My name is Chelsea, and I will be your conference call facilitator this afternoon. At this time, I would like to welcome everyone to Envista Holdings Corporation's First Quarter 2022 Earnings Results Conference Call. [Operator Instructions]. I will now turn the call over to Mr. Stephen Keller, Vice President of Investor Relations of Envista Holdings. Mr. Keller, you may begin your conference call.

Good afternoon, 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 want to point out that our earnings release, the slide presentation supplementing today's call and the reconciliation and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all 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 that will remain archived until our next quarterly call. As announced on January 3, 2022, we have closed the divestiture of the cago treatment unit and instrument business for the first quarter of 2022 and the full year of 2021, the results of this business are reflected as discontinued operations in our financial statements as required by generally-accepted accounting principles. All references in these remarks and accompanying presentation to earnings, revenues and other company-specific financial metrics relate only to the continuing operation of Envista's business, except for cash flow measures. 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, references in these remarks a company specific financial metrics relate to the first quarter of 2022 and the references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices that have applications submitted and pending certain regulatory approvals 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, anticipate 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.

Thank you, Stephen, and welcome, everyone, to Envista's Q1 2022 earnings calls. Despite a challenging macro environment, the localized COVID lockdowns, numerous supply chain disruptions, meaningful inflation and a challenging geopolitical environment, I'm pleased to report that Envista was able to deliver a strong first quarter, marked by mid-single-digit core growth and better-than-expected adjusted EBITDA margins. Our performance in the quarter is a testament to the team's passion, dedication and focus on execution. I'm proud of our team's efforts and believe that we are strategically differentiated and have a proven track record of execution. By partnering with professionals to improve patients' lives, we are well positioned to continue to outperform the market. Before I turn it to Howard to discuss our first quarter results in more detail, I want to provide more color on our progress toward our long-term priorities of accelerating growth, expanding our operating margins and transforming our portfolio. At Envista, we see significant opportunity to improve patients' quality of life by digitizing, personalizing demarketizing oral care. On March 31, we hosted our inaugural and Vista Summit early brought together the legacy Oncoform and Nobel Biocare symposium with a brand-new technology track to demonstrate our clinical workflow capabilities that improve the productivity and predictability of clinical procedures. With over 1,700 attendees, both in person and virtually, this event allowed us to articulate a vision for the future of dentistry while highlighting the combined strength and scale of the Envista portfolio. We provided high-impact training in orthodontics, implantology and digital workflows and introduce clinicians to the latest advancements in dental care that we transform dentistry over the coming decades. At the summit, we also hosted our first Investor Day as a public company where we outlined our long-term plans for accelerating growth to high single digits while continuing to…

Thank you, Amir. Before we begin, I'd like to remind you that our first quarter results are compared against prior year based on continuing operations, reflecting the sale of our combo treatment unit and instruments business. First quarter sales across all our businesses increased 3.1% to $631.4 million. Reported sales were negatively impacted 2.3% due to foreign currency exchange rate. Our core sales growth was 5.4% compared to the first quarter of 2021. Our year-over-year growth reflects solid performance across most of our portfolio, which was partially offset by temporary weakness in our infection prevention business as well as the COVID-related lockdown that occurred in Shanghai during the last week of the quarter. The catalyst for growth in Q1 was our Specialty Products & Technologies segment, which was up more than 11% versus Q1 of 2021. On a consolidated basis, Western Europe grew 17.6%, while North America increased 2.4%, dragged down by greater exposure to infection prevention. Overall, emerging markets outside of China continue to expand from pandemic lows, growing 15.6%. China was down 14.3% versus prior year, driven by the 0 coded policy that led to localized lockdowns in Shanghai and other regions across China. Our primary warehouse in China has been affected by the lockdown in Shanghai, and this has impacted our ability to ship products locally. We have been able to continue to serve our clinicians and patients outside of Shanghai by leveraging our distribution partners across China to provide product and maintain share in terms of sell-out. Our first quarter adjusted gross margins from continuing operations was 59.2%, increasing by 20 basis points compared to the prior year due to higher volumes, favorable geographic mix and productivity initiatives across our portfolio. The adjusted Q1 2022 EBITDA margin was 19.7%, which is approximately 185 basis points lower…

