Becton, Dickinson and Company (NYSE:BDX) Q1 2023 Earnings Call Transcript

Becton, Dickinson and Company (NYSE:BDX) Q1 2023 Earnings Call Transcript February 2, 2023

Operator: Hello, and welcome to BD’s First Fiscal Quarter of 2023 Earnings Call. At the request of BD, today’s call is being recorded, and a replay of the call will be made available on BD’s Investor Relations website on bd.com. The call is also being made available by phone at (800) 695-0395 for domestic calls and area code +1 (402) 220-1388 for international calls. I will now turn the call over to BD.

Francesca DeMartino: Good morning, and welcome to BD’s earnings call. I’m Francesca DeMartino, Senior Vice President and Head of Investor Relations. On behalf of the BD team, thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the first quarter of fiscal 2023. We also posted an earnings presentation that provides additional details on our performance. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today’s call are Tom Polen, BD’s Chairman, Chief Executive Officer and President; and Chris DelOrefice, Executive Vice President and Chief Financial Officer. Tom will provide highlights of our performance and the continued execution of our BD 2025 Strategy.

Chris will then provide additional details on our Q1 financial performance and our updated guidance for fiscal 2023. Following the prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents, Mike Garrison, President of the Medical segment; Dave Hickey, President of the Life Sciences segment; and Rick Byrd, President of the Interventional segment. Before we get started, I want to remind you that we will be making forward-looking statements. I encourage you to read the disclaimer in our earnings release and the disclosures in our SEC filings, which are both available on the Investor Relations website. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted.

When we refer to any given period, we are referring to the fiscal period unless we specifically note it as a calendar period. I will also call your attention to the basis of presentation slide, which defines terms such as base revenues and continuing operations. With that, I’m very pleased to turn it over to Tom.

Tom Polen: Thanks, Francesca. And good morning, everyone. And thank you for joining us. We delivered another quarter of strong performance in Q1. Our results reflect the momentum of our BD2025 strategy, which we are driving through a powerful combination of innovation and strong execution. We exceeded our revenue and earnings expectations in Q1 despite market disruption in China and continue to drive consistent, durable performance in our base business, with revenue growth of 5.2% and $2.98 in adjusted diluted EPS. Our results are a testament to the continued relentless focus by our team of talented associates who are delivering BD products and solutions that are enabling our customers to provide high-quality, cost-effective care to patients around the world.

In Q1, we continue to make excellent progress driving all three pillars of our strategy to accelerate growth, simplify the company and empower our associates. Our growth continues to reflect consistent performance of our durable core, which has become known as the backbone of health care and our continued shift into attractive and higher growth end markets through investments in both R&D and tuck-in M&A. These higher-growth transformative solutions are focused in the three areas we see reshaping health care and where we are currently investing approximately 60% of our R&D. And that’s in smart connected care, enabling new care settings and improving chronic disease outcomes. Today, we have what I believe is the most exciting innovation pipeline in the history of the company.

And through our investments, we are systematically increasing the WAMGR across our portfolio and supporting our strong growth profile. I’ll have a few of the end markets that are driving our growth and some of the key products recently launched and in our pipeline that we’re excited about. Our Medical segment is focused on improving medication delivery across a wide range of settings, making it safer, simpler and smarter across end markets that include medication management solutions, pharmacy automation, pharma and biotech drug delivery and vascular access management, where we recently launched PosiFlush SafeScrub, consistent with the expected launch timing we shared on our Q3 FY2022 call. A prefilled flush syringe with an integrated disinfection device, PosiFlush SafeScrub, is designed to simplify nursing workflow and enhance compliance with infection prevention guidelines.

It’s a good example of how we’re driving continuous innovation that extends our leadership in our durable core and within the broader $9 billion vascular access management market. Another milestone in our vascular access portfolio was clearance of our new PowerMe midline catheter by the Chinese regulatory agency NMPA. This was designed by our R&D center in China for China and is our first midline in this geography and offers up to 30 days of continuous venous access while reducing patient complications. We’re excited about the opportunity PowerMe creates to help develop and category for vascular access in China, and we look forward to the expected launch later this quarter. Our BD Life Sciences segment provides solutions from sample collection and discovery to diagnosis and serves dynamic end markets like single cell analysis, clinical microbiology, point-of-care and the molecular diagnostics market, where we continue to advance our strategy of menu expansion with initial sales outside the U.S. of our BD MAX respiratory viral panel or RVP.

