Baxter International Inc. (NYSE:BAX) Q4 2023 Earnings Call Transcript

Baxter International Inc. (NYSE:BAX) Q4 2023 Earnings Call Transcript February 8, 2024

Baxter International Inc. beats earnings expectations. Reported EPS is $0.88, expectations were $0.86. Baxter International Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Executives: Clare Trachtman – VP, IR Jose Almeida – Chairman, President and CEO Joel Grade – EVP and CFO

Analysts: Travis Steed – Bank of America Securities Matt Miksic – Barclays Vijay Kumar – Evercore ISI Pito Chickering – Deutsche Bank Securities Matt Taylor – Jefferies Danielle Antalffy – UBS

Operator: Good morning, ladies and gentlemen, and welcome to Baxter International’s Fourth Quarter 2023 Earnings Conference Call. Your lines will remain in a listen-only mode until the question-and-answer segment of today’s call. [Operator Instructions]. As a reminder, this call will be recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter’s permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may begin.

Clare Trachtman: Good morning, and welcome to our fourth quarter 2023 earnings conference call. Joining me today are Joe Almeida, Baxter’s Chairman and Chief Executive Officer; and Joel Grade, Baxter’s Executive Vice President and Chief Financial Officer. On the call this morning, we will be discussing Baxter’s fourth quarter and full year 2023 financial results along with our financial outlook for 2024. With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the first quarter and full year 2024, new product development including the impact and status of pending regulatory approvals, the status and potential impact of our ongoing strategic and recent pricing actions, business development, regulatory matters, and the macroeconomic environment, including commentary on improving supply chain conditions and evolving customer capital spending trends contain forward-looking statements that involve risks and uncertainties.

And of course, our actual results could differ materially from our current expectations. Please refer to today’s press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today’s call, non-GAAP financial measures will be used to help investors understand Baxter’s ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation, along with our earnings release issued this morning, which are both available on our website. Now I’d like to turn the call over to Joe. Joe?

Jose Almeida: Thank you, Clare, and good morning, everyone. We appreciate you taking the time to join us. I will begin with a brief overview of Baxter’s performance for the quarter and the year. After this, I will review our progress against the transformational actions we laid out for you just over a year ago, including the planned separation of our Kidney Care business. I will then turn it over to Joel Grade, who will walk through our results and outlook in more detail. Finally, we will open it up for your questions. As you saw this morning, Baxter reported strong performance for the fourth quarter of 2023 with top line sales exceeding our projections and bottom line results coming in at the high end of our guidance range.

As a reminder, continuing operations exclude the impact of our biopharma solutions business, which we divested at the close of the third quarter. Sales from continuing operations rose 4% on a reported basis ahead of our outlook of 1% to 2% growth. On a constant currency basis, sales increased 3%, also ahead of our guidance, which projected growth of approximately 1%. Strength in the quarter was broad-based with year-over-year growth in the Healthcare Systems and Technologies, Medical Products and Therapies and Pharmaceuticals, which was slightly offset by an expected decline in Kidney Care. Relative to expectations, both of our chronic therapies and drug compounding divisions reported better-than-expected sales. On the bottom line, adjusted earnings per share from continuing operations came in at $0.88 at the top end of our prior guidance range of $0.85 to $0.88.

Our fourth quarter results further reinforce our building momentum. In 2023, we focused on consistently meeting and/or exceeding our financial outlook, particularly in light of the significant supply chain and macro environmental challenges we encountered during 2022. As a testament to this focus, over the course of 2023, we were able to deliver sequential improvement every quarter, and we believe this performance provides us with a solid foundation to build off in 2024. Turning to the full year sales from continuing operations of $14.8 billion advanced 2% on a reported basis and 3% on a constant currency basis, driven by sales growth for all of our segments at constant currency rates. First, looking at the constant currency sales growth in the segment set to comprise our future Baxter portfolio following the planned Kidney Care separation.

Sales in Healthcare Systems & Technologies were up 7% in the fourth quarter and 3% for the year. Medical Products and Therapies sales rose 4% in both the quarter and for the year, and sales in Pharmaceuticals were up 7% for both the quarter and the year. Performance in these segments was filled by strong execution across our commercial and manufacturing teams. New product launches increased the availability of electromechanical component and a more stable supply chain and macroeconomic environment relative to the significant volatility experienced last year. With respect to hospital capital spending, while we still believe there may be pockets of softer spending, we are encouraged by the sequential improvement we experienced every quarter in 2023 within our Care and Connectivity Solutions division.