Thanks, Howard. We remain mindful of the challenges in the macro environment, driven by low rise, cowilockdowns, geopolitical risks and inflation and continued supply chain disruptions. We're also encouraged by the strong start to 2022 and more optimistic about the long-term outlook for the dental market and our evolving business. As it relates to our IOS acquisition for 2022, we are expecting the newly branded Texas IOS business to deliver sales of between $35 million to $45 million over the balance of the year. We expect sales to accelerate significantly throughout the year, the Q2 being relatively lower based on all in this business for 2 months in the quarter as well as on short-term pressure related to the China lockdowns impacting operations in Shanghai. It's important to note that we are planning to invest over $10 million in onetime costs to support both the integration of this business into Envista and to position taxis for rapid growth in 2023 and beyond. About half of this investment will come in Q2. For the rest of our business, there is no change to our previous guidance of core growth between 6% to 8% for 2022. We remain committed to achieving an adjusted EBITDA margin of over 20% for the full year. We're monitoring the ongoing lockdowns in China -- and while we don't believe these challenges will have a material impact impact and the full year outlook that could impact the quarterly results. Our current view is that the core growth in Q2 will be in mid-single digits, and we will accelerate growth in the second half of the year. We expect Q2 adjusted EBITDA margins to be in the high teens as we make the onetime investments in Dexus IOS and equation have further navigate through inflation and the impact…

Thanks, Amir. That concludes our formal comments. Operator, we are now ready for questions.

[Operator Instructions]. And our first question will come from Jeff Johnson with Baird.

Amir, I got 2 questions, if I could, real quickly. Just on pricing. I know another price increase went in May 1. Just wondering, one, how broad is that across product lines -- and two, is it fair to think about that price increase kind of helping offset obviously some of the China pressures right now and maybe a little bit of macro uncertainty elsewhere across the globe. Just conceptually, is that how to think about that?

Jeff, this is Howard. Maybe I'll take that 1 on pricing. We are actively managing price. I think even in late 2021 and into the first quarter here this year, we took selective price increases reduced discounts and instituted freight surcharges as appropriate. While we're not instituting across the board price increases each opco is closely monitoring inflation, market dynamics and taking the necessary price actions as appropriate. Certainly, I'll provide a tailwind here for growth, and it will help counter measure some of the inflationary impacts that we're seeing as well.

From a macro environment, Jeff, what we are seeing in here, China, we believe that the situation is going to work itself out -- throughout Q2, is a significant market with tremendous amount of opportunities. We are committed to it, and we will work through some of the interim challenges until we are able to provide the support and capabilities that needed in that country. We have been able to manage our way through Russia issues was committed to helping our partners, the professionals to provide better quality of life to patients, and we have been able to get actually products into Russia and continue to be bullish about our ability to manage some of the challenges that we see in this environment. Here is where PBS come in play, ability to really focus our daily management improve our operational capabilities, the segmentation, the commercial approach that we have. And we think that we are -- the past several quarters have proven that we have the ability to manage through some of those. In the short term, obviously, we're facing some challenges, but our commitment in delivering to that guidance that we have provided earlier remains, and we think we can some of the challenges that is coming our way.

That's helpful. And then just a quick follow-up on Spark. Obviously, doubling year-over-year, more than doubling a good number. I think we're all trying to figure out you titrate between some pressures your largest competitor and clear aligners felt this quarter versus you guys more than doubling that Spark revenue. But if I look at that, and we try to have a detailed model on Spark, it looks like to me maybe sequentially from 4Q to 1Q, and Spark revenue was still down a little bit, which would be normal for seasonality and totally get that. but just want to confirm that because that would kind of show, I think, that you and others in the space are kind of just seeing normal seasonal patterns right now and kind of similar trends to a certain extent.

Just in Q1, we saw a strong sequential growth, 17.3%, Q1 versus the Q4 of last year. So we had a strong sequential growth. We saw an increase in the number of active doctors. We saw more utilization of our active doctors. Growth is widespread across various geographies, Western Europe is showing notable strength, and we continue to add -- as far to different geographies through a registration process, we're seeing doctor adoption continue in various years, North America, Europe, China and expansion into the DSOs as well. This double-digit growth on a number of doctors that they're using Spark as well. Those are some of the things that we have seen in here and continue to be committed to what we said before. This is about tripling the size of this business over the next 3 years.

