My name is David, and I’ll be your conference call facilitator this afternoon. At this time, I’d like to welcome everyone to Envista Holdings Corporation’s Fourth Quarter 2023 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 call over to Mr. Stephen Keller, Principal Financial Officer of Envista Holdings. Mr. Keller, you may begin your conference call.

Good afternoon, and thanks for joining the call. With me today is Amir Aghdaei, our President and Chief Executive Officer. 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 on the Investors section of our website later today under the heading Events and Presentations. It will remain archived until our next quarterly call. 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, references in these remarks to company-specific financial metrics relate to the fourth quarter of 2023 and references to period-to-period increases or decreases in financial metrics are year-over-year. During the call, we may describe certain products and devices that have applications submitted and pending certain regulatory approvals that 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 or 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. 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 where required by law. With that, I'd like to turn the call over to Amir.

Thank you, Stephen. Good afternoon, and welcome to Envista's Fourth Quarter 2023 Earnings Call. We appreciate you taking the time to join us today. Despite a volatile macro backdrop, we're making progress against our long-term strategic priorities. In line with our expectations, we finished 2023 with a modest sales decline for the full year and delivered an adjusted EBITDA margin of 18.1%. We improved our free cash flow generation in 2023 and delivered greater than $220 million while continuing to invest in our strategic priorities to accelerate our long-term growth and enhance our margin. Before we reflect on our performance in 2023 as well as our future outlook, I think it is important to provide some context about the current operating environment as well as the underlying demand for dental solutions. Globally, the market remains dynamic with macro uncertainty and geopolitical risks continuing to create a challenging operating environment. Conflicts in the Middle East and Ukraine, as well as cybersecurity attacks impacting the North America distribution channel created volatility in 2023. While our team has navigated each of these challenges collectively, they have moderated our near-term performance. As we move into 2024, we believe we are well-positioned to navigate potential short-term uncertainties while executing a long-term value creation model. While we continue to see resilient patient traffic throughout 2023, we did see a weakening of demand for higher-end dental procedures, including both adult orthodontic cases and full arch implant restorations. Private practice clinicians and DSOs remain thoughtful about near-term investments in both equipment and clinic level inventories. While this has created pressure in the short-term, longer term, we are confident that patients will prioritize dental care, and our clinicians will proactively invest in areas that help them digitize their practice, making them more productive, and ensuring they can provide the high-quality personalized care. Despite the volatility seen throughout 2023, the Envista team has focused on driving our key initiatives, and we continued our progress to drive long-term growth, accelerate margins, and transform our portfolio. Our orthodontic business is performing well, growing double-digits for the full year. This performance significantly outpaced a global market where orthodontic case starts declined for the year. Ormco's comprehensive portfolio, including Bracket & Wires and aligners, and our clear focus under orthodontic specialists creates a sustained competitive advantage and a more stable business with ample opportunity for long-term share gains. During the year, we leveraged the Envista Business System, EBS, to drive our Spark growth formula and consistently added new doctors, increased case volumes with existing doctors, and grew revenue per case. The Spark business delivered over 50% year-over-year growth, and we are positioned to double this business by 2026. In 2023, our implant business declined low-single digits as challenges in North America offset at or above-market growth in other geographies. Excluding North America, our implant business collectively grew mid-single digits for 2023. We have strong brands, a leading product portfolio, a passionate and capable team, and a dedicated community of implant