Welcome to the LeMaitre Vascular Q4 2023 Financial Results Conference Call. As a reminder, today’s call is being recorded. At this time, I would like to turn the conference over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Thank you, operator. Good afternoon and thank you for joining us on our Q4 2023 conference call. With me on today’s call is our CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I’ll read our Safe Harbor statement. Today, we will make some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 27th, 2024, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales growth, as well as operating income, operating expense, and EPS excluding special charges. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com. I’ll now turn the call over to George LeMaitre.

Thanks, J.J. Q4 was an excellent quarter with 19% sales growth, a 68.1% gross margin, and 46% op income growth. I'll focus my remarks on the top line, sales force activities, and some regulatory updates. Geographically, EMEA was up 21% in Q4, the Americas 20%, and APAC 11%. By product, bovine patches were up 18%, allograft 52%, valvulotomes 12%, and carotid shunts 16%. Distribution of porcine patch also added $1.5 million of sales in the quarter. The return to hospital by staff and patients, ASP increases, ample product supply, and the growth of our sales force drove Q4 sales growth. We ended 2023 with 136 reps worldwide. By December 2024, we expect to employ approximately 150 reps. To accommodate rep growth in North America, we recently promoted three Regional Sales Managers to become Area Sales Managers. This additional management bandwidth should enable us to hire, train, and manage more RSMs and reps. The revenues from the 2020 Artegraft acquisition, coupled with recent sales growth, have made our North American territories too large. In 2023, our average North American territory had $2 million in sales. Over the years, we found smaller territories enable tighter relationships with surgeons. So, we've begun dividing some of the larger territories. This should reduce windshield time too. In Europe, we also remain in growth mode. We plan to open a Paris office in Q2, which should improve our connections with French surgeons and hospitals as well as our eight French sales reps. France is our sixth largest country by sales. Turning to Asia. I visited four of the six APAC offices in early February. Things look great over there. Our Tokyo branch is celebrating 20 years and we've just opened offices in Seoul and Bangkok. In our first direct year in Korea, 2023 sales reached $1.7 million and op profits were $250,000. Both figures exceeded expectations. In Thailand, our first full year of direct sales should be about $1.6 million in 2024. Our Chinese team is also performing well and grew 40% last year. The Artegraft CE file was submitted in December 2023, and we also plan to file for Artegraft approval in Canada, Australia and several other APAC countries this year. We also plan to make XenoSure filings for our peripheral and cardiac products by 2025 in China. And we're also making the MDR transition in Europe. As you know, Brussels has extended the MDR deadline to 2027. 22 of our product categories need this new MDR CE mark. So this is a considerable undertaking. We currently own three of these new MDR CE marks. Also in Europe, our allograft filings have been made in Ireland and Germany, an approval in either of those countries will be our first approval of allograft in the European Union. To conclude, 19% sales growth and a gross margin recovery produced 46% op income growth in Q4. Our growing profitability and cash on hand provides safety and strategic optionality. With that, I'll turn it over to J.J.

Thanks, George. 2023 was an excellent year. We posted $193 million in sales, an increase of 20% on a reported basis and 17% organically, while our operating income increased 37% on a reported basis. As 2022 was our post-COVID rehiring year with 141 ads, and 2023 was the hiring constraint year with only 23 is. This headcount control, along with our strong sales results and an improved gross margin led to a 19% operating margin in 2023 versus 17% in 2022. Separately, our cash balance has improved by $22 million in 2023 to $105 million. Turning to the quarter. In Q4 2023, we posted a gross margin of 68.1%, up 450 basis points year-over-year. This increase was driven by higher ASPs, productivity improvements and a weaker dollar. The benefits of a larger and more efficient manufacturing team have come on to the P&L. Our allograft manufacturing team had a strong Q4 and quality costs remain in check. In retrospect, our manufacturing hiring surge was well timed with the global return to hospital. Operating expenses in Q4 2023 were $23.1 million, an increase of 21% versus Q4 2022. The increase was driven largely by higher sales commissions, more sales professionals and $700,000 of onetime reversals in Q4 2022. Q4 2023 operating income increased 46% year-over-year to $10.2 million, driven by higher sales and an improved gross margin. The operating margin in Q4 was 21%, up from 17% in the prior year period. Separately, we recently went live with a new ERP system in the United States. This system should improve real-time reporting, streamlined financial processes and provide more sophisticated analytics. Implementation at our overseas entities will take place in 2025 and 2026. We estimate that we will spend approximately $7 million to $8 million on this project, and the annual P&L impact will be approximately $1 million per year. With respect to guidance, we are forecasting improved operating leverage in 2024, driven by restrained operating expense growth and an improved gross margin. Our guidance includes an operating margin of -- in 2024 of 21% versus 19% in 2023 and 17% reported in 2022. For more details, please see our business outlook issued in today's press release, but a few Q1 highlights include, reported sales growth of 10%, gross margin of 68.5%, operating income growth of 33% and EPS growth of 42%. And for the full year 2024 guidance includes, reported sales growth of 10%, gross margin of 68%, operating income growth of 22% and EPS growth of 23%. With that, I'll turn it back over to the operator for questions.

