Envista Holdings Corporation (NVST) Earnings Call Transcript & Summary

Good morning. This is Jason Bednar. And for our next fireside chat for our dental day, I'm pleased to have with me Envista President and CEO, Amir Aghdaei; and CFO, Howard Yu; and also Stephen Keller with Investor Relations. Gentlemen, welcome, and thanks for joining us today.

Thanks, Jason, for having us.

All right. So we've got about 45 minutes here for our discussion. For those tuning in, there is no audio Q&A. So if you have questions, you can type them in at the box at the bottom of your screen or you can e-mail them directly to me at [email protected] and I'll ask the team here on your behalf. So with that, why don't we just dive right in. I wanted to start here just with the journey your company has been on, Amir. It's really since being public and spinning out from Danaher, it seems like the world has been throwing you curveball after curveball as a public company. But you've guided the company through each of these challenges. And the Envista today is in quite a different spot than it was just 2.5 years ago. Maybe start by just talking about the journey the company has been on as a public company, and the overall strategy you set out to employ when you spun out of Danaher.

Yes. Thank you, Jason. Thanks for having us. As you said, it has been an incredible journey in the past 10 quarters. September 18, 2019, is when we separated from Danaher. At that point, our hypothesis was that being separate would give us an opportunity to build a company that is growing faster, has better margin and has the opportunity to put capital to use in order to be able to make decision a lot fast. Danaher over a 10-year time period created a platform by acquiring 28 companies. But inside that large company, we didn't have as much room to maneuver and make a decision as fast as we wanted it to. Obviously, becoming a publicly traded company had some challenges at the beginning, and then we had to deal with COVID. But there was a well-orchestrated strategy even before the IPO. So we had set that up, that, that's what we wanted to do. And over the past 10 quarters, we have been able to execute that. Let me walk you through that. The first part of that strategy was about realignment of our portfolio. We had a combination of 50% of equipment and consumable and 50% of our specialty and technology direct sales force in there. Through a series of moves, of course, about 5% of our business, we just proactively decided that this is not a business that we want to be in, we just proactively exited that part of the business that included Pelton & Crane and some of our businesses in Brazil and other parts of the world. And then a divestiture of our treatment unit and instrument out of our German operation with Planmeca acquiring that, gave us an opportunity to really shift the portfolio to more of a 60-40, 60% direct, 60% technology, specialty 40% indirect and equipment and consumable. In that process also we ended up having almost 85% of our business to be consumable per se, even the equipment that we have, less than $10,000, people use it on a day-to-day basis. That was a major effort on our part that required a significant remodeling footprint, change of resources, building a new factory, doing all of that in a pretty short period of time in the middle of COVID. So portfolio management, top of the priority. While we were doing that, we decided -- we had decided that regardless of what happens, we're not going to back off our organic growth opportunities. We had started with a clear alignment back in 2018 in Australia and New Zealand. In 2019, we introduced it in the U.S., and we continued to make investment -- capital equipment, factories, hiring people, putting resources on the ground -- and we achieved the target that we had set for ourselves almost a year earlier. So by November of 2021, we reached $100 million run rate. We had our 100,000th case done and we just continued to fuel that fire and just put resources and capabilities and innovation ramp. Spark wasn't the only area that we had made a significant commitment to; premium implant business as well as some of our consumable and imaging. So this organic growth, fueled by innovation and commercial execution, really got us from in the low single digit, maybe even flat, to a mid-single digit growth. And all the changes that we did and that portfolio management plus restructuring, a whole lot of EPS at work around continuous improvement allowed us to get over 400 basis of margin improvement in a 2-year time period. Last but not least, in a 3-year -- we were able to create, to build over $1 billion free cash flow. And combination of a divestiture plus acquisition that is at work really set us up for a far better performance as we go forward. We're hoping to finish the Carestream IOS sometime in Q2. That adds another element to our portfolio. So going back, say, what did we want to do? We wanted to build a business that it is growing and we have taken that first step mid-single-digit -- mid-single-digit plus, and we're going to continue to add to it. We want to build a business that has better margin. Howard and I had made a commitment to a 50 to 75 basis points of a margin improvement year-over-year. First 2 years, we have been able to accomplish that and more, and we're just going to continue to do that. And we wanted to use M&A and our capital structure as another lever to build a better company. Looking back, I feel really good about what we have been able to accomplish in the past 2.5 years. And Jason, to be honest, we're at the beginning of this transformation, and we have a really good plan for the next 5 years, which we would be talking about this Friday, during our first Investor Day.