specialists around the world. Leveraging our strong foundation, we have taken aggressive steps to address our performance issues in North America. We're making thoughtful investments in sales and marketing, training and education, and community development and are leveraging a successful European leadership model and playbook, which has resulted in over 300 basis point share gains in the past three years to reinvigorate growth in North America. The North America business is expected to return to market-level growth by the end of 2024. Turning to our Equipment & Consumables segment, we declined mid-single digits for the full year 2023. Much of the decline can be attributed to the de-emphasis of non-strategic markets and product in our diagnostics business and the cybersecurity issues that disrupted the North American distribution channel for our consumables products. Despite these isolated changes, we made progress in both businesses. In our diagnostics business, DEXIS IOS delivered core growth of over 30% for the year. We saw strong volume growth and a stabilizing price environment as we exited the year. Our traditional imaging solutions performed at or above the market in our focus geographies, and we successfully launched two innovative new products. The OP 3D LX, our next generation CBCT scanner in the OP 3D platform features a larger field of view and expanded 3D diagnostic capabilities through seamless integration with our DTX Studio Clinic software. The OP 3D LX provides more flexibility and improved workflow, aligning doctors to augment the diagnostics, planning, and treatment of patients. On the software side, we also released the DEXassist solution to integrate AI features into the DEXIS 10 Imaging Software Suite. The DEXassist solution helps practitioners to detect six pathological findings in 2D deficiency in 2D intraoral X-rays including cavities, calculus, bone loss, periapical radiolucency, root canal filling deficiencies, and discrepancies at the margin of an existing restoration. We now have over 50,000 computers running the DTX software globally and have processed over 200 million images on our platform. Sellout in the consumable business remained a highlight during 2023, as we performed at or above the market in most product categories and geographies. With the North American distribution channel stabilizing, we expect this business to grow at or about the long-term market growth rate of low-single digits globally. As expected, in 2023, our adjusted EBITDA margins declined due to lower sales as a result of the volatile macro conditions, our strategic investments in our Specialty and Technology segment, and our rapid growth of Spark. As we have discussed, Spark margins, while improving, are still below fleet average. Our 2023 performance is consistent with our intention of balancing investments for both growth and margin improvements. We believe that the focused investments we are making in both Spark and North American implants will support our margin expansion over the long term. We continue to leverage EBS to systematically drive operational improvements, footprint rationalization, price optimization, expense controls, and structural cost reductions. Spark margins are improving sequentially as we drive down the production cost of aligners and improve our process automation. Further, we are proactively managing price across the portfolio and delivered 50 basis points of positive pricing, excluding the impact of volume-based pricing. Across our emerging markets, we streamlined our organization, reduced our expenses, and concentrated our efforts in areas where we have the most sustainable competitive advantage. One of our primary priorities is to build a better, stronger, and more growth-oriented portfolio. By providing comprehensive solutions for orthodontists and implant specialists, we continue to shift our portfolio to the most attractive segments of dental. Our diagnostic solutions business has been optimized and creates competitive advantage as we help clinicians digitize their workflows. Our two most recent acquisitions, DEXIS IOS and Osteogenics, complement our strategy and are key to our ongoing transformation. Both acquisitions saw growth accelerate throughout 2023 and are positioned well for future growth. We are committed to pursuing a disciplined approach to capital deployment. We utilize our EBS-driven M&A approach to manage our robust pipeline of inorganic partnerships and investments and are constantly cultivating new opportunities. I will now turn the call over to Stephen to go through our fourth quarter financials and provide more details on our segment performance.

