Envista Reports Second Quarter 2024 Results

Rhea-AI Summary

Envista Holdings (NYSE: NVST) reported Q2 2024 results with sales of $633.1 million and a core sales decline of 3.2% compared to Q2 2023. The company posted a net loss of $1,151.6 million ($6.69 per share), including a $1,153.8 million non-cash charge for goodwill and intangible asset impairment. Adjusted net income was $18.5 million ($0.11 per diluted share), down from $76.2 million ($0.43 per diluted share) in Q2 2023. Adjusted EBITDA decreased to $63.0 million from $126.2 million year-over-year.

CEO Paul Keel acknowledged underperformance and outlined steps to reposition the company, including new leadership hires and growth investments. For full-year 2024, Envista expects core sales to decline 1-4% and adjusted EBITDA margins of 10-12%, with further decline in Q3 before returning to growth in Q4.

Positive

• New leadership hires including permanent CFO and Presidents for two largest businesses
• Growth investments made in highest-margin businesses
• Company expects return to growth in Q4 2024

Negative

• Core sales declined 3.2% in Q2 2024 compared to Q2 2023
• Net loss of $1,151.6 million, including $1,153.8 million non-cash impairment charge
• Adjusted net income decreased to $18.5 million from $76.2 million year-over-year
• Adjusted EBITDA fell to $63.0 million from $126.2 million year-over-year
• Full-year 2024 guidance projects core sales decline of 1-4%
• Adjusted EBITDA margins expected to be 10-12% for 2024, down from previous year
• Further decline expected in Q3 2024

Insights

Financial Analyst

Envista's Q2 2024 results reveal significant challenges. Core sales declined 3.2% and the company reported a substantial net loss of $1,151.6 million, primarily due to a $1,153.8 million non-cash impairment charge. Adjusted net income plummeted to $18.5 million ($0.11 per share) from $76.2 million ($0.43 per share) in Q2 2023. Adjusted EBITDA also fell sharply to $63.0 million from $126.2 million year-over-year.

The company's 2024 guidance projects continued weakness, with core sales expected to decline 1%-4% and adjusted EBITDA margins forecasted at 10%-12%. This outlook, combined with the significant impairment charge, suggests underlying structural issues that may take time to resolve. Investors should closely monitor the effectiveness of the company's repositioning efforts and new leadership appointments in driving a turnaround.

Market Research Analyst

Envista's Q2 results reflect broader challenges in the dental industry. The 3.2% core sales decline suggests weakening demand, possibly due to economic pressures affecting discretionary dental procedures. The company's expectation of further decline in Q3 before growth in Q4 indicates a cautious outlook on market recovery.

The appointment of new leadership, including a CFO and Presidents for major business units, signals a strategic shift. These changes, coupled with growth investments in high-margin businesses, may position Envista for long-term improvement. However, the near-term impact on financials and the projected full-year decline suggest a challenging path ahead. Investors should watch for signs of market share changes and the effectiveness of Envista's repositioning efforts in a competitive landscape.

Corporate Strategy Expert

Envista's Q2 results and subsequent actions reveal a company in transition. The significant goodwill impairment suggests a reassessment of business value, potentially due to changing market dynamics or past acquisition strategies. The CEO's emphasis on "repositioning" and "mitigating risks" indicates a strategic overhaul.

Key moves include:

• Leadership changes in critical roles (CFO, business unit Presidents)
• Investments in high-margin businesses
• Risk mitigation in critical areas

These actions, while negatively impacting near-term results, aim to create long-term value. The strategy appears to focus on leveraging Envista's strong market positions and operational capabilities. However, execution risks remain high and the projected sales decline for 2024 suggests a challenging transformation period ahead. Investors should monitor the pace and effectiveness of these strategic initiatives in driving operational improvements and market performance.

BREA, Calif., Aug. 7, 2024 /PRNewswire/ -- Envista Holdings Corporation (NYSE: NVST) today announced results for the second quarter of 2024.

