Envista's Q3 2025: Contradictions Emerge on Spark Growth, Implant Market, and China VBP Impact

Date of Call: October 30, 2025

Financials Results

• Revenue: $670M, core sales +9.4% YOY (FX benefit ~200bps; underlying ~5% excl. Spark deferral & dealer inventory)
• EPS: $0.32 adjusted EPS, up $0.20 vs Q3'24 (more than twice prior-year Q3)
• Gross Margin: 56.1%, up 330 bps YOY
• Operating Margin: 14.5% adjusted EBITDA margin, up 540 bps YOY

Guidance:

• Full-year 2025 core revenue growth expected to be approximately 4% (raised from 3%–4%).
• Full-year adjusted EPS now expected to be $1.10 to $1.15 (prior range $1.05 to $1.15).
• Full-year adjusted EBITDA margin unchanged at approximately 14%; Q4 expected to be in-line with that level.

Business Commentary:

* Strong Financial Performance in Q3: - Envista Holdings Corporation reported sales of $670 million in Q3 2025, with core sales increasing 9.4%. - Adjusted EBITDA margin improved by 540 basis points to 14.5%. - The growth was driven by increased core revenue, improvements in gross margins, and productivity gains.

• Spark Aligner Profitability:
• Spark, Envista's aligner business, achieved its first positive operating profit in Q3, with 1 million cases shipped since its launch in 2019.
• The milestone was reached after significant cost and growth efforts over six years.

• This was reflective of Envista's strategy to integrate Spark with its established fixed therapy solutions.

• Implant Segment Growth:

• Envista's implant business experienced four consecutive quarters of positive growth, with notable improvement in North America.
• The growth was supported by new product launches like the multiunit abutment and zirconia bridge.

• Continued focus on product innovation and strategic partnerships contributed to the improved performance.

• Growth and Profitability Across Segments:

• Specialty Products and Technologies (SP&T) reported 13% year-on-year growth, with an adjusted operating margin of 15.5%.
• The increase in margin was driven by strong growth and productivity improvements.
• Envista's Equipment and Consumables segment saw double-digit growth in consumables, contributing to overall profitability.

Sentiment Analysis:

Overall Tone: Positive

• Management: "We posted another solid quarter, delivering strong revenue and earnings growth and good margin expansion." They raised full-year guidance and noted Spark turned profitable in Q3 and adjusted EPS more than doubled versus prior-year quarter.

Q&A:

• Question from Allen Lutz (BofA Securities): It's nice to see Spark turn profitable in the third quarter. Now that the business is profitable, how should we think about the trajectory of margins from here? And can you talk about Spark's market share today and where it can go?
  Response: Spark is now profitable and management expects margins to trend toward fleet-average over time while continuing to outgrow the aligner market (Spark grew high-teens in Q3 before deferral and is approaching ~$300M).

• Question from Allen Lutz (BofA Securities): On Slide 9 volume/mix/price added ~240bps to EBITDA and it looks like price was a big portion—can you unpack contributions within volume, mix and price and how to think about embedded items into Q4?
  Response: Price drove just over 200bps of the 240bps; the remainder was volume with a small dilutive mix effect; Q4 should be roughly in-line with the ~14% full-year EBITDA guide and the EPS range ($1.10–$1.15) is the best anchor.

• Question from Elizabeth Anderson (Evercore ISI): Can you comment further on China given VBP activity—have you seen buying pauses or other effects from orthodontics VBP and potential implant VBP?
  Response: Ortho VBP is well progressed with potential timing shift into 2026; implant VBP 2.0 is expected but not yet announced—Envista is closely engaged with local stakeholders and watching timing and details.

• Question from Elizabeth Anderson (Evercore ISI): Tariffs were a bigger headwind this quarter—should we think Q3 tariff levels persist into Q4 and beyond?
  Response: Tariffs were ~$8–9M in Q3 and management models a run-rate around ~$10M per quarter; they remain on track to offset annual tariff dollars through other actions, using Q3 as a reasonable base.