This multiplex respiratory panel detects COVID-19, flu A and B and RSV in a single test and is an ideal solution for endemic respiratory testing. This aligns to our strategy to accelerate our growth in the $4 billion molecular diagnostics end market that’s growing about 9%. The RVP panel is currently under FDA EUA review for U.S. launch. We also continue to progress our strategy in blood collection at the point-of-care. Point-of-care is one of the fastest-growing categories in diagnostics today that we believe will accelerate as diagnostic testing migrates to new and more convenient care settings such as retail clinics and pharmacies and even the potential of at home. Our BD MiniDraw capillary blood collection system is a disruptive innovation that enables collection of a high-quality blood sample without a venipuncture and is designed to provide a better patient experience across a broad range of care settings.

We remain on track for 510(k) submission by the second half of FY2023. Our BD Interventional segment, which provides solutions for chronic disease management, serves end markets that dramatically improve people’s lives, such as oncology, incontinence, advanced repair and reconstruction and the $5 billion peripheral vascular disease market, a space that’s growing about 6%. Within PVD, we continued our strategy to globalize the BDI portfolio with the recent launch of our Venovo venous stent in China. The first stent in this market, specifically designed for iliofemoral venous disease. Within the $3 billion oncology end market, the space also growing about 6%, we achieved a significant milestone, completing safety testing for a multimodality vacuum-assisted biopsy system, and we’re on track for FDA submission and launch in FY2024.

The BD multimodality VAB device is expected to be the first vacuum-assisted biopsy system designed to work across all three imaging modalities of ultrasound, CT and MRI, allowing customers to consolidate capital equipment, standardize consumables and simplify physician and nurse training. These launches and milestones are good examples of how we’re strengthening our position in attractive end markets across our portfolio. Our purposeful strategic investments in R&D as well as tuck-in M&A and CapEx are supported by our strong flexible balance sheet and disciplined and balanced capital deployment strategy. This framework also gives us the flexibility to return capital to shareholders through a competitive dividend and share repurchases. In Q1, we also continued to simplify our company with programs across our manufacturing network, our portfolio and most recently, our operating model.

More specifically, we continue to make progress on our RECODE portfolio simplification program, where we are reducing SKUs of older generation products in order to focus on the most important products needed to deliver care today. We remain on track to remove 20% of our total portfolio by 2025, having achieved more than half of these SKU reductions thus far. In addition, we have numerous initiatives underway to consolidate our manufacturing footprint in more cost-effective locations. All of these efforts are designed to reduce complexity, drive supply chain excellence, and make BD more agile while supporting the achievement of our margin expansion goals. Our BD2025 strategy is balanced, robust and resilient. And our foresight planning and agility are enabling us to deliver strong performance despite the continued macro environment, challenging all companies.

To share some perspective specific to health care, overall, the environment continues to stabilize and is in line with our view that challenges are going to persist, not escalate at least through 2023. While inflation is easing in some areas, we do expect that it will remain well above what we have seen historically and have planned for another year of outsized inflation primarily in labor and raw materials. We see continued labor pressure with different market dynamics impacting hiring and increasing wages for certain roles primarily in our manufacturing organization. Across raw materials, some categories of resins used in finished goods are beginning to show signs of improvement while other materials such as packaging and rubber are still inflated versus historic prices.

In terms of the COVID pandemic, broadly speaking, we see stabilization. While there continues to be surges in certain pockets around the world, similar to our customers, we have become more accustomed to managing through COVID-driven dynamics and have been effective at avoiding any extended manufacturing and distribution disruptions. Specific to China, we anticipate that the recent COVID restrictions that impacted us in Q1 will affect our peers as well. Our local teams are navigating these restrictions well, which reflects the resiliency and strength of our China organization and the diversity and durability of our business. By successfully navigating the challenging macro environment, we are distinguishing BD and supporting our ability to continue delivering strong performance.

Before I turn it over to Chris, I’ll share a few updates on the strong progress our team is making to advance our ESG strategy and goals. In December, we published our second annual ID&E report, which provides details about our progress towards our 2030 ESG goals for promoting a healthy workforce and communities. The report highlights our improvements towards increasing diversity at the management and executive levels and spotlights our global associates who are advancing our culture and driving meaningful change within BD and the communities that we serve. We also published our third annual cybersecurity report. BD was the first in med tech to outline our ongoing efforts to advance cybersecurity in a report, including our work to protect against cyber-attacks and empower customers with information about cyber risks and vulnerabilities.

