Envista Holdings Corporation (NVST) Earnings Call Transcript & Summary

All right. Good morning, everyone. Welcome to the Envista Summit, where we're hosting our first Investor Day as a public company. We're very, very excited to have you here. We're going to have a great day. We have a good program. Before we start, I do need to do the obligatory forward-looking statements. During this presentation, we will make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of risks and uncertainties as detailed in our SEC filings, and we do not assume any obligations to update any forward-looking statements made in this presentation. With that, just a quick overview of the agenda. We're going to start off with Amir's going to give you a little bit of an overview of Envista and our long-term strategy. We'll then have -- we'll then spend time on talking through orthodontic solutions, our implant-based tooth restoration business, our imaging and diagnostic solutions. Then we'll follow up with our long-term plan. And then ultimately, we'll do a Q&A at the end. After the Q&A, we will also do a tour, where we'll tour our Envista technology village. So we're looking -- really looking forward to a great day. Thank you very much for your time. And with that, I'm going to hand it over to Amir Aghdaei.

Thanks, Stephen. It was intention to select April Fools' Day to get you here. It's been 30 months since we formed the new company. Our intention is to give you a view of what has happened in the past 30 months as a publicly traded company and paint a picture of what the next 5 years is going to look like. Let me start by framing the day. This is an awesome industry. This is my year 7 in dental. The more I learn about it, the more excited I am about the possibilities, about possibilities of transforming this industry, about making a difference in people's lives and making practitioners, dentists a lot more productive in what they do and really give access, oral care access to masses. You will see that throughout the day through what we present that our primary focus is in improving people's quality of life. And the thing that we do would have an impact in that transition and transformation. We're a company coming from the Danaher heritage that has a proven track record of execution. We are operationally capable, strategically differentiated. And the past 2 years has been an indication of what we can accomplish together when we put our set to set our mind around it. Now is the time for us to tell you what we intend to do as we go forward. We have a significant opportunity. A lot of you've been with us since pre-IPO, during IPO, we talked, and we told you that we're going to build a company that it is growing faster, have higher margin. We have access to capital, so we can do a lot more M&A. Now we have an opportunity to really accelerate growth. Accelerating that growth means higher margin, means ability to really create value for patients, for doctors, for our employees and create value for our shareholders. That's the theme of today. You're going to hear that in a variety of form or shape. We're going to give you details around it. And hopefully, you would get a feel for the kind of company that we have built and we are about to build. Our intention is to build a legacy in here, to build a company that proves the test of time as we go forward. Most of you are familiar with who we are. About a $2.5 billion company, diverse in a variety of different geographies, with brands that have been around for over 100 years. We have close to about 14,000 employees. We have over 1,600 patents. We are headquartered in Southern California, in Brea, and we are in more than 140 different countries. We have over 3,400 salespeople. Over 60% of our business is now direct. Over 85% of what we sell is considered to be consumable. They're used on a day-to-day basis. We have shifted this portfolio significantly in the past 30 months. This company exists because of this culture that we are building. As I mentioned, we brought a lot of good heritage from Danaher, but we have adjusted that to these 5 pillars. The pillars stand for customer centricity. We're focused on serving the customer, giving them the best customer experience. We're focused on innovation that matters, not only product but business model, the services, what we build in order to make doctors more productive, the work that they do more predictable. We want to be a reflection of the communities that we deal with. We're building a diverse, inclusive environment that gives people opportunity to see their career in here, to be their authentic themselves. We have started that journey. We are making progress. A lot more to be done in that area. Continuous improvement is what is at our core. It's in our DNA. Whatever we have decided to do, we have done a decent job in getting it done. And there is a lot more to be done in that area around continuous improvement, leadership, accountability, empowerment. We have shifted our approach. So 200 of our leaders now have total control of what they do on a day-to-day basis. This set of principles allows us to empower people, to make decisions faster, to get things a lot quicker. And it is becoming a model and the way we recruit people, we develop people, we promote them as we go forward, this is what makes a difference. As a kind of company that is going to make a difference for years to come, these set of values, there's cultural differences. I consider this to be our report card. In 2019, we took a business that was flat, mid-single-digit EBITDA at about a 3x leverage and produced about $260 million cash. In 2021, we built a business that was close to about -- we forecasted it's going to be a low single digit, about 15% at the time of IPO. And we have about a 3x leverage. This is what we have accomplished. If you look at it in 2021 versus if you take the COVID piece out, we have now built a business that is mid-single digit, over 400 basis points of margin improvement. We made a commitment that we will do about 50 to 75 basis points of a margin improvement every year. In a 2-year time period, we moved the needle significantly. And we have been able to improve our cash position. We're financially strong. We have access to capital. We have the firepower that is needed for us to add M&A as another lever to make us as stronger as we go forward. Step one, we consider that as foundation building. We consider that starting point, a lot more to be done. But fundamental shifts that has taken to be in this business are not a onetime event. It is a change in the direction of this company as we go forward. Another way of looking at this transformation is over a 10-year time period, from 2004 to about 2015, we have bought 28 companies. Majority of that business had a flat to declining portfolio. We were losing share. We're in a mid-teens EBITDA. We had -- less than 50% of our business was direct, and we had started making this transformation over time. We started that. Howard, myself, in 2016, 2017, we started making a series of shifts and changes, spending money in R&D, consolidating our ops, expanding our presence in China, but we still had significant number of brands. We had commercial execution challenges. We hadn't done any M&A for almost 5 years. In a 2-year time period, we started shifting this business to be more direct, more customer intimate. We made a commitment that we're going to take about $100 million structural cost out. We were able to accomplish that by doing $125 million. These are the costs that is not going to come back. In reality, we took over $300 million cost out, but part of that was due to pandemic, shutdown and other elements. But $125 million is something that we were able to do and is sustained with that business. We've fundamentally shifted the margin profile of this business going forward. We transformed the portfolio. In 2020, proactively, we exited about 5% of the business. That business wasn't growing. It had negative impact on our margin. We decided that it didn't have competitive advantage. It didn't pull together the rest of our business. In 2021, we divested about $400 million of the business, really good business, but it didn't fit in to what we wanted to do strategically going forward. We really changed the dynamic of the business going forward. However, we continued to have some challenges. The challenges around pandemic, the challenge around not having an intraoral scanner as part of portfolio, not only as a stand-alone product but as part of the bundle that we can offer to really create a digital and digitally integrated workflow. And we were underinvested and underindexed in some of the key growth areas such as value implants, regens, prosthetics and some of the software and AI-related stuff. That brings us to where we are today. Mid-single-digit plus opportunity to continue, improve margin over 20%. Over 60% of our business is direct. This portfolio of a technology and specialty growing a lot faster, higher margin, changes are dynamic. You're going to see more and more direct, more and more customer intimate going forward. We've got to accelerate our implant business. Spark reached $100 million run rate a year ahead of the plan, but there is significant opportunity for us to make a difference. It's a combination of a treatment, puts us in a really competitive advantage. Bracket and wires, the own core legacy plus having a clear aligner that stands on its own gives us a competitive advantage, differentiates us in the market. Digital leadership is going to be a standard work within the next 3 to 5 years that every imaging product that you sell needs to have cloud AI capabilities. Otherwise, you basically are taking a picture that stands on its own without any story attached to it. We're making significant investment in this space, and you're going to see some of that today. And we have a 5- to 10-year horizon of create this integration to build a story from the time that you walk into a dentist's office to the time that you get complete treatment going forward. There are some challenges. What you're hearing in Ukraine and Russia, some zero-COVID policies in China. To us, these are specific events that we would deal with, does not deter us, does not change our trajectory. We have a long-term plan and may have an impact in a month or a quarter, but that has no impact in what we are building for decades to come. We also have this balance of growth versus margin. There is significant opportunity for us to continue to make investment in commercial execution and innovation. We're trying to balance that versus margin expansion. What you would see in the other years, we're going to build a business that not only is truly differentiated but financially performing a lot better than what the market norms are. We're going to paint that picture for you as we go forward. We have a simple recipe. That recipe talks about the continuous improvement, improving the cost structure. We're going to continue to reduce G&A through footprint consolidation, through continuous efficiency that we have become accustomed to, and we know how to do. We can continue to improve gross margin. That's what we are about. We're about lean. We're about Kaizen. We're about taking costs and wastes out of the system. Put that money back in growth, continuing to invest in R&D, commercial activities, sales and marketing, accelerate growth, accelerate margin. Take that financial outcome, that balance sheet, put it to work through our acquisition to build a business that has its domino effect, a strong EPS growth year-after-year for years to come. We now have the foundation built for us to be able to put this recipe to work, the pieces of portfolio working together and individually performing to make this model a reality for us as we go forward. We talk about $125 million cost takeout. I wanted to take -- paint a picture for you of where did it come from. We had over 190 offices around the world. We have about 40 now. And we are not done yet. If think about it is not only square footage, it's IT, it's security, it's compliance, it's RHUA, it's transportation and logistics. All of that have costs associated with it. We're taking that cost up. We had over 40 manufacturing sites, 44 to be exact. We have 20 now. And we think we can drive that even further, build mega sites that is a true example of what EBS can do. Lean, on-time delivery, highest quality, highest margin. We're at a position now that we can deliver product in U.S. and Europe within 24 hours through mega centers that we have built, distribution centers that we have built. In the middle of COVID, we built a distribution center in Venlo in Netherlands. In the middle of COVID, we built a factory in Mexicali in 9 months. We built a factory that has increased our capacity significantly in meeting the demand of clear aligners. We shifted up not only our portfolio but our resources. We took about a 15% headcount reduction, a non-ortho business, and we added 60% additional headcount to our ortho in an 18 months' time period. Eric is going to talk through that. That journey is just getting started. There is a lot to be said about the transformation that we have done. You're going to see the result and outcome of that for years to come. These are fundamental shifts in the business, hard work that our team have been able to do, and they're proud of what we have been able to accomplish and where we are today. I want to talk a little bit about the market. Let me take a step back. This market, about a $350 billion spend. Growth is about a mid-single digit. There are some fundamental trends and numbers that is mind boggling. That's why we're so excited about this industry. 4 billion people today that have missing tooth. 5 billion people that have malocclusion. Aging population, aesthetics that is becoming extremely important, improving access to care and a lot of undertreatment, also inconsistency in treatment. You go on the clinician's side. Over 2 million around the world. And a good way to look at it is dentists per capita to see where you are underpenetrated. The Chinese government has made a decision to double the number of dentists in the next 10 years. They're building an infrastructure to make that real. And you're beginning to see a change in the dynamic of how dental care is provided from a GP focus to more of a specialist, to DSOs, to group practices, to specialty group. The shift is taking place in front of us. If anything, in the past 2 years, that transformation has accelerated. Dentistry has been perceived as a growth industry, as an opportunity to invest. If anything, back in March and April of 2020, everybody felt that nobody would ever go to a dentist. By end of 2020, you saw a significant investment coming in play, adding operatory, opening new sites. DSOs continue to buy and build de novos. And that trend is not going to stop. About 5 minutes from here, 1,200 people are gathering together talking about the future of DSO organization. They're all excited about the possibilities in here. There is a chance to accelerate that growth, not only in the United States, in Canada, in Europe, in China by over 20%. The dynamic of treating patients, providing access is radically changing in this industry. We see that rapid growth as an opportunity, opportunity to really improve access to people that they needed the most. Efficiency becomes a really important factor in here. Because of labor shortage, because of the cost increasing, now is the time to start thinking about how do I take waste out of system. 7% of offices' spending is used to just invoice, getting paid. One out of every 7 crown bridges that come back from lab doesn't fit. You have to go back and redo it again. There is a significant opportunity for improvement, for workflow efficiency. Digitization is real. It's here. However, it's brought tremendous amount of complexity to the system. And then you go to the suppliers' side. About a $75 billion, everybody who is participating in it, in office, in labs, there is an opportunity for people to start expanding and building and growing it here. But what is interesting, and you all know it's a lot better than I do, 5 years ago, if you wanted to invest in dental, you had very limited choices. 5 IPOs has taken place since 2019. Over 100 deals, large deals, has taken place since 2019. Investment is coming into this space. It is more of an annuity business. It's a recession resilient. It gives you an opportunity to invest, to see the outcome of it for years to come and it's bifurcating. Specialty businesses where the growth is, where the opportunity is, where it's underpenetrated and then you got equipment hygiene that is under tremendous amount of price pressure and the cost is becoming extremely important in here. A picture of an industry in transformation. This creates opportunities for those that have that EBS continuous improvement mentality creates opportunity for those who see innovation as a way to accelerate that transformation. We participate in about a $25 billion of this market. We have shifted our portfolio. So we are exposed to higher growth segment of this market. You have seen this slide over and over in the past. The only part of this that I want to talk about is that $11 billion. We're shifting our view on the implant. It is not only a titanium screw. It is tooth replacement. An implant is a method to do that. It's from time that you walk in, do the diagnostics, do the planning, AI-related activities, do the surgery, regenerative, prosthetic, 3D printing, lab capabilities, all integrated together. That's an $11 billion market. We're #2 in here, and we have every intention of positioning ourselves to be the #1 player in that space. Spark Clear Aligner, $4 billion market, growing over 20%. We're new entrants in here. We're the fastest-growing clear aligner. We're differentiated in that space. We're going to paint the picture for you why we think that we have room for growth significantly as we go forward. What's going on in this industry? Go back only a few years ago, very analog, a lot of administrative work, do the impression material, build stone models, inefficient. You have to have 15, 20 years of skills before you can do anything. Bring it today, the digital dentistry is here. You've got technology in the offices. You've got 3D. You've got printing -- 3D printing. You have IOS in offices. Everybody is buying it. You're seeing the outcome of it. The problem with is it doesn't work together. It's really complicated. A dentist is not an IT expert. They're spending a lot of time moving files from one place to another. This lack of integration provides significant opportunities. It's complex. It's confusing, and I have to tell you this, you can go to any dental office and you see, and it's not about the brand, it's about the workflow. See, in every office, regardless of if it is an DSO or individual offices, there is a different workflow, and none of them are consistent. Even with 2 dentists working in the same office, you see a different approach. You don't see consistency. When there is no standard work, you can't scale it up, you can't get efficiency coming out of it. What's tomorrow? The picture of tomorrow is an integrated, it's cloud-based. It's a history available to you, it's AI-driven, it's a simulation that gives you opportunity to see things before you actually do it. It's augmented reality. And these things are not just blue sky, exists today. We are experimenting with it, we're showing it, we're demonstrating as we go forward. It's better treatment. It's a consistent treatment. It's better efficiency. It's more predictable outcome. If there is one thing I want you to take away from today's discussion is these 3 words: We intend to digitize this industry. We intend to personalize it. We intend to democratize it. We think we have the capabilities to do that with our partners around the world. What does that look like? What does digitization look like? A single source of truth, where you can get all the patient file in variety of form or shape. You capture it, you visualize it, you see it in one place, it gives you opportunity to see all of that in one place to make the best possible decision so you can plan, so you can execute. What does personalization look like? You ask any dentists, what do they want to do? They want to spend time with the patient. They don't want to spend time, dealing with taking notes, dealing with equipment, trying to figure out how do I design things. They want to spend time with the patient. That gives them an opportunity, this personalization, to build treatments that it is digitally driven to have consistency around treatment planning. It gives them confidence to describe to the patient what the possibilities look like, and it gives the patient confidence that I can see it. I can see how long it's going to take. I can see how it's going to look like. If you do that, you can democratize this industry. You can provide access. You can do more procedures. You can be more predictable. This notion of digitization, personalization and democratization is a foundation for us for the next decade. We are gearing up to make that work. We start with what we call a single source of truth, open architecture, open system that allow you to pull, 2D, 3D, IOS, sensor, capture the videos, capture pictures in one place, a unified acquisition database. Some place that you can see them, touch it, feel it and you know that it's real. You don't have to go from one system to the next. Then you kind of start doing your execution and planning. Then you can personalize it. You have that augmented reality. You have that AI-driven capabilities that give you recommendation about identifying issues and also telling you the best course of action. Then you can plan it, you can plan implant, prosthetic, ortho treatment. And then after that, you can democratize it, have a history of what patient has gone through. Treatment, personal support capabilities that we can build, organizations such as [indiscernible] and others gives us the capability to really expand that in a worldwide basis. We can streamline the process. Now is the time to make that work, and we have the capability to make that real. DSOs are making tremendous amount of difference in this market. Not long ago, they were only about 15% of the market. There are 20% to 25% of market. In U.S., it's not unforeseeable that they would be about 50% of this market. The traditional network is changing the referral network that oral surgeon and orthodontist got is disappearing. There is a different model taking shape in here. We are positioned to be the best partner for our DSOs. You have seen that in a variety of form or shape in the past several years. We got ahead of these things. We built capabilities around it. We're partnering with them. We're in it in the long run. Building technical capabilities, unifying their offices, building training and education, building supportive staff in every place, managing the headquarter while managing people on the ground. It's a different model that is taking shape right in front of our eyes, and we are adjusting our sales organization, our software capabilities to meet the requirement of this space. The story of China is yet to unfold. 1.3 billion people. Less than 10% of those people that have access to basic dental care. There is a lot more to be done in here. We have been growing over 15% in the past several years. Yes, there is a bump in the road. Yes, they closed Shanghai for a week. They're going to open it. We have been dealing with that for 2 years now. That trajectory, that trend is not going to change. There is significant opportunity for growth over time in here, and we have been able to really change the dynamic of our business. More specialty, more capability, more direct, more training, build training and education, R&D, manufacturing on the ground and create a differentiated portfolio that is not under attack from a pricing, from commoditization point of view. A company exists because of the culture and because of its commitment to the environment, the social responsibilities as well as the governance. We had our first ESG done. We're really proud of getting that done in our second year in existence. Quality and access product that we put out there for years. And I talked to the Nobel customers, what they tell me continuously. 20 years after I have placed an implant, I still can depend on it, I still can find parts. It's a product that I can depend on. When I charge somebody $25,000 for a full arch replacement, I do not want that implant to become an issue. People and community. We have created Envista Smile Project, a foundation to help those that they needed the most. For every dollar that our employee contribute, we match it. We have done that in Ukraine. We're doing it around the world. We're sending our people to help people that they have the need. We're environmentally conscientious. We're getting more and more aware of what we need to do our part. We're building an ethical company, a company that can last the test of time, a company that can stand proud and make sure that those standards remain wherever you are around the world. This is a great industry, we're well positioned, and there is a lot more to be done in here. With that, let me introduce Eric Conley, the Senior Vice President of our ortho business, to talk about our ortho capabilities. Eric?