• Question from Michael Cherny (Leerink Partners): Where do you feel best about your positioning on implants today and where can R&D and sales expansion push harder?
  Response: Implants momentum continues—four consecutive quarters of growth with above-market performance in North America, product launches (multiunit abutment, zirconia bridge) supporting premium, while monitoring China VBP dynamics.

• Question from Jeffrey Johnson (Robert W. Baird): On organic growth adjustments: did the ~$10M pull-forward (mostly Brackets & Wires) fully reverse in Q3 and would underlying core growth be closer to 6% if adjusted?
  Response: Yes, the ~$10M buy-ahead largely reversed in Q3 (much in Brackets & Wires); underlying Q3 growth is in the ~5%–6% range after removing the buy-ahead and Spark deferral effects.

• Question from Jeffrey Johnson (Robert W. Baird): Competitors describe implant inventory drawdown ahead of VBP and then a bounce—should we model that pattern for your ~$100M China implant business line?
  Response: Expect the typical de-stocking followed by a lower price level and then restocking-driven bounce, but management expects VBP 2 to be smaller than VBP 1 in price impact and inventory effect.

• Question from Linda Bolduc (Morgan Stanley) on behalf of Erin Wright: Given SP&T results, what are you seeing in terms of balance between Brackets & Wires and clear aligners—are aligners taking share back?
  Response: No material structural shift observed between brackets and aligners; case-level clinical decisions drive therapy choice and Envista sees no meaningful move away from fixed appliances toward aligners in aggregate.

• Question from Jonathan Block (Stifel): Consumables were up double digits—what drove that outperformance and are those share gains sustainable?
  Response: Broad-based growth across composites, endo, infection prevention (particularly strong) and strong DSO performance drove outperformance; management sees branded consumables remaining resilient versus private label.

• Question from Jonathan Block (Stifel): What's left of the Spark deferral into Q4 and how should we think about the tailwind into 2026 and margin implications?
  Response: Approximately $30M full-year tailwind for 2025 with only a low-to-mid single-digit remainder in Q4; the bulk of the deferral benefit is behind them and Q3 absolute revenue/profit levels are the right baseline for 2026 modeling.

• Question from Steven Valiquette (Mizuho Securities): On marketing spend for Spark—do you have adequate marketing investment to sustain growth and how will spend change going forward?
  Response: Current marketing support is appropriate for the ~$300M Spark business; only marginal incremental spend is expected as they enter remaining geographies.

• Question from Michael Sarcone (Jefferies): Can you elaborate on diagnostics trends and outlook?
  Response: Diagnostics is stabilizing after a multi-quarter contraction—two consecutive quarters of positive growth aided by new IOS (Imprevo); interest-rate-driven site additions and financing are key determinants and early signs of demand recovery are emerging.

• Question from Russell Yuen (William Blair) on behalf of Brandon Vazquez: Can you comment on DSO strength and Envista's positioning and opportunities there?
  Response: DSOs are a key focus; increased account focus has driven double-digit imaging growth with major installs and strong consumables and Ormco/Nobel performance across geographies, demonstrating competitive traction.

• Question from David Saxon (Needham): You referenced Q3 margins as a baseline and Capital Markets Day targets—how should we think about margin trajectory into next year (2026)?
  Response: Use H2 2025 (~14% adjusted EBITDA) as a practical baseline; management expects 2026 to follow the Capital Markets Day framework (core growth with operating leverage), but it's too early to give a precise 2026 margin number.

• Question from Dylan Finley (UBS) on behalf of Kevin Caliendo: For Spark's high-teens growth, how much was same-store versus new geographies and any divergence between retail docs and DSOs in the U.S.? Also, does current guidance contemplate any Q4 de-stocking from China VBP?
  Response: Spark growth: high single-digits in North America, double-digits in other major geographies (except China); Spark performs relatively better with specialist clinicians vs DSOs; guidance already contemplates expected VBP-related impacts including some implant destocking in Q4.