Our Kidney Care segment, which will be called Vantive post separation, declined 1% in the quarter and grew 1% for the year at constant rates. Strong growth in acute therapies was offset by flat growth in chronic therapies, reflecting a difficult year-over-year comparison due to certain discrete items that benefited sales in the prior year as well as lower sales in China due to the impact of government-based procurement initiatives and the lower patient census due to the pandemic. The underlying state of the Kidney Care business continues to improve and the momentum we are building is evident. Among key indicators, we are seeing renewed growth in the peritoneal dialysis patient population following the earlier impact of pandemic-driven mortality issues.

Our strategic rationale and hypothesis for an independent Kidney Care business remains as strong as ever. Our team is executing and gearing up for a successful separation this year. Given overall business performance and environmental dynamics, I’m optimistic as we look ahead to the prospects for both Baxter and Vantive as separate entities. Our solid financial performance was achieved in parallel with meaningful progress against the strategic priorities we announced to open 2023. We kicked off the year with an urgency to rethink both the scope and velocity of our transformation. Since then, our team delivered executing on a range of goals to position a separated Baxter and Vantive for a new era of enhanced patient and shareholder impact, enabled by heightened strategic clarity, operational efficiency and innovation.

We realigned our businesses into newly streamlined simplified operating model based on globally integrated business segments. Each segment is led by a seasoned and knowledgeable executive who has profit and loss accountability, inclusive of dedicated commercial research and development, manufacturing, supply chain and functional teams. We are already seeing the benefits of improved line of sight to our customers and greater agility to recognize and capture growth opportunities. We completed the divestiture of our biopharma solutions business at the close of Q3, which further allowed us to streamline our strategic focus on our core businesses. We are in the process of utilizing the after-tax proceeds of approximately $3.7 billion to pay down debt in line with our stated capital allocation priorities, including $2.8 billion of repayments in the fourth quarter.

Finally, we continue to make progress towards separating Vantive out of Baxter. As we have consistently stated, we believe this separation will ultimately empower both companies to pursue their own unique strategic and investment priorities. Many of you had the opportunity to meet the designated Vantive CEO, Chris Toth at the JPMorgan conference last month. Chris has been hard at work building out his organization, meeting customers and setting near-term and long-term strategies. Among recent developments, Chris has onboarded Matt Harbaugh as designated Vantive CFO. Many of you may know Matt from his days as CFO at NuVasive. Meanwhile, we continue to hit key separation milestones across operational, legal, regulatory, supply chain IT domains.

In summary, 2023 was a year of rebuilding and renewing our momentum. We made significant progress on an ambitious slate of strategic initiatives coupled with solid financial performance, while never losing focus on our foundational commitments to our customers and patients. Additionally, we have created a new potential to embrace more exciting opportunities to come. I do not take the accomplishments of this past year for granted, I want to thank and recognize all of the employees who hard work and commitment helped us to achieve our objectives. I have never been more impressed by what a team could achieve in a single year and that is why I’m so energized by our potential to seize on opportunities we have created together. Now we turn it over to Joel for a closer look at our fourth quarter and full year 2023 performance as well as our 2024 outlook.

Joel Grade: Thanks, Joe and good morning, everyone. I’m happy to be joining the call this morning to provide some additional details on Baxter’s fourth quarter and full year 2023 financial performance as well as commentary on our financial outlook for 2024. As Joe mentioned, we are pleased with our fourth quarter results, which represented another step forward in our on-going business transformation. Fourth quarter 2023 global sales of $3.9 billion increased 4% on a reported basis and 3% on a constant currency basis and compared favorably to our previously issued guidance of 1% to 2% reported and approximately 1% constant currency. Outperformance in the quarter benefited from better than expected sales in many product categories and particularly in chronic therapies and drug compounding.