Thank you, Amir. It's great to see everyone, especially in person. We're all getting tired of seeing everybody in the Zoom screen. It's good to get people together, and thanks for coming out to see us. Again, my name is Eric Conley. I run our digital ortho business. I also run our Envista Business System office for Envista. And I'm here to talk to you about our ortho business, which we're extremely excited about. Three things that I would like for you to take away with you today. One, ortho is a great market segment with long-term growth drivers, a large TAM and Envista is uniquely positioned to compete in this space. Second, we have a full suite of products for orthodontists. So we're fully serving those practices. That gives us an advantage and allows us to sustain long-term growth in the double digits. And lastly, EBS, or the Envista Business System, gives us the tools to drive long-term sustainable and profitable growth, working through scaling up quickly and putting the right processes in place. Our ortho business at Envista. Last year, we finished with over $500 million of revenue and grew over 30%. Our product portfolio is broad. We have Ormco Damon system, which are wire and bracket components, so orthodontists can place braces on to patients. We have a Spark Clear Aligner solution, which can treat patients from young to old. And we also have an orthodontics lab business, AOA, which has a large suite of products, including things like retention for patients. A lot of key brands, a lot of key capabilities. And if you look at patient volume all over the world, we're the #2 player. So we're already coming into this with a great position to grow from. If you look at our geographic diversity across the world, 70% of our revenue is outside of North America that highlights the capabilities of our sales team all over the world. This market is a fantastic market. And we sell to the orthodontic professionals in this space. We support their practices. And they, in turn, go and market to patients locally. That gives us the ability as we bring on new doctors that creates a recurring revenue stream. Effectively, they become an annuity for us. And this is consistent with our historical practice of supporting those practices, making the orthodontics -- orthodontists great, and then they continue to build the business for us into the future and for them. The Clear Aligner is a $4 billion space, growing over 20% and that's for Spark place. The bracket and wires space is growing low single digits from $2 billion, and we're excited about the long-term growth drivers, not just in aligners. We're also excited in both segments as well. Wires and brackets is a strong growth market. So why is orthodontics going to grow in the long term? There are 5 billion people in the world today who suffer from a malocclusion. Out of that population, 0.5 billion -- over 0.5 billion people have both the means to get treatment and can afford treatment. And that gives us a huge market to move into. And there are 20 million case starts every year, and that is growing high single digits. And the reason these are growing is not just about the size and the opportunity of the market. But this market is becoming more accessible to patients. Costs are coming down. It's more accessible. There's more orthodontists who can do treatments in different parts of the world. And so that will continue to drive the ability for doctors to do patient care and orthodontics, and also, patients are becoming more aware of the benefits of orthodontic treatment. If you look at the wires and brackets portion of this segment, most of the cases are done with wires and brackets, with braces. 15 million cases this past year, and that is growing. And there's some important drivers behind that growth that you've got to keep in mind. One is the case complexity. So when a patient comes in, the doctor with wires and brackets can perform a treatment plan with any complexity of cases, whether it's simple or very complex. There's no choice to be made. They can do anything. Second is affordability. Doctors -- the cases are cheaper for doctors to purchase. So they're more profitable for the doctors. In a lot of cases, that profitability means a lot for the practice. And in some cases, doctors actually will pass along some of those savings to the patients to make it more accessible for them as well. There are certain markets in the world where aligners just aren't available and not able to use them. Wires and brackets, if there is orthodontics available in a geographic market, wires and brackets is always there. Lastly is compliance, right? Here in the U.S. in a lot of places, orthodontic treatment can be expensive. And if you're a parent and you're going to put your child in orthodontics, you can't take braces out, right? So they will be in there the whole time, and you'll get uninterrupted treatment through the entire process. Clear Aligners were 5 million case starts, and that's growing very rapidly. And the interesting thing about Clear Aligners is it's brought in adults to this space to get orthodontic treatment. It's fundamentally changed the size and the opportunity for orthodontics. And so if you're an adult, whether you're getting your first orthodontic treatment you've had in your life or like me, you had orthodontics, you had braces as a teenager, you stopped wearing your retainer. You need orthodontics again, it's a big opportunity, right? And so that's driving a lot of this. In addition to that, for doctors, the workflow that digital orthodontics and Clear Aligners brings is a unique workflow. It's a different workflow. And as doctors adjust to that, they have more control over their scheduling. And so they like to have that as part of their practice. These 2 things together, 20 million case starts. We see that growing, high single digits, long into the future. So if you look at Envista's journey, we've invested heavily in the orthodontic space, and those investments are paying off. If you go back to the pre-IPO period, Ormco was a credible, leading wires and brackets business with great sales execution and capabilities all over the world, but we weren't participating in a fast-growing clear aligner space. So post-IPO, we pulled together a team of experts in clear aligners, and we invested aggressively to make Spark a reality. And in doing so, we've built up the sales team even more and taught them that they can sell both wires and brackets and aligners. It's the same customer, right? So we're bringing that capability and giving them the ability to cross-sell across those things with a full portfolio of solutions. We also built up our manufacturing and treatment planning capabilities, scaling that rapidly. As Amir mentioned before, we built a 94,000-square foot Spark facility in less than 9 months, shipping product, which is really incredible how we're able to do this. And the key there for us is how we use the Envista Business System office that gives us the tools to scale that rapidly and do so in a very responsible way, so we're building for the long term. If you look into the future, Spark will continue to grow very rapidly. Spark will grow 3x from 2021 to 2024. And as we build, we're always adding capacity. We're thinking ahead of what's needed for the future, building that manufacturing capacity, the treatment planning capacity to be prepared to meet the demand at any given time. We want to be the choice for an orthodontist practice for all the tools that they need. And so we're investing heavily not just in Spark, but we're also investing in Ormco and launching new products, to make sure that the wires and brackets portion of the market, we're in a position to take tremendous share there as well. We will continue to outpace the market in both of these segments, and we're excited about the future. So if I think about it, how are we really different? What makes us unique? First, we have over 500 specialist salespeople all over the world selling the complete solution. So when you look at a practice and how do you support a practice. And remember, our focus is on making sure orthodontic practices have the tools, have the training. We make them great and then they will, in turn, reward us. So we've got people embedded in these practices who understand orthodontics all over the world. In addition to that, we put a real focus on clinical training, education. And we want to make these practices great practices. We want to make sure they can maximize the use of our solutions and deliver for their patients. And just in the last year, we held over 3,000 education events all over the world, training over 50,000 clinicians, and that continues to be a focus. It continues to grow. And of course, we backed that up with the innovation. We're innovating rapidly in Spark, and we're also innovating on the wires and brackets side with the launch of Damon Ultima to really give them the best tools, train them on the tools and support them along the way. So when I think about innovation, I think about what problem are we trying to solve for both the orthodontists and for their patients. And if you're an orthodontist, what do you want? At the end of the day, you want a great smile, an aligned pallet, aligned teeth not only to have a beautiful smile but also to eliminate potential health problems that come along with misaligned teeth, headaches, bone recession, all kinds of things that could lead to bad outcomes down the road. And we focus our products and making sure that they can precisely move the teeth and do it efficiently. The other challenge is they want to get to the end of the treatment quickly, right? The doctor wants to do it to free up chair time so they can move on to the next patient. And of course, the patient wants to get out of treatment and get through it as fast as they possibly can as well. So we focus our innovation in these 2 areas. And so when you look at Spark, we have very high-performing plastics that move the teeth consistently through to a very precise position. We do that with more surface area covering the teeth. We do that with a consistent force retention throughout the treatment plan. We also give doctors a choice of plastics, and that's a very unique thing for us. They can choose a plastic based on what's needed at each stage of the treatment plan to optimize the results. We're also imaging experts here at Envista. And we not only incorporate from the doctors the topical 3D scans or IOS scans of the teeth and gum line, we've also introduced the capability for them to use CBCT or use x-rays to see the roots and the bone density around the teeth. Because when you move teeth, you're not just moving the tops, right, you're moving the roots. And you want those roots, just like the teeth, to be in the correct position at the end. Without that visibility as part of the treatment plan, you're not able to do that. So we bring that in as well. Damon is a very similar problem we're solving there. The new Ultima bracket system provides for very precise tooth positioning and movements throughout the treatment. And the wire that we have and the way the bracket engages the wire means that all of the teeth are moving at the same time to get to the end more quickly. The other problem we're trying to solve for orthodontists is about productivity in their practices. Orthodontists are under pressure more and more to drive productivity. And with the consolidation of practices into DSOs or orthodontic DSOs, that pressure is there to drive growth, more growth, more profitability all the time, and they've got to bring in new patients. They got to be as productive as possible to do that. And so we focus our innovation here as well to help them solve that problem. So if you look at the workflow that a doctor has with clear aligners and an individual case treatment. It always starts with the patient exam. So they look at the malocclusions. And then they take the 3D scans of the teeth and gum line with IOS scanners. And then increasingly, using x-rays, CBCT, see the roots, see the bone structure underneath. All of that data comes together to build the treatment plan. And we allow the doctors complete flexibility to use their internal setups what they have. We don't force them into certain x-ray technologies, into certain IOS technologies. So the equipment that the office is trained on, the doctors are trained on, what they have, we let them use that and we adapt to that. Once all that data is sent to us through the cloud, we work with a doctor through our software to devise a customized treatment plan for each patient. And as the doctors work with us to build this treatment plan, we give them complete flexibility on how they treat that individual patient. Every patient is different. It's all unique. So we give them a maximum amount of choices to optimize the treatment plan through. We don't limit the movements they can make in the teeth. We allow them to use different tools like the multiple plastics. We also have doctors who are doing combo treatments. So they start patients in braces to get maximum expression in the beginning. And then they finish with aligners and allows an adult, for example, to shorten their treatment time by getting a lot of movement in the beginning and then they finish in aligners, which is just more aesthetically pleasing. So once that treatment plan is created, doctor approves it, the case goes into manufacturing. A handful of days later, the practice and the patient has the aligners. From then on, the patients are going through their treatment, getting regular checkups with the orthodontists to make sure they are on track. So these are office visits that the patient has to make that they don't want to do, the doctor has to make, it's pure cost at that point. So we want to limit what has to happen in that phase as well. And so higher-performing plastics, the better treatment planning shortens the time frame of that treatment. And we have doctors who are cutting time significantly from what they had before and the amount of time it takes to get to that final position. So as they eliminate appointments, that frees up chair time for new patients. In addition, we are believers in tele-dentistry and we're partnering with companies that have these technologies out there to integrate that in. And what that does is it takes an actual in-office visit and converts that to a virtual visit, which increases profitability and chair time availability significantly for the doctor. So you see, the innovation really is about solving all of these problems, so we can partner with these practices and orthodontists in the long term. And Spark just continues to accelerate rapidly. And the reason why we can grow as fast as we can grow is because we're building this on the back of the Ormco brand. Ormco is a credible brand, highly trusted in the space, with decades of science, understanding of orthodontics, and so we are not just a new brand coming in. So they know we know what we're talking about. They know we're going to be here for the long term and understand the space well. Also, we have access. The 500-plus salespeople all over the world, the customer support people all over the world. When we enter a new market geographically, we are there and able to go and talk to every single orthodontist. We are in those practices already. Those salespeople are trusted by that orthodontist. It allows us to move customers over to Damon and also to Spark. EBS gives us the tools to scale all of this. So as we build rapid demand, we build excitement around Spark, we can scale up. We can scale up quickly and do so thinking about the long term, building the process, building the organization, so we can have long-term growth, profitable growth for a long time to come. So I mentioned earlier 3x growth from '21 to 2024, and we're building the foundation for long-term strong double-digit growth out into the future. And as you think about the building blocks, especially around Spark, right, we're doing this in 3 different ways, driving this growth. One is we focus on bringing new doctors in, converting them over to Spark, right? And that starts that annuity stream, that starts that recurring revenue; as you bring doctors on, we build upon that. Second, our existing doctors, they just increase their share. They increase in their markets, and that drives more business to Spark as well. And third, we're entering new geographies. So as we go through the regulatory process in different places, we enter those markets. The team is in place already to make sure we're successful. So all 3 of those things help drive us in a fundamentally fast way and a unique way. So as you go home this weekend, the 3 things I want to leave you with is this is a great market. It's a great market. It's going to be there for the long term. There's great long-term growth drivers behind it. And we are uniquely positioned with a complete portfolio to play in this space. Second, that complete portfolio and the ability to partner with practices in a very unique way will help us sustain that long-term double-digit growth. And third, EBS means that we can build this, we could scale rapidly and we could do it in a responsible way. So we don't have to be concerned about can we sustain the growth? Can we do the things that we need to do? Our teams know how to do this, and we've got the tools to help them. Thank you all. I think we've got a 15-minute break. So please come back at 10 after the hour. Thanks, everyone. [Break]

