James Saccaro: Sure. Listen, as I mentioned in my prepared remarks, Robbie, we were disappointed with performance in 2022, clearly. And frankly, as we reflect back, it was a highly volatile and dramatic environment that we were faced with and that we were operating through over the course of the year. As we put together guidance for this year, I would say a couple of things. We’ve taken levels in terms of indices as they currently sit today. We’ve reflected continued supply constraints in things like electromechanical components. And then in addition to that, we’ve added margin of safety in terms of contingency to offset which is why you see a much wider range than we’ve had previously. I would add to that, we’ve also done things like taking out the LVP pump.
We’re really optimistic about the large volume pump getting approved this year. We’re working very closely with FDA towards achieving that goal. But from a guidance standpoint, we’ve removed $100 million related to sales for that product. And so, I’m hopeful that these assumptions prove conservative. And that by the end of the year, we’re looking at a very different world in terms of indices, electromechanical component availability and it really sets the stage up for a nice second half and a nice 2024 but we’ll continue to watch these very carefully. Part of the issue, as we look at the 2022 to 2023, is the rollout of the very significant manufacturing costs that we’ve incurred this year. And so we have a big headwind that we’re faced there.
Offsetting that is $300 million worth of savings. Now that’s not all incremental based on the new model. What I would tell you is approximately $200 million of that or so relates to previously discussed or identified initiatives, including the Hillrom synergies. There’s roughly $100 million related to the new program that we put in place that will be reflected in our numbers. So really, that’s the overall story. We’ve tried to take all of the learnings as we look at volatility and those items and reflected as we put it together.
Robbie Marcus: Great. And Jay, how should we think about cash flow going through the year here? And how it will play out in ’23 relative to ’22? Will these cost savings actually cost money in ’23 to achieve? Or do you think you could see cash flow improve despite the lower margins?
James Saccaro: Sure. Robbie, we have an intense focus on cash flow. And I will tell you that the financial performance in 2022 was challenging. And certainly, the free cash flow performance reflected those challenges. As we move to next year, my expectation is that free cash flow will more than double relative to the 2022 level. And a lot of that has to do with improvements in working capital balances. If you look at the working capital balances, as I currently sit, the days inventory on hand has expanded over the course of the year, in large part due to missing components and having our plans run sub-optimally, longer lead times for products leading to disruptions of our supply chain, longer shipping lanes. All of those things have led to a higher days inventory on hand.
Additionally, from a receivable standpoint, because of the cadence of sales, we actually had very strong sales in December, leading to a higher receivables balance than we would normally have relative to prior years. And finally, due to timing of some vendor payments, our payables balance came in low. So our clear expectation is each of these categories will improve. And by — and along with careful CapEx management, our expectation is more than doubling free cash flow because, like I said, at the end of the day, that’s an important valuation metric for us. In addition to that, it’s an important incentive compensation metric for us.
Operator: We’ll go next to Vijay Kumar at Evercore ISI.
