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| Statement |
|---|
| International sales increased 7% on an organic constant currency basis, exceeding the high end of our growth expectations by more than 300 basis points in the quarter |
| We also believe our efforts will drive cumulative free cash flow generation of at least $400 million during the three-year period ending December 31, 2026, which will significantly enhance our balance sheet and financial condition |
| Importantly, the better than expected constant currency revenue growth in the fourth quarter was driven by a strong organic growth reflecting particular strength versus expectations in our PI, CPS, and OEM product categories, and relatively balanced contributions to the upside in quarter four from both the U.S |
| With respect to our profitability performance in the fourth quarter, we leveraged the strong revenue results to deliver non-GAAP gross profit and operating profit growth of 13% and 13% respectively, which resulted in year-over-year margin expansion of 100 basis points and 40 basis points respectively |
| And we delivered non-GAAP net income and earnings per share results that modestly exceeded the high end of our expectations as well |
| Overall, we believe our performance in the fourth quarter resulted in strong financial results versus our expectations, and more importantly, capped off an impressive year of operating and financial performance in 2023 highlighted by nearly 10% constant currency revenue growth, improvements in our profitability profile with an 18.2% non-GAAP operating margin, a 120 basis point improvement year-over-year, and strong free cash flow generation of more than $110 million |
| This performance continues to be a direct result of our team's continued hard work and commitment to our strategic objectives, and we're very proud of the strong execution our team delivered in 2023 |
| We are very proud of the team's strong execution and relentless focus on the multi-year strategic endeavor |
| It is because of their efforts that the FFG program has resulted in a constant currency, organic revenue CAGR of 9.4%, a 440 basis point improvement in our non-GAAP operating margin, and cumulative free cash flow generation of approximately $300 million |
| Notably, when compared to 2019, we delivered a constant currency revenue CAGR in excess of 6% more than 630 basis points of non-GAAP operating margin expansion and cumulative free cash flow in generation of more than $418 million |
| Building upon the notable success achieved in our Foundations for Growth program, the Continued Growth Initiative program reflects our commitment to identifying opportunities to better position the company for long-term, sustainable growth, and enhanced profitability |
| Importantly, not only do we expect strong free cash flow generation to continue, we expect enhanced free cash flow generation over the next three years |
| We believe we executed well over the last three years, and we're all very proud of the progress we have made with FFG |
| The constant currency revenue growth we delivered in the fourth quarter was stronger than the high end of our range of growth expectations that we outlined on our quarter three earnings call, specifically, we expressed constant currency revenue growth in the fourth quarter in a range of five to eight% year-over-year |
| First, maintain above-market profitable growth, leveraging our proven ability to innovate together with our customers, and deliver unique, therapeutic-based solutions to the market |
| Again, I will defend everything we did during Foundations of Growth, I think was well thought out and well executed |
| Second, significantly improve our non-GAAP operating margins through ongoing network consolidation, growing sophistication in forecasting, planning, and tracking, and continued focus on lowering costs and increasing efficiency throughout the organization |
| The stronger than expected organic constant currency growth to customers outside the U.S |
| We believe strong execution towards this goal is integral to best position the company for sustained success in meeting the evolving needs of changing healthcare markets in the years to come |
| Our operating expense performance in Q4 of 2023 reflected higher commissions on the better than expected sales results and prioritization of investments to support our future growth initiatives as expected |
| We generated more than $110 million of free cash flow in 2023, and as Fred mentioned earlier, are extremely proud of the significant free cash flow generation we have delivered as part of our FFG program, totally nearly $300 million in the three years ended December 31, 2023 |
| market during the fourth quarter, particularly in our direct business, which saw impressive growth in sales of both our PreludeSYNC Radial Compression hemostasis device and our SplashWire Hydrophilic Steerable Guide Wire and geography products |
| I think we're pretty proud of the team of what we were able to accomplish, to be honest |
| Our cardiovascular segment was the primary driver of the better than expected revenue results versus the high end of constant currency growth expectations, while our endoscopy segment sales were in line with expectations |
| We've got better human resources, efficiency, sharper on materials, logistics, and everything else that we can throw at gross margin, because that's what it takes |
| growth performance reflects continued strong execution and overall improving trends in the U.S |
| We are pleased with our profitability performance in the fourth quarter where we leverage our stronger than expected revenue results to drive expansion in our gross and operating margins and non-GAAP diluted earnings per share that exceeded the high end of our expectations |
| increased 13% on a constant currency basis and 9% on an organic constant currency basis, exceeding the high end of our growth expectations by nearly 300 basis points in the period |
| Sales of both our cardiac intervention and OEM products increased 6%, and were also key contributors to our organic growth in the cardiovascular segment this quarter |
| Cardiac intervention product sales were at the high end of our growth expectations, driven primarily by strong sales of both our hemostasis and EP and CRM products, which increased 35% and 12% respectively |
| Statement |
|---|
| First, our ongoing FFG and CGI initiatives related to SKU rationalization represent a roughly $15 million headwind to revenue in EMEA and to a lesser extent in the U.S |
| The expected year-over-year decline in APAC sales is substantially related to China, where we expect to grow sales of units on a year-over-year basis, but we expect total revenue to decline due to continued headwinds related to volume-based purchasing |
| But obviously, we are seeing a decline due to the continued headwinds related to volume-based purchasing |
| Now, you know, we're not going to run a victory lap yet, but it looks like things are going to be slower than people anticipated |
| It looks like the cumulative free cash flow goal came in 600 grand shy of the goal |
| And as it all works out, I will call a little bit of a headwind, you know, because it wasn't, you know, someone could have questioned it |
| With respect to China specifically, sales were essentially flat year-over-year and were impacted by the headwinds related to volume-based purchasing tenders as expected |
| The GAAP net revenue guidance range assumes net revenue growth of approximately 4% to 5% in our cardiovascular segment and net revenue growth of approximately 8% to 9% in our endoscopy segment, and a headwind from change in foreign currency exchange rates of approximately $5.9 million or approximately 50 basis points to growth year-over-year |
| You know, the guidance here for 2024, you're saying China revenue down due to VVP, just more of a fact check or clarification |
| We're dealing with the wage pressures in Mexico |
| I think we called out the 4% decline in the APAC region, of which most of it is related to, actually, all of it is related to China |
| And then, international CAGR is a little bit less than the U.S |
| And I would say generally speaking that the wage pressures are, I would call them global, quite frankly |
| Importantly, we're not done |
| And so, I mean, I understand you're probably trying to be somewhat conservative, but is there, and I saw the call out about the SKU rationalization, but I mean, is there anything else that you would point to in terms of things that have maybe changed or something that would prevent you from being able to grow high single digits potentially? I mean, I'm not asking you to guide there, but just wondering if there's other headwinds, I guess, that you're baking in or something there? Raul Parra Well, look, I think, look, I think when we threw out, you know, foundations for growth, I mean, I think, none of us anticipated all the headwinds we would have seen, right? I think everything in the kitchen sink was thrown in there from what everybody saw and everybody had to experience |
| But that's the SKU dynamic, you know, in which segment do you expect to see a bit of a slowdown? You kind of called out PI and CI as the drivers |
| The increase in gross margin year-over-year was at the lower end of expectations as benefits from mixed were partially offset by manufacturing variances compared to the prior year period |
| And I think also just to highlight a couple of things, right? I think a little bit of the flack that we got too was, hey, look, interest rates are going to be dropping |
| You know, the initial, I think projection for people would see seven rate decreases this year |
| It looks like the implied organic and cardio is about 4%, guessing it's disproportionately impacted by the SKU rationalization |
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