[Audio Gap] In implants, and almost all of it is coming from our premium businesses. As Amir mentioned in the beginning here, we've redefined the marketplace and the size of the market. We're now including prosthetics, which we think is about a $6 billion market. That includes standardized abutments, CAD/CAM abutments, all the crowns and bridges, et cetera, that goes on top of an implant. We have the traditional implant business which is the titanium screw business, the fixtures and the components that goes together with the implant. $4 billion business, mid-single-plus digit growth. And then the biologics in the regenerative business, biomaterials, about $1 billion business, double-digit growth. It would include bone grafts, membranes, growth factors and other things that help promote bone generation and growth. In our business, there is a premium segment that is defined by 4 companies, Nobel Biocare being one of them. The value business has Implant Direct and ABT in them and probably 200 other implant companies in the value segment. Typically, that's a geographically spread business with local heroes in different parts of the world. On the biomaterial business and the regenerative, Nobel is one of the players and there's a handful of other players that are in this space together. We have 3 types of customers: implant specialists or implant placing specialists, general practitioners and laboratories. They tend to buy a little bit different out of our portfolio. Our oral surgeons and implant specialists typically buy a lot of implants from us. Many of them also buy our biomaterials as they go hand in hand with the procedure. Our general dentists, they are typically restoring implants, but many of them are now also starting to place implants and do the whole generation from start to finish, they tend to buy from all of these 3 categories that we offer. And laboratories typically buy from our prosthetics portfolio and they will continue to do so. Eric mentioned this, and we have the same phenomenon here. It's a phenomenally underpenetrated market. We believe there's 4 billion people that have a missing tooth in the world. Half of them have access to care. But only 5% of them actually seek treatment. So this is a huge opportunity in itself. So about 200 million people every year would go and seek treatment for a missing tooth. What is really even more surprising, that less than 10% actually end up with an implant. And there's a couple of barriers and a couple of obstacles that avert them from an implant treatment. One is the awareness of implant being one of the treatments that could be undertaken. The other one is the doctor that are not trained to place implants. The third one is fear. And a lot of people think of fear as the patient having fear, which is true, but the doctors also have fear. If you weren't probably trained, you haven't seen it before, you're probably not going to be comfortable recommending that. There's also a notion that it's a more invasive and more painful procedure maybe than the alternatives that are available. And then there's a cost component to this as well. We're all patients at some point in our life, and we're all an implant candidate. You think about this, the most common way to solve the problem of 1 missing tooth is to put a 3-unit bridge in there. You have 2 healthy teeth and then you have a gap in between. The 3-unit bridge solution takes the doctor to actually take your 2 healthy teeth, revise them back and grind them down so you can fit a bridge on there that has 3 teeth on them. That solution will last between 5 to 7 to 10 years. It's a little bit cheaper than getting an implant, but you got to redo it later in life. And the next time you do it, you're going to have to grind your 2 healthy teeth a little bit more. And then at the end, you might end up having 3 teeth that you need to resolve. So that's the 3-unit bridge solution. That's the most common way to solve that problem. There's a better way to do it, we believe, which is putting 1 implant there, preserve the 2 healthy teeth next to it and restore this through an implant and the prosthetics and, if you need also, bone regeneration. I think there's a huge opportunity for everybody to drive education here, to drive awareness about different ways of solving this problem. And it's a great opportunity to grow this part of the business and this part of the market from less than 10% to a much higher number. Let's talk a little bit about our transition. Before the IPO, we were essentially a flat business. We were spending a lot of money on R&D, building a portfolio of new products and innovation coming through. We spent time and effort on restructuring the business to drive a different margin profile and reduce our cost. And we have talked a lot about how we're driving the hunt for waste everywhere we did. That was a lot of the focus that we did prior to the IPO. We had a number of challenges at the same time. We weren't executing very well commercially. We were struggling with competing brands between our premium and our value implant businesses that actually competed against each other in the marketplace. Our offering on the value implant side was not particularly strong. And we were very under-indexed in the fast-growing biomaterials and regen business. So during the transformation and the resetting phase here, which would be '19 till last year, we've gradually improved performance every quarter. The last 6 quarters, we have accelerated our growth. And that continues. We have done that by focusing on our commercial execution and really get a much leaner machine going around focusing on customers, making sure that we have proper segmentation, and leveraging the EBS tools to drive discipline and execution into that part of our business. At the same time, the investments in R&D is starting to pay off and we've launched products that we've invested in for a number of years, our surfaces technology being one of them with Xeal and TiUltra. We also recently have launched N1 in Europe and just a few months ago here in the U.S. with a clearance from the FDA. We've also cleaned up and streamlined the value portfolio in the implants and made sure that we don't compete with each other anymore, and that's a segmentation and a structure that we've taken care of over these last few years. At the same time, we are doubling down on the workflow and the investment in DTX and navigated surgery and other digital technologies to promote the workflow from the beginning to the end. And that will pay off, and you'll hear more about that from JC. We still have challenges. We are under-indexed, we are under-represented, and we don't have scale in our value implant business. We're still under-indexed in our regenerative business. And we see that we have gaps in our digital portfolio that we should rapidly close, so that we can provide an even better and comprehensive workflow going forward. We're at the mid-single-digit growth rate at this point, and we can see a sustainable way to maintain that and also accelerate that in the future. So if you look into 2022 and beyond, we're going to be a high single-digit growth business. We see share gains happening as well, leveraging in digital workflow and the workflow around the entire spectrum as well, and doubling down on that will help us drive and grow that. We've continued challenge on the value implant scale situation, and we have great opportunities to continue to do supplemental things on our digital workflow. What makes us different? It's 4 things. First, the commercial execution. We have 1,300 highly skilled and highly trained individuals around the world that are promoting and helping our clinicians be successful clinically and with their business every day. And we're continuing to expand and grow that. We have just recently nominated and appointed on certified centers of excellence for All-on-4. This is a procedure that's been around for over 20 years. We have over 300 centers in the U.S. alone that are experts in treating edentulous patients and really changing their lives. We are also working very hard to improve the customer experience. When you deal with us as a company, we want you to have an outstanding experience. We measure that with Net Promoter Score, which is currently 65. And we've been increasing this by making sure that we deliver product on time with the highest quality. And we're making also sure that all of the different touch points you have with our business is removing all the waste in the system. It should be easy to pay. It should be easy to understand your invoices. It should be easy to return product. It should be easy to whatever it is that you need to do. And we're relentlessly doing this month after month, week after week, quarter after quarter. Just like Eric talked about training and education, we train and educate a lot of people. And if you go back to the market opportunity, that's one of the things to unlock, to really make sure more clinicians are able to place the implant, remove their barrier of fear, and making sure that they have the skills to place the implant successfully. We ran over 1,200 events last year and trained over 30,000 clinicians. Some of them were new to implants, so they learned how to place it for the first time. Others are going from a new level to maybe learning how to do All-on-4s or upskill themselves and to be able to do more indications and treatments with patients. Innovation is a huge part of our heritage. That's what we've been doing for the last 40 years as a company. The All-on-4 treatment concept, which is 2 decades old now, continues to be evolved and developed to treat more complex cases and more indications. The new surfaces allows us to also have a much higher and better treatment outcome compared to what we've seen in the past, and it's now available on all of our implants across the board. And then, of course, our N1 system, that is a biologically driven innovation, to really help promote in 5 different dimensions and much better way to place and maintain implants for success. And then lastly, and perhaps what really touches my heart the most, is that over 1.5 million patients that we had a hand in, we had a small part of treating last year, changing their lives, changing their trajectory, making them smile again. This is a purpose of ours, this is purpose-driven that gives me a lot of pleasure and it's a privilege to actually be able to impact another person's life like we are. You've seen this slide before. This is about the really digital workflow. And I think we're at the beginning of a trend and an emerging of a lot of technologies that would enable us to do things in the future that we couldn't dream of doing only 5 years ago. If you think about the starting point of treatment on the diagnostic capture, I was part of the transformation from an analog world to a digital world, and that was profound. We had another shift in this technology from 2D imaging to 3D imaging, that was profound. We're seeing how each of the image modalities continues to get better sensors, better definition and combination of different image modalities from 2D to 3D to surface scanning to facial scanning and positioning allows us to combine those data sets and really drive a totally different diagnostic ability and capability. And if you think about some of the things that also JC will mention on, how we can apply algorithms and AI to help aid a clinician to identify things in the diagnostic part of the treatment, to make sure that you're doing the right treatment protocol or you're selecting the most successful one, maybe even help aid what that might look like in the future. Having one source of truth, like Amir said. If you walk out to a clinic today and ask them how many software systems they have, ask them how many places they store data to have a complete medical or dental record of their patients, the answer is not one, it's a lot and it's hard to keep track of. Our mission is to make it easy to collect all of this information, to have one source of truth, and that's what we're doing with DTX. We're continuing to rapidly move into more and more aids for the clinician, help you sort what's in there so you can find what you're looking for, help you identify things in the diagnostic panoramic images and other images, so that you can get to a conclusion much faster, document it well and make sure that you're consistent time after time after time. Once you've established that, you have a great opportunity to then go in and design the treatment plan and design the customized ways in which you're going to treat this patient, perhaps present more than one alternative, preferably not the 3-unit bridge, but maybe an implant solution. If you think about that, you do that in DTX, too, you can plan your entire implant case there. It turns out that the placement of the implant is very critical for the long-term sustainability and the long-term success of the implant. In DTX, you can get help to create a guide or send it immediately to a navigated solution that don't require any printouts, but it's more of a guidance system, navigation system. These 2 technologies are significantly helping clinicians to place the implant exactly in the right place. If your bridge is really wide, you have a lot of space to place the implant and it can go in more than one place. But if you ask any of the clinicians that are here today, there are complicated cases with narrow ridges. You don't have a lot of room for error. And this is where you can really make a difference when you guide or navigate these, place them at the right place. Now I've placed the implant, it's time for the prosthetics. Systems now can help you design these in the software. You can put a lot of help into aiding that, making that planning process a lot more efficient. And the possibilities to do this incredibly well in the future is just around the corner, I believe. When you think about the All-on-4 treatment concept, and this is a patient here that has that. You walk into an office, like I went to a live surgery a few weeks ago, the patient, a 49-year-old female without any teeth in one of her arches, came into the office at 8:00 in the morning. The doctor started to perform the implant surgery and placed a number of implants for an All-on-4 treatment. At 2:00 p.m., the patient walked out of that office with a whole set of teeth and a new arch. And she was crying. And I told the doctor, why did you hurt her so bad? And it turned out she cried of joy because that was the first time in over 10 years that she's been able to be proud of her smile. You think about our digital workflow and how we can really help that and help doctors and clinicians get to that result more efficiently and faster, that's exactly what this workflow will help them do. This is on the prosthetic side. All of this is underpinned and helped by the biologics and regenerative business to make sure that you have great placement and great bone for that to happen. This young woman here is not the 49-year-old I was talking about, but she also had a really life-changing experience, as you can see the before and after. And it's a privilege for us to have a hand in this and to be able to help professionals and clinicians all over the world accomplish this great success with patients. Our growth is driven by innovation. It's our heritage. Our surfaces are there to promote faster healing and they've been incredible. We use them also to manage soft tissue, which is really unusual and it's an unusual approach for an implant company to do. We've had an incredible uptick here. So over 30% of the implants that we ship now have the new surfaces. And remember, we launched this in America a year ago. So this has been very quickly. Our N1 system, again, is geared towards a biological concept, making sure that we have faster osseointegration and faster healing, so that we can shorten the time to teeth. Again, going back to the patient, they're fearful that it could be painful to do an implant treatment. The treatment protocol and the drilling protocol of N1 is different. You only need 2 drills, 1 pilot and then another drill. And that drill doesn't produce any sound. It's a very low speed way to create an osteotomy. So the comfort for the patient is incredible. So if they've ever had an implant before, they don't even think the implant is placed when the doctor's already done. So I'm very proud of that innovation, and I think that's going to have a long runway for decades to come. It's a paradigm shift. Just in summary, we love this business. We love this market. It's significantly underpenetrated. There's a lot of opportunity for us to grow in here, and we're incredibly well positioned across the entire implant workflow. Thank you very much. With this, we're going to switch gears. I'd like to welcome JC Kyrillos, our Senior Vice President for Diagnostics and Imaging.