As compared to the prior year period, we reported solid quarterly growth in health care systems and technologies, pharmaceuticals and medical products and therapies. And collectively, sales for these three businesses, which will comprise Baxter post the separation, increased approximately 5%. As expected, Kidney Care sales declined slightly in the quarter due to the factors Joe mentioned earlier. On the bottom line, adjusted earnings totalled $0.88 per share, increasing 13% versus the prior year period. These results reflect the ongoing operational improvements we are recognizing both commercially, as well as within our supply chain network as that team successfully executes on its margin improvement programs. Lower interest expense and a benefit from foreign exchange also contributed favorably to the quarter, partially offset by the impact of a higher tax rate compared to the prior year.

Adjusted earnings per share for the quarter came in at the high end of our expected range of $0.85 to $0.88 per share, primarily driven by better sales and operational performance. Now I’ll walk through performance by our reportable segments. Commentary regarding sales growth will reflect growth at constant currency rates. Sales in our Medical Products and Therapies segments were $1.3 billion, increasing 4%. Full year 2023 sales totalled $5 billion also advancing 4%. Within Medical products and therapies, fourth quarter sales from our Infusion Therapies and Technologies division totalled $1 billion and increased 4%. Sales in the quarter benefited from strength in our IV Solutions portfolio, particularly outside the United States, as well as solid performance in our infusion system portfolio.

Sales from Advanced Surgery totalled $278 million and grew 6%, coming in ahead of expectations and reflecting strong growth internationally. For our Healthcare Systems & Technologies or HST segment, sales in the quarter were $795 million and increased 7%. Full year 2023 sales totalled $3 billion, advancing 3%, within the HST segment, sales in our Care & Connectivity Solutions, or CCS division or $492 million, increasing 11%. Performance in the quarter benefited from double-digit growth in all key product categories within the division, including our care communications, surgical solutions and Patient Support Systems product offerings. Growth in the quarter was partially offset by lower contribution from rental revenues. Fourth quarter United States orders within CCS continued to improve sequentially, but notably also grew on a year-over-year basis for the first time in 2023.

While we are encouraged by the improvement in capital spending we’ve seen from our U.S. hospital customers, we continue to believe there may still be select pockets of cautiousness in the marketplace. Front Line Care sales in the quarter were $303 million, increasing 2%, given the improvements in electromechanical component availability over the course of 2023, we’re able to successfully address our elevated backlog and exited the year at more normalized levels. Sales in our Pharmaceuticals segment were $596 million, increasing 7%. For the full year, sales were $2.2 billion, also advancing 7%. Performance in the quarter reflected double-digit growth in our U.S. injectables portfolio driven by new product launches, as well as continued strong demand for our services within our drug compounding portfolio internationally.

Other sales, which represent sales not allocated to a segment and primarily include sales of products and services provided directly through certain of our manufacturing facilities were $18 million and declined 58% during the quarter in line with our expectations. This lower level of sales reflects reduced demand for certain contract manufacturing volumes and the termination of a royalty arrangement. Moving on to Kidney Care, sales in the quarter were $1.2 billion and declined 1%. Full year 2023 sales totalled $4.5 billion and increased 1%. Within Kidney Care, global sales for chronic therapies were $950 million, declining 3%, though as mentioned earlier, came in better than expected. Sales growth in the quarter was impacted by a difficult comparison to the prior year period, which included certain discrete items in the U.S. that totalled approximately $25 million.

Finally, performance in chronic therapies continues to be impacted by lower sales in China due to certain government-based procurement initiatives and a lower patient census due to the pandemic. We estimate that collectively, these country-specific factors negatively impacted sales by approximately $35 million in the quarter. Sales in our Acute Therapies business were $206 million, representing growth of 6% with strength across most regions, including double-digit growth in the United States, where we’ve now rebased this business following the pandemic-related benefits we previously experienced. Now moving through the rest of the P&L. Our adjusted gross margin totalled 42% and represented an increase of 80 basis points over the prior year.

The year-over-year improvement in gross margin primarily reflects the stabilization of macroeconomic factors and inflationary pressures that previously contributed to higher cost for raw materials, overhead and labor that impacted our margins earlier in the year. Margin improvement in the quarter also benefited from pricing initiatives in select markets and on-going margin improvement programs in our integrated supply chain network. Performance for the quarter was inline with our expectations as topline outperformance in the quarter was driven by lower-margin divisions, which drove a slightly negative gross profit mix in the quarter. Adjusted SG&A totalled $829 million or 21.3% as a percentage of sales, an increase of 20 basis points versus the prior year period.