For the quarter ended June 28, 2024, reported sales were $633.1 million.  Core sales in the quarter declined 3.2% over the corresponding quarter in 2023. Net loss in the second quarter was $1,151.6 million or $6.69 per share.  The net loss included a $1,153.8 million non-cash charge related to the impairment of goodwill and intangible assets. During the same period, adjusted net income was $18.5 million or $0.11 per diluted share compared to adjusted net income of $76.2 million or $0.43 per diluted share in the same period of 2023. Adjusted EBITDA for the second quarter of 2024 was $63.0 million compared to $126.2 million in the second quarter of 2023. 

Paul Keel, Chief Executive Officer, stated, "Our performance in Q2 does not reflect the full capabilities of Envista.  As such, we took important steps to begin repositioning Envista for improved performance in the future.  We hired a permanent CFO as well as Presidents for our two largest businesses.  We mitigated risks in critical parts of our Company.  And we made much-needed growth investments in our highest-margin businesses.  While these actions negatively impact near-term results, they are essential for longer-term value creation."

Mr. Keel continued, "Envista is fundamentally a good business with leading positions in attractive markets, strong operations, talented people, and a high-performance culture of continuous improvement.  I'm encouraged by all we achieved together in my first three months and thank my twelve thousand colleagues around the world for their collaboration, care, and commitment."

2024 Guidance

For the full year 2024, we expect core sales to decline between 1% and 4 % and adjusted EBITDA margins of between 10% - 12%.  We expect further decline in Q3, before returning to growth in Q4.  Our guidance reflects the aforementioned improvement actions, growth investments, and continued macro uncertainty.

Please note, we do not provide forward-looking estimates on a GAAP basis as certain information is not available and cannot be reasonably estimated. 

Envista will discuss its quarterly results and provide an updated outlook for 2024 during an investor conference call today starting at 2:00 P.M. PT. The call and an accompanying slide presentation will be webcast on the "Investors" section of Envista's website, www.envistaco.com, under the subheading "Events & Presentations." A replay of the webcast will be available in the same section of Envista's website shortly after the conclusion of the presentation and will remain available until the next quarterly earnings call.

The conference call can be accessed by 800-579-2543 within the U.S. or +1 785-424-1789 outside the U.S. a few minutes before 2:00 PM PT and referencing conference ID #9467851.  A replay of the conference call will be available shortly after the conclusion of the call. You can access the replay dial-in information on the "Investors" section of Envista's website under the subheading "Events & Presentations." Presentation materials relating to Envista's results have been posted to the "Investors" section of Envista's website under the subheading "Quarterly Earnings." 

ABOUT ENVISTA

Envista is a global family of more than 30 trusted dental brands, including Nobel Biocare, Ormco, DEXIS, and Kerr united by a shared purpose: to partner with professionals to improve lives. Envista helps its customers deliver the best possible patient care through industry-leading dental consumables, solutions, technology, and services. Our comprehensive portfolio, including dental implants and treatment options, orthodontics, and digital imaging technologies, covers a wide range of dentists' clinical needs for diagnosing, treating, and preventing dental conditions as well as improving the aesthetics of the human smile. With a foundation comprised of the proven Envista Business System (EBS) methodology, an experienced leadership team, and a strong culture grounded in continuous improvement, commitment to innovation, and deep customer focus, Envista is well equipped to meet the end-to-end needs of dental professionals worldwide. Envista is one of the largest global dental products companies, with significant market positions in some of the most attractive segments of the dental products industry. For more information, please visit www.envistaco.com.

NON-GAAP MEASURES

All "Adjusted" amounts including core sales growth and free cash flow are non-GAAP items. Calculations of these measures, the reasons why we believe these measures provide useful information to investors, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these non-GAAP measures are included in the attached supplemental schedules. We do not reconcile forward looking non-GAAP measures to the comparable GAAP measures because of the inherent difficulty in predicting and estimating the future impact and timing of currency translation, acquisitions, discontinued products, and any other potential adjustments which would be reflected in any forecasted GAAP measure. 

