We are blinded. We’ve told everybody a number of times that this is the part where it gets a little more frustrating to wait.
Matthew Dodds: We’re getting closer.
William Cozy: We’re getting there.
Matt Taylor : Great. Thanks for the talk, guys.
Operator: The next question comes from Adam Maeder with Piper Sandler. Please go ahead.
Adam Maeder: Hi, guys. Congrats on the finish to the year and thank you for taking the questions. I wanted to pick up on that same topic, depression and SPIs, and maybe I’ll ask it a little bit differently, but just trying to understand what is the level of SPI spend for depression and OSA that’s baked into the guidance for 2024 and specifically wondering if the guidance accounts for some of the preparatory costs to push forward, assuming a positive trial on depression and then I had a follow-up or two? Thanks.
Alex Shvartsburg: Hey Adam, it’s Alex. So we spent roughly $32 million in 2023. We are anticipating a modest increase on that spend in 2024. The level of spend really depends on just how compelling the data is. And once we know as to how kind of the trial’s trending and the results in June will make a definitive decision around the level of investment.
Adam Maeder: And the market debt, there was an interest, there was a sub question there about, is there anything in?
Alex Shvartsburg: There’s a small amount of market development spend incorporated into the guide in OSA.
Adam Maeder: OSA.
Alex Shvartsburg: Yeah. And as far as OSA goes, we spent roughly $27 million in 2023. We expect a modest step up in investment in that program as well as we continue to enroll and follow patients through the end of the trial.
Adam Maeder: That’s great, color. Thank you for the clarification there. And for my second question, wanted to flip over to CP and the outlook for 2024, the 6% to 7% growth. I heard some of the prepared remarks, but was hoping you could put a little bit of a finer point on what’s assumed in that guidance for HLM growth versus Oxys, what are you assuming for the oxygenator competitor issues? And then just one clarification on a cybersecurity incident in Q4 of last year, what was the revenue impact and reasonable to assume that was more on the CP side of the business? Thanks for taking the questions.
Alex Shvartsburg: All right, let’s take this one at a time. So as far as the guide goes, and we expect double-digit growth in the heart-lung segment in our guide. The guide also assumes that due to the capacity constraints and our expected benefits, as Bill mentioned in the second half, a modest sort of low to mid-single-digit growth rate on the consumables. Now, the next part of your —
Adam Maeder: Yeah, go ahead. Sorry.
Alex Shvartsburg: What was the second part?
Adam Maeder: Just wanted to clarify, the cybersecurity — yeah, sorry, cybersecurity impact in Q4 from a revenue standpoint, what did that look like and I think that was on the CP side of the business, but wanted to confirm that? Thanks.
Alex Shvartsburg: That’s right. So the incident impact is the oxygenator production. We lost about a week of production. Kind of hard to track exactly the impact on revenue because it really depends on how the inventory flows and when you expect to see sort of the capacity constraint or the inventory constraint that would result in lost revenue. It wasn’t material.
Adam Maeder: Got it. Thanks, Alex.
Operator: The next question comes from Mike Matson with Needham. Please go ahead.
Mike Matson: Yeah, good morning or good afternoon. So just in terms of the tax rate, I think before you talked about kind of 15% to 20%, now you’re looking at like 21%. So I guess, why did it end up being higher than you expected and is this mainly through the pillar two or is there something else going on? And then have you, I’m assuming you haven’t baked anything in for the stock-based compensation benefits into that 21% guidance?
Alex Shvartsburg: So when we were looking at the range at a point in time, Mike, it was really difficult to predict because the tax rate is a function of jurisdictional profitability. So as we got closer to exiting 2023, looking at projections for 2024, we got a better sense for how the mix of profitability will work out. 21% is our best estimate at this point in time. And yeah, I’m not sure I understand your question around the stock-based compensation.
Mike Matson: I just thought that typically there’s some kind of tax benefit from stock-based comp, but companies generally don’t factor that into their guidance or tax rate, it’s kind of unpredictable?
Alex Shvartsburg: Let us come back to you, and I will follow up on that if that’s okay with you.
Mike Matson: Yeah, sure. And then just wondering what you’ve assumed in the guidance for gross margin benefit from Essenz, just given the price premium there, is it going to help your gross margins in 2024, and how much do you think that’ll help?
Alex Shvartsburg: Yeah, it absolutely supports a gross margin improvement. We’re expecting a modest gross margin improvement of about, call it 100 basis points year-over-year, overall as a company. So Essenz plays a major role in that.
Mike Matson: Okay, got it, thank you.
Alex Shvartsburg: You’re welcome.
Operator: Our next question comes from David Rescott with Baird. Please go ahead.
David Rescott: Hey guys, thanks for taking the questions. I want to start on the Neuromod segment. I think the guide that you called out maybe was this mid-single-digit new patient growth and low-single-digit replacements, but ultimately getting to I think the 6% to 7% product guide for the segment as a whole. So just, I think if you do the math you’re getting to something at or below that 6% to 7%, so wondering if pricing is a piece there, if I’m understanding the way in which you laid out guidance for Neuromod specifically? And then I think the segment itself has done better in 2023, and you’ve talked about the inability for that and a higher level of growth to be sustainable. So just wondering where we stand from that point, are we at a point at which Neuromod is seeing some structural changes to the replacement cycle or to the new implant cycle where we can start to think about better growth in Neuromod, just any clarity there would be helpful?