[Operator Instructions] Thank you. Your first question comes from the line of Suraj Kalia with Oppenheimer. Your line is now open.

Hi George, J.J., can you have me all right?

Yes.

Gentlemen, apologies for the background noise. So George, let me start out. In your prepared remarks, you talked about territories or maybe it was J.J.'s comments. But when you split the territory, let's say, from $2 million to, let's say, $1 billion, can you walk us through the thought process in terms of sales rep commish retention? How does the process go about?

Okay. Sure. And of course, Suraj, this is completely normal medical device activity, right? So this is how -- exactly how sales forces grow. It's like in a meat thing gets big, you've got to cut it in half. And it becomes too big for them to handle it. If a rep is running around Ohio trying to cover $2 million worth of medical device sales, of course, some of the smaller hospitals start to feel ignored and so, very high level, you would clearly split it and put one guy and pick a city of Cleveland and one guy in Columbus, and they would now split Ohio, if you will. So, I think that's sort of the EMEA aspect of it is perfectly normal. And then what else would you like to know about what happens there?

I was just curious in terms of -- I understand it's a normal process in the industry. I was more specifically curious in terms of usually do you encounter any sales force retention issues, hence, by definition, any concerns about churn?

Sure. No, I don't have particular concern. I do agree with you anytime you touch anything near the sales force, you sort of get near higher turnover, but this is perfectly normal and you have to do it or else you won't get good service to those surgeons in the hospital. So -- and on that score Suraj, maybe just -- I know you didn't exactly ask this question. But we're into this thing, I read some article recently, it's called the Big Stay, I don't know if anyone's heard that. And so as opposed to the Great Resignation, we're now into the Big Stay and LeMaitre experienced dramatically reduced turnover in last year. I think our number was like 7.5% down from somewhere, I'm going to get it wrong, somewhere around 14% or 15% the year before. We're always three or four points better than our Massachusetts manufacturing colleague companies or peer companies, but major decrease in turnover. And notably with the sales force, one thing to further mention, Suraj, specifically, remember last year we had this massive surge in procedures and we grew organically 17%. Usually, LeMaitre before that had grown about 9% organically. And as a result, the W-2s in the sales force, how much we paid the sales reps, was dramatically higher in 2023. And as a result, they stuck around to get those paychecks and you would have seen them start leaving January 15, January 25, when they were getting their final commissions and bonuses. We haven't seen that at all, there's been one or two here and there, but we have not seen that at all. And so we're in a very, very happy time, in my opinion, in the sales force. Great results, commission checks are huge, et cetera., et cetera.

And, Suraj, part of your question was how do the commissions change when you split the territories? And as you recall, we compensate the reps based on their performance versus a gross profit dollars quota. And so when the territories split, we obviously commensurately split the gross profit dollar quarters or change them based on whatever the new answer is. And then their compensation, their tier that they get paid, doesn't change, but what it's linked to does change. So it's kind of, "fair" when you make the split. There isn't a big topic necessarily around that, that they're obviously going to make half of what they were making before.

Fair enough. Gentlemen, I'll quickly ask my two follow-ups to avoid the background noise. So, George, I'd love to get your updated thoughts on your M&A strategy looking forward. And the second question I have is I'd love to get your perspective. Valvulotomes grew 12% year-over-year. Obviously, that was the BEST-CLI study, and that has really seen pull through for you guys in terms of growth. Are you all seeing any counterbalancing going on with the Basel II study, which gave somewhat opposite results? Just curious if any, onto your thoughts on that front. Thank you for taking my questions again.