That was awesome. Well done. Well, I'm really humbled by these great explanations by Patrik and Eric and Amir, I mean, bring it home with imaging and diagnostic solutions. The first step in almost every dental procedure starts with imaging, and certainly with high-value procedures, that's definitely the case. We're going to talk about 3 things here. First, that our strategy is pretty simple. We're trying to get easy-to-use devices and easy-to-use software to help clinicians with their confidence to drive cases. And by doing that, they can also help patients understand the case and accept the case. So simple-to-use devices and software ultimately driving patient acceptance. If we do that -- I should say, when we do that, because we're already doing it. When we do that, we drive more procedures like the ones you just heard about. 2021 was a good year for us. We made a number of difficult decisions over the 2.5 years and a lot of them came in for us and still are. Let's talk a little bit about some of the equipment, what's inside this $450 million in sales -- $425 million in sales. So we start with 2D intraoral sensors. So intraoral, inside the mouth, and [ phos replace ] would do the same. And then a number of extra oral products, and you're going to see some of these when we take our tour later on today. Extraoral, outside the mouth, 2D panoramic; 2D cephalometric, which is a profile shot of the head; and then 3-dimensional CT or CBCT. We also sell the X-Guide product from the X-Nav Corporation. I see our partner, Ed Marandola, here in the audience. Thanks for coming, Ed. An awesome product. That's the navigated and guided surgery tool that Patrik spoke about. We wrap that up with the DTX software. You heard a bit about that. I'm going to speak about it further, but basically software that helps all of those imaging modalities come together and also empowered further with our AI tools. So a recap on how big this market is. It's an essential part of dentistry, it's a great market and we have the best-in-class products in that market. If you go to a dentist's office and you see our tools or brands there, you know right away, that's an office that cares about quality, that cares about patient outcomes. Now our products, most of where we sell today is in that first piece, that $2 billion, which is low single digits growth. We've had a gap in our portfolio for a while now on the IOS side. We're very excited about adding that to the portfolio and adding even more growth to the portfolio as it is. These products are applicable to all the different types of dentists. So general dentists, the different specialists that we talked about, orthodontists, oral surgeons, they're very, very relevant for DSOs. The standardization that our tools, the ease of use that our tools bring, very, very relevant for those organizations, help them grow. We're proud of the fact that we reversed the trend of several years of negative growth on a pre-IPO basis. And as I mentioned, 2021 was a good year for us, got into mid-single-digit growth compared to pre-pandemic. How did we do that? Well, the first thing we did is during the pandemic, we said, let's take a look at all our costs from scratch. Let's go into zero-based budgeting, zero-based staffing. Let's not think about what we used to need, let's just say what do we need now to do. And we looked at every part of it around the world and every function. We're proud to have been a substantial contributor to the $125 million that Amir mentioned earlier. We also did a major set of portfolio shifts, both on the product and on the geography. We exited over 40 products that were either low margin or low growth or both. We exited over 50 countries that were either low margin or low growth or both, really focused on the places where we can win, where we've got a differentiated advantage. And that's working out for us, and I think it will continue to be the case. We also had, over the course of the last 6, 7-ish quarters, like everyone, lots of supply chain challenges. And every supply chain challenge has got its own unique drama. Using our investor business system tools, our EBS tools, we've been pretty successful in mitigating those. We've, for the most part, been able to ship. Now no one knows what tomorrow brings and there's undoubtedly going to be more problems that come, but we've got a sense of confidence with that capability that we're in a good position to deal with those as they come up. And I'm very proud of the team that's managed that huge attention to detail and commitment on that. Let's talk about on a go-forward basis for 2022. Those changes we made, those good decisions we made, combined with the installed base that we have and the new products that we're bringing to the table, the AI solutions that I'm going to speak about in more detail and the high relevance for standardization and assist to the big DSO growth that you see, make us super-optimistic about the future. This is an essential part that is synergistic with the other 2 businesses that we talked about, and I'm personally really excited about our products. The other thing we did and really tuned up in addition to cost and portfolio adjustment is we went back from scratch and looked at the customer experience. We said, listen, we have the best-in-class products, we have an excellent quality and an excellent quality system, why don't we talk to people about -- and we talk to people routinely, 1,500 a day, why don't we let them have a chance to try our products? So we introduced a 60-day money-back guarantee, no hassles, for any reason or no reason at all. To our knowledge, this was virtually unique in the dental industry. And when you think about some of those more expensive price points, 6 figures for an extraoral device, it's a big decision, who you're going to go with. And if you get a chance to try one for 60 days and you can still give it back, that's a potential big incentive to do that. So no kidding, all of our products in North America and Europe, you can try them, you can give them back. We also use that offering as a way to contact our installed base. As you can see, the numbers there are extensive and ascribe that to them. If you've got one of our devices in your office, I often use the analogy with the team, if you have one of our appliances in your kitchen, why not have more? Why not take a look at the rest of our offerings? And as I mentioned before, another one of those offerings is the excellent navigated surgery from the X-Nav company. We tried all these to drive simplicity, drive ease of doing use. So let me talk a little bit more about some of the software that we wrap around that and driving, as I said at the very beginning, confidence for clinicians so that they in turn can instill knowledge and confidence with the patients. So the DTX Studio, you basically have about 7 different imaging modalities that can come to place in an office. I mentioned several of them already, intraoral scanner, and another one. Also a simple camera inside the mouth, intraoral camera or an external camera. So you have the potential for 4 or 5 or 7 different softwares to look at all of those images. And you can imagine the challenge in doing that and keeping that straight inside your mind. The size of the tooth itself, a simple cosmetic, might be larger on one image than on another. This software has the ability to take all of those. First of all, you tap on 1 tooth, all the images associated with that tooth and any modality come together all at once. We have AI fusion technologies which can take 2 different kinds of 3D, the CT 3D, which is looking inside your body, and the IOS 3D, which is a topographical 3-dimensional image, and fuse those together in an automated way. By having these kinds of technologies, the easy-to-use devices and easy-to-use software gives us the opportunity to teach clinicians and drive expertise and confidence in doing it. So after we had run our 60-day guarantee for a while, we introduced another 60 concept, 60 images within 60 days. And what does that mean? Well, dentistry is unusual in the field of medicine in that the clinician is usually their own radiologist. Dentists are usually their own radiologist. But if you get a new tool that's expensive and difficult to use, and also if you take a 3D, some dentists worry about liability. I've taken a new kind of image, have I understood and diagnosed everything that, that teaches me? So it helps to have an expert, a formal dental radiologist to give me a second opinion as I get trained up on it. And so offering those 60 images within 60 days, and we do that through a third-party, an excellent company called BeamReaders, that offers that service for it. And that helps us to give the dentist that opportunity to digitize, then allows them to talk to the patient, personalize it. And more and more dentists can do that, more cases, more acceptance, democratize. In addition to the facility of having those software -- those images together, we have those energized and further impacted in a positive way by artificial intelligence. Now you hear a lot about artificial intelligence in our society in all aspects, right? Hardly a day or even an hour goes by where we don't either interact with it or read about it in some way. You should know that this is a company that has very deep and very long understanding in AI. Our first FDA software as a medical device was cleared in 2017. We've had several clearances since then. The most recent was just last week. Just a week ago today, we had our last one, which was for the mandibular nerve automatic tracing. That's another example where a clinician who is not used to doing an implant may have a concern because they can injure that mandibular nerve causing potential paralysis, permanent paralysis for the patient. And so we understand how to do that. We understand how to interact with FDA and get the 510(k)s approved. These tools on AI are also excellent for the DSO community. And we announced end of last year, a partnership with Pacific Dental Systems. They are a partner with us in developing additional future AIs. What's that interaction about? Well, they have access to virtually unlimited images. Obviously, we need images to understand that and train the next day on. They can give us advice about human factors and clinical relevance that helps them with their workflow. And as a large user, they are a great testimonial site for us. I mentioned the gap on intraoral scanners. So this is an area that we've studied for years, and we've looked at the whole spectrum of small to large players, premium to lower price point. I feel that we are very, very informed on this subject. We're thrilled with the acquisition of the Carestream IOS scanner line of products. These are excellent products, the 3600, 3700, 3800 cordless. And they've satisfied a range of price points and a range of needs in terms of clinical application. Importantly, this is a great addition to our portfolio, not only because it rounds out the solution, but also doesn't hurt that it's above our fleet average in both margin and in growth profile. Taking this product and putting it into the Envista Business System, putting it into our imaging installed base, putting it into the over 3,000 commercial people around the world is an opportunity for us to drive that even further. We are a great owner of this kind of a product to further drive it. Also our supply chain knowledge, also our quality management systems, all of those, we think, are going to accrue some great value creation and huge growth for this product. Many of you are aware that we divested our treatment unit in instrument business at the end of last year to Planmeca. With that went the KaVo name. So we announced very recently that we are changing the KaVo imaging name to DEXIS. DEXIS was already on some of our products, a great brand known for premium images, known for easy-to-use software. We're now going to move that DEXIS name over to the rest of our imaging products and that will include our new IOS products once that closes. So summary. The first step is imaging. Our strategy is to make easy-to-use devices, easy to use software that drives that clinical confidence and, ultimately, patient acceptance. More cases presented, more cases accepted. And when we do that, it's an opportunity to sell more of our implant-based tooth replacements and our orthodontic products, both on the wire and bracket and also on the aligner side. Thanks a lot.