Thanks, Amir. Before reviewing our fourth quarter results in detail, I would like to quickly comment on the $258.3 million non-cash impairment charge related to goodwill and intangible assets that we recorded in Q4. This impairment was primarily the result of an increase in the discount rate driven by sustained higher interest rates and the impact of a more volatile macro environment. On a reported basis, fourth quarter sales declined 2.3% to $645.6 million. Sales in the quarter declined by 0.3% due to the impact of foreign currency exchange rates, and our core sales were down 2% compared to the fourth quarter of 2022. While our year-over-year growth was supported by solid mid-single-digit growth in our Specialty Products & Technologies segment, this was more than offset by a double-digit decline in our Equipment & Consumables segment. Geographically our developed markets declined by 4.8% with strong growth in Western Europe offset by a double-digit decline in North America. Our emerging markets grew to greater than 9% in the fourth quarter. Our fourth quarter adjusted gross margin was 52.4%, a decrease of 380 basis points compared to the prior year. The decrease in gross margin was the result of lower volumes and unfavorable product mix, VBP-driven price reductions, and currency headwinds. Our adjusted EBITDA margin for the quarter was 15.6%, which is 530 basis points lower than Q4 2022. The lower adjusted EBITDA margins were anticipated and driven by lower gross margins, unfavorable geographic mix, and investments in both Spark and the turnaround of North American implants. Our fourth quarter adjusted diluted EPS was $0.29 compared to $0.52 in the comparable period of the prior year. Core revenue in our Specialty Products & Technologies segment increased by 4.8% compared to the fourth quarter of 2022. Strong growth in Western Europe and emerging markets was offset by declines in North America. Within this segment, our Orthodontic business grew nearly 15% with Spark continuing to outperform, and our Bracket & Wires business delivered mid-single-digit growth, with emerging markets performing especially well. Overall, we are confident that our Orthodontic business is outperforming the market with clinicians continuing to value our comprehensive portfolio and our focus on the orthodontics specialist. Our implant business declined modestly in the fourth quarter as strong growth in China was offset by underperformance in North America. Overall, we see signs our implant business is stabilizing with our Q4 performance improving relative to the first three quarters of the year. As we have discussed, we are making significant investments in North America and leveraging our commercial EPS capabilities and standard work to get this business to return to market-level growth as we exit 2024. For the fourth quarter, our Specialty Products & Technologies segment had an adjusted operating profit of 15.4%. This was down 460 basis points versus the same period in the prior year, with the decline largely due to unfavorable mix, the pricing impact of the China VBP program, continued investment in Spark, and targeted investments in North American implants. Turning to our Equipment & Consumables segment. Core sales in the fourth quarter decreased by 12.4% compared to Q4 2022. Our Consumables business declined in Q4 primarily due to the timing of orders in the North American distribution channel. As we have discussed, the cyber attack experienced by our largest distribution partner reduced the visibility of channel inventory levels and slowed stocking orders throughout much of Q4. It is important to note that while sales into the distribution channel were down, sellout to end customers in Q4 performed well. Moving forward, we expect inventory levels to stabilize throughout 2024 and our sales to normalize as we move through the year. Outside of North America, we saw solid growth in our Consumables business and we continue to drive sellout that is at or above market growth in both geographies. Our Equipment business also declined in the fourth quarter relative to the prior year. As higher interest rates and concerns around the macroeconomic environment reduce global demand for large imaging equipment. Despite this dynamic, our performance in North America stabilized, showing a more modest decline in the quarter. Emerging markets saw a large decline in the quarter, driven by the combined effect of challenging macro conditions and the de-emphasizing of non-strategic geographies and solutions. Our intention is to refine our focus and then concentrate our efforts in those markets where we can build and maintain a sustainable competitive method. While this will create a modest headwind to core growth in the short-term, long-term it will allow us to improve both the growth and margin profile of this business. Our IOS business grew greater than 30% in the fourth quarter, driven by strong unit demand and a stabilizing price environment. We continue to see DEXIS IOS as a long-term growth driver for Envista, and our focus on expanding our global reach by partnering with our distributors and system integrators helps clinicians digitize their office. In addition to driving growth for Envista, DEXIS IOS Solutions enhance our end-to-end orthodontic and implant solutions. Equipment & Consumables adjusted operating profit margin was 19.5% in the fourth quarter of 2023, down from 27.2% in Q4 of 2022. The decline in margins was primarily driven by the lower sales of consumables in the quarter. This decline was anticipated and is expected to be temporary. As we have discussed throughout 2023, we have taken significant actions to reduce our costs, streamline our operations, and improve our focus in this segment. Long-term, this segment is positioned to accelerate growth and improve operating margins. In the fourth quarter, we generated free cash of $99.9 million and delivered $223.6 million of free cash flow for the full year. This represents a greater than $100 million improvement in free cash flow over the full year of 2022. Overall, we were pleased with our progress in improving our free cash flow management and are committed to our long-term goal of delivering annual free cash flow in excess of net income. I'll now turn the call back to Amir to provide an update on our outlook for 2024 as well as some closing comments.

