On the other hand, when you look at the U.S. Donor Screening business specifically, these are the larger factories, if you will. That business is in a market that’s flat to declining, not expected to grow. It’s a very expensive business to maintain. And by not being in that business over time, I think we get about 100 basis point improvement in our growth rate and I think it helps our margins as well, our profile. So great question, Jack. Our IH business, the immunohematology part of it, I think is a valuable asset that we want to see if we can grow up.
Joseph Busky: Yeah, Jack. Just…
Jack Meehan: Sounds good.
Joseph Busky: In 2023 — sorry, Jack, I didn’t mean to talk over you, but I just wanted to add that in 2023, if you were to exclude the Donor Screening business, our ex-respiratory growth actually would have been 200 basis points higher. So it had a much bigger impact even in 2023.
Jack Meehan: Got it. Makes sense. And then on Savannah, I just want to understand, I guess, like the gating factors to getting RVP4 approved, does there any — do you feel like you have all the trial activity you need done at this point? That’s number one. And number two, when do you expect to be CLIA Waiver for Savanna? Does that come in conjunction with RVP4 or do you think that’s later in the year?
Douglas Bryant: I’ll go in reverse order. It’s an appropriate question. The CLIA waiver is expected by year end. The status of the submission of the 510(k) is on track per my previous comments. Recall that I had said that we expect to get clearance before the end of the first quarter, I think we’re still on track for all that.
Jack Meehan: Okay. I could squeeze in one final one. Joe, what is the guidance assumed for growth in the China region for 2024?
Joseph Busky: Yeah. The China region goes back to what we would define more as a normal high single-digit growth. If you go back to before the pandemic with the ortho business, it was high-single digit growth region, it gets back to that.
Jack Meehan: Okay. Thank you.
Operator: Thank you for your question. The next question is from the line of Conor McNamara with RBC. Your line is now open.
Conor McNamara: Hey, guys. Thanks for taking the questions. Appreciate it. I guess just — first question, in early January, you guys didn’t pre-announce, which typically you have in early January, and given the size of the EBITDA guidance and mis-relative to where folks had come out, was there anything that — first off, what was your decision not to pre-announce, was there anything that’s come up in the last month that kind of surprised you that you didn’t know about in January start?
Douglas Bryant: Yeah. Thank you, Conor. The total revenue, we knew, and we knew that we were going to be quite close in understanding that the miss was about 6% or 7% of what we had projected. So we didn’t feel like it was something that we could announce. And further to that, I didn’t — I knew for sure I wouldn’t have all the answers to all the questions that we would have during the one-on-ones at the conference. And we certainly didn’t know where we stood at that stage in terms of EBITDA. So, I could have told you, obviously, that any gain or loss relative to the forecast with respiratory has a bigger impact, I knew that, but we really didn’t have the specifics as we went into the conference. That’s the only reason.
Conor McNamara: Got it. Thanks for that, Doug. I appreciate that. And then, Joe, you talked about getting the high 20s EBITDA margins in fiscal ’25. And you know that — is that for the full year, or should we think about that as the things ramp up through 2024 and then exiting 2025, you’ll be there as assuming Savannah gets to a high respiratory number, exiting ’25? Or is that — is it realistic to think that’s something that’s achievable for all of fiscal ’25?
Joseph Busky: Yeah. Hey, Conor. We’ll talk more about this in detail at the Investor Day. But at this point, I would say, I do think it’s for the full year 2025. We execute as the plan has been laid out.
Douglas Bryant: And as I said, Conor, we’re chasing a bigger number than the 100 needed in terms of cost synergy.
Conor McNamara: Got it. Okay. And just — sorry, our last question, just housekeeping on the decision to transfer out of the — get out of the US transfusion business, what — can you quantify at all the revenue and EBITDA impact to that? And it actually sounds like you’re going to reinvest some money. So maybe it’s pretty dilutive to EBITDA, but is there any way to quantify the impact there?
Joseph Busky: Yeah. The revenue — we’ve said this, the revenue is about 25% of the total TM business, and the EBITDA margins are in the low single digits. So by exiting this business, it’s going to be accretive, both top and bottom line.
Conor McNamara: Okay. All right. Thanks, guys. Appreciate that.
Operator: Thank you for your question. Next question is from the line of Andrew Cooper with Raymond James. Your line is now open.