Great. Yes, there's a lot there that I probably want to come back to here, but great overview. And I think there's a lot of topical things here that we can touch on. And things that have developed here just in the last several weeks and been very obvious elements in the headlines. A lot of investors here today have questions about kind of what's transpired for your business in Russia and Ukraine. So I guess maybe we'll start there. You've been very upfront in saying this is about a $100 million business for you, about 4% of sales. So that's been very helpful. Maybe talk about, are you still operating in that market? I mean what is your -- the situation look like for Envista in Russia? And how are you managing your local resources there, things like your employees, your distributors, the facilities you have there? Anything there would be helpful.

Yes. Happy to talk about it. Maybe a little bit of background is helpful as well. When I was in Danaher, I was Danaher Russia President during the 2013, '14 and '15, during the Crimea invasion. So plenty of experience in what is happening on the ground, and we were able to manage that situation pretty nicely for Danaher as a whole, not only the dental, I was representing Danaher at the time. So the way we look at that, and I'll come back to the actual financial in a second. There are 3 elements in here that we should be talking about and considering. One, we are doing everything possible to help refugees through a variety of different form or shape. We have what we call Envista Smile project. It's a foundation nonprofit, and we have been matching every dollar that our employees and others donate, that we match that and we give it to the refugee support resources and try to do our part. We have given plenty of room and opportunity to our Eastern European sales organization and resources to take a day off and help with the refugees, specifically in Prague we have a really large operation. So we have been doing that as well. We have a small number of people in Ukraine, and we have offered passage for them. We have a company on the ground ready to lift them and take them out of Ukraine at any point in time if they choose to do so. And we have done one, and we are ready to do additional work as needed. At the same time, as you said, we have about $100 million business in Russia and close to about 300 people on the ground. We are a med tech company. Our purpose is improving the quality of life of people worldwide, regardless of where they are. And that vision does not change. We're an American-based company that follows American standard of doing business in various parts of the world. As long as that process continues, we're going to continue doing business in Russia. However, that has tremendous amount of challenges. We have had challenges getting products into Russia. Even though the demand is robust, the logistic, the transportation has become more and more challenging. So we are able to sell what we have, but getting product into Russia has become a really difficult task for us in the past 3, 4 days -- I'm sorry, 2, 3 weeks. If you take a look at that $100 million that we talked about, we think that business is going to have challenges for the rest of the year. That's not a short-term limited issue. This is going to be with us for quite some time. As it happens in Crimea, we were able to adjust and adapt every month, every quarter to the realities by managing currency, by managing import, by working with the local dentists and team. And we are prepared to do that as we go forward. But I don't think this would go away any time in Q2 or Q3. This is a challenge that we're going to be dealing with, if not only in 2022, but in a much longer period. So -- and we are prepared to do that as we go forward.

Yes. And the Crimea context is really helpful, and your experience running that back in '13 through '15. Can you help us with what you saw during that time? And I understand this is a little bit of a different situation than then. But how long did it take to get back to maybe 2013 levels? I feel like I recall it was maybe a 2- or 3-year process before it really got back. Is that right?

Yes, exactly. By year -- let's say, 2 years after that, after 2014, after invasion, we were back on business and we were growing as we had done before. But a few fundamental things took place. One, the moment sanctions started taking place, currency became a major issue. So, we had stopped basically selling product in local currency because it was daily, every day you have a different valuation. So we pegged our local product to euro and the U.S., depend on what product. And we have done that already. We did that immediately after Ukraine invasion. So it took us a little bit of time back in 2013, '14. This time, we were on it pretty quickly. The second part that we did, Jason, was that we stopped black market. What that means is people are hoarding a whole lot of products, bringing it to various sources and then creating a secondary market. So, we made sure that we don't allow that to take place. It's unfair, it's unethical and it has ramification. So, we have been very conscientious on what is in inventory, what is in the hands of our distributor, and customer and not letting that to take place, manage that very quickly. We also work with -- there is an American representative of various companies in Russia back then that we became part of and had conversation, share best practices, what is the best way to go forward, learning from others what they do. That took place pretty quickly, and we were able to share best practices, learning from each other. And process is in place as we speak. And at the same time, we put the time right, as I said, I was on the ground for a good period of time, a lot of supported structure on our own employees -- this is not -- this is fact, Jason. It's not bragging. Our retention during that time, morale in the organization significantly improved because of the level of support that they got from management, from people behind it. Attrition went down. We had better engagement score and through a whole lot of training, development, communication that we used to do continuously. And that process is something that we are doing as we speak. I just talked to our Russia team this morning, trying to figure out what is going on in the ground, make sure that they know we have -- we are here to help them and support them. Those are a few things that we learned back then and we have put it to work very quickly, thinking [ out ] and say yes, I think you got it.