FORWARD-LOOKING STATEMENTS

Certain statements in this press release are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other things, the conditions in the U.S. and global economy, the impact of inflation and increasing interest rates, international economic, political, legal, compliance and business factors, the markets served by us and the financial markets, the impact of our debt obligations on our operations and liquidity, developments and uncertainties in trade policies and regulations, contractions or growth rates and cyclicality of markets we serve, risks relating to product manufacturing, commodity costs and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole or limited sources of supply, disruptions relating to war, terrorism, climate change, widespread protests and civil unrest, man-made and natural disasters, public health issues and other events, security breaches or other disruptions of our information technology systems or violations of data privacy laws, security breaches or other disruptions affecting our external information technology contractors, vendors or other service providers, fluctuations in inventory of our distributors and customers, loss of a key distributor, our relationships with and the performance of our channel partners, competition, our ability to develop and successfully market new products and services, our ability to attract, develop and retain our key personnel, the potential for improper conduct by our employees, agents or business partners, our compliance with applicable laws and regulations (including regulations relating to medical devices and the health care industry), the results of our clinical trials and perceptions thereof, penalties associated with any off-label marketing of our products, modifications to our products that require new marketing clearances or authorizations, our ability to effectively address cost reductions and other changes in the health care industry, our ability to successfully identify and consummate appropriate acquisitions and strategic investments, our ability to integrate the businesses we acquire and achieve the anticipated benefits of such acquisitions, contingent liabilities relating to acquisitions, investments and divestitures, our ability to adequately protect our intellectual property, the impact of our restructuring activities on our ability to grow, risks relating to impairment charges for our goodwill and intangible assets, changes in accounting standards and subjective assumptions, estimates and judgment by management, currency exchange rates, changes in tax laws applicable to multinational companies, litigation and other contingent liabilities including intellectual property and environmental, health and safety matters, risks relating to product, service or software defects, the impact of regulation on demand for our products and services, and labor matters. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings, including our Annual Report on Form 10-K for fiscal year 2023 and our Quarterly reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release and except to the extent required by applicable law, we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.     

CONTACT
Stephen Keller
Envista Holdings Corporation
200 S. Kraemer Blvd., Building E
Brea, CA 92821
Telephone: (714) 817-7000

 

ENVISTA HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ($ and shares in millions, except per share amounts)
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Sales	$                  633.1		$                  662.4		$               1,256.7		$               1,289.6
Cost of sales	306.5		283.8		573.8		548.3
Gross profit	326.6		378.6		682.9		741.3
Operating expenses:
Selling, general and administrative	302.5		272.9		587.4		539.0
Research and development	23.6		26.8		46.9		51.3
Goodwill and intangible asset impairment	1,153.8		—		1,153.8		—
Operating (loss) profit	(1,153.3)		78.9		(1,105.2)		151.0
Nonoperating income (expense):
Other (expense) income, net	(1.1)		7.1		(1.0)		7.4
Interest expense, net	(11.7)		(17.4)		(24.6)		(34.1)
(Loss) income before income taxes	(1,166.1)		68.6		(1,130.8)		124.3
Income tax (benefit) expense	(14.5)		16.7		(2.8)		28.6
Net (loss) income	$             (1,151.6)		$                    51.9		$             (1,128.0)		$                     95.7
(Loss) earnings per share:
(Loss) earnings - basic	$                  (6.69)		$                    0.32		$                  (6.56)		$                     0.58
(Loss) earnings - diluted	$                  (6.69)		$                    0.29		$                  (6.56)		$                     0.54
Average common stock and common equivalent shares outstanding:
Basic	172.1		164.0		172.0		163.8
Diluted	172.1		176.3		172.0		176.9

 