The depth of capabilities and the scale that we are building, we want to close this by telling you what the long-term potential of this business looks like. We're in some of the most attractive segments of this market, ortho, implant, diagnostics, relationship with DSOs, high-growth margin. The segment exposure has radically changed in the past 2 to 2.5 years. We're thinking about the next 5 or 10 years. What does this digital workflow look like? We've got a large imaging set of capabilities that gives us the installed base to be able to integrate, improve productivity and drive usage, usage of implant, of ortho treatment. We've got a strong workflow solution with continued improvement culture behind it. And then the capital structure that we have, the M&A capabilities that we have, allows us to continue to make investment. An implant, specifically regen, variety of different software tools, adding to our digital portfolio, continue to do AI development and put some resources and investment in some of the emerging technologies, early investment in areas that gives us an opportunity to experiment. Take the market, take the exposure, multiply that by the company that we are building, that culture that we talked about, the culture of customer centricity, the focus on the patient, the focus on productivity, innovation, diversity, continuous improvement culture, the leadership that we are still in the market, an EBS-driven model that is here to last and continue to improve over time, the outcome of that would be market leadership. We are positioning ourselves to be the winner of this market for decades to come by accelerating growth, by improving margin and we are going to build a model that has a compounded return, a domino effect that continues to build on it as we go forward. As we started building this equation, you're going to see us moving from a mid-single-digit plus to high single-digit growth. Our intention is, every year, to continue to improve the growth profile of this company organically. Our intention is to continue to build the margin structure. Howard and I have made a commitment on a 50 to 75 basis point of improvement year after year after year. You're going to see that evolving over time. We think that there is no limit. There is no ceiling. In building this momentum of growth and margin, we are committed to a double-digit earnings per share growth as we move forward. And this acceleration is going to take shape and take momentum. Bumps in the road as we have seen in the past several weeks. Long-term horizon, that's what we are communicating, that's what we're committed. We have a proven track record of execution, strategically differentiated, building the company that would prove and stand the test of time. We want to build a $4 billion enterprise with the exposure to the market that has about a 4% to 5%. Divestiture that we did last year, the exits that we did in 2020 has moved our exposure to 100, 150 basis points better. We're in a 4% to 5% growth market now. The commercial execution capabilities that you have seen, as painful as it was to make those changes, has allowed us to outpace the market. 6 quarters of growth on implant. Our Ormco business, our brackets and wire taking share quarter after quarter. And innovation playing an important role in here. Opening a new dimension, going from 0 to 100,000 cases from 2018, reaching $100 million run rate on Spark. And one is adding another dimension to good performing businesses going forward. And then you have the power of capital structure, the firepower to put acquisition and M&A as another lever. A $4 billion enterprise, double-digit earnings, that's the business that we are building that is going to impact the life of patients, those that they needed the most. It's going to partner with people that they see potential in this industry for years to come. This is an incredible market. We're excited about it. We're excited about the possibilities. We are differentiated. We are strategically differentiated. We can demonstrate that we have a proven track record. We come from that culture of continuous improvement. We have an opportunity to create significant value for patients, for dentists, for our own employees. We want to build a company that they want to come to work, be proud of what they do every day, to have a hand, to go home, tell their families, their neighbors that I make a difference in the world. We want to create value for our shareholders to see that doing the right thing, doing the good things pays off in the long run. We're going to open it up for an opportunity to have a little bit of exchange with you. Let me invite the rest of my team in here on the stage. You have to bring your own chair. Thank you. We have -- Stephen, I think we have people online, and we have microphone in here. Stephen, we got the question right up front.