Suraj, I'm going to pass your M&A call over to Dave, question rather, over to Dave, and then I'll come back to the Valvulotome questions.

Hi, Suraj. Great to hear from you. And, yeah, with respect to the acquisition strategy, I'd say the criteria are consistent from previous calls. Of course, we're focused on open vascular targets with more than $5 million of revenue. There are about 25 of them altogether. Beyond that, we are and have been hunting in adjacent markets, maybe first cardiac surgery and endovascular. If anything, I think we learned from the Artegraft acquisition a few years ago that hunting larger is probably a good thing. It will move the needle more. So we've been looking at a little bit larger targets. And also, we have more cash, of course, to do an acquisition. With $105 million of cash and leaving $20 million on the balance sheet, plus maybe 3x our $46 million LTM EBITDA, we could fund $225 million of purchase price, excluding an equity raise or the target EBITDA levered up. So I think we're just consistently looking out in the same hunting grounds where we have been. And hopefully, someday, we'll be able to report back that we've done the transaction.

And Suraj, you asked BEST-CLI question. Yes, in the first half of the year, I feel like we got excited about the BEST-CLI study, as it relates to Valvulotome’s. And then, of course, Basel comes out, the European study, Basel II comes out. And it's sort of the antidote to BEST-CLI, BEST-CLI basically says, do leg bypasses, first open surgery. And then Basel II comes and says, "No, no, you can do stent in angioplasty, you're going to get great results that way too. So in some ways, you do have surgeons that want to do open surgery saying, "I listen to BEST-CLI and then you have surgeons and Angiologists, who want to use angioplasty in stents who come out and say, "I heard about Basel II. So there was a little bit of a retrenchment, I would say. For the exact factor, we grew Valvulotome’s 12% in dollars. That's 11% organic and units were up 5% last year. In fact, in general, across our portfolio, units were up 5%. So our first year with Basel II, I would say Valvulotome’s didn't go crazy, good, although that 5% was better than the slightly decreased units of 2021 and 2022. So 2021 and 2022 decrease was around 3% or 4% in units and then it bounced up again post Basel. I guess I'd say make of it what you will. It seems like it was a good thing, but it then got counteracted by Basel II.

Thank you.

Thanks a lot, Suraj. Those are great questions.

[Operator Instructions] And one moment for your next question. Your next question comes from the line of Daniel Stauder with JMP Securities. Your line is now open.

Yes. Great. Can you guys hear me?

Yes, Dan.

Great. So first off, I just wanted to ask on gross margins, very healthy gut and great to see, and you talked about some of the primary drivers there. But as you look out to 2024, could you give us an idea of how much of the contribution is coming from the manufacturing efficiencies versus some of the ASP gains? And then how should we think about cadence for gross margin in 2024? Thanks.

Yes. So those are the two largest drivers. I would say that those manufacturing efficiencies, I have been talking about them for two or three quarters and now the time we come into the P&L. So that's good to see. And the ASPs, you've heard us talk about those and it was a really healthy ASP year this year. And so I would say those two are battling for sort of number one position, maybe they're one-third each of the story or something like that in terms of the improvement. And it depends what your comparison period is and if you're year-over-year or sequential or whatever, but at a high level, I would say, general DL efficiencies and ASP is battling up. There's some other lesser lights in there that maybe I didn’t put in the script that matter as well, like our quality costs are a big part of the story -- and they had been sort of growing at a pace that was accelerated from really where we want it to be. And so we started monitoring that and putting a little bit of a lid on that. And I think that's helped a lot as well. And so to the extent that we can keep those quality costs in check, that will help the margin going forward as well. And then RestoreFlow had some really nice operational results on the sort of processing side as of late. And so hopefully, we can keep that going throughout the year.

Great. Thanks. And then just one follow-up related to M&A. Cash generation has been very healthy this year in 2022 and 2023. Just with the announcement of the share repurchase, $60 million. How should we think about the pecking order for use of cash? Does that change how you look at M&A this year? Or do you feel that you would be able to achieve both and just kind of weighing your options? Any thoughts there would be great. Thank you.