ENVISTA HOLDINGS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ($ in millions, except share amounts)
	As of
	June 28, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$                 1,036.2		$                  940.0
Trade accounts receivable, less allowance for credit losses of $27.7 and $17.3, respectively	380.6		407.5
Inventories, net	263.8		258.8
Prepaid expenses and other current assets	141.3		137.4
Total current assets	1,821.9		1,743.7
Property, plant and equipment, net	290.8		309.6
Operating lease right-of-use assets	125.0		125.1
Other long-term assets	218.6		180.5
Goodwill	2,283.7		3,292.2
Other intangible assets, net	698.1		954.0
Total assets	$                 5,438.1		$             6,605.1
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$                    115.7		$                  115.3
Trade accounts payable	172.4		179.5
Accrued expenses and other liabilities	498.8		455.7
Operating lease liabilities	34.5		30.3
Total current liabilities	821.4		780.8
Operating lease liabilities	103.8		109.9
Other long-term liabilities	147.5		142.4
Long-term debt	1,388.7		1,398.1
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 15.0 million shares authorized; no shares issued or outstanding at June 28, 2024 and December 31, 2023	—		—
Common stock, $0.01 par value, 500.0 million shares authorized; 173.9 million shares issued and 171.9 million shares outstanding at June 28, 2024; 173.3 million shares issued and 171.5 million shares outstanding at December 31, 2023	1.7		1.7
Additional paid-in capital	3,773.4		3,758.2
Accumulated (deficit) earnings	(496.8)		631.2
Accumulated other comprehensive loss	(301.6)		(217.2)
Total stockholders' equity	2,976.7		4,173.9
Total liabilities and stockholders' equity	$                 5,438.1		$             6,605.1

 

ENVISTA HOLDINGS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($ in millions)
	Six Months Ended
	June 28, 2024		June 30, 2023
Cash flows from operating activities:
Net (loss) income	$              (1,128.0)		$                       95.7
Noncash items:
Depreciation	21.1		17.9
Amortization	45.0		52.0
Allowance for credit losses	13.8		3.2
Stock-based compensation expense	16.3		20.2
Loss (gain) on equity investments, net	1.1		(6.9)
Restructuring charges	—		0.8
Goodwill and intangible asset impairment	1,153.8		—
Fixed asset impairment charge	17.1		0.2
Non-cash operating lease cost	15.0		13.1
Amortization of debt discount and issuance costs	2.3		2.1
Deferred income taxes	(46.1)		1.0
Change in trade accounts receivable	5.1		(24.0)
Change in inventories	(11.0)		(3.9)
Change in trade accounts payable	(5.0)		(47.1)
Change in prepaid expenses and other assets	(3.7)		(2.1)
Change in accrued expenses and other liabilities	56.7		(27.2)
Change in operating lease liabilities	(20.1)		(16.8)
Net cash provided by operating activities	133.4		78.2
Cash flows from investing activities:
Payments for additions to property, plant and equipment	(17.8)		(31.6)
Proceeds from sale of equity investment	0.4		10.7
All other investing activities, net	0.8		(3.9)
Net cash used in investing activities	(16.6)		(24.8)
Cash flows from financing activities:
Proceeds from stock option exercises	1.9		5.9
Tax withholding payment related to net settlement of equity awards	(3.4)		(6.4)
All other financing activities	(0.8)		1.6
Net cash (used in) provided by financing activities	(2.3)		1.1
Effect of exchange rate changes on cash and cash equivalents	(18.3)		(9.7)
Net change in cash and cash equivalents	96.2		44.8
Beginning balance of cash and cash equivalents	940.0		606.9
Ending balance of cash and cash equivalents	$                1,036.2		$                    651.7

 