Jeff and you have mic on.

Amir, you mentioned the long-term plan, I guess, here questions on active and not to focus too much [indiscernible] you mentioned the question break trying to lock out. Currency has not been [indiscernible] recently, things like that. So just wondering if you can help us, we know there's enough round of prices [indiscernible] May 1. Should we think of that as incremental to the last time you've guided it? Or would those other things that brought us initially, is that just kind of help offset there just really in the context of your guide when you think about '22 with everything that's changed in the last couple of months?

Yes. So Jeff, let me go ahead and take that one. I think you're right, there is a lot going on these days, certainly even in the last week. With regards to China, we see that as continued par for the course. We don't think that, that's going to be long term in nature. We think that it's a short blip. As we've seen since Q1 of 2020, things get shut down, things open up, the business returns. And so we think the same way about the situation. Little bit unique in the timing of it. And then obviously, we have a warehouse that's in the province of [indiscernible], and so that's been impacted this last week. Again, we've been in communications with the management team there on a consistent basis, even as recently as this morning. And we think that once they open up -- they have a couple of national holidays, next Monday and Tuesday, once they open up, that business will return, we'll get the product shipped and we'll be in good shape there. Russia is a little bit different. As we provided the guidance, at that point, all the geopolitical things that are going on there, I think, are unique and have recently occurred. And so -- and we have about 4% of our business. We said $100 million of our revenue is based in Russia. We've gotten primarily through the first quarter. Getting products in, in relationship to all these sanctions and all the logistics companies that have fundamentally pulled out has made it a bit more challenging. So we'll provide an update as it relates to guidance with the Q1 earnings.

On the pricing.

Yes. I mean as it relates to the pricing component, I mean, we look at each of our businesses to do and to monitor both their growth as well as their margins to maximize both of those. And so we're going to continue to look at pricing and periodically adjust throughout the year. At no point do we say that we're one and done as it relates to pricing. And so we'll continue to look at that and look at opportunities to increase on the pricing. Of course, it's tied somewhat to inflation as well. And so we want to make sure that we're doing the appropriate counter measuring.

And I have two follow-ups. Just one, you're not making any comment about 2022 guidance at this point, not reiterating, not commenting, not anything. Is that correct?

Yes. We're going to provide a -- We'll provide an update with our Q1 earnings.

Okay. And then on the pricing side, it's easy to talk to someone, maybe the dealer reps that we all talk to or go out and figure out what's going on maybe on the consumables side in that, but what are you doing pricing-wise on maybe implants on core ortho? Are there opportunities there as well? And maybe, Amir, if you could even talk about the longer-term pricing outlook for those areas where I think you tend to have a little bit better pricing power. But just any thoughts there.

Yes. I mean, again, Jeff, we look at each of the operating companies, we look at their pricing strategy, looking at their growth and making sure that they're managing to drive maximized growth but also to ensure that we have the profitability. And so when we look about pricing, we will see what our competitive position is. We believe that in many instances, we've had opportunities to do some increases. And so if you think about it, historically, pricing had been a challenge. We see this as an opportunity for us to go ahead and put in some of that pricing. We started that in 2021, particularly in the second half of 2021. And we'll continue to do that here in 2022 as well. One more maybe comment around pricing and the way we think of things, I know that we measure it year-over-year same SKU sales. But the way we think of things is also with all the heavy emphasis that we put in innovation, we see that as an opportunity for us to upscale into newer product as well. So if you think about implant, one of the areas that you mentioned, getting people from the Nobel Active product, the TiUnite to the TiUltra, yes, they are different SKU numbers, but we sell those at a premium pricing. And so those -- that's another way to think about some of this as well. Michael?

Perfect. Thanks so much for all the details so far. I guess it's probably a good transition talking about premium pricing implants. The high-end premium implant market has been one that's been, I would say, volatile. Clearly one competitor that's doing quite well. I know N1 seems like it for, all your sakes, took longer than you probably wanted to get in the U.S. I remember you dialing it back at New York Dental in 2019. Now that it's here, how do you think about your position and your ability to continue to build back towards that high single-digit growth rate that you targeted in premium implants given the competitive environment and the fact that your competitors aren't necessarily sitting still?

Okay. First of all, the premium implant space, we have some formidable and very good competitors in there. The new surfaces in Xeal and TiUltra, that has been in the U.S. market for a year and in Europe for a little bit more than 2 years. We've been able to gain price on those, as Howard was mentioning. And so far, the revenue stream that we're getting from N1 is not a significant growth driver for us, so that's further upside opportunity. We're using the Spark model when we're launching N1, which I think we've covered a little bit. But we take a small group of doctors and train them and follow them and then we train another group.

Great. Erin Wright, Morgan Stanley. On Carestream, how quickly can you integrate and start to see more material cross-selling contributions from that? And thinking about other emerging technologies out there, what's of interest to you? Are you interested in 3D printing? Are you interested in other technologies? What can really bolster your offering and portfolio and maybe fill some gaps there?

You take the Carestream and I answer the second part of the question.

Yes, I didn't understand. You said integrate and then I couldn't quite copy what you were saying on Carestream.

Cross-selling opportunity, integration with the broader portfolio.

Yes. Sure. Well, we're going to start on that immediately. We're going to close in the second quarter. We're already doing extensive planning, both internally and in some part with the Carestream organization. We want for both organizations' customers for this to be as seamless as possible. And for us, we're going to plug it into our network, into our channels and our Opcos on the Nobel and Ormco and other side. So we'll start with that immediately. And then we'll also start development with the DTX group on integration of that product.

Erin, when you think about emerging technologies, you normally start with the patient journey. And what is taking place in a dentist's office, a day in a life of a dentist, so where they spend their energy, their time, where are the bottlenecks, what problems are they trying to solve? We deployed about 50 people in a 3 months' time period, interviewed about 1,000 dentists, DSOs, individuals, rank and stack, from #1 impediment waste in the system to #100. And we started looking at where can we make a serious difference in taking cost waste out of the system. The #1 priority revolves around patient file. How do you manage that patient file without moving it from one place to another in unified format that you can take it from diagnostics, AI helping you doing planning, execution, post treatment, to lab, on-site, same-day crown, [indiscernible] printing, guided surgery, all these elements, but it is centered around that patient file. So you hold that as a core and you start looking at what are the activities around that. We have always said that we subscribe to open architecture. We're willing to work, partner with many companies in order to make that workflow a lot more effective. In this room, there are 2 of our closest partner that we have been working with building this API, this relationship with them so we can offer a complete solution. The new world is a different world. It is not a co-system. It's an open architecture that you cooperate with a focus on the patient, the focus on the dentists. We have seen in some areas, and we have done that, in some of the CAD/CAM technologies, in some of the design capabilities. We have placed investment, early investment and experimenting with that, right, to see what the outcome look like for us to be able to execute that. There are plenty of opportunities around material, around case acceptance, around 3D printing. We're exploring all of that. We're finding people, that they're innovative and culturally complementary to us in order to be able to build a better world together.