Thanks, Stephen. We remain confident in our strategy and long-term outlook. The dental market is attractive, underpenetrated, and has solid growth trends. Our business is strategically differentiated, and we have a proven track record of executing in a dynamic environment. We have conviction in our ability to create meaningful value over the long term. While we remain confident in the future of the dental industry, the current backdrop causes us to be more cautious in the near term. For 2024, we expect demand for higher-end dental procedures, including full arch restorations and adult orthodontic cases, to remain somewhat restrained. We further expect private practices and DSOs to remain cautious before making large investments in new clinics. For the full year 2024, we expect core sales to grow low-single digits and deliver adjusted EBITDA margins of between 16% to 17%. We further anticipate that our margins will accelerate as we move through 2024. Our guidance takes into consideration both our investments for the long term and the continued uncertainty in the macro environment. In 2024, we're focused on three main priorities to improve our short-term execution and build a foundation for long-term value creation. First, we will further accelerate our orthodontic business by providing orthodontic specialists with a differentiated and integrated suite of treatment options, including Bracket and Wires and Clear Aligners. We anticipate growing our Spark business by 2026, while simultaneously driving sequential margin improvements. A second area of focus is on reaccelerating the growth of our implant business. Globally, we will leverage both our premium and value implant franchises to provide full solutions across the implant workflow, including regenerative and prosthetic offerings. We will continue to utilize our premier diagnostics and digital capabilities to create differentiation and win customers. In North America, we are making targeted investments to improve our commercial execution, refresh our approach to marketing, improve our training and education, and further support our clinical community. We see a clear path to invigorating growth and aim to be growing with the market as we exit 2024. As we move forward this year, we will further utilize EBS to optimize our cost structure. We expect to reduce structural costs by an additional $13 million annually for the full-year impact being realized in 2025. Our continuous improvement culture will allow us to further consolidate operations, streamline our corporate functions, and drive out G&A spending across the organization. We believe 2024 will be a transformational year for Envista as we continue to balance investments in growth with our goal of expanding margins. Given our desire to drive improved execution of this transformation in 2024, we believe it’s prudent to revisit our long-range targets. Further, because of this focus, recent leadership changes, and our process to name a permanent CFO, we have decided to postpone our Investor Day and will reschedule. Postponing will allow us to provide a more comprehensive update with our full leadership team. I want to stress that this change in the timing of Investor Day does not diminish our excitement about the future of the dental industry and the future of Envista. Our purpose is to partner with dental professionals to improve patients’ lives by digitizing, personalizing, and democratizing dental care. We remain focused on delivering long-term value for patients, our customers, our employees, and our shareholders.