ENVISTA HOLDINGS CORPORATION SUMMARY OF FINANCIAL METRICS (Unaudited) ($ in millions, except per share amounts)
	GAAP
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Gross Profit	$                   326.6		$                   378.6		$             682.9		$               741.3
Operating (Loss) Profit	$               (1,153.3)		$                     78.9		$         (1,105.2)		$               151.0
Net (Loss) Income	$               (1,151.6)		$                     51.9		$         (1,128.0)		$                 95.7
Diluted (Loss) Earnings Per Share	$                    (6.69)		$                     0.29		$              (6.56)		$                 0.54
Operating Cash Flow	$                     93.1		$                     75.1		$             133.4		$                 78.2
	NON-GAAP *
	Three Months Ended				Six Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Adjusted Gross Profit	$                    342.9		$                   383.4		$             700.9		$               747.6
Adjusted Operating Profit	$                      51.4		$                   116.6		$             129.0		$               221.8
Adjusted Net Income	$                      18.5		$                     76.2		$               64.3		$               144.0
Adjusted Diluted EPS	$                      0.11		$                     0.43		$               0.37		$                 0.81
Adjusted EBITDA	$                      63.0		$                   126.2		$             150.2		$               240.2
Free Cash Flow	$                      86.3		$                     61.0		$             115.6		$                 46.6

* For information on non-GAAP measures see "Reconciliation of GAAP to Non-GAAP Financial Measures" below. Also see the accompanying "Notes to Reconciliation of GAAP to Non-GAAP Financial Measures."

 

ENVISTA HOLDINGS CORPORATION SEGMENT INFORMATION (Unaudited) ($ in millions)
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Sales
Specialty Products & Technologies	$                  415.1		$                  417.0		$             823.8		$             827.0
Equipment & Consumables	218.0		245.4		432.9		462.6
Total	$                  633.1		$                  662.4		$          1,256.7		$          1,289.6
Operating (Loss) Profit
Specialty Products & Technologies	$                      6.0		$                    55.7		$               50.2		$             126.8
Equipment & Consumables	26.5		48.4		62.1		80.9
Other	(1,185.8)		(25.2)		(1,217.5)		(56.7)
Total	$             (1,153.3)		$                    78.9		$        (1,105.2)		$             151.0
Operating Margins
Specialty Products & Technologies	1.4 %		13.4 %		6.1 %		15.3 %
Equipment & Consumables	12.2 %		19.7 %		14.3 %		17.5 %
Total	(182.2) %		11.9 %		(87.9) %		11.7 %

 

ENVISTA HOLDINGS CORPORATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) ($ in millions, except per share amounts)
Adjusted Gross Profit and Adjusted Gross Margin
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Gross Profit	$                 326.6		$                 378.6		$          682.9		$         741.3
Restructuring costs and asset impairments B	16.3		4.8		18.0		6.3
Adjusted Gross Profit	$                 342.9		$                 383.4		$          700.9		$         747.6
Gross Margin (Gross Profit / Sales)	51.6 %		57.2 %		54.3 %		57.5 %
Adjusted Gross Margin (Adjusted Gross Profit / Sales)	54.2 %		57.9 %		55.8 %		58.0 %
Adjusted Operating Profit
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Consolidated
Operating (Loss) Profit	$            (1,153.3)		$                   78.9		$     (1,105.2)		$          151.0
Amortization of acquisition-related and other intangible assets	22.4		24.1		45.0		52.0
Goodwill and intangible asset impairments A	1,153.8		—		1,153.8		—
Restructuring costs and asset impairments B	23.8		13.6		30.7		17.9
Litigation settlement C	4.7		—		4.7		—
Acquisition related expenses E	—		—		—		0.9
Adjusted Operating Profit	$                  51.4		$                 116.6		$          129.0		$          221.8
Adjusted Operating Profit as a % of Sales	8.1 %		17.6 %		10.3 %		17.2 %
Specialty Products & Technologies
Operating Profit	$                    6.0		$                   55.7		$             50.2		$          126.8
Amortization of acquisition-related and other intangible assets	14.3		15.9		28.7		31.6
Restructuring costs and asset impairments B	17.6		6.2		20.9		7.8
Adjusted Operating Profit	$                  37.9		$                   77.8		$             99.8		$          166.2
Adjusted Operating Profit as a % of Sales	9.1 %		18.7 %		12.1 %		20.1 %
Equipment & Consumables
Operating Profit	$                  26.5		$                   48.4		$             62.1		$             80.9
Amortization of acquisition-related and other intangible assets	8.1		8.2		16.3		20.4
Restructuring costs and asset impairments B	0.4		6.4		3.2		9.0
Adjusted Operating Profit	$                  35.0		$                   63.0		$             81.6		$          110.3
Adjusted Operating Profit as a % of Sales	16.1 %		25.7 %		18.8 %		23.8 %
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