And maybe one more on this topic. Amir, you said very difficult to move product in and around Russia. And I've heard that from a lot of other medtech companies, a very similar comment. Can you maybe give a little bit more color? I mean, is it -- are you able to get product in and it's just more expensive? Is it literally just unable to get product -- predict on when you're going to get product in the hands of the customers that need to get it? Just maybe a little more color there would be really helpful for everyone.

Yes. Maybe Jason I'll step in here as well and just say that, yes, it's difficult getting product. Just organizing logistics and distribution and transportation into the respective country right now is very difficult. And so we're looking at different routes, different countries by way of access and it's just becoming progressively more difficult. And so that's why we're having challenges. As Amir indicated, I mean, we had put some inventory in Russia initially. And so working through that, and we're continuing to do business there as it relates to that, but getting more product into Russia right now is proving pretty difficult.

Okay. All right. That's helpful. And Howard, while I have you, just is there anything that investors should be contemplating with respect to the margin impact from this -- from the situation having probably a material reduction in revenue in Russia? I mean, is there a way to quantify or have everyone think about like decremental margins or and/or the higher costs associated with getting product in the hands of the people that need it?

Yes. I think maybe, Jason, the way that our Russia business has held up, it is more on the specialty side. And as you know, the margins typically on our specialty side are a little bit higher than our fleet average. And so that's perhaps the way to think about it overall as it relates to the impact. I mean as it relates to logistics and distribution, we continue to look at that. The best I can say right now is it's very fluid, and we're monitoring it closely. Clearly, we want to make sure that we provide products as much as possible to anyone around the globe, including Russia. And so we'll continue to monitor and effectively look for [ needs ] to go ahead and get product and support our business there.

Okay. All right. Understood. Why don't we pivot over to China. They're in the midst of another round of lockdowns or rolling lockdowns. Also another market where Envista is really ahead of the pack in terms of infrastructure investments, resourcing R&D and sales reps and so on. I mean, I guess, how would you compare this latest round of lockdowns to what we've seen in the past for that specific market? And then maybe remind us of like the rebound trajectory we saw in that market previously when we've emerged from lockdowns.

So it's been 2 years since this trend, specifically starting in China, continues to stay in China, challenges that we have been dealing with. This zero COVID policy really has had significant impact in ability -- people's ability to actually do basic things. Monday morning in Shanghai, there was a complete lockdown. They did over the weekend, they did a wide testing across the board, and it didn't meet the requirements. So they just completely shut it down until April 1. Buses, taxis, subway, you're not allowed even to come out. The only businesses that they're open are the one that they are COVID related and they have government stamp of approval. We have a large operation in Pudong. We have a large warehouse that is sitting in Pudong. And we're not able to ship out of that warehouse. And the criteria for opening is 4 days in a row, employees need to get tested and they need to pass the test and they shouldn't be in contact with anybody who is COVID positive. So very challenging. Upon saying that, we have seen this before. We have been dealing with it for 2 years. It's ups and downs is what the reality on the ground look like. And the phenomenon that we've seen in China is a temporary. It's not a long-term issue. We're confident in our ability to execute our plan in Russia. We have factories, 2 factories in China. One of those factories actually ship products outside China. And so we have a little bit of a challenge in here to deal with, but we're not deterred. We know that within 5 days, 7 days, 10 days from now we are back in the business. And this -- we are prepared as these sort of issues pop up in different places. I don't think this issue is going to go away in 2022. I'm hoping that somehow by 2023 -- you think about it, 1.3 billion people, they've got to get vaccinated. Most people in various parts of the world are now thinking about shot #4. That's not what is happening on the ground in China. So we are aware of it. We're dealing with it. It has short-term impact that we're dealing with it real time. But we don't think that Russia and China are the same. They are very different phenomena. China is a temporary. We'll deal with it as we go forward. Russia is a long-term phenomenon that we need to adjust our views of what is happening in Russia over time, at least in 2022, not maybe even longer.