I will sharpen my pencil on that model. Thanks, Amir.

Of course.

Our next question will come from Elizabeth Anderson with Evercore ISI.

I had a question about the China number. One, it seems like from my recollection, China is about 10% of your total revenue or maybe about half of your emerging market revenue. does that imply that China was that these results came through with trying to be down to about 15% year-over-year. Does that seem about roughly the right ballpark?

Yes. So if I get back to the emerging market, Elizabeth, outside emerge -- outside China, emerging market in Q1 was up almost 15%. So look, our overall emerging market business is about 23%, 24%. And China is about 10% of that. We have seen a strong growth in other geographies -- and in exactly as Howard said, that was about 14% to 15% down in Q1, the rest of the business did extremely well. And we think that commitment that we have made to emerging markets continues to deliver for us in the long run. As China opens up. We have orders in our hand as warehouses opening up in Shanghai. We think that we can catch up and compensate for some of the challenges that we have due to lockdown.

Got it. That's super helpful. And then I also just want to make sure I understand the different macro drivers. -- did I also hear you say that you think the Russia revenue should sort of come back in 2Q and thus not be a headwind as we think about the go-forward revenue?

So that in Q1, we did better than our original plan. in Russia and Ukraine. We have said that this business is about $100 million. And obviously, the conflict is going to continue in here. Our expectation is for the rest of the year, we're going to see flat, maybe a little bit modestly lower than what we saw last year. But if you go back only 4 weeks ago, 4 to 6 weeks ago, we have a better outlook of what is taking place in underground. And as I mentioned earlier, we are now in a position that we can actually get some products into Russia that help us to continue to provide hope to the patients and the doctors and provide quality here that we have become accustomed to our Russian customers.

Our next question will come from Erin Wright with Morgan Stanley.

Can you speak to what the initial focus is in terms of the integration of Carestream here? You mentioned obviously some of the near-term investment on that front. But -- but what is some of the near-term opportunities to capture greater market share with that offering? And then also maybe some of the longer-term opportunities that would require maybe some incremental investment as well.

Of course. So I'd like to break it down into 3 key areas of what that integration looks like. But before I do that, this is about $1 billion, as you knownership, over $1 billion market. It's growing double-digit. We bought a business that it is really R&D and from a technology perspective, is well established as an EBITDA margin of over 30%, and Overall, IOS as a whole is less than 15% penetrated worldwide. So now coming back to the integration, 3 areas. Number one is around go-to-market and commercial activities. We have over 3,000 people in our commercial organization. Over 60% of our business is direct. We have access to large areas of underpenetrated geographies that the Carestream was not able to reach a great relationship with the DSOs. That gives us an opportunity to really ramp up the reach, the access of this business in various geographies, in various segments, under is our direct product go through DSOs and work with the partners that we have around the world. So that's the first area. And we are in a really good place already to leverage what they have done in the past and add to it going forward. The second part of this is around operations. We're known for our lean approach in improving on-time delivery, quality, margins. And I think we can add a lot of substantial amount of effort in here as soon as we have access to that manufacturing, we can improve the quality, delivery, margin and reliability of this product -- and we have a long-term plan for it, and we have a really good insight into this. During the due diligence of what we can do to improve it continuously and create a product that is really outstanding and one of a kind in the segment. Last but not least is around innovation. This team comes with a very good exceptional R&D team. They have a robust hardware. They have a really good application suite of applications, and they have some capabilities that is really positioned for DSOs and aligners. We take that you're integrated into our ETFs. You integrated into our clear aligner business and our implant placement capabilities. Now we have a full launch solution digital workflow capabilities that we can put that as a first step of many high-value dental procedures implant for sericlear aligners. So go-to-market operational improvement and R&D and having the long tail of the product that we can put out there in order to really advance this over time. We think this business in the long run requires some investment on our part. It's a core rock, it has basic investment in IT and other operational fees that we need to do. But as we have communicated in the past, we think -- it's going to add about a 50 basis point of growth and over 40 basis points of our margin to our current portfolio as we ramp it up over time.

