Liam Kelly: Thanks, Mike.
Operator: Next question comes from Jayson Bedford with Raymond James. Jason, please go ahead.
Jayson Bedford: Good morning. So I wanted to ask about operating margin the fourth quarter was strong but the 2023 op margin guidance was a bit softer. And the heaviness seems all to be in the operating line OpEx. It implies a pretty sharp step-up in OpEx and I assume some of the restructuring helps this line. But I guess my question is where is the reinvestment occurring. And how much of this is kind of structural inflation-driven or discretionary?
Thomas Powell: Well to your point I think as we look at the op margin for 2023, the first point is that just given the inflationary pressures and foreign exchange we’re getting a lesser gross margin benefit than we would typically get. So we’re starting off with the last benefit from the gross margin. But then, as you look at the OpEx, there’s a couple of things that are I guess I would characterize them as structural in that, there are head count-related expenses that we’re adding back in €“ in 2023 that were not there in 2022. Variable compensation was lower than target and there were a number of open positions quite a few that took a while to fill given the tight labor market environment and we’re we’ve filled those positions and we’re resetting the variable comp back to 100%.
So there’s a pretty big structural kind of move as a result of that. Now investments to grow we’ve got some continued investments behind our high-growth drivers. Expansion into international markets would be one as well as continuing to build out the capabilities of our systems and otherwise in 2023. Now, restructuring does provide a benefit. Part of that is in gross margin, part of it is in OpEx, and some is in 2023 and the balance in 2024 and about two-thirds of that restructuring will benefit 2023. So I would say, overall the biggest impact is just a structural putting the cost back into the OpEx that were not there in 2022. And that’s part of the reason why we benefited in 2022 at a higher margin as these costs were not in the cost structure.
Jayson Bedford: What’s the expected dilutive impact from Standard Bariatrics in 2023?
Liam Kelly: So that’s €“ as we stated before Jayson it’s $0.10. So it was €“
Thomas Powell: $0.10 to $0.15.
Liam Kelly: It is $0.10 to $0.15 for this year and it was $0.10 in the fourth in last year.
Operator: Our next question comes from Lawrence Biegelsen with Wells Fargo. Lawrence, please go ahead.
Lawrence Biegelsen: Yeah. Good morning. Thanks for taking the question. One on 2023, one on the LRP. Just on 2023, Tom maybe help me with the math here. The midpoint of the Q1 guidance day adjusted 6%, I think constant currency. It’s slightly below the rest of the year. Just why would €“ why would the growth for Q2 through Q4 be lower than Q1, if I’m doing the math correctly?
Liam Kelly: So I’ll take that one instead of Tom, if you don’t mind Larry. So really you have a year-over-year, comp is one of the reasons for it. If you recall, there was Omicron last year which had a slight impact on some of the procedures that we’re getting done. We also expect in Q1 to see a good solid performance as €“ in the overseas markets and in OEMs so €“ just because of that, impact in the prior year period. So, that’s why it’s a little bit front-end loaded in that regard Larry. And I think most investors would prefer to see a front-end loaded revenue plans and a back-end loaded revenue plan in my experience at least. So I think coming out of the blocks pretty well at a 6% growth with the guidance that €“ with the midpoint of our full year guidance at 5.5% I think should be seen as a positive for the investment community.