Okay. Okay, that's helpful. And maybe building on some of the supply chain and production elements that you're talking about there, Amir. I guess what -- Envista has done a really good job so far of avoiding a lot of -- well, from at least my perspective, avoiding a lot of the supply chain hiccups and challenges that have impacted other parts of the dental industry. So is this -- chalk this up to better working capital management? You just -- you have better buffer levels of inventory? You've got a diverse manufacturing and distribution base? And what all is it that's allowed you to kind of to escape some of those challenges and operate in a very, I think, enviable fashion through all these challenges that others have been running into?

Jason, I want to take us back to our heritage. What is Danaher known for? Continuous improvement. That's the heritage that we brought with us to Envista. All of us. Howard, myself, Stephen and the rest of the management team, we are a practitioner of that continuous improvement culture, EBS. And it shows itself in all the things that you touched on. Lean in manufacture, better inventory management, supply chain management, distribution model, currency management, working capital. When you combine all of that together, that's when you see that we are able to better execute given the tough times going forward. During -- and I say that from the experience in 2008 challenges, Danaher came back a lot stronger and were able to do a lot more deals during that time because the cash management, the supply chain management, the [ corporate situation ], all stayed intact. Nothing really changed, it's continued to [ operate ]. We see ourselves as a student of that methodology. We see ourselves getting up every morning, trying to improve what we do every day, be it account management, be it supply chain management, be it distribution. And every day, we have that mindset across the organization. This is not only at the management level. We have about 200 people that they are getting together once every month talking about these set of issues. We train everybody on fundamentals of EBS. It is one of our core principles. We rank and promote people based on what they do on this continuous improvement model. So it's in our DNA. It's in our culture, and that shows itself in some of the challenges that you see today. And I think what differentiates us is our ability to execute during difficult times. What has -- what is different now about this company, that we are setting ourselves to be strategically differentiated as well. Strategically differentiated with a track record of execution. You combine these 2 together, you will see why we're so excited about the future of Envista.

All right. Got it. I did have -- just on China, but a little bit of a different topic, I had a question come in from the investor group here. Just, I guess, kind of curious to what extent you have exposure or you've been able to comment on value-based purchasing initiatives that are taking place in China. And I think specifically with respect to your implant business?

Yes. So Jason, the Chinese government, both at a national level and even at local levels, have deployed this value-based procurement. And so in different areas, right? So we anticipate here sometime in 2022, that, that will be adopted likely into our implant business as well. Important to note here that the majority -- so this will be specific to the public sector. And so -- and as you may recall, we talk about our business in China in large part by public and by private sector. And we've been focused much more on the private sector over the last several years. So that's true in our implant certainly, also as it relates to our ortho. And so -- and remember, China is much more paid -- individual or patient pay. And so another thing to keep in mind there. We think that value-based procurement is going to become a reality here in 2022. We're looking at our strategy as it relates to what products that we offer there and what would be covered in that, let's call it, RFP, the government RFP. And we'll be thoughtful about how we navigate it.

Are you able to break out -- I don't know -- and forgive me if you've done it in the past, I don't have it top of mind, your mix or the split between public and private on your implant business in China?

I think we have a higher proportion on the private side, and that's been purposeful all along, with regards to just being a premium product in China in our largest representation there. And so we have a disproportionate share, I believe, of our private business, both in implants as well as the rest of our business.

Okay. All right. Got it. Maybe just one -- coming back to the supply chain one more real quick. Just Howard, oil has flown around here quite a bit since your call. How sensitive is your P&L to things like shifts in oil, shipping costs? And then what measures are you able to take in terms of offsetting some of those in order to stick to kind of your bigger picture of margin commitments?