We’re proud to receive continued recognition for our ESG efforts, most recently being named for the fourth consecutive year to both Newsweek’s list of America’s Most Responsible Companies, ranking in the top 25%, and the Bloomberg Gender-Equality Index, recognizing our ongoing commitment to workplace equality. In summary, I’m proud of our progress and momentum. Our associates are bringing our BD2025 strategy to life as we operate as a more agile, innovative med tech leader. BD is well positioned to drive profitable growth and create long-term value. First, our growth profile is consistent and durable. Second, we are enhancing our leadership positions through purposeful portfolio shifts into higher-growth markets, increasing the WAMGR across our portfolio.

Third, we are improving our margin profile through our differentiated growth, enhanced simplification programs and ongoing supply chain excellence. And fourth, we are committed to remaining disciplined and maintaining a strong and flexible balance sheet. We see an increasing capacity through our BD2025 time frame to support value creation and continued strong growth through tuck-in M&A. All of this adds up to a compelling financial profile with a long-term targeted base revenue growth of 5.5% plus and double-digit EPS growth. Our updated guidance for FY 2023 reinforces our confidence in our ability to achieve these targets. With that, let me turn it over to Chris to review our financials, guidance and outlook.

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Chris DelOrefice: Thanks, Tom. Echoing Tom’s comments, we delivered another quarter of strong performance in Q1, which demonstrates our consistent, reliable, durable growth profile in our BD2025 strategy, playing out as planned. So first, beginning with our revenue performance. We exceeded our expectations for the quarter, delivering $4.6 billion in revenue with base business growth of 5.2% or 3% organic. We see underlying organic growth more at mid-single-digits when adjusting for strategic product exits, the licensing fee comparison in life sciences, and several COVID-driven comparisons. COVID-only testing revenues were $32 million, which is expected, declined from $185 million last year. Total company base business growth was strong across BD Medical and BD Interventional with approximately 6% growth.

Base revenue growth in BD Life Sciences of 3.3% reflects the comparison to licensing revenues that impacted growth by almost 400 basis points. Base revenue growth was strong regionally as well with mid-single-digit growth in the U.S., EMEA and Asia Pacific. Revenues in China declined slightly, which reflects the impact of COVID restrictions, offset by strong performance from new product introductions in BDI and research solutions in BDB. For the full year, we continue to expect to deliver near double-digit growth in China. Our base business revenue performance continues to be supported by our durable core portfolio, and an increasing contribution from the transformative solutions in our innovation pipeline and tuck-in acquisitions. We also continue to benefit from the organic contribution from acquisitions we anniversaried, which was about 30 basis points in the quarter.

Let me now provide some high-level insight into each segment’s performance in the quarter. Further detail can be found in today’s earnings announcement and presentation. BD Medical revenue totaled $2.2 billion in the quarter, growing 6.1%. BD Medical performance reflects strong growth in both Medication Management Solutions and Pharm Systems, which more than offset a decline in Medication Delivery Solutions. The decline in MDS of 1% was driven by COVID-related comparisons and the impact of recent COVID restrictions in China as well as planned strategic portfolio exits. We continue to see strong performance in Vascular Access Management outside the U.S. Double-digit growth of 15.5% in MMS was driven by strong demand for our pharmacy automation solutions, including both Parata and Rowa.

We’ve been very pleased with customer response and the performance of Parata. As expected, growth in MMS also reflects the comparison to higher dispensing installations and infusion set utilization in the prior year driven by COVID dynamics. We continue to have a very healthy backlog of customer orders for Pyxis and BD HealthSight, which reflects the strength of our connected medication management portfolio. And despite strong growth of 18% in Q1 of last year, Pharm Systems delivered another quarter of double-digit growth of 10.6%, driven by continued penetration in the high-growth biologic and vaccine markets. BD Life Sciences revenue totaled $1.3 billion in the quarter. The decline of 7.3% year-over-year is due to the expected lower COVID-only testing revenues.