Thanks, Amir. That concludes our formal comments. We are now ready for questions.

We will take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead. Your line is open.

Hi, guys. Thanks for the question. Maybe to start off with the operating margin guidance for 2024. I mean, that came in pretty disappointing in our view. And, if we look at this recently as Q3, you guys were talking about operating margin expansion. So, can you talk a bit more about what happened between that point where you're sort of thinking about expansion and then what is the current guidance that you guys are giving us tonight?

Of course. Thank you, Elizabeth. Thanks for asking the question. As we move through Q4 and close the quarter, it became really apparent to us several key factors. To be specific, one is around the macro environment. We do not expect 2024 to be any different than what we have seen in the past several quarters. Uncertain economic environment, interest rate, inflation, consumer sentiment—we see that demand for our high-end dental procedures is going to be below long run growth expectations, and we are cautious about capital spending. Specifically on DSOs and some clinicians and inventory management, on top of the geopolitical uncertainties, we do not think that will change over time. So with that backdrop, that has impacted our mix. If you take a look at it, that backdrop of macro truly impacted some of our highest most profitable businesses in different geographies. In addition, the growth that we are seeing today in our Spark accelerates that mix change over time. As an outcome of that, we did a series of scenario planning. We looked at opportunities and risks. We also took a look at what we needed to do to put the organization in a format that we can create long-term value, realign investments into margin expansion and growth in Spark and North America. Now that we have a really good feel for what it takes to invigorate the growth in there as well as the G&A spending. And we thought we needed to be more cautious in here, provide a guidance that considers all that background. Of course, if the environment improves as we go forward, we have an opportunity to perform better. We think throughout the year, we'll see acceleration of our margin as well as our growth throughout the year. That's basically our assessment and assumption on how we put that guidance in place.

Got it. That's helpful. So, how do we think about the long-term guidance? I know you're sort of ensuring that the longer-term margin expansion possibility with this new step down in 2024.

Yes. And we have been fairly consistent, as you know about creating long-term value by expanding growth, by expanding margin, by shifting our portfolio; we don't think that really has radically changed. That framework that we have created in the past four, four and a half years has stayed intact. The realities of what we're dealing with in here are one, we have a new leadership formation. As CFO, hopefully soon to be named; we are placing Nobel, our implant president over time, and we wanted to make sure that we have a solid leadership team in place. We also wanted to show progression on those three key priorities that we talked about: Spark growth and margin, Nobel back to growth, as well as resizing our infrastructure. We wanted to show tangible results and show the progression in there, and then come back and have a discussion about long-term guidance that we have provided. We think that over time, our view around growth, margin, and portfolio is still valid, and we need to talk about the capital structure as well. That's why we decided to postpone that conversation, and here we are in a better place to provide better insight. We're not canceling it; we are postponing it, and it should be ready when the team is in place, when we have momentum to come back and have that conversation.

Got it. And one last one for me. You just said you have a potential CFO announcement shortly. Would you like to put any time parameters around that?

We're working on it. We have been working on it, as I mentioned. Continuously, we have some very strong candidates, and our goal is to have that name as quickly as possible in the near future.

Thank you. Good afternoon, guys. Amir, I wanted to follow-up on the margin question Elizabeth asked. Primarily around your answer kind of included some things that you've really been dealing with for the last few quarters now. None of the stuff you talked about sounded overly new relative to at least in the past couple of few quarters. But this quarter really dragged down those gross margins that flowed through to both Specialty and the Equipment & Consumables operating margins. With that drop in the gross margin, and you've mentioned targeted investments in the North American dental implant business several times in your prepared remarks, it all sounds to me like there could be some pricing rethought going on here, some change in maybe your pricing strategy on the premium implant side. Is any of that going on? And how do we think about the flow-through of the gross versus operating margin for that if it is happening over the next few quarters? Thanks.

Thanks, Jeff. Very good question. But let me answer that margin first, then we'll talk about the pricing specifically. So mix, as I mentioned, plays such an important role in here. When we put the plan together in 2022 and also the long-term plan that we put in place, there is a set of assumptions about the mix that we are putting in place. As you correctly pointed out, mix has shifted over time. The China challenges, Russia challenges—these are the businesses that have the most impact on our margin. If you take a look at it, in our Bracket & Wires business, which is one of the most profitable businesses that we have, one-third of that business is outside the United States. And where it has been impacted the most are those geographies that are in the middle of these geopolitical challenges. So, you take a look at that and we consider that would not change, not in the near-term going forward. We have considered the impact of volume-based purchases in China—a 35% to 40% price reduction in our implant business. Despite the fact that we have responded to that and we have seen significant growth, it had a direct impact on our margin structure. And last but not least, the shift in Spark—the faster that this growth is happening, it is below average, and it has a significant impact on our margin structure. If I exclude the volume-based pricing, we actually have good pricing momentum on various pieces of our business. I should have mentioned one more thing, and that's the IOS. Despite the fact that that grew almost 30% last year, the prices were declining very quickly. I'm talking about Q4 where that stabilized. But now we have a stable situation. We know what it will look like. With that, we made assumptions that, let's not assume anything radically changes here. Let's not hope that the macro will change radically. Let's not assume the geopolitical will get a lot better going forward. But coming back to your question about impact, we have not seen a degradation in pricing or price reduction on our premium implant. That has not been the case. The discussion in here specifically on North America has not been about price; it has been around customer experience. It has been around training and education. It has been around the community and clinical support. In comparison, this is exactly what we saw in 2019. We corrected it in Europe. We saw 14 quarters of growth. We took 300 basis points of share. We're replicating that model in North America. Price was not a factor in Europe, and we do not think it's going to be a major factor on the premium side of our business.

