Envista Holdings Corp Q1 FY2026 Earnings Call

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 were provided for participants. 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 2025. 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. Orthodontics, 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 four 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 three core priorities of growth, operations and people. Starting with growth, we delivered strong broad-based performance across the portfolio. As mentioned, orthodontics, consumables, diagnostics and implants all delivered good growth. In terms of segment performance, Specialty Products & Technologies grew core revenue by more than 8%, while Equipment & 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 value-based procurement 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 seven points in Q1 with price accounting for the remaining two-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 in 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 two 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 three 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 one-quarter 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 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 caries, bone loss and root canals. Full mouth AI detection and intelligent layout create a digital twin of a patient's anatomy in less than five 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. Processing this vast data set, DEXIS' AI-powered digital ecosystem is 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 osseointegration 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 foreign exchange 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 two 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 four 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 four 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 three 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-over-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 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 one-third 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.

The first question comes from Elizabeth with Evercore ISI.

Congrats on another good quarter. This really helps extend some of the momentum that you built from 2025. Maybe from a high level first, what is it that is clicking nicely for Envista? And then what areas do you 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 two 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 three principal areas, those being growth, operations and people with the thought that they would help bring 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 six 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 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. The combination of the two 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 healthy and helpful. In terms of 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 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 2024. Then 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 2025 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. 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. Thanks for the question.

That is helpful. As a follow-up, you pointed to the four extra days that changed the back half of the year. Can you talk about whether those macro drivers are causing you to not raise guidance at this point for the outperformance? Is it just too early in the year? I know you didn't raise the guide in Q1 last year either. I'm trying to calibrate how things are faring versus when you originally set the guide.

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. 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 a pretty good track record now of consistent performance. So all of these give us confidence in continued performance moving forward. But 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. Net-net, 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 one quick clarification. You mentioned the implant performance in China in terms of value-based procurement. Can you remind us what's embedded in guidance on VBP timing?

I'll let Eric get in on this one.

So Michael, when we talked in the fourth quarter call, at that point in time, we were looking at orthodontics and implants and effectively a value-based procurement 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. We have modestly updated information. But at this point in time, our best estimate and what's included in guidance is both of those VBPs starting the process in Q2 or Q3. And then what we always remind our sell-side analysts and investors 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 destocking once the process begins, which will mean we'll have a slight compression of revenues in the short term. Then we'll see some benefits as our businesses, particularly our 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.

That's helpful, Eric. If I could stay on implants: encouraging to see the mid-single-digit growth in the quarter ex China. Can you give us a sense of 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?

Big picture, we grew low single digits in core growth in implants in the first quarter. Very different trend as we look at China versus developed markets. We were down strong double digits in China, which reflects the start of VBP-related channel adjustments even though nothing was formally confirmed. Within that positive low single-digit growth, we had strong mid-single-digit to even high single-digit growth in developed markets, roughly equal in Europe and the United States. Paul mentioned the 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 significantly contributing to our implants growth overall. Most of the growth has been from the commercial investments we've put in, the existing portfolio, investments into clinical and having a strong comprehensive implants portfolio. We had a very strong growing regenerative biomaterials business this quarter, good growth in our prosthetics Procera business, and continued strength in the digital space, albeit a smaller part of the implants business. There was good performance coming from some early new product launches, but more to come there.

Your next question comes from Jeff with Baird.

I love the first-name basis. We're all such good friends. Just wanted to ask a follow-up on the implants business. Eric, would we think most of the impact of the VBP preparation 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 two and then maybe get some tailwinds a quarter or two after that? How should we think about that? And what are you hearing on ortho VBP? That's been harder to get updates on the last quarter or two.

To your first question, Jeff, the significant decrease that I mentioned, a double-digit decrease in Q1, we expect that to be the larger percent 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 the second quarter and then again as plans get updated or remain the same, we expect to get more into the growth part of that, importantly with prices reduced and volume up. On the ortho side, we don't have much better information. Right now, Q3 is our planning assumption. That's how we went into the year. But as Paul talked about in the Q4 call, be mindful that implants and ortho are among dozens of med tech businesses being considered in the next couple of quarters, and that creates some complexity. But right now, our planning assumption remains third quarter and we'll update as we get clarity.

Fair enough. A follow-up on pricing. You guys have taken good price. We've been surprised at some price inelasticity, especially on the Wires & Brackets side. One of your larger distribution peers mentioned possible additional price increases from manufacturers starting in Q2. How are you thinking about the next round of potential price increases? Was last year a one-and-done? Do you feel there might be still some room? And it looks like you have a new calculation for pricing in your 10-Q. Can you help us understand what pricing under the old calculation might have looked like versus now so we can model apples-to-apples?