Yes. So I mean inflation broadly, I think oil specifically, but certainly inflation broadly is impacting everyone. We're not immune from that, no doubt. In an inflationary environment, I mean, I think that the first thing that we turn to is looking at our productivity gains and seeing what we can get internally. And then certainly, we work with our suppliers as well, to defer or extend relationships and ensure that we hold off inflation as much as possible. And then we also, as you've heard and read, increased prices appropriately. And so we don't do something that's just across the board. What we look at is to provide each of our opcos with a reasonable amount of latitude so that they can go ahead and manage effectively both the growth as well as the profitability. And so that works. And as it relates to specific around petroleum, we have also deployed surcharges as well, as necessary. And so trying to make up for some of that -- some of the inflationary factors in the form of surcharges. And so we take every one of these measures to countermeasure the impact of inflation. I think the way we think of things just broadly in terms of pricing, in terms of growth is, long term it has been and continues to be our view that innovation helps us win the day. And so we continue to innovate, making sure that products that command higher value, command greater loyalty as it relates to the customer base. And that's how we think of things.

Have you implemented any specific fuel surcharges just here in the last month or 2 in response to what oil has done?

We have, we have. And so different businesses have deployed additional surcharges as it relates to shipping and freight and things of that nature as well. I mean, clearly, we've seen the impacts of that on the demand side for us. And so we look to go ahead and pass those back out as well. And so in the form of these surcharges.

Got it. All right. And actually had a another question come in from an investor just on the supply chain topic. But specifically related to imaging, are you having any trouble in terms of accessing ships for your digital imaging systems? Or even extend it beyond ships, I mean just any other broader supply chain challenges in terms of like accessing components or sourcing any products that would be needed for your systems. And I think the genesis here too is this is an issue that's popped up for some of your competitors. So I think everyone is just very sensitive right now as to whether you're seeing this as part of your business as well.

Yes. So Jason, I think this is a lot where the EBS mentality has come in and working with our procurement teams, our manufacturing teams and working with suppliers. And in this case, looking for multiple suppliers. And so we've been able to countermeasure that concern up to this point. I'm not going to say that that's going to be intact permanently. The reality is the situation continues to be fluid. We have not had supply shortages that we have not been able to manage through, to this date. But certainly, we continue to monitor that. The team is working tirelessly and making sure that we get the supply products and the raw materials that we need. You have seen, as you mentioned earlier, us being a little bit more lenient as it relates to working capital, inventory, having higher levels of raw materials to ensure that the effective lead times and the like that our customers are used to, we continue to manage within that. So those are actions that we've taken thus far.

All right. Great. Very helpful. Maybe why don't we just pivot for a moment for those on the line that are tuning in. The Envista team here is down in Austin preparing they're really going to be -- they're down there for their Investor Day and the event that they're hosting for doctors here this week. So Amir, Howard and Stephen as well, I'm sure are in kind of the heat of final prep for the event later this week. Is there a theme or a focus that investors should be considering? I know you're not going to be gracious enough to provide the LRP that we're all waiting for. But is there a theme that we should all be thinking about that you'll be discussing at the event?

Yes, Jason, happy to answer that. So we've been thinking about communicating 3 major factors and elements in here. Our journey the past 10 quarters, what have we been able to accomplish? What has been the driver? What are the things that you can count on to continue to be a part of this new company going forward? I want to talk a little bit about the dental market as a whole. What do we see in the next 5 years? What are the opportunities for innovation, for growth, shifts in the industry, and then last but not least, I want to talk about what our road map look like. I mentioned that we want to be -- we have started that journey to be strategically differentiated compared to others in the market, we want to describe that differentiation. How would that come to fore, organically and inorganic. Internally, we have an intention of building a strategically differentiated company that has a track record of execution. By doing that, our intention is to make dental care accessible to as many people as possible around the world. In order to do that, you've got to address some of the fundamental challenges around cost, around skills, around [ paying ], time to bill and so on and so forth. Our intention is to describe those challenges and to tell our investors, our customers, how well we are positioned in order to solve those as we go forward. We haven't had an Investor Day. We had a pre-IPO, Howard and myself, we spent a lot of time describing what Envista was during IPO. But since then, we haven't had a chance to tell our story, the story of Envista journey, the story of Envista's future. This gives us an opportunity to have that dialogue and the conversation. And we intend to paint a picture of what this company is going to look like in the next 5 years.

All right. Great. Great. I did have another and sorry to bounce around, right. But I had a pretty specific question just come in from an investor and relates to guidance, to the ability you're able to talk about it. But given the strong top line guidance, it feels like you gave yourselves room on margin expansion. So how much room do you have to hit that -- the margin targets that you laid out there in this shakier world that we're in right now? And then how would you position the current kind of macro updates that have been out there within that full year revenue commitment that you provided a couple of months ago?