Performance in the quarter benefited from our on-going transformation initiatives to enhance operational efficiencies, offset by higher bonus accruals under our annual employee incentive compensation plans compared to the prior year and select investments in sales and marketing initiatives. Adjusted Research & Development spending in the quarter totalled $172 million and represented 4.4% as a percentage of sales, increasing 20 basis points versus the prior year. We have ramped up our R&D efforts, particularly increasing our investments in advancing new products across the portfolio and like SG&A, R&D expenses include the impact of higher employee incentive accruals as compared to the prior year period. These factors resulted in an adjusted operating margin of 16.2% and an increase of 30 basis points.

Overall, we are very pleased with the second half margin expansion we’re able to realize with operating margins improving approximately 300 basis points in the second half of the year as compared to the first half of 2023. Net interest expense totalled $73 million in the quarter, a decrease of $44 million versus the prior year and down $55 million sequentially, driven by debt repayment of approximately $2.8 billion associated with the utilization of the proceeds from our BPS divestiture. We plan to continue to repay debt in 2024, consistent with our stated capital allocation priorities. Adjusted other non-operating income, totalled $11 million in the quarter compared to an expense of $11 million in the prior year period. Year-over-year improvement was largely due to lower foreign exchange losses incurred as compared with the prior year period.

The adjusted tax rate in the quarter was 21.0% compared to 14.6% in the prior year period. The year-over-year increase is primarily driven by statute expirations on certain tax positions benefiting the prior year period. The tax rate in the quarter came in higher than expected, primarily driven by changes in geographic earnings mix. And as previously mentioned, adjusted earnings totalled $0.88 and increased 13% versus the prior year, primarily driven by better-than-expected sales and operational efficiencies, as well as lower interest expense, partially offset by the tax rate in the quarter. For the full year, Baxter’s adjusted earnings from continuing operations decreased 14% to $2.60 per diluted share, reflecting the impact of higher cost of goods sold, driven primarily by the macro environmental factors we previously discussed, greater annual employee bonus accruals, as well as increased non-operating expenses.

These factors were partially offset by our operational and supply chain savings initiatives. With respect to cash flow, we generated free cash flow for the year of over $1 billion from continuing operations compared to $411 million in the prior year period. Going forward, cash flow generation and in particular, improving our working capital metrics is a key priority both for me and the Baxter team. To close on our full year results, we are pleased with our operating performance through 2023, which reflected both consistent progress and building momentum. And it is important to note that our teams were able to achieve this performance, while also making meaningful progress against our strategic initiatives designed to enhance our future performance and drive incremental value for all stakeholders.

We look forward to building on that positive momentum as we enter 2024. Let me conclude my remarks by discussing our outlook for the first quarter and full year 2024, including some key assumptions underpinning the guidance. For full year 2024, Baxter expects total sales growth of 2% on both a reported and constant currency basis, as the impact from foreign exchange is currently expected to be minimal on a full year basis. Constant currency sales guidance for the full year by reportable segments is as follows; for Medical Products and Therapies, we expect sales growth of 3% to 4%; sales in our Healthcare Systems and Technology segments are expected to increase approximately 3%; we expect Pharmaceuticals sales growth of 4% to 5%. Collectively, sales for these remaining Baxter businesses are expected to increase 3% to 4% in 2024; for Kidney Care, we expect sales growth to decline 1% to 2% as compared to 2023.

Factors impacting year-over-year growth are primarily driven by select market and product exits in connection with our margin expansion initiatives for this segment which we estimate will negatively impact sales by approximately $150 million. Additionally, the incremental impact from the ongoing government procurement initiatives in China is expected to total approximately $70 million in 2024. Now turning to our outlook for other P&L line items. We expect adjusted operating margin to increase by at least 50 basis points in 2024. We expect our non-operating expenses, which include net interest expense and other income and expense to total approximately $350 million in aggregate during 2024. We anticipate a full year adjusted tax rate between 22.0% and 22.5%, which reflects an approximate 100 basis point impact to the 2024 tax rate from the implementation of Pillar 2 [ph].