Life Sciences base revenues grew over 7%, excluding the licensing grow over as previously discussed. Growth was driven by growth in Integrated Diagnostic Solutions base revenue of 1.3%, or 6.4% when excluding the licensing comparison. This strong underlying mid-single-digit growth was driven by BD Kiestra that is helping to address laboratory labor shortages through automation and informatics and continued leverage of our molecular testing menu across our expanded BD Max installed base. In addition, there was strong demand for our respiratory testing portfolio that was partly aided by the timing of orders. High single-digit growth of 9.2% in Biosciences reflects continued growth from new product launches combined with strong double-digit growth in research reagents, enabled by our differentiated content and dye strategy.

We continue to see demand for our expanded suite of flow cytometry analyzers and sorters as researchers continue to do even higher parameter cellular analysis for cancer and other immune-related conditions. BD Interventional revenues totaled $1.1 billion in the quarter, growing 5.6%. Growth was driven by surgery growth of 3.1%, which reflects strong performance in advanced repair and reconstruction driven by continued strong market adoption of Phasix, Hernia, resorbable scaffold and double-digit growth in biosurgery, aided by the Tissuemed acquisition. Growth in surgery was tempered by planned strategic portfolio exits and then expected decline in BD ChloraPrep due to a tough comparison to the prior year as a result of dealer stocking. Peripheral Intervention grew 10.8%, which reflects double-digit growth in PVD, driven by the Venovo relaunch, coupled with continued global penetration of Rotarex, and the acquisition of Venclose, which addresses chronic venous insufficiency.

Additionally, growth was strong in oncology, within Greater Asia due to an improved backlog situation associated with prior year supplier constraints. Urology growth of 1.8% reflects double-digit growth in our PureWick, chronic, incontinence solutions and endourology that benefited from reduced back order due to improved supplier performance. Offsetting this strong performance was a difficult comparison in urological drainage due to shore step back order release and distributor stocking in the prior year. Now moving to our P&L. We reported Q1 adjusted diluted EPS of $2.98, which included gross margin of 54.7% and operating margin of 22.9% that were consistent with our expectations. While we are no longer providing a specific breakout of the impact to margins from COVID-only testing, you will recall the comparison to higher testing in the prior year is weighted to the first half and as expected is the driver of the decline in reported Q1 margins year-over-year.

Excluding the COVID impacts to margins in Q1 of both years, both gross and operating margins in our base business were up slightly year-over-year. The improvement in base margins was delivered despite around 350 basis points of outsized inflation that as expected was primarily driven by selling through inventory that included peak inflation impacts from FY 2022, such as increases in certain raw materials noted earlier as well as the impact of labor inflation and elevated shipping. We were able to offset a large portion of this impact to our simplification and inflation mitigation initiatives and the benefit from strategic portfolio access of lower-margin products as planned. We expect the impact from inflation to moderate as we move through the year.

Base margin performance also includes growing over the impact from licensing revenues in the prior year. As expected, we had favorable FX that was recorded in inventory that benefited our GP as it flow through sales. R&D of 6.4% of sales reflects our innovation investments aligned to our strategy in support of our long-term growth outlook. Q1 reflects timing of project spend. We expect R&D to remain elevated in Q2 and normalize over the balance of the year to around our long-range target of 6%. Our tax rate in Q1 was lower than anticipated due to the timing of certain discrete items that were planned for during the year. Regarding our cash and capital allocation; cash flows from operations totaled approximately $400 million in the quarter. Operating cash flow reflects an impact of approximately $300 million from higher inventory balances.

The increase reflects the impact of inflation and our strategic investments in raw materials to optimize product delivery and meet customer demand. We’ve seen good progress in December and January on WIP and finished goods rightsizing with January inventory dollars down sequentially from December. We are working to moderate strategic raw material purchases as stability improves in select markets. However, we continue to make prudent trade-offs where necessary to ensure we support our customers while delivering strong results. Assuming continued stabilization of the macro environment and supply chain, we expect to continue to manage inventory levels down and by the end of the fiscal year had this be a positive source of cash and meaningful progress towards meeting our long-term cash conversion goals.