Yes. So I guess I'd start, Jason, by saying that things have -- things are fluid. And so -- and even since the last time we provided the guidance, at our Q4 earnings, I think the world has changed a bit. So we're being thoughtful about that, thinking through that. As Amir described when you were talking about some of the situations in Russia, the Ukraine area as well as in China, I would say that those things weigh in. As we indicated earlier, the China situation is strictly timing, we think, at this point, knowing that we've gone through ebb and flows and lockdowns before, maybe not quite as severe as the one that's currently intact there. But that we believe fundamentally that, that's going to be timing. So product as certain provinces are shut down, when they open up, that demand comes back as well. And so we've seen that time and time again as it relates to China. Clearly, the Russia situation is a bit more longer term, mid- to long term as Amir described, and so that will have some impacts on our business overall. And so we will provide an update. We anticipate doing that with our earnings release in Q1 -- we're ramping up the quarter here as it relates to this week. And so we're monitoring closely, and we'll provide an update as we can in the next month or so.

All right. So Howard, and I don't mean to put you on the spot, but just I think the natural question is from what you said. Investors should not expect some kind of update this week at the Investor Day, the Investor Day is focused more bigger picture and longer term. Is that correct?

I think fundamentally, that's true. I mean that the Investor Day is focused in on longer term and the goals that we have as it relates to, let's call it, the next 5 years, and hearing from some of the opcos talking about what they're doing. And so the exciting work that they're doing on return that's going to help us sustain the long-term growth. As it relates to short term, we'll provide an update at the -- at our quarter earnings.

All right. Perfect. Makes sense. Why don't we go over to Carestream. I think we're maybe less than a quarter away, I think you mentioned it'll close sometime in 2Q. So we're right at the end of 1Q. So sometime in the next 3 months should have it closed. A few different questions that I have. But first, strategically, what does this mean for Envista, Amir?

Yes. So we have talked about this for quite some time that this was a serious gap in our portfolio. We're the largest imaging provider worldwide, with over 150,000 installed base, and we did not have intraoral scanner. So that's a gap on a stand-alone point solution that we have been working on, we have been partnering. We have been doing our own development. And then eventually, we decided that this is an incredible opportunity for us to get a product that it is one of the best in the market, and then we can really bring it into the family of our capabilities with 3,400 sales force and then try to kind of expand it. So filling the gap was the first and the most important part of that equation. The second part of it was the direction that we are going. We want to really create an integrated digital workflow. What that means is that you want to have simplification through the process so you can do things more productively, more predictably. Today, any dental office that you walk into, you're going to find a variety of different tools and solutions and a lot of people either take notes or use thumb drive or have iPad in 1 place and a lot of inefficiencies in the system. I want to go back to the EBS thing. One of the key thing that we look for is this what we call value stream mapping, waste in the system. And what the IOS does, including the software that integration brings to the table, take waste out of the system in a lot of effort that takes place that doesn't return that ROI that is expected. For example, I'll give you 1 example. 7% of all the resources in dental offices are spent getting invoices out, getting paid by insurance. 1 out of every 7 crown and bridge and other prosthetic that comes back from labs requires rework. In most places, when you look at the average DSOs in this country, out of every 3 or 4 diagnostics that they do, they only treat 1. And there are many factors in there, but the software, the IOS, that digital work flow plays a really important role. So we got a permanent solution, with the IOS. Hopefully, we get that closed in Q2. And then we're going to integrate it, integrate it to our ortho, to our endo, to our implant, to our prosthetic piece, end to end unified software. You just saw today, we announced our third FDA approved capabilities around this, for lack of a better word, assistant intelligence that would allow dentists to do what they do well with some capabilities that really didn't exist a few years ago. This is going to become a standard operating model in the next 3 to 5 years. You have -- you put all of that together and a strategically differentiated becomes real. We're going to digitize this industry, we're going to democratize this industry. And through that process, it gives us an opportunity to really personalize it, that it is that clinical file, that patient information become ubiquitous, it becomes available in the cloud in every 1 of the offices. That's the direction that we are going, and this is an important part of that equation, this acquisition.

