Envista Surpasses Q4 Growth Hopes, But Risks Lurk in China VBP Timing

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Q4: $751M; Core sales increased 10.8% YOY, FX added ~400 bps. Full year: $2.7B, core sales up 6.5% YOY.
• EPS: Q4 adjusted EPS: $0.38, up more than 50% YOY. Full year adjusted EPS: $1.19, up 46 cents YOY.
• Gross Margin: Q4 adjusted gross margin: 55%, down 220 bps YOY. Full year adjusted gross margin: 55.1%, slight decline YOY.
• Operating Margin: Q4 adjusted EBITDA margin: 14.8%, up 90 bps YOY. Full year adjusted EBITDA margin: 13.7%, up 190 bps YOY.

Guidance:

• Core revenue growth for 2026 expected to be 2%-4%.
• Adjusted EBITDA growth expected to be 7%-13%.
• Adjusted EPS expected to be $1.35-$1.45.
• Free cash flow conversion expected around 100%.
• Guidance assumes dental market similar to 2025, with faster Q1 and slower Q4 growth due to calendar effects.
• Expects ~$40M tariff headwind in 2026, offset by prior actions.
• Non-GAAP tax rate expected to be ~28%.

Business Commentary:

Revenue and Core Growth Performance:

• Envista Holdings Corporation reported sales of $751 million for Q4 2025, with core sales increasing by 10.8%. For the full year, sales were $2.7 billion, with core sales growing by 6.5%.
• The growth was driven by widespread positive growth across all businesses, increased new product activity, and clinical training, resulting in share gains.

Adjusted EBITDA and EPS Growth:

• The company's adjusted EBITDA margin for Q4 was 14.8%, a 90 basis point improvement year-over-year, and adjusted EPS was $0.38, up more than 50% from Q4 2024.
• The growth was supported by Spark turning profitable, price and tariff mitigation strategies, and reduced G&A spending.

SG&A Reduction and Tax Rate Improvement:

• Envista reduced G&A spending by over $35 million in 2025, or about 10%.
• The company expects a roughly 4-point tax rate reduction in 2026 due to improved U.S. profitability and deductibility of interest expense.

Share Repurchase and Cash Flow:

• Envista initiated a $250 million share repurchase program in early 2025 and returned over $160 million to shareholders across the year.
• Strong cash flows were supported by a free cash flow conversion of 114% for 2025.

New Product Launches and R&D Investment:

• Envista launched several new products across its major businesses, generating nearly $100 million in revenue from products introduced in the last 12 months.
• The company increased its R&D investment by double-digit percentages in Q4 2025, supporting future growth and innovation.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated: 'Q4 capped a strong year of progress and performance for Envista, positioning us well for continued improvement here in 2026.' Also noted: 'Our plan seems to be working, and as they say, we’ll keep working the plan.' Guidance exceeds medium-term targets for EBITDA and EPS.

Q&A:

• Question from Brandon Vazquez (William Blair): What are the potential upsides and risks to 2026 guidance, especially regarding top and bottom line momentum?
  Response: Upsides include momentum from accelerating sequential growth, diagnostics market potential, consumables investment, and pricing upside if inflation remains elevated. Risks include macro volatility and China VBP timing/timing uncertainty.

• Question from Jonathan Block (Stifel): What are the details/assumptions on VBP for ortho and implants embedded in 2026 guidance?
  Response: Guidance assumes a second implant VBP in Q2 and an ortho VBP in H2 2026, with timing uncertain due to complexity of Chinese medical VBPs.

• Question from Jonathan Block (Stifel): Why was Q4 core growth (~11%) significantly above implied guidance (~2%)?
  Response: Attributed to a shift in China ortho VBP timing (stronger channel) and better-than-expected implants growth, with underlying normalized growth around 4%.

• Question from Kevin Caliendo (UBS): How did implants growth compare to the market, and how much did new products contribute?
  Response: Implants outgrew the ~5% market in Q4, driven by commercial investment, customer training, and tariff-related pricing, with new products not yet impacting 2025 results.

• Question from Jeff Johnson (Baird): Any change in Spark competitive positioning/market trends in Q4, and what is the profitability trajectory?
  Response: Spark continued to outgrow the market; profitability remained consistent with Q3, driven by cost reductions and deferral benefits, with future improvements from automation, growth, portfolio, and design cost efficiencies.

• Question from Elizabeth Anderson (Evercore): What are the focus areas for growth in 2026 and beyond?
  Response: Focused on executing the value creation plan centered on growth, operations, and people, with continued investment in new product development and organizational stability.

• Question from Steven Valiquette (Mizuho Securities): Why is North America growth strong across categories while competitors cite challenges?
  Response: No major geographic differences; strong growth was broad-based across North America, West Europe, and emerging markets in Q4.