 

Adjusted Net Income
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Net (Loss) Income	$               (1,151.6)		$                      51.9		$         (1,128.0)		$                95.7
Amortization of acquisition-related and other intangible assets	22.4		24.1		45.0		52.0
Goodwill and intangible asset impairments A	1,153.8		—		1,153.8		—
Restructuring costs and asset impairments B	23.8		13.6		30.7		17.9
Litigation settlement C	4.7		—		4.7		—
Loss (gain) on equity investments, net D	1.1		(6.9)		1.1		(6.9)
Acquisition related expenses E	—		—		—		0.9
Tax effect of adjustments reflected above F	(36.0)		(7.3)		(43.6)		(15.1)
Discrete tax adjustments and other tax-related adjustments G	0.3		0.8		0.6		(0.5)
Adjusted Net Income	$                       18.5		$                      76.2		$                64.3		$              144.0
Adjusted Diluted Earnings Per Share
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Diluted (Loss) Earnings	$                     (6.69)		$                       0.29		$             (6.56)		$                0.54
Amortization of acquisition-related and other intangible assets	0.13		0.14		0.26		0.29
Goodwill and intangible asset impairments A	6.68		—		6.67		—
Restructuring costs and asset impairments B	0.14		0.08		0.18		0.10
Litigation settlement C	0.03		—		0.03		—
Loss (gain) on equity investments, net D	0.01		(0.04)		0.01		(0.04)
Acquisition related expenses E	—		—		—		0.01
Tax effect of adjustments reflected above F	(0.21)		(0.04)		(0.25)		(0.09)
Discrete tax adjustments and other tax-related adjustments G	—		—		—		—
Net (loss) to adjusted net income share adjustment H	0.02		—		0.03		—
Adjusted Diluted Earnings Per Share	$                       0.11		$                       0.43		$               0.37		$                0.81
Adjusted Diluted Shares Outstanding
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Average common stock shares outstanding - basic	172.1		164.0		172.0		163.8
Assumed exercise of dilutive options and vesting of dilutive restricted stock and performance stock units and assumed conversion of 2025 Convertible Notes H	0.7		12.3		1.1		13.1
Average common stock and common equivalent shares outstanding - diluted	172.8		176.3		173.1		176.9
Adjusted EBITDA
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Net (Loss) Income	$            (1,151.6)		$                   51.9		$     (1,128.0)		$            95.7
Interest expense, net	11.7		17.4		24.6		34.1
Income tax (benefit) expense	(14.5)		16.7		(2.8)		28.6
Depreciation	11.6		9.4		21.1		17.9
Amortization of acquisition-related and other intangible assets	22.4		24.1		45.0		52.0
Goodwill and intangible asset impairments A	1,153.8		—		1,153.8		—
Restructuring costs and asset impairments B	23.8		13.6		30.7		17.9
Litigation settlement C	4.7		—		4.7		—
Loss (gain) on equity investments, net D	1.1		(6.9)		1.1		(6.9)
Acquisition related expenses E	—		—		—		0.9
Adjusted EBITDA	$                   63.0		$                 126.2		$          150.2		$         240.2
Adjusted EBITDA as a % of Sales	10.0 %		19.1 %		12.0 %		18.6 %
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

 

Core Sales Growth 1
Consolidated	% Change Three Month Period Ended June 28, 2024 vs. Comparable 2023 Period		% Change Six Month Period Ended June 28, 2024 vs. Comparable 2023 Period
Total sales growth	(4.4) %		(2.6) %
Plus the impact of:
Currency exchange rates	1.2 %		1.2 %
Core sales growth	(3.2) %		(1.4) %
Specialty Products & Technologies
Total sales growth	(0.5) %		(0.4) %
Plus the impact of:
Currency exchange rates	1.4 %		1.3 %
Core sales growth	0.9 %		0.9 %
Equipment & Consumables
Total sales growth	(11.2) %		(6.4) %
Plus the impact of:
Currency exchange rates	1.1 %		0.9 %
Core sales growth	(10.1) %		(5.5) %