We expect our diluted share count to increase slightly and average 510 million shares for the year. Based on all these factors, we anticipate full year adjusted earnings, excluding special items, of $2.85 to $2.95 per diluted share. Specific to the first quarter of 2024, we expect global sales growth of approximately 1% on a reported basis and 1% to 2% on a constant currency basis. And we expect adjusted earnings, excluding special items, of $0.59 to $0.62 per diluted share. With that, we can now open up the call for Q&A.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. I would like to remind participants that this call is being recorded, and a digital replay will be available on the Baxter International website for 60 days at www.baxter.com. Our first question is from Travis Steed of Bank of America Securities. Your question, please.

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Q&A Session

Travis Steed: Hi. Good morning, everybody, and thanks for taking the question. I’ll go ahead and ask both of mine upfront. One, on the revenue side, talked about sequential improvement every quarter and when you look at the 2024 revenue guidance to 2%, maybe think through like some of the areas that could improve over the course of the year, where there could be some conservatism built then to the ‘24 and how to think about the cadence of the year? And the second question really is on margins. If you think about the 50 basis point margin guidance. Curious what some of the underlying assumptions are on FX and inflationary pressures and stuff like that? Thanks a lot.

Joel Grade: Hi, Travis. It’s Joel. Thanks for the call. So I guess I’d say a couple of things. First of all, we feel very good about the momentum in our business. I think we had a – we saw a solid fourth quarter. We are pleased with some of the results that we have heading into this year. And I think the revenue guidance that you see, if you think about overall, the business outside of Kidney is growing 3% to 4% that we have, as we’ve talked about our forecast. With Kidney itself, if you think about that, we actually have about – there’s about $150 million of purposeful business that we’re actually exiting products. We’re exiting markets. And so if you actually factor that into that equation, again, we’re up over that 3% number for the year, which I think is great.

If you think about the full year guidance itself, a couple some of that strong sales performance with the fact that we’re actually expanding our margins by over 50 basis points – and we’re actually leading to double-digit EPS growth. I said we feel really good about that. Now on the margin side, what you asked the question you asked, I think the main puts and takes of that – the main part is the operational cost improvements in that. There’s a big piece of that from also pricing, from volume. And again, so I think some of the things that you have in there are some of the key assumptions on the margins. I think in all those areas, we feel good about the opportunities again to build on momentum we’ve had. If you remember in the last quarter, our HST business, we’re very pleased with the momentum we had from a sales perspective in Q4, and we do anticipate that heading into the year as well.

So again, lots of good stuff there, but I’ll pause there for any other.

Clare Trachtman: Yes, in that, I’ll just – I’ll add in a little – or sorry, Travis. I’ll add in a little bit here. That was my fault. So in terms of the cadence, I would say if we think about just the shape of the P&L, I think sales will be relatively – you’ll see some slight acceleration in the second half of the year. But in terms of margin expansion, you are going to see first half margin expansion more outsized than you will see in the second half, obviously, just given the comp and similarly, you’ll see that on earnings growth. So earnings growth in the first half of the year will be very strong. Your question on FX, Travis was FX is negative on margins for the year, about 40 basis points of an impact on our operating margins on a year-over-year basis.

Travis Steed: Great. Thanks a lot, Clare, and everybody.

Clare Trachtman: Great. Thank you.

Operator: Robbie Marcus of JPMorgan has a question. Please state your question.

Unidentified Analyst: Thanks. This is Allen on for Robbie. I had a question on some of the strength that we saw in the fourth quarter and a little bit of the softer first quarter guide. Was there any pull forward of sales into this quarter? You talked about how you recovered some of the backlogs. I expect some of that drove the outsized strength. But also just looking at first quarter, given what we view as an easy comp, why aren’t you able to put up a better growth number at the start of the year? How much of that is conservatism versus realism?

Clare Trachtman: Yes. So what I would say is probably one of the biggest drivers in terms of the quarterly cadence is within our HST business, where sales do ramp over the course of the year. So very similar to what we saw in 2023. You will see our HST business have growth – accelerated growth in the second half of the year as compared to the first half of the year. So I think that’s probably one of the bigger drivers in terms of the first quarter guidance.