Elizabeth Anderson from Evercore. Two questions. One, could you talk through sort of the impact on the short term of some of the margin -- on the margin line of some of the short-term dynamics in terms of the Russia business and potentially in China, too? And then over the longer term, can you talk more specifically about the value implants and sort of that contribution to the high single-digit growth algorithm you were talking about in terms of the implant business?

The margins, and I'll answer the value implant.

So Elizabeth, we do have a reasonable infrastructure based in Russia. And so as that business is very dynamic and fluid, we know that we're in that business for the long term. I happen to know the President of Russia during -- Danaher, during the previous disruption period. And we know that, that business will return. One of the things that we did do very quickly, same day essentially, was looking the ruble impact and the devaluation and we raised prices. I mean, to your question, Jeff, around not the 3% or 4%, 5%, but we raised it north of 30%. And so that limits some of the exposure as it relates to the FX impact there as well. And we'll continue to look at that. Russia is part of our long-term strategy, continues to be. It's been part of that emerging markets that has contributed nicely to our growth overall. And so we're in it for the long haul. I mean, as Amir has indicated, we're not building a business for this year, next year or the one after that, but we're building one for many years to come. And so we think that Russia will still be a part of that strategy.

Elizabeth, I was fortunate enough, it's interesting now you look back so well, that worked out really nicely. I was Danaher President of Russia in 2013, 2014, early part of 2015. And then the Crimea annexation took place. We did -- we had attrition. Retention in Russia was a serious problem in 2012 and 2013. By 2015, we had one of the best retention policies. Our engagement survey in Russia went up by 20% over a 2-year time period. So what did we do? We -- exactly as Howard talked about, we immediately changed our practices, pegged prices, to euro and dollar. We started looking at the inventory situation, make sure that we are not fueling a black market, secondary market. We partner with a lot of the American companies in Russia trying to figure out what was the best practices, try to do [ yet ]. And we spent a tremendous amount of time educating our people, communicating, instilling the Danaher business model at the time. That 3, 2.5 years of experience really came handy in the past 6 or 8 weeks. We got to work immediately. The management team that is underground is the same management team that was back there. We have about 300 people. We have an R&D organization in there. We understand the dynamic of what is taking place. But we are focused on helping people having better quality of life. That's our mission. I mean follow American guidance and a MedTech, whatever the standards are. I want to come back to the value, and if I may take a step forward. And why did the people buy a value implant versus a premium? There are oral surgeons sitting in this room, that they have 30 years of experience. You charge $25,000, $30,000 for a full arch All-on-4. The price of that impact compared to what you do is very minimal. But do you want your reputation to be impacted on a lifetime solution that you put out there? I mentioned that before, I reinforce it. Parts and Nobel impact 20 years later, you're able to go and receive those and get that started. But if this is the first time that you are entering that market, this is the first implant that you're placing and you want to experiment with it, the value implant plays a really important role, they teach you to get you started, get you going. But majority of places that we see, there is a door approach. You take the oral surgeon, the best-in-class, out of the equation. Go to DSOs, general practitioners, total solution providers, referral network. It gives you an opportunity to test, experiment and get a variety of different solutions out there. We need to be present throughout this whole continuum. We need to give people options. But at the same time, we've got to make sure those values as a standard that we[indiscernible] , it's prevalent and present regardless of what product we put out there. We're in a really great position, with Implant Direct in North America continue to make progress. But we are really under indexed in a $2.25 billion market that is growing mid- to high single digit. We have very small position. The only way to solve that problem is through inorganic activities. We took the first step in filling the portfolio gap on IOS. Now we have a methodology and a process, standard work, continue to repeat that as we go forward. We've got to demonstrate that acquisition is an important part of this equation. We're going to demonstrate and show that integration of IOS inside Envista has a much better performance and not only as a standalone product but as an integrated solution. Next step in that journey, biomaterial, value impact, AI-related, digital capabilities, 3D printing, we're going to continue to do that for the next 5 to 10 years.

Nathan Rich from Goldman Sachs. Two questions. Maybe the first on margins. Amir and Howard, you kind of laid out the path to 22.5% margins or higher. It seems like with the level of revenue growth and the amount coming from those higher margin categories that you expect, you should, in theory, I think, be able to do comfortably that 50 basis points plus, if not something well higher. Can you talk about maybe how you think about balancing investing for growth versus dropping some through to the bottom line and how that might change over that kind of 5-year horizon that you gave?

Yes. So sure. Thanks for the question, Nate. I think you're exactly right. You hit the operative word, it's about balancing and making sure that we're measuring not just maximizing pure growth at the cost of margins, but also making sure that we're investing appropriately. If you think about our Spark business that Eric described today, clearly, we're pleased with the performance. It's ahead of schedule. Every indicator shows that we want to continue to invest and ramp up in that business. And so we'll continue to do that. Does that cost us a little bit because the margins right now for that business are below our fleet average? The answer is yes. Do we anticipate that we'll continue to put productivity, efficiency gains that we've seen quarter-over-quarter in that business and get us above fleet average at some point? The answer is yes long term. So we'll do that. Think about the Carestream acquisition. Eyes wide open, we know that it's a carve-out, we're going to go ahead and bring that in. There'll be some investments that will be needed, whether it be in R&D, quality, the infrastructure setup associated with that. And so we want to make sure that we stay very balanced. What we've committed to is getting to that mid-single-digit plus and taking it to the high single-digit growth and then committing to 250 basis points of margin expansion over the next several years. If I recall, I mean -- and I think Amir showed this in the report card a little bit this morning as well, we commit to 50 to 75 basis points when we went public. We were at mid-teens. We're sitting at 20% this year. And so the idea here is that we want to make commitments that we can deliver on and be prudent in that regard as well.

Makes sense. And then, Amir, going back to the time of the IPO, one of the other growth drivers was high-growth emerging markets. Can you maybe talk a little bit more about where you see the most attractive opportunities? It sounds like you're committed to Russia. China is obviously a large opportunity, like you highlighted. But could you maybe just kind of go through that landscape and talk to us about where you see the biggest potential for growth?

Yes. Thanks, Nate. About 25% of our business today is in emerging markets. The growth actually has accelerated. It's going double digit, the whole combination. You saw China, China is about 10% of our business. The other 15% has come out of COVID a lot stronger. But what we did in the past 2 years, you saw that transformation in Russia, that we became a lot more specialty-focused. We did exactly the same thing in emerging market. JC talked about 50 countries exited. A lot of that was in emerging markets. We saw ourselves in subscale and a tremendous amount of price pressure, commodity-based product that really wasn't differentiated. We saw the shift in our business in emerging markets to be a specialty-focused, differentiated, with the ability to really be visibly differentiated through training and education, feet on the ground, ability to really build a great registration, quality assurance, the RA/QA capabilities, warehousing capabilities that we can deliver things very quickly. Let me go back to our original hypothesis. The top 20 metropolitan cities in the world is where the majority of all the opportunities are going to be in the long run. It's no surprise that the uneducated, looking for opportunities, that's where they're going to gravitate to. And that's where we want to be. We want to build our infrastructure. And in fact, in some of these geographies, we have decided that we are going to go direct. We just made a series of announcement over the past 3 months that we're building infrastructure in these major metropolitan cities to be able to scale up over time. Emerging market is going to be an important part of the growth equation for us in the long run. But we also want to make sure that we are differentiated. We're not competing just on price and just be present. This is a little bit of a history of 28 different companies bringing it together and building something new. The answer resides somewhere in the middle. You don't have to centralize everything, but you need to get the best of the capabilities that we have and try to leverage it. And that's the journey that we are on. We're committed to emerging market. We're going to continue to build capabilities in order to make that difference. When we talk about democratization, a big part of that resides in this emerging market. Eric is registering Spark in every one of those geographies quarter after quarter, and we can make a difference in there.

Thank you, Nate.

Justin Lin from William Blair. Just a quick question on N1. Can you talk through the use cases a little bit more? For example, can you use it in full arch cases currently? And what are the current size options available for N1?

So N1 originally was developed to hit 5 different biological aspects and improve the performance of the system and the faster integration. We didn't particularly develop it to do full large solutions with All-on-4. We have excellent products today that are already doing that. However, there's nothing that would prevent probably N1 to be used for All-on-4s. As a matter of fact, some customers are already doing so, but we were never originally intending that to be the focus. N1's target group and target focus is really where it matters, on soft tissue management and really protecting the implant as such. The surfaces with Xeal and TiUltra comes in to protect that. The drill protocol and the preparation of the osteotomy is another aspect where it provides a totally different starting point for future osseointegration and healing. We've also developed a new connection that is tighter and has a lot less micro motion in it, which is also a good thing for the future stability of the implant.

Got it. That's very helpful. The second question is just about your CapEx needs going forward. Maybe help us with a breakdown of that, if you could, how much -- for example, how much is going towards growing Spark threefold in the next few years versus digital -- your digital workflow transformation and growing the implants business?

This is around CapEx, was that the question, Justin?

Yes.

Okay. I got it. So yes, JC kind of hit on this in his presentation as well. I mean, during the -- we've always done it, but more intensely, I think during the pandemic, about looking at ROI specific to all of our investments. And so as a result, I mean, we made some decisions, that were tougher decisions around, some of the equipment business. And then directed some of that, we call that DRA, into some other areas. Likewise, even on the headcount, we reduced headcount by 15% elsewhere but grew headcount in our Ormco business by over 50%. So if you take that mentality and also apply it to our capital expenditure policies, that's the way we think of it as well. We mentioned earlier that we're going to get 3x the business in 2021 by 2024 in Spark. That's going to require some CapEx. And so we built a facility in Mexicali, as Amir talked about. We're going to continue to build that out in a meaningful way to make sure that we meet customer demand. We'll do that with every bit of our business. As we think about Carestream and the acquisition and what might be involved as it relates to equipment there. We'll continue to protect our Ormco bracket and wire business. Amir and I were just on a call approving some things last night around some of the CapEx associated with some of the MIM products and the like. And so we think that CapEx will continue to be a relevant component of our investment. And some of that will come by way of equipment. We'll continue to look at consolidating, as Amir said, even in our manufacturing facilities. While we've made some substantial progress, we'll continue to do that as well. So we'll see some of that as being an offset, too.

We're going to take a couple of questions from online. This one is from Jon Block. Can you provide some of your long-term thoughts about Spark and bringing that into general practitioners' channels? Is that needed to triple the business? And then as a follow-up, how dependent is implant high single-digit plus on N1 rollout and success? Or could N1 be accretive to the high single-digit plus goal?

We start with the Spark and general practitioners and then we come back to N1.