• Question from Lily Lozada (JP Morgan): What drove SG&A leverage in Q4, and how should we think about R&D/sales & marketing spend in 2026?
  Response: SG&A leverage from volume, price, productivity, and G&A reductions. For 2026, expect continued margin expansion from growth/productivity, with R&D increasing faster than revenue and sales/marketing flat to modestly increasing.

• Question from Lily Lozada (JP Morgan): Can you provide more color on VBP impact timing and magnitude for 2026?
  Response: Expects ortho VBP (40%-45% price decrease) with volume offset, net revenue benefit; implant VBP (10%-20% price decrease) with potential market share gains.

• Question from Allen Lutz (Bank of America): What is underlying growth for diagnostics/equipment in 2026?
  Response: Diagnostics market likely low single-digit growth, with Envista outperforming; equipment growth not specified, but diagnostics double-digit growth in Q4 aided by easy comps.

Contradiction Point 1

China Orthodontics VBP (Price Control) Timing and Impact

Timing and revenue impact of the orthodontic VBP shifted significantly between quarters, affecting business outlook and guidance assumptions.

What factors contributed to the 10.8% Q4 2025 core growth versus the 2% guided expectation? - Jonathan Block (Stifel) - Follow-up

2025Q4: Earlier-than-expected VBP preparation in China led to a stronger channel in Q4 2025. - Paul Keel(CEO), Eric Hammes(CFO)

How is the market environment in China being affected by VBP and consumer trends? - Elizabeth Anderson (Evercore)

20251031-2025 Q3: Two VBPs are underway: one for orthodontics (expected in 2025, possibly slipped to H1 2026). - Paul Keel(CEO)

Contradiction Point 2

Spark Aligner Profitability Trajectory and Milestones

The timeline for Spark to reach fleet average margins was presented as a recent milestone versus a future goal, creating confusion about future margin expectations.

What drove Spark's high single-digit Q4 growth (vs. high teens pre-deferral changes), and what were the profitability trends and expected progress? - Jeff Johnson (Baird)

2025Q4: Spark turned profitable in Q3 and remained profitable at consistent levels in Q4. - Paul Keel(CEO), Eric Hammes(CFO)

What is the expected margin trajectory for Spark aligner? What is its current market share and growth potential? - Allen Lutz (Bank of America)

20251031-2025 Q3: Spark's profitability was a 6-year milestone driven by cost and growth improvements. Margins are expected to reach fleet average over time. - Paul Keel(CEO)

Contradiction Point 3

Tariff Cost Impact and Run-Rate

The quarterly tariff cost run-rate was stated as $10M but then a higher figure was reported for a recent quarter, creating inconsistency in financial headwind estimates.

What are the potential upsides and risks to 2026 guidance regarding top-line and bottom-line performance, considering current momentum? - Brandon Vazquez (William Blair)

2025Q4: Tariffs are a ~$10M per quarter headwind. - Eric Hammes(CFO)

What is the expected tariff impact for Q4 and beyond? - Elizabeth Anderson (Evercore)

20251031-2025 Q3: Q3 tariff costs were $8-9 million (vs. $4 million in Q2). Using $10 million per quarter as a forward run-rate basis is a good estimate. - Eric Hammes(CFO)

Contradiction Point 4

China Implant VBP Magnitude & Expected Impact

The expected price decline for implants is downgraded, affecting projected revenue benefit and inventory impact forecasts.

What specific go-to-market variables are driving Envista's strong growth in North America compared to competitors' challenges? - Steven Valiquette (Mizuho Securities)

2025Q4: Implant VBP (Second Round): Expected 10%-20% price decrease. Benefit is smaller than the first VBP but still positive. - Paul Keel(CEO)

Should we model the inventory drawdown pattern (2-3 quarters of reduction, then volume recovery) for Chinese implants ahead of VBP 2.0? - Jeffrey Johnson (Robert W. Baird)

2025Q3: VBP 2.0 for implants is expected to be smaller in price decline and inventory impact than VBP 1.0. - Paul Keel(CEO)

Contradiction Point 5

Spark Business Growth Outlook

The expected growth trajectory for Spark is downgraded from high-teens to high-single digits, impacting investor expectations for future business performance.

What drove Spark's Q4 high single-digit growth (vs. high teens pre-deferral changes) and its profitability trend, and how will profitability progress? - Jeff Johnson (Baird)

2025Q4: What drove Spark's high single-digit growth in Q4 (vs. high teens pre-deferral changes,... - Paul Keel(CEO) and Eric Hammes(CFO)

Can you break down Spark's high-teens growth between same-store sales and new geographies, and any divergence in behavior between U.S. retail doctors and DSOs? - Dylan Finley (UBS)

2025Q3: Spark had high single-digit growth in North America and double-digit growth in all other major geographies except China. - Paul Keel(CEO)