John Stansel: Just going back to the Investor Day, you called out a new medical customer win, I believe. Can you just help qualitatively frame how that’s contributing to the 2024 guide and what services are being sold there?
Edward Pesicka: Yeah, that’s one that should start to implement – it’s going to start implementing in March. So next month, we’ll start to implement that business. We haven’t quantified the dollar amount, but it’s a meaningful win. It’ll end up being one of our top 10 customers overall once we put it into the system. And it is a combination of a portion of our customers we did have an expansion. And so, it’s a meaningful win and that’ll begin in March.
John Stansel: If I can just squeeze one quick one in at the end. It’s more of a long term question. I know that, in December, there were some chatter around potential changes to CMS reimbursement for CGMs. Now I know only 20% of your Patient Direct revenue comes from government sources. How are you thinking about potential changes around CGM reimbursement from someone like CMS? As you think about out years, that is meaningful or not really for the Patient Direct business?
Alexander Bruni: It’s Alex Bruni. This is certainly something we continue to watch. We noted the press release in November with the OIG looking into CGM reimbursement. They don’t expect to have findings until 2025. So we’ll continue to watch this space, but we don’t expect any implications at this point for us.
Operator: Your next question comes from the line of Stephanie Davis from Barclays.
Stephanie Davis: While I understand the ramp to the 2028 plan wasn’t meant to be linear, the 2024 EBITDA guidance does imply a pretty healthy step up in the out years. So I was hoping you could help us bridge this and call any maybe one-timers or areas of potential conservatism in order to get you there?
Edward Pesicka: Stephanie, you’re right. It’s not linear. And we wanted to make sure that – when we talked about at Investor Day, we gave a 2028 full-year end-of-year target there. And part of it is the investments that are being made. Again, I use two different examples. Again, one is on the commercial aspect of what we’re going to do in our Patient Direct business. The second aspect is some of the technology we’re using in Patient Direct, both of those are going to have benefits associated with them. And again, they’re going to have benefits after they get implemented. So those are things that have meaningful paybacks 12 months plus out. I think very similar on the Products and Healthcare Services business. You’re absolutely right, if we think about the portfolio expansion, those are things that take time to develop.
It’s something that I was reminded been trying to do for years, but you have to make sure you have the investments upfront, and part of what we’re leveraging is the operating model realignment savings we have. We’re redeploying that back into longer term investments, like the product aspect. The other aspect is network rationalization and optimization. That’s something that doesn’t happen overnight. It’s something that we’re aggressively looking at right now. But we know that’s going to take time to execute on and then that will provide material benefits as we get into the future. So, that’s why when we looked at our internal strategic plan for the five year period of time, in 2024, if you look at our range, it provides, we think, pretty good reasonable returns, but also it’s enabling us to make significant investments to provide those higher, longer term returns.
Stephanie Davis: If I had a bridge from here to here, your long term guidance, is the right way to think of this as 2024 is more of an investment year and then we’ll start to see a step up in 2025 or is it being more of a gradual bridge as some of these things come through?
Edward Pesicka: I think probably your first assumption is closer. 2024 is more of an investment year, but it’s still going to provide – if you just take the midpoint of our range, it’s still providing double-digit growth in EPS, adjusted EPS at the midpoint of our guidance. In addition to that, so what we’re trying to do is balance that as we go through 2024 with the right investments for long term, but still providing the right level of returns in the short term. I think as you exit 2024, there’s still some – things are going to take longer. The network rationalization and optimization, that’s something that will bleed into 2025. But as we continue to come out of 2024 and into 2025 and then continue to progress, you’ll see that ramp, accelerate in the out years even faster.
And that’s really been the beauty of what we’ve done with the operating model realignment program, is it’s enabled us to take costs out, it’s enabled us to drive improved cash flow and profitability, and then take those dollars and invest them in areas that may take a longer term to get a payback, but still not impact the short term returns. Again, taking the midpoint of adjusted EPS from 2023 to 2024, still going to be a double-digit growth while we’re still investing materially in the business for long term success.