Jeff, I'll take the pricing strategy part, and I'll let Eric weigh in on the disclosure. Our pricing approach has been consistent since Eric and I joined. We've always thought of dental as less price elastic than the broader market, which has contributed to dental generally outgrowing the broader market in expansion and contraction. During COVID, many categories lost sight of the importance of pricing. When Eric and I joined, we refocused Envista on pricing. It has both a strategic and an executional element. Strategically, our focus 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. That means we aim to limit our price increases below procedure price increases so customers can continue to do well while we capture a portion of the value. Executionally, you must make price visible: put it on the P&L, include it in objectives and show it on dashboards. We have capabilities to turn those targets into delivery through the Envista Business System and have focused kaizens on pricing execution. Moving forward, that algorithm remains the same. We got extra price last year because exogenous effects required it and customers understood that. We'll monitor inflation and, if needed, take additional pricing action. Eric, do you want to talk about the 10-Q methodology change?

Thanks, Jeff. We disclosed in our 10-Q that our price methodology changed slightly. We now calculate price by looking at current quarter price versus prior year full year. The headline is this reduces volatility. We calculate price internally by SKU and customer, and by using a full-year base we get more stability. If we have regular predictable cycles of price increases—traditionally around the first quarter—there's no impact relative to the previous methodology. If we have significant off-cycle price changes, you may see some effect. This quarter, the difference between the prior method and current was immaterial. The change was intended to get a better, more stable price growth metric given our SKU- and customer-level calculation.

Your next question comes from Michael with Jefferies.

You briefly mentioned headwinds around the Middle East tension. What are you seeing in terms of input costs, freight costs, and inflation from higher oil prices? What is baked into the guide, if anything? If input costs increase, do you have methods to offset those?

Thanks, Michael. At the highest level, the Middle East is less than 1% of our total revenues. Operationally, our direct exposure in the region is nominal. So we're focused on second- and third-order impacts: what inflation may look like. We learned a lot through last year's tariff landscape—task forces, scenario planning, and mobilized teams—so while we wouldn't wish that on any company, we feel stronger having gone through it. We have task forces in place since the beginning of the conflict focused on two areas: fuel costs and logistics, and the broader impact on chemical feedstocks such as polypropylene. Our supply chain overall is functioning well. The majority of our supply chain moves through ground transportation. Only about 5% of our logistics movement is ocean and air, which means direct disruption is minimal. We estimate a mid-single-digit million dollar type of risk from fuel increases and related surcharges and are working on mitigations. We don't consider these significant to our guidance and we will mitigate. For broader feedstock risk, we have it well understood and mitigations in place—shifting supply sources, managing internal cost structure and, if needed, using pricing levers. At this point, we haven't changed guidance but have contingency plans ready unless something goes significantly off trend.

Great. One other on the Versah acquisition: you mentioned the system can be used with a broad array of implant systems. From a strategic standpoint, do you plan to close that off and make it usable only with Envista implants, or will you keep it open?

No, we'll keep it open. That versatility is a key attribute for clinicians, and we start from what's best for the clinician. So it will remain compatible with multiple implant systems.

Your next question comes from Jon with Stifel.

Paul, you reviewed some new products recently introduced. The amount you plowed back into growth investments via the bridge looked step-function higher than in prior quarters. Maybe talk about where the company is with the next wave of innovation. Timeline for some of those initiatives would be helpful.

Thanks for the question, Jon. At a high level, the model is: get the top line growing, strong gross margins generate more gross margin dollars than you need to reinvest to fund accretive new product development and commercial programs, and you'll still have incremental drop to the bottom line as margins expand. That's a virtuous cycle. If you look back, you see that trend over the last eight quarters. We did put more money into new product development and front-end commercialization in Q1 because we had more money to invest and we think those investments will generate continued strong growth. We'll continue to pace investment to where we see the best returns, and we expect to discuss the outcomes of those investments in future quarters.

Fair enough. A second question: your Equipment & Consumables performance has outperformed industry peers. How should we think about durability of that outperformance given you will lap some strong comps? Any guidance on how to model that going forward?

Starting with consumables: over the past several quarters we've clearly outgrown the consumables market. We benefit from a couple of things. First, our Metrex infection prevention business has captured a lot of share and introduced high-impact new products. For example, a hydrogen peroxide surface disinfectant that's unique in the market has resonated with customers. Second, consumables tend to be less price elastic because they're a small portion of total clinical spend, so price increases are often absorbed easily by customers. In diagnostics, we've also outgrown the market. That is driven by three things: a strong installed base and brand of DEXIS, which gives us share as the market turns positive; very strong new product generation—big launches including the CBCT platform and the iOS launch with Imprevo; and third, software and AI are differentiating in diagnostics. This used to be principally a hardware game, but differentiated software and AI-enabled solutions are important, and we have the largest installed base to leverage those digital add-ons. Those factors explain why we're outgrowing the market in E&C.

Your next question comes from Erin with Morgan Stanley.

On capital deployment: you announced the $300 million buyback authorization. Is any of that embedded in guidance today that would offer incremental upside to EPS? How are you weighing M&A versus buybacks? You had a small tuck-in. Are there a lot of attractive small acquisitions out there? What is the acquisition pipeline like?