Yes. Hey, Danny. It's Dave Roberts. I would say, I think the doubling of the authorization on the share repurchase is just good corporate oatmeal. I mean, obviously, our cash balance is growing, as you mentioned, pretty healthily. So we thought increasing it from 25% to 50% is probably a good idea. But really, at the end of the day, we're feeding -- we're taking cash and we're feeding the dividend. Obviously, you heard we just increased the dividend for Q1 from $0.14 to $0.16 on -- so that's, I think, our 13th annual increase in a row. So that's sort of a mainstay. And then excess cash beyond that is set aside for acquisitions, we've been hunting for a while. At some point, we'll identify one. And if it's larger, we'll use more of the cash beyond that, are there other consumers of cash in terms of running the business like capital expenditures or when we buy out distributors as we did a couple of years ago in Korea and last year in Thailand, those are uses as well.

Great. Thank you very much.

Thanks, Danny.

Your next question comes from the line of Rick Wise with Stifel. Your line is now open.

Hey. This is John on for Rick. Just to start off, I wanted to get a little bit better understanding of guidance this year, and maybe how price is contributing to the growth outlook in 2024 versus how it contributed to 2023?

Yes. So in 2023, I mean, you've heard us talk about it quarterly. And I think George mentioned that for the full year 2023, it's about 11%, 12% pricing answer. And I would say going forward in 2024, maybe our default answer is sort of around 5% or 6%. Notably, that was kind of the default answer this past year 2023. We instituted something a little bit new call pricing floors. And I think we've got more traction out of those than we thought we might get. And so maybe we'll do a little bit more of that this year. We'll see where that goes. But I would say if you want a sort of base case answer, it's probably in that mid, high-single-digits range.

Thanks. That's helpful. And just looking ahead, just focusing on the gross margin line. You're guiding to 68% for 2024. That's pretty strong growth. You're talking a lot about manufacturing increases, manufacturing efficiencies and price increases. Just as I look further ahead, I mean, how should we be thinking about the gross margin structure for the business going forward with higher ASPs, more efficient manufacturing, could we be thinking about potentially returning to sort of the pre-Covid 70% gross margins you had? Thanks.

Yes. I mean, obviously, we're not looking out that far with you guys right now on that score. I would say for right now, we're happy with that 68% sort of next step in the evolution here. We'll see where it goes from there. If you keep getting those, I don't know, call it, 10% price hikes instead of 5% price hike, that does bleed through, and that is an incremental benefit that you will get. And if you can keep your direct labor folks efficient as they are now or maybe a little bit more going forward, that obviously is going to help. But there's so much other stuff that goes on in gross margin and that -- those aren't the only two answers even if they're the biggest answers. Inventory is a topic for us whenever we do consolidations or transfers or manufacturing or other issues when excess and obsolete comes and gets you for a quarter or two of those issues come and go. -- that quality topic, the quality expenses that I talked about, that's a topic, transitions of manufacturing product lines like Omniflow and CardioCel, which we've done recently, those can come in and out of it. We've built a couple of clean rooms in the last year or two, and those pieces come through in terms of depreciation and get us there and push the margin down a little bit. So I just -- I don't want to make it a clear line story for you. There's a lot going on in gross margin. We'll see what happens after this year. But Jay, I'd like to leave John with a little bit of hope going forward. I think there are several shots on goal in that line item. We're just getting used to what it's like to be 68 again. So we need a lot of studying, et cetera. But I think there's some short time goal, John.

Appreciate the color, guys. Thanks.

And your next question comes from the line of Michael Petusky with Barrington Research. Your line is now open.

Thank you. Good evening. J.J., you get the 300 basis point improvement. People are asking for more, they're never satisfied.

I know that is the last long -- it really didn't.

You had about an hour after the press release came out, I guess. All right. So I didn't catch this if you guys mentioned it. Did you guys mention what percentage of the Q4 sales growth was related to price and volume, how that split out for Q4 specifically?

We did not. It was 13 price, one unit. And for the year, again, to repeat, it was 12% price 5 units.

Okay. And is it possible -- and I know you guys don't always do this, but you've occasionally done this. Is it possible to get the Autograph revenue for the quarter and for the year?

Yes, of course. Let's try to find it quickly for you here.

I have, Mike, it's Dave. It's a little under $8 million, $7.9 million, up 10% for the quarter, Q4 in the year.

Going to be around $34 million, something like that.

We can get you that while we're on the call.

I have another question. So obviously, it's been a while and the Artegraft deal has been successful, and I know Dave has been looking diligently. J.J., in terms of the -- your comfort level with leverage, obviously, you guys said you could do a $225 million deal potentially. I mean where do you think you sort of top out in terms of your comfort level a leverage ratio on an external growth opportunity?