Got it. Very helpful overview. I know one of the -- not just strategic but also financial merits of the deal is that Envista can do more with the scanner than what Carestream could do independently. And you referenced some of the things there in terms of integrating this into a very streamlined digital workflow and an efficient suite for the practice. So maybe that all makes a ton of sense, and I can absolutely see how this is going to play out in the product road map. But what does the time line look like as far as like, once you have this -- let's say, this deal closes at the end of June. I'm not saying it will, but just for time line, middle of this year closes, when does this all get integrated? And then how are like -- what are the maybe costs we should all be thinking about? Or are there a lot of incremental costs in terms of developing, and integrating this workflow that you have kind of out there is like the big prize?

Yes. I'll let Howard answer the cost piece, but let me tell you 3 things that as soon as these deals close. Commercial, we're already in the process of making sure that our current distribution as well as the existing distribution, the Carestream users as well as our direct sales force, have access reach to all of a sudden extend the reach through DSOs to various geographies, commercial. Operation, one would deploy resources in place to improve quality, delivery, margin. And we can do that fairly quickly, fairly fast, we can do in the second half of this year. And the last one is around innovation. The product has already -- it's a really good product. We spent a good deal of time to look at it, due diligence on it, but they also have a big road map for years to come. Our ability to re-execute that and then integrate it into our system, the DTX software and other capabilities. That's going to require a little bit more time. We think that's going to happen throughout 2022, '23, that we would be fully integrated. But the operation and commercial, we can get that going immediately, get it improved as quickly as we go. On the cost side...

Yes. So Jason, of course, we did our due diligence and looked under the hood to the extent that we could. But we'll know better as we close this business. Going into it, we know that we're going to have to make some investments, right? This is a carve-out. And so getting this OpCo standup ready, cost of integration, there's going to be certainly some of those onetime costs, [ TSAs ] and the like. And then as Amir has indicated, we really want to accelerate growth. And so to that extent, whether we need to shore up some more R&D resources, selling and marketing to make sure that we have adequate feet on the street and the channels to go ahead and sell this product, as well as working very closely with our partners and the like. That's going to be important. So clearly, there's going to be a step-up in investment associated with this. We'll know better as we kind of get closer and close this deal. But certainly, we anticipate we're going to go ahead and do everything it takes to make this business successful.

I was on mute there, sorry. So maybe looking beyond Carestream, that was helpful. You've been very clear that there are some other opportunities out there for you on the M&A side, mostly targeting the [ I mean the ] implant arena and that could take a number of forms that you've spoken to in the past. But I'd also -- it seems like this market is -- it's pretty competitive on the -- as far as like pursuing implant targets. There are a lot of players out there that I think are trying to do the exact same thing that Envista's doing in terms of targeting higher growth, higher-margin assets, specifically in implants or regional value implant providers. So I think it would just be great for everyone just here in the last couple of minutes. Hear what you're seeing out there in terms of the targets, the acquisition funnel or the M&A funnel that might be out there? And how do you get the right target without overpaying in this competitive market?

Happy to answer that. So when you think about implant, there is titanium screw or you can think about implant on tooth replacement. Titanium screw $4.5 billion, $5 billion market. That tooth replacement market, $11 billion from that's diagnostic planning and surgery, regen, prosthetic, the actual implant, robotics. So we are looking at that $11 billion market. First, talk about that a little bit. And our intention is to acquire organic development, integrate debt so people can place more implants, be it the full arch restoration or a single implant. Now in the premium side, which is half of that $4.5 billion, we're in a really good place with Nobel. We got a good market share, innovative, continue to have commercial execution, and we have been growing double digit in the past several quarters, and that's just gaining momentum as we go forward. Where we are lacking, we are under-indexed, is on the value side and in different geographies and the region and some of the prosthetic piece. Those are much smaller companies. You're not talking a couple of billion dollar companies, there are a lot of smaller companies that our scale, our capability can really add lot of value to it. So we have been really talking about this. This is my year 7 in dental. Acquisition, cultivation, market work is another standard method of EBS. We do that every month, we review them all the time and we cultivate and develop those relationships. So we feel confident that we've got a really good funnel of activities to go after. And our intention is to be thoughtful, rigorous, do our due diligence, but continue to add to that $11 billion mark as we go forward.

All right. So I think that's a great way to end it. So -- and we are actually out of time here. So Amir and Howard and Stephen, thank you all for joining us. Very insightful. And I'm looking forward to seeing you all in person here later this week. For those tuning in, the next fireside chat for our dental day begins in 15 minutes with LightForce. Thanks, everyone.

Thank you.

Thank you.