All right. That's fair. I guess, if I take your comments there about when you did go back above market several years ago, that was right when Ultra had come out, you were getting some mixed benefits there. N1 hasn't scaled here at this point. You're really, I think, relying primarily on NobelActive, which is an older product in the market. So, how do you reengage these doctors with an older product? Should we think about getting back to market growth because there's a newer product coming out, there's new feature sets coming out that will help drive that? Is this just purely going to be heavy lifting of going out and reengaging the doctors and trying to get them to come back and use NobelActive? Just what's the path to that back to market growth by the end of 2024 in the North American market? Thanks.

I will answer that, but I want to just define one specific thing. About 50% of our business is North America, 50% outside North America. That 50% that is outside North America has been going mid-single-digit with the same product. In the past five months specifically, we have done a detailed analysis interviewing 100 doctors and conducted a competitive study of our product, our pricing, our coverage, and what we have seen is that the product is not the most important factor in how we have not performed as well as we should have in here. If I may, I give you a little bit more detail in here, I think it would be helpful. Out of 200,000 dentists in North America, 70% of our implants are placed by less than 5% of those dentists. There are two groups in that category of about 10,000. Let's say 50% of them are specialists. These specialists depend on a referral network. That is 50% are GPs that provide a one-stop solution. They diagnose, place the implant, and work with labs or have in-house labs to provide that prosthetics. Both these groups, which are a target for our premium implant, have three major requirements. Customer experience has a very wide definition—about coverage, order management, returns, and training. Clinical training—that training needs to hit the mark. The model has changed over time; you need to provide a wide range of training online through social media, through a clinical advisory team, and at the local level. Lastly, advocacy—having individuals who can advocate, show results, and teach it to other people would be impactful. That's the definition of what we call community, customer experience, coverage go-to-market, training, education, and advocacy or clinical support. You take a look at those and you figure out that what has really been a challenge for us is that we haven't done as well in building this referral network; many of those have been acquired by DSOs. We need to work with these specialists to provide support and training, study clubs, and lunch-and-learns so that we can rebuild that referral network at the local level. We need to ensure that the training and education we provide is relevant. This is exactly what we did in Europe. We took the decision to go to the local level. When I mention local level, I don't even mean countries; we went to cities like Madrid and Barcelona, Paris, and replicated this model, and we have seen growth. We have seen growth continuously. We're doing exactly the same thing in North America. I'm not suggesting that the product is not an issue; I'm not saying that it's irrelevant. What I am responding to your question is that we are in a good place from brand, recognition, product, pricing, and quality. What we need to improve is our operations and marketing, training, and education. That's what we're after. That's what we are doing as we speak.

Very helpful. Thank you.

Great. Thanks. And you said you remain cautious on the underlying demand environment, which is obvious, but what did you see on a monthly basis throughout the quarter or year-to-date? And how are there any signs of stabilization in certain pockets of the market that you're looking at, or anything to call out on that front in terms of areas where there's disproportionate either deterioration or stabilization?