Yeah. So if you're maybe 3 times, 3.5 times EBITDA, maybe somewhere in that range before you talk about the EBITDA of the acquired company. And if EBITDA is sort of in the 45, 46-ish range these days, maybe it's in that sort of $130 million, $140 million, $150 million, somewhere in there, Mike, I would say.

Okay. Very good. And then just one more quick question. The pricing floor initiative, it does seem like it's really, really helped incremental basis. I'm just curious, I suspect maybe you went after some of the easiest low-hanging fruit on that and maybe it's tougher going forward? Or is that -- was that not the case in terms of pricing for and what you can do there?

Okay. Yeah, that's a good question. And at a high-level, what the management team has been trying to do over the last three years is sort of take the pricing lever away from individual reps and bring it back in-house, because as the previous question asked, the reps don't last forever here, and sometimes they cut a deal at a low price, then we're left with it for x-years. So we're just kind of pulling it back. And this all started, Mike, about two years ago in the US with one or two products. And now it's become a full-blown effort. And for the first time ever, this year, there's a full set of pricing floors in Europe. We've had some pricing floors in Europe before, but for the first time ever, it's drilled into what we call the plank card, which is this little goal set, that we pass out to every single employee. So we've got a European plank set that has pricing for us. And then also, again, for the first time ever, it's being drilled into the Japanese planks and so in Japan, specifically, not all of Asia, just Japan, which is half of our Asia right now. So we have it on the -- so I think you still got some room to go here. I think you'll start learning in nine weeks when we come back to you guys with Q1 and say, hey, what happened in Q1 relating to pricing. But it's become a full-blown effort and it started with the dribs and drabs 2.5 years ago. And now it's real. And it's worldwide.

And Mike, on your…

And then…

Sorry, did you have a follow-up on that?

No, no, go ahead.

Yeah. On Artegraft question we have a category, bovine-graphs I think it's nearly all the autograft cancer it was -- call it, $33 million in the year and it was up 15% on a reported basis.

Can I just confirm -- George, you were talking fast when you were talking about some of the OUS development. Artegraft, Canada and Australia filings in 2024, is that correct?

That is correct. And then also, we've thrown in roughly five more Asia Pac countries we'll file over there as well.

And then offshore XenoSure is still 2025 in China.

Yeah. I mean it just keeps pushing away, but yes, XenoSure cardiac and peripheral in China 2025.

Okay. Great. Well, listen, congratulations and particularly, congratulations to the team and particularly JJ on that gross margin. I know you've been after that for a while and congrats. Thanks.

It's a thankless job, Mike.

That's right.

And your next question comes from the line of James Sidoti with Sidoti & Co. Your line is now open.

Hi. Good afternoon and thanks for taking my questions. Can you talk a little bit more about -- a little bit more about the sales force expansion? You said, I think you're going to add about 14 folks in 2024. Can you break that out internationally and domestically?

Sure. It feels -- James, this is George. It feels largely like it's a domestic thing. We've got a bunch lined up to go in the US, less so in Canada, but call it a North American thing. And then a couple over in Asia Pac, where we have some of these newer subsidiaries where why would you start in Korea, if you didn't give the guy three or four sales reps, right? It was not worth going over there, and I should do that. So mostly North America, a little bit Asia and not much in Europe oddly this year.

Okay. And you mentioned you opened offices in Korea and Thailand, what were you doing this year with those folks just working into their home? Or what's changed?

Okay. So -- and 2023 was our first year of full year of operations in Korea. No, we were going through a distributor, and we sold items to that distributor, and then she passed them along to Korean hospitals for -- actually from before I started, Jim, four years later, she was still doing that. And we finally bought out her distributorship. We set up an office, hired a general manager and then hired three sales reps for Korea. And now they're in our Seoul office, and they've been operating for one year, same drill in Thailand.

Okay. All right. And for 2024, you guided for about 9% organic growth. Is it fair to say that a significant portion of that is from pricing?

I would say we try not to guide on pricing, because it's so variable what's happening. But if you look back to the 12% and 5% this past year in 2023, 12% price, 5% units, maybe that relationship holds until we all know differently.

Okay. And then the last one, can you -- JJ, can you tell me what you're assuming the tax rate will be for 2024?