Thanks, Erin. Our capital deployment priorities: highest priority is organic growth. We still see the highest risk-adjusted return on marginal dollars in good organic programs. Second priority is accretive M&A. We have done three small deals in the last year or so, all accretive on purchase multiple and financial contribution. Third is returning surplus cash to shareholders, which is why we increased the repurchase authorization. On acquisitions, we have an experienced M&A team and continue to see a steady stream of opportunities across the global dental space. We remain disciplined and focused on strategically aligned targets that offer accretive economics. The three recent deals fit that approach: Versah for clinical differentiation in implants; another small deal that increases our challenger penetration in implants; and a deal in Turkey to strengthen presence in a targeted international market. We view acquisitions as a supplementary lever to organic growth.

On Spark in orthodontics: can you talk about strategy, current status, Brackets & Wires and Spark go-to-market evolution, and any competitive landscape changes?

Orthodontics remains highly underpenetrated; roughly five percent of clinically appropriate cases get treated in any given year. Approximately three-quarters of cases are treated with Brackets & Wires and about one-quarter with clear aligners; that mix has been relatively stable. Our competitive advantage is that we're the only scaled player with a sizable offering in both. We're clearly the market leader in traditional fixed orthodontics and a strong number two in clear aligners. Orthodontists value that we've been in the market for decades and that we give them tools rather than telling them how to treat. That approach helps us consistently outgrow the market and capture share.

Your next question comes from Glen with Barclays.

Eric, digging into the core growth number of 9.5%: looking back to last year you raised prices due to tariffs. I'm trying to parse how meaningful that was on a year-over-year basis and how big a headwind it will be in Q3 and ultimately in Q4 with both the tariff anniversary and fewer selling days. How should we think about the cadence for Q2, Q3 and Q4?

If you look at the Q1 bridge we provided: 9.5% reported core growth; take out the billing days and the Spark deferral benefit and our normalized growth was about 4%. Similarly, last year our published core growth normalized to about 4% as well. Think about the business around a normalized 4% core growth baseline. For cadence, our guidance range of 2% to 4% for the year is a helpful frame for Q2 and Q3. The 4.5% impact from billing days in Q1 should be thought of as something you remove from Q4, meaning Q4 could be low to mid-single-digit negative year-over-year while the underlying business performs well. Regarding price, prices put in place last year will continue to be reflected as we go through Q2. Pricing will return to a more normal range excluding China.

I appreciate that. You suggested Q2 and Q3 should be in the published range, but if you're anniversarying mid-year price increases, wouldn't Q3 theoretically grow slower than Q2, all else equal?

All else equal, yes. But we have a portfolio of businesses and various dynamics. Think of being near the midpoint of our guidance range for Q2 and Q3 as the right instructive view.

Your next question comes from Jason with Piper Sandler.

Apologies for any background noise, I'm at the airport. On Spark: it's been a while since you updated where you stand with the percentage of Ormco accounts using Spark. Any details on runway would be helpful.

You're testing my memory on that figure; I don't have it to hand. General takeaway: there's still quite a bit of runway. Many of our core Bracket & Wire users remain to be converted, especially in DSOs. Spark is now large enough that it's not limited to core Ormco users; it targets broader orthodontist audiences who don't already use our brackets. So plenty of room to run.

Totally appreciate that. Paul, a bigger picture follow-up: you've navigated the last couple years extremely well. For the go-forward, how do you continue to win with your pricing spread and innovation strategy, given secular headwinds like inflation and private label pressure? How do you wrap that together for Envista going forward?

That's what's great about dental: it's a global market where every person is a potential patient, so there's persistent excess demand. Our strategy is to take advantage of that rising tide by executing well to bring our performance in line with the portfolio's potential. Over time, if you take care of customers and colleagues, results follow. We will continue to focus on execution, differentiated innovation, and customer value to sustain growth and margin expansion.

Your next question comes from Daniel with Citi.

Focusing on EBITDA margin cadence for the remainder of the year: good result this quarter. How are you pacing growth investments given the Q4 fewer selling days headwind, and how are you thinking about realizing productivity benefits across manufacturing and G&A for the rest of the year?

Welcome to dental, Daniel. Regarding growth investment pacing: think about our Q1 bridge and the margin impact from growth investments; Q1 comps against a lower investment quarter last year, so the ramp isn't as significant going forward. For margin rate cadence, think Q2 and Q3 at roughly similar margin rates to Q1. Q4 has cyclicality where we could see slightly better margin rates that help us reach the midpoint of our 7% to 13% adjusted EBITDA growth range. On productivity, our playbook remains similar: drive factory and G&A productivity to create margin opportunities and fund sales, marketing and R&D. We'll cadence growth investments in line with how we plan to grow.

There are no further questions at this time. I'll move the call back to Paul Keel.

All right. 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. I'll briefly underline 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. Second, our performance is broad-based: all our major businesses and most geographies posted strong performance, with good contribution from volume, price and new products. Third, we continue to focus on executing our value creation plan and have demonstrated ongoing progress on growth, operations and people priorities. Fourth, today we announced an incremental $300 million share repurchase authorization and reaffirmed our 2026 full-year guidance. 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.