1

We use the term "core sales" to refer to GAAP revenue excluding  (1) sales from acquired businesses recorded prior to the first anniversary of the acquisition ("acquisitions"), (2) sales from discontinued products and (3) the impact of currency translation. Sales from discontinued products includes major brands or products that Envista has made the decision to discontinue as part of a portfolio restructuring. Discontinued brands or products consist of those which Envista (1) is no longer manufacturing, (2) is no longer investing in the research or development of, and (3) expects to discontinue all significant sales within one year from the decision date to discontinue. The portion of sales attributable to discontinued brands or products is calculated as the net decline of the applicable discontinued brand or product from period-to-period. The portion of GAAP revenue attributable to currency exchange rates is calculated as the difference between (a) the period-to-period change in sales and (b) the period-to-period change in sales after applying current period foreign exchange rates to the prior year period. We use the term "core sales growth" to refer to the measure of comparing current period core sales with the corresponding period of the prior year.

 

Reconciliation of Operating Cash Flows to Free Cash Flow
	Three Months Ended				Six Months Ended
	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Net Operating Cash Provided by Operating Activities	$                       93.1		$                       75.1		$               133.4		$                 78.2
Less: payments for additions to property, plant and equipment (capital expenditures)	(6.8)		(14.1)		(17.8)		(31.6)
Free Cash Flow	$                       86.3		$                       61.0		$               115.6		$                 46.6
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

 

ENVISTA HOLDINGS CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

^A Represents impairment charge related to goodwill and certain intangible assets.

^B We exclude impairment of certain long-lived assets, executive transition costs, and cost incurred pursuant to discrete restructuring plans that are fundamentally different (in terms of the size, strategic nature and planning requirements) from the ongoing productivity improvements, that result from application of the Envista Business System. These costs are incremental to the operating activities that arise in the ordinary course of our business and we believe are not indicative of Envista's ongoing operating costs in a given period. 

^C Represents the settlement of certain litigation matters.

^D Represents gains or losses on equity investments.

^E These represent acquisition related transactions expenses and integration costs with respect to business combinations.

^F This line item reflects the aggregate tax effect of all pretax adjustments reflected in the preceding line items of the table using each adjustment's applicable tax rate, including the effect of interim tax accounting requirements of Accounting Standards Codification Topic 740 Income Taxes.

^G The discrete tax matters relate primarily to excess tax benefits from stock-based compensation, changes in estimates associated with prior period uncertain tax positions and audit settlements, tax benefits resulting from a change in law, and changes in determination of realization of certain deferred tax assets.

^H The Company was in a net loss position for the three and six months ended June 28, 2024, therefore no shares reserved for issuance upon exercise of stock options, vesting of restricted stock and performance stock units or assumed conversion of the convertible senior notes due 2025 were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive. However, given that the adjustments noted in footnotes A-G resulted in adjusted net income for the three and six months ended June 28, 2024, the dilutive impact of stock options, restricted stock and performance stock units and assumed conversion of the convertible senior secured notes due 2025 are being included to arrive at adjusted diluted shares outstanding.

Statement Regarding Non-GAAP Measures

Each of the non-GAAP measures set forth above should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP measure, and may not be comparable to similarly titled measures reported by other companies. Management believes that these measures provide useful information to investors by offering additional ways of viewing Envista Holdings Corporation's ("Envista" or the "Company") results that, when reconciled to the corresponding GAAP measure, help our investors to:

