes improving to approximately 80% of pre-COVID levels. We are cautiously optimistic about the outlook for China in the third quarter as patient volumes continue to rebound. Over now, the demand for implants improves, and we benefit from share gains in our orthodontic business. In North America, our largest region at 48% of our business, we are experiencing better demand for our product as we move into July. Customer demand for implants, orthodontics, and traditional consumables has been stronger than anticipated, as patients are returning for previously delayed procedures and as we enter a clean orthodontic season. In Western Europe, representing 22% of our business, we continue to experience a wide divergence in performance. We anticipate the best performing areas will continue to be Germany, Austria, France, and Scandinavia, as a combination of pent-up demand and easing restrictions should lead to a meaningful improvement from the second quarter. Finally, we believe demand in the rest of the world will remain challenged, as nations including India and Brazil have high COVID-19 infection rates and remain under government order lockdowns. In conclusion, we're encouraged by the progression of the global dental market demand during the quarter. Our strategic growth investments, including N1 and Spark, remain on track, and we have made significant progress to reduce our structural cost position. After the exit of Pelton & Crane and our Brazilian treatment unit businesses, we believe our portfolio is well positioned for the new normal, with more than 85% of revenue from consumables and lower-cost equipment. The progress in our priorities during the quarter was made possible by our employees' teamwork, solidarity, and tireless work ethic. We're committed to our customers' success as we navigate through these uncertain times. These efforts and our improved execution position us well for better financial performance going forward.

Thanks, Amir. That concludes our formal comments. Stephanie, we're now ready to take questions.

Your first question comes from the line of Elizabeth Anderson with Evercore.

Hi, guys. Congrats on a pretty great performance in a tough environment. I just had a couple of questions in terms of the demand trend that you're seeing. If you think about the core consumable business and equipment and consumables, how would you say that sort of, like you ended the quarter? I'm just trying to sort of get a little bit more detail on that part of the business. And then on the equipment part, how are you seeing practices think about equipment purchases? Are they still sort of interested or is there something they're pushing off to 2021? Any details you can provide there would be helpful. Thanks.

Yeah. Thank you, Elizabeth. So let's start with the consumable. As you can imagine, at the end of March, we reached the trough. As you can imagine, as offices started closing, the demand for daily consumables dropped significantly. Our partners, like us, started managing cash flow and working capital, and they started setting whatever need they had through inventories. So, as we mentioned, our overall business in April was down over 60%. I think that was the trough of our business. As inventories came in line and as we saw the slow and steady gradual improvement starting with China and in other geographies, demand for traditional consumables continued to increase going forward. In the traditional consumables, we normally look at it from three different perspectives, the infection prevention aspect of that business, which as we mentioned, grew double-digit and continued to grow both in dental and medical, more on medical to begin with. But as we progressed through the quarter, we saw more and more increase on the dental side. Though driven primarily by paying customers, who experienced needs that dentists needed to provide that support, really did not see much impact. Even the smaller part of our business maintained throughout the quarter. However, restorative, which is a big part of our traditional consumables, saw a rebound starting in May and continued through June, which is ongoing into July. While inventories declined, we saw that demand continue to increase, driven by a lot of work we did internally. We established a support arm with our partners to get dentists back to work, and we have seen the outcome of that by demand for specific products increasing throughout the quarter. This recovery varies significantly from geography to geography, but I can tell you that we are cautiously optimistic and really encouraged by what we have seen in the past two to four months.

Thank you. That's helpful. Can I also, you mentioned that obviously your cash balance is in a pretty good state and the operating cash flow in the quarter was impressive given the macro environment. As you go through the back half of the year, how do you think about de-levering versus potentially some M&A or other capital allocation decisions from that perspective?

Elizabeth, I want to make sure that I answer your question on equipment as well because you asked about the equipment piece. Let me answer that, and then Howard will address the question about capital allocation and M&A. We had anticipated that equipment would ramp slowly, and it would take some time to recover. What we saw was that some of the equipment orders we already had in hand surprisingly did not see many cancellations. We continued to provide these services going forward. Our equipment, specifically in imaging, has a large portion of our imaging that is contractual-based services that didn't get impacted as much. Imaging has been resilient. As we moved through the quarter, we saw it coming back. On the other hand, the larger capital equipment pieces, these are $50,000 and above, we're seeing a slower ramp, and as you mentioned, if people do not have to make those investments, we expect to see that ramp throughout the second half and into 2021. One of the things we did during the quarter was reshape our portfolio. Today, 85% of our portfolio consists of consumables that people use every day or equipment that is less than $5,000, which people use with limited need for installation and maintenance. The remaining 15% are larger equipment, and we expect to see a slower recovery as we move forward. Howard?