Yes. Thank you, Erin. So, it's worth mentioning a couple of things. In China, as you know, Q4 of 2022, as well as Q1 of 2023, we really didn't have a whole lot of business. First, it was COVID and then VBP, and then we had, for lack of a better word, we had this zoom boom that we saw in the U.S. in Q2 of 2023. In China, we have seen more of a stabilization in patient volume, and that's what we are counting on. That assumption that what we saw in Q3 and Q4 is carrying itself forward throughout at least the first couple of months of this year. Outside of that, what we are seeing is a stabilization of patient volume. We have a really good relationship with a large number of DSOs, and that's what they tell us. Spending per patient has been challenging for a lot of these DSOs in the past several months, and that's impacting high-end procedures. Adult orthodontic cases, full arch restorations, which cost between $25,000 to $30,000, can get postponed. So far, during the year, what we have seen is consistent with what we saw in Q4, not a radical change one way or another.

Yes. Thanks, guys. Good afternoon. I guess the first one will be the longer one. It sort of follows up a little bit where Elizabeth and Jeff were going. But in February ‘23, so at the Analyst Day right, 12 months ago, I think we all had about 21% EBITDA margins for 2024. And now we're all going to be about 500 basis points lower as of tomorrow morning. And I know dental has softened, but everyone's dealing with that. And I know you got VBP and IOS pricing, but again, everyone's dealing with that. It doesn't sound like the trajectory of the gross margin ramp has really changed, or at least I haven't picked up on that. And none of the other dental companies have 2024 EBITDA margins that are anywhere close to compressing like yours are being revised down to that magnitude. So what I'm just getting jammed up on, and maybe you can help, is what is this specific to in regards to Envista? Is it all about implants? Is it the consumables that are being worked down, arguably because the decremental seems so extreme, specific to Envista when a lot of those challenges are more dental industry? Thank you.

Yeah. Of course. I definitely understand where you're coming from, and This is a challenge that we are trying to make sure that we are thoughtful about this, and we put a guidance in place that considers the realities of what we see in price. We are well aware of where we started in 2021, 2022, where we have ended up in 2023. So I want to give take us back to Q4. Steven talked about where we ended up in Q4. Those dynamics that you talked about, Jon, is exactly what we are faced with. The Spark is rapidly growing. It's growing and becoming such a bigger part of our equation. And if you go back, we're a year ahead of what we have considered where we not needed to be. That one year ahead has a significant impact on that mix equation, one. Two, I mentioned that repeatedly because it's worth mentioning it again. The Bracket & Wires business is not a business that is going rapidly, but we have been taking share. And the reason we have been taking share is that one-third of our business is sitting outside developed markets. This business is growing high single-digit, double-digit with high margins. That is not in the picture. It wasn't in the picture. It is not coming back as rapidly as we expect. Not only that, we're facing the VBP in China, which is really uncertain when it's going to happen. We are assuming the second half of this year. We want to be thoughtful again, not to be surprised. The volume that is impacting us on the high margin and areas like Russia and China is really radically changing that mix. The North America Nobel, we know we're going to turn this around. There’s no question in my mind because we know exactly where the problem and challenges are, but it's going to take some time. We have to layer some investment in order to get it to that market growth over time. You combine all of that; you put in place to say, I'm not going to make any assumptions on macro. The realities are what the realities are. If it changes, absolutely. We'd be the first one to come back and communicate that. But what we see today, what we saw in the past several months is the realities that we are dealing with, and we wanted to make sure that we are thoughtful about this. We put a guidance in place that we can deliver on; we put the right set of measures for growth and margin in place for delivery on what we promised.

Okay. That's very helpful. And maybe just a quicker follow-up. Stephen, this one might be for you, but just a lot of moving parts with the 4Q GM compressing notably, so if we say EBITDA margins are down 160 basis points year-over-year going from the 18.1 to the midpoint of next year. Any way to think about that, just like sort of the breakdown between GM and OpEx? Because obviously, you're still going to be sort of investing in the business, so any color between those would be helpful. Thank you.