We paid down approximately $500 million in long-term debt in Q1 and ended the quarter with a cash balance of approximately $600 million and a net leverage ratio of 3 times. As the year progresses and we build cash, we can increase our capacity to deploy cash towards tuck-in M&A. Moving to our guidance for fiscal 2023. For your convenience, the detailed assumptions underlying our guidance can also be found in our presentation. Given our first quarter performance, we are confident in increasing our revenue and EPS guidance, given the strength of our base revenue growth, consistent execution of our margin goals, and reflecting the latest FX rates. Starting with revenues, I will provide some insights into some of our key guidance assumptions. First, we are well positioned for strong growth across our three segments, which are delivering at or above our initial expectations despite the impact of restrictions in China, and thus, we are increasing our base revenue guidance.

On a currency-neutral basis, we now expect base revenues to grow 5.75% to 6.75%. This is an increase of 50 basis points from our prior guidance of 5.25% to 6.25% and is driven by our Q1 revenue outperformance and the confidence we have in our consistent durable growth profile. Our base revenue guidance continues to include planned strategic portfolio exits that will enable increasing manufacturing efficiency and capacity and ensure the reliable supply of the products that matter most to our customers. We initiated these actions in Q1 and for the full year, continue to expect the impact to base revenue growth of approximately 100 basis points while being accretive to margin. Offsetting this revenue impact, we continue to expect a positive contribution of approximately 100 basis points from the full year benefit of our recent acquisitions with Parata being the predominant driver.

While we aren’t providing segment-specific guidance, we are on track to deliver strong performance across our segments this fiscal year, in line with our long-term planned commitments. We expect Medical segment growth to be above the total company range, which includes the acquisition of Parata; Life Sciences growth to be below given strong prior year comps and Interventional to be above the midpoint. For COVID-only testing, we are now assuming about $50 million to $100 million in revenue versus our previous expectation of about $125 million to $175 million and is driven by reduced testing volumes and the continued shift in the market to combination testing for respiratory illness. Regarding Alaris, we continue to only model shipments related to medical necessity in line with fiscal 2022 demand.

Regarding our assumptions on earnings, we continue to expect operating margins to improve by at least 100 basis points while absorbing the decline in COVID-only revenue, which has a higher margin profile. Despite the challenging macro environment persisting, our focused execution on driving profitable revenue growth, combined with our simplified programs, gives us the confidence that we will be able to continue to mitigate inflationary pressures and make meaningful progress to achieving operating margin levels of about 25% in fiscal year 2025. We continue to expect over 80% of the improvement in operating margin to come from SSG&A , driven by internal cost containment and leverage. The balance is expected to come from slight improvement in gross margin and R&D as we normalize back closer to our target of 6% of sales.

Below operating income, our assumptions regarding interest, other and tax remain unchanged. We continue to expect adjusted EPS before the impact of currency to be around double-digit growth and within a range of approximately 9% to 11%. This includes absorbing about a 350 basis point headwind from the anticipated decline in COVID-only testing, which is about 50 basis points more than we previously anticipated. As a result, this implies a very strong low-teens base earnings growth of approximately 12.5% to 14.5% compared to 12% to 14% previously anticipated. Let me now walk you through the estimated impact from currency. As a reminder, we manage our business and provide guidance on an operational basis, but provide perspective on currency using current spot rates.

Since our last call in November, the U.S. dollar weakened against all of our major currencies. Based on current spot rates, which assumes the euro at $1.08 for the remainder of the year. For illustrative purposes, currency is now estimated to be a headwind of approximately 200 basis points, or about $370 million to total company revenues on a full year basis, which is an improvement of approximately 250 basis points compared to our prior view. The currency headwind to adjusted EPS growth has also declined significantly since our November earnings call. At current rates, currency would represent a total headwind of approximately 230 basis points to adjusted EPS growth compared to approximately 420 basis points previously. All in, including the estimated impact of currency, we are increasing our reported revenue guidance by approximately $500 million to a range of $19.1 billion to $19.3 billion compared to $18.6 billion to $18.8 billion previously and are raising our adjusted EPS guidance to be between $12.07 and $12.32, which is an increase of $0.22 at the midpoint compared to our prior guidance range of $11.85 to $12.10.

As we think of fiscal 2023 phasing, there are various items to consider. We have outlined more detail in the accompanying presentation slides, but the following are key areas to note. First, regarding margins. We expect Q2 operating margin to be similar to our FY 2022 full year margin. This demonstrates our strong focus on profitable growth given the continued impact of inflation and the grow-over impact of our COVID-only testing revenue, both of which we expect to be most prominent in the first half of the year. As a reminder, COVID-only testing has a higher margin and reinvestment of COVID-only testing profit was weighted to the back half of the year. As the year progresses and we continue to benefit from our simplification and inflation mitigation programs, we anticipate margin expansion to be most prominent and to increase through the second half.