• with respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA, understand the long-term profitability trends of Envista's business and compare Envista's profitability to prior and future periods and to Envista's peers;
• with respect to Core Sales, identify underlying growth trends in Envista's business and compare Envista's revenue performance with prior and future periods and to Envista's peers;
• with respect to Adjusted EBITDA, help investors understand operational factors associated with Envista's financial performance because it excludes the following from consideration: interest, taxes, depreciation, amortization, and infrequent or unusual losses or gains such as goodwill impairment charges or nonrecurring and restructuring charges. Management uses Adjusted EBITDA, as a supplemental measure for assessing operating performance in conjunction with related GAAP amounts. In addition, Adjusted EBITDA is used in connection with operating decisions, strategic planning, annual budgeting, evaluating Company performance and comparing operating results with historical periods and with industry peer companies; and
• with respect to Free Cash Flow (the "FCF Measure"), understand Envista's ability to generate cash without external financings, invest in its business and grow its business through acquisitions and other strategic opportunities. A limitation of free cash flow is that it does not take into account the Company's debt service requirements and other non-discretionary expenditures, and as a result the entire Free Cash Flow amount is not necessarily available for discretionary expenditures.
• with respect to Adjusted Diluted Shares Outstanding, allows for the dilutive impact of stock options, restricted stock and performance stock units and assumed conversion of the convertible senior secured notes due 2025 as the Company is reporting adjusted net income compared to net loss under GAAP;
• Management uses these non-GAAP measures to evaluate the Company's operating and financial performance.

The items excluded from the non-GAAP measures set forth above have been excluded for the following reasons:

• With respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA:
  • We exclude the amortization of acquisition-related and other intangible assets because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions we consummate. While we have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and related amortization term are unique to each acquisition and can vary significantly from acquisition to acquisition. Exclusion of this amortization expense facilitates more consistent comparisons of operating results over time between our newly acquired and long-held businesses, and with both acquisitive and non-acquisitive peer companies. We believe, however, that it is important for investors to understand that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized.
  • With respect to the other items excluded from Adjusted Gross Profit, Adjusted Net Income, Adjusted Operating Profit, Adjusted Diluted Earnings Per Share and Adjusted EBITDA, we exclude these items because they are of a nature and/or size that occur with inconsistent frequency, occur for reasons that may be unrelated to Envista's commercial performance during the period and/or we believe that such items may obscure underlying business trends and make comparisons of long-term performance difficult.
• With respect to core sales, we exclude (1) the effect of acquisitions and divested product lines because the timing, size, number and nature of such transactions can vary significantly from period-to-period and between us and our peers, which we believe may obscure underlying business trends and make comparisons of long-term performance difficult, (2) sales from discontinued products because discontinued products do not have a continuing contribution to operations and management believes that excluding such items provides investors with a means of evaluating our on-going operations and facilitates comparisons to our peers, and (3) the impact of currency translation because it is not under management's control, is subject to volatility and can obscure underlying business trends.
• With respect to the FCF Measure, we adjust for payments for additions to property, plant and equipment (net of the proceeds from capital disposals) to arrive at the amount of operating cash flow for the period that remains after accounting for the Company's capital expenditure requirements.

 

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SOURCE Envista Holdings Corporation

FAQ

What were Envista's (NVST) Q2 2024 financial results?

Envista reported Q2 2024 sales of $633.1 million, with a core sales decline of 3.2%. The company posted a net loss of $1,151.6 million ($6.69 per share), and adjusted net income of $18.5 million ($0.11 per diluted share).

How did Envista's (NVST) Q2 2024 results compare to Q2 2023?

Compared to Q2 2023, Envista's core sales declined 3.2%, adjusted net income decreased from $76.2 million to $18.5 million, and adjusted EBITDA fell from $126.2 million to $63.0 million.

What is Envista's (NVST) financial guidance for 2024?

For full-year 2024, Envista expects core sales to decline between 1% and 4%, and adjusted EBITDA margins to be between 10% and 12%. The company anticipates further decline in Q3 before returning to growth in Q4.

What strategic actions is Envista (NVST) taking to improve performance?

Envista is repositioning for improved performance by hiring a permanent CFO and Presidents for its two largest businesses, mitigating risks in critical areas, and making growth investments in its highest-margin businesses.