So we are primarily focused on the orthodontic space. And we're not exclusive there, so if GPs want to come into the practice, and you've seen announcements with [ beetle dent ], PDS, we are open to that. But really, our innovation focus, our marketing and sales focus is on the orthodontist. And to reach the growth goals we've got over the next 3 years, that's enough. I mean we can really focus on the orthodontists, build that up, and we've got a lot of share that we can gain there.

And just to repeat the question about N1 so I got it right, Melissa...

It's the expansion, the plan, what does that look like? What have we seen so far in Europe? And what's the rollout plan look like?

Yes. So the rollout plan is mimicking what we did with Spark. So it's a very methodical small groups, one after the other. We are seeing great success with our current surfaces, and they will help us drive the growth targets we have. Today, N1 is a nominal contribution to our growth. And over time, that will continue to grow and drive further growth opportunities for us.

Yes. I think what we've committed to is that over the next few years, that between Spark and N1, that will drive 200 to 300 basis points of growth. And so we're excited about both those products.

A question from Rachel Wanstall. Adjusted EBITDA margins are expected to go from over 20% this year to over 22.5% in 2026. How should we think about margin contribution from cost savings versus growth from higher-margin products like clear aligners and intraoral scanners?

You need to answer that. I'll tell you what the question is, margin contribution of the product versus...

Yes, I got it. So yes, we're talking about 250 basis points of expansion minimum over the next 5 years. We feel confident about that. Clearly, as the question implies, I mean, we're growing faster in our more profitable business. And so that's clearly going to have some tailwind associated with that. We will continue, as part of a tenet -- a fundamental tenet of EBS is around productivity gains. And so that's what we look at every day, is to improve those things. And so even in -- maybe taking a little bit further, even in the context of this inflation, I mean, one of the first things that we look to countermeasure some of that is look for productivity gains within our own manufacturing processes, to go ahead and improve that and mitigate some of those impacts. And so that will contribute a substantial amount as well, as part of that 250 basis points of margin expansion. But really, it's going to be driven by the growth and the more profitable profile that we have going forward as well.

Apologies, we have a little bit of a hard time hearing the questions. So...

There's a lot of reverb, so. .

Please.

Matt Miksic from Credit Suisse. So one question on sort of the guidance commentary that you talked about, the impact of Russia. And then I have one follow-up. So I think you've mentioned a couple of times that you have this exposure to Russia, you're taking action to sort of mitigate that impact and something will come out of that in terms of a guidance update. Can you talk about anything else in the quarter or in recent trends that we can expect to hear about that, either can offset that or things that are perhaps going better than you expected since the beginning of the year. I had one follow-up.

Yes. So I think as it relates to Russia, what we said was getting -- given all the sanctions that are there and getting products into the country has been the challenge. And so we continue to remain open for business. We're working through the inventory that we have in country today. And so that gets us through much of the quarter. I think as we look forward, we're looking at opportunities as to how do we get additional product into that country. And that's the current challenge that persists today. And so we'll continue to look at that. The business outside of Russia, as it relates to the developed markets and such, I mean, continue to perform well. And so even with the latest late December, early January Omicron, I think that North America has worked its way through it and continues to improve throughout the quarter as well.

Okay. And then on digital dentistry, this is something I think you've highlighted and others have highlighted this sort of fragmentation of platforms in the doctor's office and the opportunity to get after that. If you could talk maybe just a little bit about what the sort of key catalysts or sort of drivers for Envista to be the leader of that and how much of that is real opportunities to unlock productivity that you can get to quickly and how much of that comes with change in behavior that perhaps take a little bit longer.

Yes. Sure. Happy to take that. So I mean, in part, you answered the question, it's a combination of both. I think that as we've rolled out both new equipment and new aspects of the DTX software, the potential for people to embrace it goes up. And we've also spent a lot more time training our own teams and our own partners on what those value propositions are. Like many things in dentistry, it takes time for people to change what they learned in medical school. And a lot of these things weren't even thought of 2, 3 years ago, never mind 20 years ago, if you've been practicing and had a successful living doing it. But the more we educate on it, and in many ways, this meeting is about educating people, taking clinicians who are very successfully using it and basically telling the story that now that I've broken through the other side to use it well and my staff is trained and they can use it well, I'll never go back. And we hear that phrase over and over again. And so driving that, the summit is a commitment to having educational activities. We have many other educational parts. And we've gotten better over the course of the pandemic at delivering virtual content of the same.

A question from Jason Badner online. Regarding the gaps that exist on the implant side, are there things that you could do internally? Or do you have to go outside the walls of Envista to fill those gaps? And for those implant areas that you need to fill via M&A, is there an elegant way to do this in a single transaction? Or will these need to come together through a series of transactions?

I'm sorry, I...

Yes, it's a lot of reverb.

I didn't even.

Yes.

I couldn't understand.

Let me try again. So can you hear me now? Can you hear? So the gaps that exist on the implant side, are there things that you could do internally? Or do you have to go outside the walls of Envista to fill those gaps? And then to the extent that you need to do M&A, can you do it with one transaction or will need to be multiple transactions to fill the gaps on the implant side of the business?

I got it. I got it. Why don't you take the organic activities and I answer the inorganic part.

So in each of our different product portfolios, we're constantly looking at closing gaps in the portfolio to make it a better system and more comprehensive way for our clinicians to treat patients. That's an ongoing organic activity inside of all of our implant companies. And then I think the M&A portion of that, maybe, Amir, you can take.

So there are set of capabilities that we can do internally. As Patrik said, there we have put tremendous amount of R&D into the program. We are also doing a whole lot of collaboration in various places. But let's take, for example, the biomaterial. These are the kind of capabilities, building a clean room material science, it's not something that we have inside, it's not something that we are developing. The best way to do that is to find the best-in-class solution in different geographies and come to an agreement. And it doesn't necessarily have to be everything around M&A. We can come to a partnership agreement. We can get product rebranded, OEM and other method. Our approach is shifting towards everything in-house or a complete acquisition. You could do a lot of work around early investment, seed money, partnership. Both companies are seeing the benefit of it. A good example of it is the relationship that we built with Medit and 3Shape. We compete with them in some places, we cooperate with them. That is the new model that is going to exist in this industry. And we are championing that. We did that in those 2 areas, and we're going to explore our options. Not all founders want to be bought. Not all founders want to be part of big companies. So we're trying to adjust our approach based on the realities on the ground. But again, I will go back to that single principle of patient and dentists. As long as we can meet those requirements, we are open for business. We're willing to do what it takes to make that happen. We do have the firepower now and the credibility to be able to deploy capital and do things very rapidly. So having those optionalities, having that in our hands, gives us the option to close the gap and get ahead of it a lot faster than what we had done before. I want to touch on one more thing. Incredible company, Danaher, beautiful performance. But doing a $50 million acquisition inside Danaher was not necessarily moving the needle. Inside it, $2.5 billion, $3 billion company, a $100 million acquisition is really meaningful. And that's what we intend to do continuously going forward. Things that make a difference in what we offer has impact across our portfolio but make us stronger in an ongoing basis.

Great. Do we have any other questions in the room?

Sorry, just one follow-up. So Amir, on the double-digit LRP for orthodontics, if we look at clear aligners, penetration has been moving up maybe 1 point or 2 a year in the teen category for the last several years. It seems like we're kind of at an inflection point, although that's always tough to call. If everybody is aggressive, Spark and SureSmile and Invisalign numbers are going to come true over the next few years or prove somewhat accurate, that penetration rate is going to have to accelerate. You're going to have to pick up 3 points a share, then 4 points a share, then 5. So within your LRP, I guess my question is in the core base braces business, the last couple of years, we haven't been at that big inflection for clear aligners. So you've been able to nicely offset a little bit of pressure maybe on volume and price mix. But a few years from now, my gut is that the volume component has to accelerate to the downside a little bit. Is there enough price mix to keep that part of your business still growing, not next year, not in the next 1 or 2 years, but 3 or 4 years out? So again, in the LRP to get to double digits, are you assuming braces are flat, they're up, they're down? Just how to think about that.

Yes, that that's a really good view of this. And we have seen that, by the way. We are seeing exactly what you touched on. The number of case start, it's kind of flat. It's really not radically changing. So what is happening is the mix is radically changing to high-growth market, to emerging market. Less in United States, less teens in United -- preteens in the United States, a lot more outside U.S. Let me just give you a simple answer. Average treatment and on clear aligner today is $4,000, $5,000, in some places up to about $6,000. And about 20% of that goes to manufacturers, 20% to 25%. And with the amount of time and energy that you spent to do that. Now compare that to the bracket and wire. You pay 1/4, 1/5, to the manufacturers. So getting a sub-$1,000 treatment in India and Brazil, in China is a lot more affordable than a $5,000 treatment. And with average labor rate, with all the things that is taking place, being able to do that and give that quality to adult, to preteens in those geographies, so the numbers are shifting, the mix is shifting, going becoming a lot more in a high-growth market in other places. There is one more thing. There are 750 clinicians in here. I've been here since Wednesday now. They're going to be here until Saturday afternoon. And I've been walking around talking. We are not asking people, they're telling us, that if the bundle solution from the same company, if you give me Damon Ultima, if you give me Spark, I can make that treatment a lot faster, a lot quicker. Do it 6 months, 9 months and then go to a Spark. So they have it today, yes. But there are 2 different systems, 2 different pricing, they have to charge it twice. So now you're giving options to people. You're giving option to people to have opportunity to make difference. Having those in our portfolio, exactly as Howard said, it gives us the optionality to change the margin structure and pricing. The numbers are flat to go down, no question about it. We are compensating for it by going to emerging market, by doing this optimum of a mix treatment, by opening the door in one place and expanding it in other places. At the same time, people are exiting that market. We all know that. This gives us an opportunity to enter. It's been interesting, Eric talked about Ormco gives us an opportunity to go sell a Spark. The opposite of that is also true, that we are able to enter in places with Spark and now start teaching Damon, now start teaching bracket and wire and use that combination. Lots of numbers are not changing, that's absolutely true. How you deal with that, what your approach is and the pricing and the combination will compensate for it as we go forward. We're committed to the bracket and wire. We're not exiting that market. It is a high margin, 35 years of presence in that area and it gives us a base of differentiation compared to everybody else.

Thanks. I think that will be our last question. So for everyone on the virtual event, thank you very much for joining. We're going to adjourn to a break. And then for people here, we will do a tour. We really appreciate you joining us on our first Investor Day as a public company. The replay of this as well as the presentation will be posted on our website a little bit later today. We really appreciate your time, and thank you. For people in the room, we'll take a 15-minute break, and then we'll regroup for a tour. Thank you very much.