Okay. That's really helpful there. And just 1 other smaller item was on supply chain challenges just across equipment. It seems like you have better visibility there at this point. And I guess that goes into a broader question on the reaffirmed guidance. Do you think you have enough buffers in there just given the variables from a macro supply chain and political perspective at this point, it just seems you have better visibility there? Is that the right way to think about it?

Erin, this is Howard. I think that we're cautious about consistently the supply chain. We know that things are dynamic in the marketplace. We have deployed our EBS tools. One of the things that we've done is and we talked about with increasing our inventory supply to ensure that we still have our consistent lead time. The reality is there are some challenges around petroleum-based type of products as well as chips. And so we're monitoring that very carefully, but the team has done an exceptional job to date and ensuring that we have it, we've been able to meet customer demand. And so that's what we continue to anticipate as we move forward.

Our next question will come from Nathan Rich with Goldman Sachs.

Amir, I wanted to start maybe high level. You obviously acknowledged some of the macro pressures facing the consumer, but it sounds like you expect demand for procedures remain pretty strong. I guess, could you maybe just help us think about or talk about what played out in kind of March and April as some of these macro headwinds became more acute. And why you kind of feel like the business is going to be pretty resilient kind of in light of some of the uncertainty out there?

Yes. Thanks, Nate. This is what we think there is a fundamental shift in the long-term view of the dental industry. We don't think this is which we have seen that during the earlier stages of the 2020, we saw the resilience of industry, how quickly it came back. You see there is a fundamental change in how people invest and use dentistry to improve the quality of life. So in the long run, we believe that this industry has tremendous amount of runway. But now going back what we saw in December and January specifically in North America and Europe, the volume of patient drops significantly. And it was purely because of -- and we sure cancellation, we saw some postponement in some places up to about 30% of even dental professionals. We had some challenges coming to work in January -- I'm sorry, in December and January. At the start in February, we saw a ramp taking place and continue that ramp continued through February, March April has been an interesting month. You have Easter, you have some holidays in here. And then purely what we are seeing in here is the China impact. Outside of that, we see a continuation of what we saw in February and March. So as long as we can work through that process and we are able see are sometimes in May, maybe year in June that the China opens up. We think that the market is resilient. -- market is going to come back. That's why we feel comfortable with the guidance that we have provided, and we think we can manage through some of the choppiness in the short term in order to be able to execute going forward. The other part of it is Nate that maybe worth mentioning in here is our ability to execute. We have become a lot better in putting energy run a specific set of priorities and continue to build robust capabilities. Example, Spark ramp that we have done in the past 9 months and one training that we are now able to do on a cohort week after week after week, we have been able to do those things, and that would give us that confidence that we would be able to continue to expand our business for years to come here.

That's helpful. And then maybe just a quick follow-up on China. One of the other focuses in the market right now is just the volume-based procurement that the government is putting in place on the implant side. Could you maybe just update us on your expectations around that? And maybe remind us how big your implant business is in China as well as the timing for when we might see an impact on that front?

Yes, of course. We had mentioned that we have over $200 million, $250 million business in China, about 10% of our businesses in China. A big part of our businesses implant. That business has been growing significantly. The volume-based procurement for dental implant is something that is going to become reality in selected provinces in 2022 and probably national rollout in 2023. It's important to notice that the Chinese dental market is a self-pay market. volume-based procurement does not directly impact in the private sector. It's unlikely that it's going to have in the long run, much of an impact as we have shifted our business into more a private sector and on the premium side and the self-pay, we think that our focus on the -- that segment, the rise in middle class, growing disposable income, we would be able to manage through this. It would have an impact, but that impact is not that substantive we think that we would be able to compensate for us and is not going to impact our long-term growth expectation in China.

Our next question will come from Michael Cherny with Bank of America.

If I could jump back to North America. I know you called out the infection prevention business as part of the headwind for the quarter. Can you give us a sense of what North America grew ex infection prevention or what the headwind entailed, especially given some of the choppiness that we've seen from some companies specifically within the U.S. and North American markets.