Jose Almeida: And also, we are continuing to see momentum from 2023 into 2024. So I feel cautiously optimistic about the momentum that we got in Q4 going into Q1. Of course, we look at many different factors when we are guiding. But I can tell you that based on the market growth, some of the demand that we’re seeing, we feel very comfortable with Q1. And also, we have always a crescendo throughout the year, whereas we have product launches. We have 10 molecules launching in pharmaceutical. They’re starting this quarter that we see ramping throughout Q2, Q3 and Q4. And also, there are some very important accounts that we – is still closing on for the rest of the year that we will also boost our ability to do well in 2024.

Unidentified Analyst: Got it. And then if I could slip in a quick one. You talked about the capital equipment environment continuing to improve some pockets of weakness. What are you assuming for 2024 in the guidance? Are you expecting continued – a little bit of pockets of weakness? Or are you having that basically normalized over the course of the year? Thank you.

Jose Almeida: Most of our assumptions are large system – medium to large systems continue to improve. We can see that, and we’re going to see that slightly in Q1, but going into Q2, Q3 and Q4. There are pockets of softness in capital like always are primarily smaller systems. Remember, interest rates are still very high and those affect the smaller systems. But for the majority of our customers, we’re starting to see a recovery in capital when we feel really comfortable in 2024 that is recovering completely from what we saw in the beginning of – end of ‘22 into ‘23.

Clare Trachtman: Yes. And Allen, just to add on to that. Similarly, I think we will see sequential improvement for capital orders within our CCS business every quarter this year, leading to orders being up on a year-over-year basis. And as mentioned in our prepared remarks, we saw a very similar trend kind of in 2023 as well. And then in the fourth quarter, we did see our orders up on a year-over-year basis. So we’ve been seeing this steady sequential improvement. And so we’re going to build on that momentum as we go into 2024.

Operator: Matt Miksic of Barclays is on the line with a question. Please state your question.

Matt Miksic: Hi. Thanks so much for taking the question. Can you hear me okay?

Jose Almeida: Yes, we can.

Matt Miksic: Great. Thanks. So I had – congrats on the solid results here and the pickup in the Hill Rock business. So I just have a question on the seasonality of that business. And also if you could maybe just the – to the extent of recurring revenues in that business. And I think we’re used to a history there being capital driven, Q4 driven. But with some of the increase in sort of contracting around connected care and systems that – I’m wondering, is that a mix of recurring revenue that we should see over time? Or you’re starting to see a mix change in that business? Any color on that front would be super helpful. Thanks.

Jose Almeida: So we always have the seasonality. We see hospitals a little bit more cautious in the first quarter. And then as they get through the first quarter, they start spending the money that they have for the year and it culminates usually with a strong Q4 in terms of growth because a lot of spending gets done there. We try to, as much as possible, create more – a less seasonal less seasonality, but those things happen. And our focus are the – I think one important program we have in Baxter, as you noticed, strengthen our beds in the fourth quarter. We continue to go for some large accounts and conversions and we’re starting to get some success there. When we bring Baxter together, what Baxter can do as one company is incredible for hospitals.

So we feel that, that momentum is starting to kick in with accounts that are partially penetrated, going full blow into a Baxter account. We saw that with the conversion that we get this kind of launch in early 2025 in Northern Cal that we have large accounts and other things that we can see. So this is a really good momentum for Baxter. We can see that going. But the first quarter is always a much lighter quarter than the rest of the year. The revenue in terms of Front Line Care is a business that has less seasonality than the CCS business under HST. The reason is that it’s more consistent with procurement in doctors’ offices and monitors into hospital med search floors. So that brings less seasonality. A business that is very predictable is our MPT business, which has been successfully growing, as you can see in 2023.

150 basis points above its market growth rate, driven tremendously by infusion systems as well as solutions, IV solutions. So that brings that business to a quite less seasonable, more repeatable. I hope I was able to answer your question.

Joel Grade: Yes. Thank you. If I could just add one thing to that. I mean I think the way to think about that HSD business over the course of the year just a bit on what Joe said is that we’re going to see, I’d say, sequential ramp up over the course of the year in that business. So I think the – again, as Clare talked a little bit earlier. I mean there’s going to be somewhat of a ramp up in sales that you’re going to see, and that’s particularly going to be applicable to that segment. The other thing I would just say, you recall last year, Front Line Care had a fairly sizable amount of growth in 2023 as they work through some of the backlog. There’s a bit of an early headwind on that business during the first part of the year as well. So again, sequential ramp-up in that business is just one add I would make to that. So, thanks.