• Question from Jason Bednar (Piper Sandler): For implants, can you split growth between Premium and Challenger and confidence to step growth forward given tougher comps?
  Response: Premium performed strongly while Challenger was closer to flat in the quarter; management expects Challenger to grow on a full-year basis and views the premium performance as a good near-term baseline.

Contradiction Point 1

Spark's Market Share and Growth Trajectory

It involves differing perspectives on Spark's market share and growth trajectory, which are crucial for investors to understand the company's competitive positioning and growth prospects.

Now that Spark is profitable, how will its margins evolve, and what is its current market share and growth potential? - Allen Lutz(BofA Securities)

2025Q3: Spark has outpaced market growth since launch, with high teens growth in Q3. - Paul Keel(CEO)

What is your assessment of Spark's current U.S. market share, and how should we view its trajectory going forward? - Elizabeth Anderson(Evercore ISI Institutional Equities)

2025Q1: Spark has been successful at achieving 25% unit share in the U.S. adult market. - Paul Keel(CEO)

Contradiction Point 2

Implant Market Growth and Product Launch Strategy

It pertains to the growth and strategic positioning of Envista's implant business, which is a significant revenue driver and competitive area for the company.

Where are you best positioned in the implants market, and how are you expanding? - Michael Cherny(Leerink Partners)

2025Q3: Envista feels strong in the implants market with four consecutive quarters of growth, particularly in North America. - Paul Keel(CEO)

What is your current tariff exposure and what specific mitigation measures are you taking? - Jonathan Block(Stifel)

2025Q1: Implant market in 2025 is expected to be down mid to high single digits in the U.S. - Paul Keel(CEO)

Contradiction Point 3

VBP Impact on China Implant Business

It involves the anticipated impact of Value-Based Procurement (VBP) on Envista's China implant business, which could significantly influence revenue and market strategy.

What is the impact of VBPs in China on Envista's dental market performance? - Elizabeth Anderson(Evercore ISI Institutional Equities)

2025Q3: VBP for orthodontics is proceeding as expected, with a potential delay to Q1 or Q2 2026. - Paul Keel(CEO)

What are your expectations for the timing and scope of VBP in China this year? - Elizabeth Anderson(Evercore ISI Institutional Equities)

2025Q1: VBP is expected to migrate to orthodontic supply costs in Q2, with less impact to us than the procedure costs. - Paul Keel(CEO)

Contradiction Point 4

Diagnostics Growth Expectations

It involves the company's expected growth trajectory for its diagnostics business, which is crucial for revenue and market positioning.

What are the current trends in diagnostics and the growth outlook? - Michael Sarcone (Jefferies)

2025Q3: Diagnostics have returned to growth after a contraction, fueled by a new IOS launch. Market trends suggest improved interest rate conditions and site openings will continue to support growth. - Paul Keel(CEO)

How is your guidance structured regarding diagnostics? - Ahmed Muhammad (Leerink Partners)

2024Q4: Diagnostics expected to be flat to low single-digit growth, with no significant market recovery. - Eric Hammes(CFO)

Contradiction Point 5

Tariff Management and Cost Mitigation

It involves the company's strategy to manage and mitigate tariff costs, which directly impacts financial projections and operating expenses.

Will Q4 tariffs mirror Q3 levels? How will Envista manage tariff costs? - Elizabeth Anderson (Evercore ISI Institutional Equities)

2025Q3: Tariffs are expected to be around $10 million per quarter for the foreseeable future. Envista plans to offset these costs on a dollar basis for the full year, with a focus on supply chain mitigation. - Eric Hammes(CFO)

How are you positioned on tariffs, and have you made proactive adjustments? - Erin Wright (Morgan Stanley)

2024Q4: Supply chains are diversified across regions, allowing for flexibility in responding to tariffs. No significant impact expected on Envista from current tariffs. - Paul Keel(CEO)