Outside infection prevention, we have seen continuous growth in ratio our business. We mentioned that our implant business has had 6 quarters of a positive and every quarter has been better than the previous quarter. So our premium implant continued to perform really without high single digits. Our Spark business and on core business continues to perform our bracket and wire business in the mid-single digit, double digit on the Spark side. imaging, mid-single digit continue to grow and our consumable outside the infection prevention at an incredible Q1 high single-digit growth in that area. Put all of that together, we think it is in a low single-digit growth. North America, we mentioned that it's 2% to 3% as a whole. But a big part of that, the impact is this cost correction and infection prevention.

Yes. Maybe just to jump in here, Michael. I think our Q1, that was the 1 low life as it relates to North America. If you think about our core growth, as Amir indicated, Cabo, our instruments business for our -- I'm sorry, our imaging business was up high single digits. Our Ormco business in North America, combining both wire and bracket as well as aligners was up well into the double digits. And our Nobel overall, our impact business our premium endpoint business is also a piping business. So really a lot to be very favorable about it's just that infection prevention. And again, a lot of it has to do with the comps and we anticipate by the second half that we get back to growth there. And long term, even in that business, we anticipate that being mid-single digits.

Understood and helpful. And if I could just circle back on the VBP question relative to China. As you think about your exposure between the public versus the private hospitals, at what point in time do you feel like you have visibility around, a, where VPP will impact your public hospital business? And then, b, I know at times in some of the other markets, it seems like there's been some pricing spillover from public to privates. How are those conversations going with your significant private hospital market contract about how they think about pricing in the in a world where the VBP could impact the public hospital pricing?

Yes. I may touch with them despite of all the challenges that I'm not having. We are ongoing discussion with some of our partners in the over 70%, 75% of our business is in the private segment, and that has continued to increase almost every quarter. Yes, your assumption is absolutely correct. It's going to have an impact and the public cost growth and would have an impact. So this is where innovation, training and education and the commercial execution that we have comes in place. This is not necessarily related to China, but overall, let's say you want to do a full arch treatment in most of these places, even in China, a full is over $20,000. The cost of implant in those areas, when you get the credibility, the support, the reliability, it's fairly small compared to what you get on the consumable side. And given the self-pay nature of this, if you have the support capabilities, the training and education, the technical innovation that people are looking for, you're able to manage through this to get yourself in a much better position. That's what we have been able to do in various geographies. And I don't think China is going to be any different than other the value segment that the implant exists everywhere that has been a phenomenon that has been around for quite some time. In parallel to that, we continue to grow our premium mobile business while we're getting prices.

Our last question will come from Jason Bednar with Piper Sandler.

Really just building on a couple earlier in the call. Just maybe on Carestream to start. Howard, when do we see some of the fruits from the pipeline that you've referenced now a few times? Or I guess maybe asked another way, how do you see the new product cycle and replacement cycle playing out now that the iOS assets under your ownership?

Yes. Happy to answer that, Jason. So the current portfolio has a group of products. It has 3 different products already a point solution, kind of on the value side, 3600, the 3,700 has been in the market. And then the newly released -- this is really an outstanding product with wireless capabilities, and that was just launched. So you've got a continuum of a product that it is already in the market -- and unfortunately, the 3,800 didn't get as much of a momentum because of the core as well as the lock down in China. We think the current portfolio offers a range of options that we can put out there and start getting momentum on it and erasion of this product into the DTX, into the 1 solution that we do is going to be a significant opportunity for us, not only on the IOS side as a point solution, but also improving our position in orthodontics as well as a clear alignment as well as on the implant base. But we have done tremendous amount of due diligence on this company and the innovation part of it. And they have a long-term tailwind and opportunities for improvement and add to the product categories what we see today, what we have today is sufficient for us to make an impact on growth and start seeing the momentum in here. Keep in mind that this market is less than 15% penetrated. the product that they have is 1 of the top 5, and they have less than 10% market share, and that gives us an opportunity to really ramp that up very quickly, very fast.

Very helpful. And then maybe coming back to a Nate's question earlier and just looking at trends here, March to April and thinking bigger picture here. I mean understanding the well maybe not exposed to some of the issues that are going on in other parts of health care. But are you seeing capacity constraints or staffing dynamic second dynamics grading capacity constraints when you look across specialists or general dentists that are out there and whether that's been a bottleneck to getting back to normal? Or has that not really been an issue again, across all the markets that you play in?