Second, regarding FX. At current spot rates, we expect the headwind to revenue and EPS will be over-indexed to the first half with about 90% of the full year impact to revenue and about 80% of the full year impact to EPS occurring in the first half. For the full year, we expect the FX drop-through to earnings to be in line with our BDX operating margin. Lastly, a couple of timing items to note. We expect R&D as a percentage of sales to remain elevated in Q2 and normalize over the balance of the year to around our long-term target of 6%. Additionally, the midpoint of our full year effective tax rate guidance indicates an effective tax rate over 16% for the balance of the year, which is best to assume occurs evenly throughout the year as the exact timing of any other discrete items is hard to predict.

In closing, we are very pleased with our performance, which demonstrates our consistent, reliable, durable growth profile and our BD 2025 strategy continuing to progress as planned. As we look forward and as reflected in our FY 2023 guidance, we are well positioned for growth with excellent momentum in our base business. With that, let me turn it back to Tom for few additional comments.

Tom Polen: Thanks, Chris. The future has never been brighter for BD. We have demonstrated a powerful combination of innovation and strong execution and have the talent, vision and momentum to continue delivering robust performance. As we move through the back half of the fiscal year, you can expect to see continued relentless focus on execution of our strategy. I’d like to thank our associates worldwide once again for their tireless commitment to our purpose of advancing the world of health. With that, let’s start the Q&A session. Operator, can you assemble our queue?

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Q&A Session

Operator: Thank you. And our first question comes from Vijay Kumar with Evercore ISI. Please go ahead.

Vijay Kumar: Hey guys. Congrats on the quarter and thanks for taking my question. Tom, maybe at a high level, when I look at this guidance here and Q1 performance, I think your prior comments were Q1 organic to be a couple of 100 basis points below the annual guide. And I’m looking at the annual guide €“ prior annual guide of 4.75, which included the product exits. So I think the Street was looking at sub 3%. You came in at 3%, slightly better. But the base here was increased by 50 basis points. It looks like underlying business momentum is accelerating. So maybe just talk about what’s giving you confidence? I think you mentioned some new products. So what’s driving this confidence in organic guide raise?

Tom Polen: Good morning Vijay. And thanks for the great question. I’ll turn that over to Chris.

Chris DelOrefice: Yes. Thanks, Vijay. Thanks to everyone for joining the call. Maybe a couple of macro comments. One, I just think this represents another quarter of strong execution, consistent with what we shared overall. When you think of our kind of forward-looking view from our updated guidance, I think, a few key things, not that we highlighted and then I’ll address your question maybe with where we see some pockets of strength. But one, we did increase to your point, 50 basis points of growth on our base business. That strength is pretty broad-based when you think of it. I’ll come back to that. And that’s despite the fact that you had the restrictions and impacts in China as well. So we more than absorbed that. We also absorbed the COVID-only testing revenue, which given the testing dynamics in the marketplace are not surprisingly down when you think of COVID only relative to our position in the market.

That’s a higher-margin offering, and we absorbed that as well. I think importantly, we continue to execute against our margin, and we committed to our €“ at least 100 basis points of margin improvement and then we incorporated FX. Yes, and to your point, when we’re entering the year, I mean, one, Q1 is still under-indexed relative to our full year guide. Right? So that still holds together. We know there was about 100 basis points of headwind associated with the licensing revenue impact in our Life Sciences business that you saw in our results. We had estimated there is maybe about another 100 basis points of other dynamics, comp-related issues, mostly attributed to COVID. We also had some difficult comps in the quarter in certain areas like pharma systems, for example, grew 18%, Q1 last year, and we still delivered north of 10% growth in this quarter.

So, I think that continues to be a source of strength for us. I think the flu season, there is probably a timing dynamic there. It peaked a bit earlier than we thought and was a higher spike. As we go through this call, Dave can certainly amplify that, but it’s played out like it’s played out in other areas with a quick season that’s going to abate. So I think you have a timing dynamic there as well. So there is various items such as that. But largely speaking, I think, things are very consistent. We feel really good about the first quarter of the year, and it gave us confidence to increase our guidance.