17 May AiroAV Malware Said: Envista Holdings Corporation (NVST) Q1 2020 Earnings Call
Envista Holdings Corporation (NYSE:NVST)
Q1 2020 Earnings Call
May 12, 2020, 5:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Hello. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Envista Holdings Corporation first-quarter 2020 earnings conference call. [Operator instructions] I will now turn the call over to Mr.
John Bedford, vice president of investor relations. Mr. Bedford, you may begin your conference.
John Bedford — Vice President Jonathan Cartu and of Investor Relations
Hello, everyone, and thanks for joining us on the call. With us today are Amir Aghdaei, our president and chief executive officer; and Howard Yu, our chief financial officer. I’d like to point out that our earnings release, the slide presentation supplementing today’s call, and the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are available on the Investors section of our website, www.envistaco.com. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations, and will remain archived until our next quarterly call.
A replay of this call will also be available. During the presentation, we will describe some of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the first quarter of 2020, and all references to period-to-period increases or decreases in financial metrics are year over year.
We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.
With that, I’d like to turn the call over to Amir.
Amir Aghdaei — President Jonathan Cartu and and Chief Executive Officer
Thanks, John, and welcome, everyone, to Envista’s Q1 2020 earnings call. I hope everyone joining us today is well, safe and healthy. For those who are affected by the global pandemic, you’re in our thoughts. On behalf of Envista, I want to express our appreciation for those in the healthcare field who are working diligently around the globe to safeguard us all.
This includes the many dental professionals who have worked tirelessly and selflessly to ensure patients continue to have access to care. I would like to thank our employees for their commitment, engagement in their communities and constant focus on keeping their families, our customers, partners and fellow employees safe. Thank you for all that you do. We’re going to change the cadence of the call today given the unique nature of these circumstances.
I will start by walking you through our approach to address COVID-19 before handing it off to Howard, who will share our quarterly results, and then I will walk you through what we are seeing in the world today and how we see Envista position for the new normal.When we reflect on the first quarter, we feel good about the progress we made during the first two months of the year, with revenue exceeding our expectations. With the emergence of the global health pandemic, our business experienced a significant adverse impact in the last three weeks of March. This caused us to pivot our focus and adjust to new realities we face today. Our approach to the current health crisis is focused on what’s important, the safety of our employees, supporting our customers, partners and communities and preserving our financial strength.
First and foremost, our No. 1 priority is the health and safety of our employees. The actions to protect employees are driven by a task force that was assembled very early in the first quarter. This team acted quickly and efficiently to move those who can work remotely to their homes and implemented safety protocols for other employees, including social distancing measures, staggered shifts, personal protective equipment and more frequent disinfection processes.
We increased the use of virtual technology to provide the Envista leadership team the ability to communicate on a regular basis with our employees and enable remote collaboration. Most importantly, we increased the frequency of cross-company communication with the weekly CEO town halls open to all 12,000 employees. In these sessions, we share our immediate actions, strategy and offer the opportunity to ask the leadership any question. We have held hundreds of visual Kaizens online training events, which provide employees the opportunity to continue learning and improving business practices.
Finally, we’ve put together a back-to-work plan to protect employees and customers as they begin returning to the office environment. These activities have prepared us to enter back to work more knowledgeable, using new tools and resources and become more productive by utilizing visual connectivity like never before. After employees, our focus is on supporting our customers, partners and the communities we serve. Now more than ever, our partner and customers are looking for us to support them through this crisis.
One of the ways we have supported and collaborated with them during this difficult period is by expanding the availability of remote support, virtual trainings and education. The response from customers far exceeded our expectations. Last month, we held the Nobel Biocare Global Symposium virtually for the first time and had a record 12,000-plus clinicians registered to learn from their peers about innovative implant and workflow solutions and best practices to grow their patient base. In the first quarter, we substantially increased online training and education content and frequency and had more than 200,000 participants across our operating companies.
Many of these interactions resulted in new leads. This is significantly greater than any prior period and demonstrate the strength of Envista’s customer education programs. We are proud of our role in protecting the health of our customers and the communities we serve around the globe. Envista employees donated thousands of masks and other personal protective equipment to their local communities worldwide.
In China, we were one of the first companies to donate infection prevention products to the Wuhan government, and our Orascoptic business donated eye protection to hundreds of healthcare professionals. Through our infection prevention business metrics, our team worked tirelessly during the crisis to ensure continuity of shipment of medical-grade disinfection products used by healthcare professionals. Financially, we are now in a changed environment that requires us to operate effectively to preserve our strength and ensure long-term financial success. This requires an acknowledgment of the core realities we are confronting, refining priorities, accelerating our portfolio optimization and relentless execution.
Our first focus is business continuity. We tested our continuity plans and assessed our supply chain to ensure our factories can keep producing. We also increased inventory levels to ensure our businesses have the appropriate stock on hand to meet customers’ needs. We have not experienced any significant supply or manufacturing issues to date and have maintained high levels of service to our customers.
After securing our business, we then turned to our existing debt arrangements and renegotiated with our lenders to provide a suspension of debt leverage covenant through the first quarter of 2021. We drew $250 million on our revolver to provide additional liquidity over the coming quarters. These actions are intended to provide us flexibility in this uncertain environment. Operating in this new reality also requires us to acknowledge the need to take more aggressive actions to align our cost structure.
Our approach has been to adjust in the short term to preserve capital by executing executive and management pay cuts, furloughs and foregoing most discretionary spend and capital expenditures. Collectively, we anticipate these actions will help reduce our operating expenses by more than $100 million, much of this in the second quarter. We will modulate these actions for the balance of the year as we gain further visibility on the recovery trajectory. We’re also taking additional actions to change the long-term financial structure of the business and adjust our portfolio to what will become a new normal.
As you may recall, our previous structural cost reduction plan committed to $16 million in savings to be achieved over the next three years. In this new environment, we are now moving forward with an increased reduction program targeted to reduce expenses by more than $100 million on an annualized basis through EPS-driven productivity gains, a targeted reduction of more than 10% of our global workforce and portfolio rationalization. With regards to the portfolio rationalization, there are areas of…