Yes. I think maybe addressing our own kind of the discussion around our own labor concerns. I mean we have seen some tight localized challenges with regards to adding some labor. But I think that we've been able to manage that through our EBS and improve productivity as well. And certainly, long term, we know that the best team wins. And so we focus on cutting and retaining the best folks. As part of our circle culture, we continue to engage closely with our employees. And we want to make sure that we are and we remain the preferred employer of choice wherever we operate.

But we do see some labor shortage in the dental offices. And -- here is where we really can make a difference in EPS at work to take a look at opportunity for productivity, opportunity for predictability. This is a software and integration work for really make a difference. To be able to take rates out of the system. So we're looking at the market not necessarily as a provider of a specific product, but enabling the dental offices to be a lot more productive to get the acceptance rate to go up to treat more patients, Das the charter, that's the approach that we are taking, and we're beginning to see good momentum and results as the outcome of it. But your assumption about the labor shortage and some of the challenges are absolutely true and continue to be an issue, not only in between March and April, and I think it's going to be with us for quite some time bachelor innovation, productivity, IT-related capabilities to software really can make a difference.

We've done a pretty good job managing through it. So congrats on that.

We do have a question from Jon Block with Stifel.

I'm sorry about that might add some technical issues. How are your -- I'll just sort of ask a direct question because this is what I'm getting some inquiries on. Russia are in and around 4% in 2021 revs, I believe, within the 6% to 8% core revenue growth guidance Talk to us about that assumption. In other words, is it the assumption that Rush's only modestly down this year? I think you might have alluded to something like that earlier. And then sort of did over same plane book for China. China is 10% of revenue, again, approximately, it was down, I think, Howard, you said 14% in the quarter, but you also seem to say, hey, look, it's a little bit of timing on China, right, quarter-to-quarter, what can go out and look hand. Maybe just if you guys can give a little bit more color, embedded in the 6% to 8%, what are the assumptions on Russia 22 even at a high level and same sort of question specific to China? And then I promise I'll ask a sort of follow-up.

Yes, no problem. No problem, Jon. So with regards to the China component, I think Amir addressed a little bit as well. Clearly, we're a bit more positive on Russia than we were 6 weeks ago during our analyst meeting is largely because we're able to address some of the supply constraints in getting products into Russia. For the year, as it's been contemplated in our guidance, we think that the Russia overall business is Ukraine combined will be somewhere flat to marginally down is what we anticipate. And then as it relates to China, you're right, we did see a decrease of mid-teens. I think there was almost 15% down in China in the quarter. We do anticipate that we'll still see some growth in China this year. just based on past experience, I think if you remember in 2020 with the beginning of the COVID situation, I think we had our business in China go down by in excess of 35% in that respective quarter. And by the end of the year, I think we were essentially flat. And so leaning on that experience and the expectation that, that demand does come back, we do have some modest goals in there for China in our guidance.

Okay. Great. Very helpful. Howard, mall just stick with you and stick to the P&L. So on the gross margins are really impressive flat to actually up slightly year-over-year considering freight, et cetera. So maybe just talk to us about how you get to the EBITDA margin over 20%. In other words, does it hold the line on GM and then get some OpEx leverage? And then just maybe a clarity question on the same topic is be greater than 20% EBITDA margin includes the care -- sorry, the DexaSIOS investments near term?

Yes, sure. No problem, Jon. So yes, I think that we anticipate gross margins, I think we had 59.2%. It's a 20 basis point improvement. We anticipate those to be fairly stable throughout the year. For us to get to that 20% EBITDA number for the full year. We do see some additional improvements on the spend side. And obviously, we're going to see some additional growth. And so in the second half of the year, we anticipate that our growth accelerates overall as well as our margins improving overall. And so that's how we get there. And then as it relates to the IOS and the investments. That is included as it relates to the expense side of investments in that 20% EBITDA number.

All right. Thank you.

Thank you very much, everyone. I think that's -- we are in time. So appreciate all the time and look forward to following up with each of you after calls. Thank you.

Thank you.

Thank you, ladies and gentlemen. This does conclude today's teleconference, and we appreciate your participation. You may disconnect at any time.