Andrew Cooper: Hey, guys. Thanks for the questions. Maybe first, just following up on some of the margin dynamics, and this one’s going to be a little bit backwards looking. But I guess thinking about respiratory revenues that ultimately came within the range you had provided for the full year. But EBITDA coming some 10% below the low end of the range. Was the low end of the respiratory revenue not actually contemplated in that margin range? Or if so, why not? What were the offsets? Maybe you expected that you might have found that you didn’t — just help us think about the disconnect there between the top line and the prior guidance ranges.
Joseph Busky: Yeah. Hey, Andrew. It’s Joe. You may recall on the Q3 earnings call that I said that we needed to be at the high end of the flu range to hit our numbers that we were talking about on the bottom line. So $230 million to $270 million was the flu range. Doug’s right, we did a bit of middle. We did 248, right? But we needed to be at the high end or even slightly above that range to hit our numbers, and we weren’t. And in addition to that, there were some estimates on COVID that we came in below as well. And so, the combination of those two things led to the miss.
Andrew Cooper: Okay. And then just on kind of the guide for ’24, appreciate the $40 million to $60 million flu as a volume number, the $200 million of COVID as a dollar number. Can you maybe just help us think about sort of the apples-to-apples, whether it’s unit volumes or dollars across that respiratory base? And then maybe also where combo fits in that math as you talk about it today, I know historically it was in flu, but just want to make sure we sort of understand what the starting point assumptions are for kind of overall unit volume or dollars.
Joseph Busky: Yeah. It’s a good question. I’m glad you asked because I did want to get through this. So, first of all, just a clarification, and this has not changed. But the combo test for us is included in the flu numbers. Now, we’ve always included it in flu. It’s not in the COVID numbers that we’ve talked about, the endemic COVID numbers. And you will recall that if you look at what we just put out, the ’24 respiratory revenue guide is $460 million to $730 million. So if you pull out an estimate for low end of the range for COVID, you pull out an estimate for RSV and strep that’s consistent with 2023 and you pull out the $30 million to $50 million of Savannah, you’re going to get a flu range that now is about $160 million to $360 million.
And that compares to the $230 million to $270 million that we gave for 2023. So we have — in response to what happened in Q4, we are widening the range on the low and the high end, so we don’t miss. And we’ve included a realistic high-end that is possible, and that’s the $40 million to $60 million. And if you think about sort of historical, where that $40 million to $50 million sits. In Q4 ’23, it was a $50 million or 50 million — sorry, 50 million test market — size market. And that compares to Q4 ’22 is a $57 million size market. And so for ’24, we’ve landed somewhere between, call it, $46 million to $50 million of test file to get to. When you think about like a midpoint of that range, that’s a midpoint. If you go between there, between the $40 million and the $60 million.
Andrew Cooper: Okay. Great. I will [Multiple Speakers] stop there. I appreciate it. It does. Thank you.
Joseph Busky: Yeah. Sure.
Operator: Thank you for your question. Next question is from the line of Patrick Donnelly with Citi. Your line is now open.
Patrick Donnelly: Hey, guys. Thanks for taking the questions. Joe, maybe another one on the margins. Just given exactly what you were talking about there on the respiratory and COVID piece. Given that that’s going to be pretty impactful in terms of the cadence of the year, can you just help us think about the right way to kind of map out margins for the year? Obviously, with the respiratory piece maybe being kind of on the barbell side of 1Q and 4Q, just want to get our heads around the margin piece as the year progresses here.
Joseph Busky: So, that range — that wide respiratory range, Patrick is going to give you an EBITDA range of 21% to 24%, as I noted. And as I just said to Andrew, I would probably recommend that we focus on the midpoint of that right now as a realistic place to start. It is going to give you gross margins in the range of high 40s. And again, I think I said this earlier, that the difference between what we were talking about prior to Q4 of gross margins in the low 50s and now high 40s is driven by the drop in that COVID revenue of roughly $200 million. And the impact of Savannah and the launch and the dilutive impact there, that’s about 400 basis points between those two items, with about 80% of that being the COVID drop and maybe 20% of that being the Savannah drop or the Savannah dilution, I should say.
Patrick Donnelly: Okay. Got you.
Joseph Busky: But you’re going to see in terms of the quarter [Multiple Speakers]. I was going to say, for the quarters, you’ll see the same normal cadence of Q1 and Q4 will be higher and Q2 and Q3 will be slightly lower.
Patrick Donnelly: Okay. Understood. And then just on the LRP, I know you got a few questions. Is that something you guys are going to be reviewing in the next month into the Analyst Day or you kind of feel good about reiterating it today and then we’ll kind of talk at the Analyst Day in more detail? I just want to make sure we’re kind of getting the message correct on the margins, that is, sorry.