Sure, sure. So let me go ahead and answer your question. You're right, Elizabeth. We did have strong free cash flow, better than anticipated at a decline less than $5 million. This was largely due to strong working capital management and cost actions we took to preserve liquidity. As I mentioned earlier, our cash management was one of our focal points coming into the quarter, and the cost actions exceeding $100 million helped mitigate some of the impacts on the revenue decline. As it relates to deleveraging, I think near-term our priorities continue to be centered around executing on these cost actions. We're about 70% of the way there, and we'll finish the remaining portion in the second half of the year. Initially, we're focused on reducing leverage driven by those cost actions, and we'll look as the recovery continues on our underlying business. More intermediate and long-term, M&A is still a major part of our strategy. We'll look to take advantage of any dislocations coming out of this current environment as well.

Okay, great, thank you guys.

Yep.

Hey, good afternoon, guys. How are you? I wanted to ask a question, I guess first starting on just gauging throughout the quarter. And you both gave a lot of detail; I appreciate that. But for a simple guy like me, is it as simple to think about the numbers in April, May, June kind of down 65, 45, 25? Is that at least ballpark accurate? And Amir, I know we heard you don’t say July momentum is continuing. Do you think we continue to improve off that July or the June exit rate? A lot of us are kind of a little concerned that we might hit a structural headwind, and you talked about it for some of the operatory turnover reasons and what have you. But should we continue to see improvement at this point, you think in the July, August, September timeframe? Just any high-level thoughts would be helpful?

Yeah. Thanks, Jeff. Yeah, you're right; we were down 60%, a little bit more than down in April. And we saw gradual improvement, geography by geography, product category by product category through May and then got better in June. We were watching carefully to see if this is purely driven by pent-up demand, and we continue to monitor that very carefully. But we have seen gradual improvement, June better than May, and thus far what we have seen in July shows improvements over June. Our visibility is limited, and that's the reason we have been cautious not to provide expectations — not to set expectations for guidance until we have better visibility moving forward. What we observe today, with traditional consumable beginning to recover in June continuing into July, is promising. As we mentioned, orthodontics and implant have improved significantly, better than we expected. Cautiously optimistic and positively surprised by the results seen in July and hoping this trend continues.

Understood; thank you. And maybe just on Spark, it seems like to me now you're expecting somewhere in the neighborhood of $20 million to $25 million for the year. I'd love to hear kind of how that compares to maybe your pre-COVID expectations. I think that's about in line. So I'm a little surprised by that in a good way. But maybe how you're thinking about building off that $20 million to $25 million base in 2020 and maybe implications going into 2021?

Yeah, thank you, Jeff. You're absolutely correct. We started the year strong in January and February, and we set expectations for about $15 million to $20 million based on a strong performance. We have an internal plan that should exceed that plan. We're pleased with the demand we're seeing from doctors and patients regarding the clarity, stain-resistant improvements, and comfort the product offers. We built sufficient capacity for 2020. We significantly increased capacity in the past three or four months. We now have more than 500 active doctors and trained over 300 in Q2. We believe we're confident in delivering at 100 basis points growth through Spark, as the demand is there and the number of cases being treated has exceeded January levels. We aim to double the current customer base by the end of the year, and our goal is to reach over a $100 million product line over the next few years. We're investing in the capacity and infrastructure to achieve that objective.

Thank you.

Hi, thanks. This is Elena on for Tycho. Thanks for taking our questions. I wanted to start with the infection prevention business. You noted that it grew double-digits in the first half of the year. And I recall in the first quarter, you said more than 35%. So just wondering if it decelerated in Q2 or how it's been trending, and then whether you could see upside to the 200 basis points tailwind in the back half of the year given the added capacity?

Yes, absolutely. Last year, the infection prevention business was over $150 million, and we made products like disinfecting liquids and wipes that generally kill most viruses. We saw substantial growth in the first half, double-digit growth. As we started Q2, we have over a $25 million backlog. We're adding capacity; we believe that 25% capacity will be online in Q3. One important factor in this business aspect is the mix; about 40% is medical, and 60% is dental. We saw a ramp at the beginning of the quarter, largely focused on medical, and as we got to the halfway point of the quarter, dental has begun to ramp up. To answer your question, we feel very comfortable with the 200 basis point growth for the second half, and we think the infection prevention business could grow to about $275 million in the next year, due to demand and capacity increase. Product reception has been very positive. The new EPA approval increases our confidence level, and we can keep supporting office openings for a safer environment.

Great, that's very helpful. And then, one question on the velocity of patients returning to offices you mentioned gradual improvement through the quarter. But thinking of the increasing infection rate in the U.S., has there been a change in pace in July?

