Patrick Donnelly: Hey guys, thanks for taking the questions. Steve, maybe one on the breast health side. Obviously, you guys — you had a bit of a backlog with the supply chain issues last year. Can you just talk about how you’re working that down, what goes into the guide this year there? And then a second one, just on the margin piece. Yeah, I know we don’t have Karlene, but maybe Ryan, just in terms of the moving pieces, as you think about the 2024 margin build, obviously COVID coming down, some high margin stuff, can you just talk about what you guys are doing to offset that and keep margins moving in the right direction? Thank you, guys.
Stephen MacMillan: Great, thanks. First in terms of the breast health business, I think we see clearly placing at least a double-digit increase in gantries this year, both domestically and internationally. We really got going more in our second fiscal quarter last year. So especially this first quarter we’ll show much bigger growth for the breast health business. But I think we feel great about being able to continue to place the gantries and just based on the backlog alone, let alone the additional customers were winning. Quick first crack at the margin piece. The way I think about it is before Ryan comes in is, I think they will basically be lower in our first fiscal quarter and then growing through the year as we continue to bleed through the higher cost, especially chips in gantries.
And we’re also in the midst of relocating some of our manufacturing — basically our manufacturing for our breast health business from Connecticut down to Delaware. So at the current time, we’ve got double costs as we do that. And I think we’ve got great visibility that those gross and operating margins will be improving throughout the year. I don’t know if you want to add more to that.
Ryan Simon: Yeah, sure, Steve. So as we previously called out Q3, Q4, our expectation is that would be the trough with respect to operating margins. And as Steve mentioned, our expectation is to work up from there to the low 30s as an exit rate in 2024. Steve pointed to the fact that we’re working past and farther away from the highest cost chips. Our breast business is also recovering, which is going to be a tailwind to margins as well. We did mention that we divested the SSI business, and that will also be a tailwind to margins as we go into 2024.
Operator: Our next question comes from Tejas Savant with Morgan Stanley. Please go ahead.
Unidentified Analyst: Hi, team. This is Madison on for Tejas. Thanks for taking the question. Maybe just firstly, I was wondering if you could elaborate on how you’re thinking about international growth for 2024? I know you flagged the under-indexation to China as an advantage in the near term, but what’s your combined exposure to China and the Middle East. And should any of that ongoing conflict weigh on the demand throughout the latter part of the Middle East region?
Stephen MacMillan: Sure, we have very little in the Middle East, and China is 2%. So between the two, it’s call it 2% to 3%, really. So I think we love that from the current environment. And as it relates to international overall, I think we’ve continued to see our international business as being clearly accretive to the growth rates of the company. And really over the last number of years, it’s been a double-digit grower and wouldn’t count out that it couldn’t do that again this year. So we’ve strengthened our international businesses significantly over time. Our breast health business getting stronger. Diagnostics has benefited hugely from all the additional Panther placements. So that’s been growing tremendously internationally.
And our surgical business after years of trying to work on reimbursement and getting products approved is really also starting to take off internationally as we said, a real nice grower here over last year. So I think we see all three franchises being in very good shape to grow here in 2024.
Operator: We will take our next question from Vijay Kumar with Evercore. Please go ahead.
Unidentified Analyst: Hey, this is Kevin on for Vijay. Just a clarifying question on the 4% to 7% base organic guidance for the full year. Does this include or exclude the four selling days impact, meaning excluding the impact would guide the 5% to 8%?
Stephen MacMillan: You got it exactly. Yes, we factored that in. So that’s why it’s actually — yes, it’s 5% to a little north of 8%.
Ryan Simon: And just a reminder that is ex-COVID.
Unidentified Analyst: Got it. So just to follow up, if the guide excludes day’s impact, why is the lower end of –
Stephen MacMillan: No, it includes the day. The 4 to 7 is including, just to clarify.
Unidentified Analyst: Okay, got it. And just to follow up then, you also highlighted new share repurchasing in fiscal first quarter and an accelerated repurchase program. Is this a change in your capital allocation priorities? It seems like M&A was a focus in previous quarters.
Stephen MacMillan: Yeah, as we reiterated, we continue to focus on M&A. Right now we’re just having to think that one of the great acquisition opportunities is our own stock where it’s priced and we’re trying to send that signal very strongly, but we’re continuing to look for external M&A as well. But we just love the position we’re in. So it’s not a change. It’s just an extra opportunistic based on where the valuation of ourselves sits right now. Thanks, Kevin.
Operator: We’ll take our next question from Tim Daley with Wells Fargo. Please go ahead.
Timothy Daley: Great, thanks. So, Steve, following up on the Fusion comments you made to Jack’s question. Could you update us on the percent of the Panther install base currently Fusion enabled at the end of fiscal year 2023? And I guess, or similarly, what were the Fusion sidecar placements in 2023?