Yes. So I think you can assume given where our guidance is, I think you can assume that our gross margins for the year, year-over-year will be down a little bit. That would be our expectation. Obviously, Q4 with margin and gross margins were quite a bit lower. That's a little bit more related to some specific issues that we had in Q4. I think for the year, it's a better comparison for the full year with margins down a little bit due to mix.

Hi, good afternoon. Thanks for taking the questions. I guess, first, just when we think about the margin progression over the year. You talked about seeing improvement through the year, and by Q4, I guess if you could help us think about the magnitude or range that we should think about where the company is targeting to end the year relative to where you're starting.

Yes. Thank you. Thanks, Nate. So let's just work through that a little bit and see if we can build a kind of a bridge in here. So every quarter, the Spark margin has improved every quarter. It is coming up every quarter, and we expect that trend to continue. As it ramps up, we've doubled the business over three years. Our goal is to get it to the fleet average. So for that to take place, we need to see this progression every quarter. And the other part of that equation is Nobel. Nobel is one of our most profitable businesses. We expect that to get to market proxies by the end of the year. So if you start where we were for the whole year in Q4 and start making progress every quarter, we will see this margin progression throughout the year. We think Q1 is going to be nominally better than Q4, and we expect as we go through the year, we want to see that progression every quarter. We see better performance on margin until we get to end of Q4. And that's what we put that guidance in place to take a look at. It's a range that we can manage with the opportunity if the macro improves and we respond to it as necessary.

Okay, great. And if I could just ask a quick follow-up. I wanted to just get a bit more details on your outlook for China. You had good performance in the quarter. I kind of understand it was against an easier comp. It sounds like you have one more quarter like that in Q1 of the year. But I guess beyond that, could you maybe just talk about how you feel about the demand environment in China overall and what type of growth you'd expect as the comparison is normalized? And I just wanted to also clarify; I think you said you may be expecting a VBP related to Wires & Brackets in the second half of the year. I just wanted to make sure I caught that right.

Of course, sir. So what we saw in Q4, China sales increased by almost 15%. And that's as you mentioned, that's a good indication that cost played a really important role in it. But if I take a look at the entire year, China was flat. Normally, about 10% of our business has been going double-digit for years. In 2024, what we see in here, Q1, because of easier comp, we expect a strong growth. As we go through Q2 to Q4, we're going to have a more difficult comp in here. VBP of implant comes into place, so we know exactly what that looks like, but it's more of a moderate thing. Our assumption is that the ortho VBP is going to be in place in the second half, and that's how we have planned for. If it doesn't happen, then we will have a different model to discuss. We expect some volatility in China, and the reason for it is purely because of consumer spending and sentiment. What we hear from our team, what you hear, I'm sure, about the housing crisis, slower growth, and government intervention in some of the areas, we are considering all of that to be an issue and that we need to deal with. But we have not taken our eyes off China. We think China is going to be a growth driver for Envista. It's under-penetrated. We've got a great reputation in brass. Our specialty business is really well positioned. We just need to deal with these short-term issues and find the new model, transform our business as we did with our implant, do that on ortho, get ourselves in a better place on equipment and consumables, and we expect this to stabilize as we go forward. The patient demand in China, based on the latest information that we have, seems to be resilient as it stabilizes. We're not getting any major feedback that we are seeing a major change, as you can imagine. February 9, Chinese New Year 2016; we're going to have a little bit of a breaking year. Our hope is after they come back, we're going to see that momentum continue.

And I'll now turn the call back to our speakers for any closing comments.

Thank you very much for your time with us today. We really appreciate it. We look forward to delivering our 2024 key priorities, and we'll talk to you next quarter. Thank you very much.

This does conclude today's program. Thank you for your participation, and you may now disconnect.