Yes, that’s a really good question. We watch the statistics carefully and monitor various services and surveys conducted. Internally, we have not seen significant negative impact today. We're observing closely at the regional level to understand what's happening in those areas with uncertainty. Outside China, we see similar dynamics as the U.S. As some geographies reinstate controls, we're monitoring closely for our customers' demand. Fortunately, we have not seen a rise in COVID case numbers correlate with demand, allowing us to maintain some sense of stability in demand trends.

Thanks, guys. Good afternoon. Amir, you mentioned pent-up demand. What are your thoughts on the industry's backlog? I think backlog yields results in Q2, and I'm guessing it’s likely going to aim results in the third quarter. But what do you think about the rate of improvement for the market? Is that sustainable into the fourth quarter if the backlog tailwind is depleted at that point? Your thoughts there? I have a follow-up.

It's really hard to quantify pent-up demand. On the doctor side, many offices closed abruptly without restocking. We know more than 50% of our business is direct, allowing us to get a sense of what's happening with our partners' inventory management. We saw evidence of this trend when we checked with customers. Our observation is that in June and July, pent-up demand has helped spur recovery and it initially affects our outlook for the third quarter.

I think, Jon, this is Howard, just to maybe jump in here as well. Just from the cost reductions we've taken, we feel comfortable regardless of the environment going forward. So that's something else that we feel good about.

Yeah, absolutely. It's essential to watch how our top 10 customers in the U.S. manage their ramp-up recovery by geography. We are encouraged by the strong signals we're getting from them.

Got it. Thanks. And one more question; you have a sizable position within DSOs. Any high-level color on how those entities are growing versus the fragmented mom-and-pop operations? Could your positioning within DSOs be a long-term benefit if we see accelerated consolidation coming out of COVID-19?

Absolutely. As we mentioned before, it's an important part of our future strategy. We expect growth above the fleet average, especially given the demand recovery in June and rentals are improving. We've put significant effort into training DSOs during the quarter, and we've seen acceleration from our implant business with double-digit revenue growth from DSOs. We're keeping pace with customer feedback. Further consolidation will depend on market conditions, but they appear to be ramping back up based on what we've seen in June and July.

Thanks very much. Amir, I wanted to come back to the topic of inventories. It sounds like you're watching this very closely in the channel. What is your sense about where you stand? Have they stabilized? Are they likely to go back up? Or could there be more downward pressure as some of your partners also try to manage cash flow?

Thanks, John. Inventory positions have been the best we have seen in the last three years. We're monitoring not just inventory but also market share and sales data through our partners. As inventory levels were corrected, we've seen sales growth benefiting. Our last observation regarding inventory indicates that we've stabilized and could see orders coming through in response to sustained demand. I would argue our partners are less about overstocking and more focused on maintaining effective levels as we proceed.

Wonderful. That's great. Thanks. And one follow-up, and this relates to Spark and N1. As you get more experience with these new products, how comfortable are you that the sales generation will be incremental, as opposed to migration with some of your existing customers from older brands, be it Ormco or Nobel?

So regarding Spark, we're keeping a close eye on customer benchmarks. Currently, typical customers remain highly satisfied. The ramp we're seeing with bracket and wire is in line with our projections as we’ve mentioned before, so we're confident in no significant switching impact. The N1 implant may entail some cannibalization, but our goal is to drive new incremental business to far exceed that impact in 2021 and 2022 as new product sales ramp up. We see this providing meaningful revenue growth.

Very helpful. Thank you.

Hi, good afternoon. If I could start with looking out to 2021 regarding your N1 and Spark products. It seems like the uptake of Spark is going smoothly. For N1, what type of contribution should we expect next year and what would that assume with respect to the U.S. approval and launch? Do you feel like based on the traction you're seeing early in Europe that could be a meaningful contributor to the top-line next year, regardless of how the ramp-up in the U.S. looks?

Yes, Nathan. N1 is approved in Europe, we have to see that marketing registration in various geographical segments, and we believe it will significantly impact our business starting in Q4 next year. It could differentially impact our revenue trajectory positively, and we are encouraged by the strong performance in regions where we have initiated marketing activities. Also, N1 alongside Spark could deliver over 1% growth for the second half of this year, and is likely to be significant in our 2021 revenue goals as well.

So, Nathan, I'm not 100% sure I heard much of the question just due to sound quality. My understanding is that we have strong cost actions in place. We're focusing on executing them, and once the recovery continues, the cost actions are projected to result in $100 million savings by 2021.

Thanks, Stephanie. Thanks, everybody. Appreciate the time today. We will be around for the rest of the week to answer any further questions. Thank you.

Thank you very much.

This concludes today's conference call. You may now disconnect.