For Q1 or a 2024, let's see, we I put it, Jim, 24.3% and then for the full year, 24.1%.

Well, can you be a little more specific?

You ask?

Okay. 2024 would have been good. All right. Thanks.

Thanks, Jim.

Your next question comes from the line of Brooks O’Neil with Lake Street Capital Markets. Your line is now open.

Hey, good afternoon guys. This is Aaron on the line for Brooks. So most of my questions have been addressed. But -- so I guess for 2024, we're sensing solid pricing and mainly solid volume and tight expense control remain key priorities for you guys. Can you just give us a little more color and an updated sense for the general environment in these areas?

Sure. And one of the folks on this call from KeyBank, Brett, I would see them up on he screen. KeyBank just published a really nice report about credit card swipes in USA hospitals. And also we're studying staffing in USA hospitals. And I would say it feels good from all the stuff we read, we're not revealing what's going on in the business for the first eight weeks of the year, but it feels good from all the stuff we read that this “return to hospital of staff and patients seems to be stretching out into 2024, and we were happy to see it take place in 2023, and I feel like it really helped the business in 2023, so maybe more of the same procedure-wise.

Great. Yeah, that's helpful. And then last one for me. So you hired aggressively in sales and manufacturing last year, and this has been brought up, but you plan to add 14-ish reps. So if you could just outline some of the priorities for 2024 and how you're thinking about those? Thank you.

So priorities in terms of hiring, is that where we're going, Aaron?

Correct. Yeah.

Okay. Great. So -- and just to sort of getting there on the beginning of that question. The big hiring spur took place at this business in 2022. We put on 141 new headcount. And then in 2023, we really slowed down a lot. We only put in 23 new headcount. So we really put on the brakes last year. We wanted to catch up to all that post-COVID hiring. We think we did that. And now we're back at it a little bit. And of the people we plan to hire this year, it feels like maybe we talked about 15 reps, you add 5 sales managers, there's 20 in the sales department, maybe and maybe there's 2025 elsewhere. And maybe the biggest bucket of that is operations and manufacturing. There's something like 40-ish, 50-ish. We're still working that out. But we're pretty tight fit. We're on a pay-as-you-go plan here. Our number one goal here is op income and then stuff come fill in after that.

Great. Very helpful. Thanks for that clarification and congrats on the quarter. I’ll hand over guys

Thanks a lot Aaron.

Your last question comes from the line of Brett Fishbin with KeyBanc Capital Markets. Your line is now open Q – Unidentified Analyst: Hi. This is actually Liz [ph] on for Brad. Thanks for taking the question. Just to start off with the 9% growth for the year, how should we think about that amongst the different regions? And where do you expect to drive the most growth?

Well, that's a good question. I would say, generically, we always think Asia-Pac is going to grow faster. Europe is going to grow second fastest and North America is going to be a little bit slower. So that's generically -- we don't really make guidance based on which region is going to happen. We'll be thrilled when we show up with that 9% organic growth, regardless of how it happens, 10% reported for the year, is also what we guided. Does that get some of your question, Liz? Q – Unidentified Analyst: Yes, that was really helpful. And then if I could ask on the op leverage side, how are you thinking of balancing our R&D investments versus SG&A? And how should we think about this going forward?

Right. So sort of all balancing down as some kind of op margin numbers or something like that. I mean R&D, we've been kind of building a little bit on a percent spend. I think we're up at 9% of sales on that. Maybe historically, we were sort of in the 8s and now we're in the 9s. So maybe we've been cranking up a little bit on the R&D side. And specifically, for us, R&D really means expanded regulatory and clinical efforts, not so much old-fashioned R&D with new products. We tend to try to bring the products in through acquisitions. So that may cover your R&D thing is a small part of your question, but -- the bigger part of the question is, I think our guidance is implying 21% op margin for the year. Am I getting that right? 21% op margin for the year. And I think in 2023, that same figure was 19%. And the year before that, it was 17%. So I think we're seeing a little bit of operational leverage here. Of course, we're helped out in a big way by that gross margin number. If that sticks around, should make things pretty easy -- not easy but more doable around here. So a little bit of leverage coming from gross margin and still growing the sales force. Q – Unidentified Analyst: Okay. Great. Thanks for taking the question.

Thanks a lot, Liz

Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation, and you may now disconnect. Have a great day.