Dev Kurdikar: And, Cecilia, this is Dev, good morning. With respect to your question about the long-term outlook, I mean obviously, we will give formal 2024 guidance at the right time when €˜23 is done. But certainly, we are pleased with the strong start to the year and certainly what the outlook for €˜23 looks like. So, no real change from what we have discussed before, but will provide more updated guidance certainly at the end of the year. But at this point, we are pleased with where we stand today.
Cecilia Furlong: Okay. Thank you. And if I could follow-up to just your annualized constant currency performance in the quarter. If you could speak to what you saw out of China versus other markets, the impact from pricing, positive impact on pricing that you saw. And then also just the competitor shortage, if you could walk through the benefit you saw in the quarter and also included in your updated outlook? Thank you for taking the question.
Dev Kurdikar: Yes, sure, Cecilia. So, several parts of this question here, right. So overall, international performance was strong, right. I mean it was, we saw a favorable price and volume in several markets. In China, in particular, our performance by our team in China has been quite resilient because you remember, through the calendar year of 2022, fourth quarter calendar year 2022, there was a rise in spikes. So, we certainly had a rise in infections as well, but our team has managed through it. What we see in China certainly is that the situation is certainly improving as we went from zero COVID to now open. And like I said, our team has fought through those infections that occurred. Our outlook on China obviously, remains uncertain.
It all depends upon the path that COVID takes and the resulting government policies that are put into place. In terms of our guidance, we certainly are anticipating a modest improvement in performance in China and some other markets in Asia where COVID has taken a toll. And that’s all included in the guidance that we provided for 2023. I think with respect to the competitive shortage, we certainly did have some benefit in our Q1 numbers of the competitor shortage. It was in several markets around the world. It is difficult for us to forecast how long that shortage would last. But certainly, we have taken our sort of best thinking into account when we provided our guidance, including the raising of the constant currency top end of the range for 2023.
Cecilia Furlong: Alright. Thank you for taking the questions.
Dev Kurdikar: Thanks Cecilia.
Operator: Thank you. Our next question comes from Marie Thibault with BTIG. Your line is open.
Marie Thibault: Good morning Dev. Good morning Jake. Congrats on a great quarter here. I wanted to start here with a question here on the constant currency revenue growth guidance. If I look at what you did this quarter, this fiscal first quarter, constant currency revenue growth was actually about 0.7%. And when I look at what you are guiding for this year, it looks like the top end of your new range is 0.5%, just a little below what you already accomplished in Q1. So, curious how you arrived at that guidance? I know you have given us some details on the various markets, but just curious why not go a little bit higher?
Jake Elguicze: Yes. Thanks for the question, Marie. So, I am really pleased to say that we got off to a really strong start in the first quarter. Quite frankly, we exceeded our internal estimates, I would say, by approximately $14 million on an as-reported basis. Now, about $2 million of that was due to the positive impact from FX as compared to what we had originally expected it to be. But on a constant currency basis, we exceeded, I would say, our internal estimates by almost $12 million. Now, about $6 million of that additional constant currency revenue beat was driven by the strength within our international business that Dev just mentioned. This was very broad-based, covered several countries, and it’s something that we expect will remain for the entirety of fiscal year 2023, hence we increased both the low and high ends of our constant currency revenue range by about 50 basis points.
Now, the other $6 million of, I would say, overachievement in comparison to our initial expectations that occurred in the quarter was really largely due to the timing of distributor orders and it positively impacted our U.S. business. And that occurred, I would say, very late in the month of December. And it’s something that could happen from time-to-time. However, during the course of an entire year, it does tend to even itself out. And as we look forward, really beginning as early as the second quarter of the year, we would anticipate that positive benefit that we saw in the first quarter from those distributor orders to reverse itself. And we have taken that into consideration when we updated our guidance range.
Marie Thibault: Okay. That makes a lot of sense. Thank you, Jake. I wonder if I could get a little bit more detail on some of the transition service agreements. I know you still have the ERP transition ahead. But I am curious if you can tell us which of these agreements have been exited? Is this process ahead of schedule, is it on schedule? Maybe you can give us a sense of that as well.
Dev Kurdikar: Yes. Broadly speaking, Marie, it’s on schedule. Many of our transition services agreements that have yet to be exited are obviously tied to the implementation of the ERP, and that’s obviously a longer scheduled project, just given the number of countries we are operating and the complexities of installing €“ or implementing a new ERP. The ones that we have exited so far, I would put them in the sort of the more minor category as compared to certainly the ones that are associated with ERP or our distribution network and so on and so forth. Jake, anything you would add..?
Jake Elguicze: Yes. I mean I would say, again, to your point, I think we have continued to make progress there. And just maybe from a cost standpoint, we currently estimate that we would incur around $60 million worth of TSA expense for the full year. And for that to certainly be more heavily weighted in the first half of the year as compared to the second half of the year.
Marie Thibault: Okay. Thank you for that. I guess last question here. I did want to €“ it sounded to me like you were confirming that your pre-spend fiscal €˜24 outlook hasn’t changed. I believe that was low-60s gross margin, about 30% adjusted EBITDA margin. But I did want to just confirm that there is no change to that outlook. And then if there is any way that you can start to help us think about fiscal €˜25, kind of after this transition is completed, how we should be thinking about Embecta as a standalone company at that point? Thank you for taking the question.
Dev Kurdikar: Marie, with respect to €˜24, nothing that we have seen so far would say we should change our outlook on 2024. But obviously, we will give more formal guidance when €˜23 is done. And just given the number of activities we still have to complete as we exit the TSAs and the implementations we have talked about. I want to refrain from talking about 2025. We are focused on getting and executing all these separation-related activities and getting FY €˜23 done before we start talking about FY €˜25.
Marie Thibault: Okay. Understood. Thank you.
Operator: And our next question comes from Travis Steed with Bank of America. Your line is open.
