Q4 2021 Conmed Corp Earnings Call

January 26, 2022

Good day, and thank you for standing by and welcome to the Q Q4 full year 'twenty One comment earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on <unk>.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to Kam Mid Corp. Refill now please.

Please standby momentarily.

Good afternoon, everyone.

The conference call begins let me remind you that during this call management will be making comments and statements regarding its financial outlook and its plans and objectives, which represent forward looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws investors.

Investors are cautioned that any such forward looking statements are not guarantees of future events performance or results and the companys actual results may differ materially from its current expectations.

Please refer to the risks and other uncertainties disclosed under forward looking information in today's press release as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially.

The company disclaims any obligation to update any forward looking statements that may be discussed during this call except as may be required by applicable law.

You will also hear management refer to certain non-GAAP adjusted measurements during this discussion.

These figures are not a substitute for GAAP measurements management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies.

Adjusted net income and adjusted earnings per share measure the income of the company excluding credits or charges that are considered by the company to be special or outside of its normal ongoing operations.

These adjusting items are specified in the reconciliation supporting the companys, earning releases posted to the company's website.

With these required announcements completed I will turn the call over to Curt Hartman <unk> chair of the board President and Chief Executive Officer for opening remarks, Mr. Hartman.

Thank you Julian Justin Good afternoon, and thank you for joining us for <unk> fourth quarter and full year 2021 earnings call.

With me on the call is Todd Garner Executive Vice President and Chief Financial Officer.

Today, I will provide a brief overview of the financial and operating highlights for the fourth quarter and the full year. Todd will then provide a more detailed analysis of our financial performance and discuss our 2022 financial guidance. After that we'll open the call to your questions.

Turning to our results total sales for the fourth quarter were $274 million representing.

Representing a year over year increase of eight 4% as reported and an increase of nine 1% in constant currency.

For the full year sales reached 1.01 billion, representing a year over year increase of 17, 2% as reported and 16, 3% in constant currency.

This is the first year that <unk> has exceeded $1 billion in revenue and are proud of our team for its persistence and attaining this goal in the current operating environment.

Our expectation is it will not take another 52 years to achieve the second billion.

From an earnings perspective during the fourth quarter, our GAAP net income totaled $24 4 million. This compares to net income of $24 1 million in the fourth quarter of 2020.

Excluding special items that affected comparability, our adjusted net income of $33 4 million increased 33, 5% year over year and our adjusted diluted net earnings per share of $1 seven increased 27, 4% year over year.

For the full year, our GAAP net income totaled $62 5 million compared to net income of $9 5 million in 2020 <unk>.

Excluding special items that affected comparability, our adjusted net income of $99 4 million increased 54, 8% year over year and our adjusted diluted net earnings per share of $3 21 increased 47, 2% year over year.

Overall, our financial performance in 2021 was consistent with our original forecast, though the year did not unfold as we might have expected. The environment was and continues to be impacted by surges of COVID-19 cases, staffing issues and supply and logistics disruptions against setbacks.

Drop we had another great year of strengthening our business infrastructure advancing product innovation and elevating our digital strategy.

Which helped us to deliver solid earnings growth and cash generation.

Overall I'm honored to work with my executive team and beyond impressed by their commitment and persistence and pursuing what is in the best interests of conduit.

It all day and all of our global employees and related partners remain committed to our growth strategies and I consider 2021, an excellent step in that journey.

In 2022 will define success by staying focused on our people and ensuring the financial growth and health of the company, while remaining committed to our strategy to drive above market growth in both revenue and earnings with that I'll turn the call over to Todd who will provide a more detailed analysis of our financial performance and discuss our 'twenty two financial.

Guidance Todd Thank you Kurt.

All sales growth numbers I reference today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release.

As usual we have included an investor deck on our website that summarizes the results of the quarter and our updated guidance.

For the fourth quarter of 2021, our total sales increased nine 1%.

Well, that's a good growth number over the prior year. It was a little lower than we expected at the beginning of the quarter.

The Delta Varian had a larger impact on hospitals in November and December than we had expected and the new Omicron variant had an increasing impact as we move through December and continues to have a significant impact on hospital procedures in January .

For the total year 2021, our total sales increased 16, 3% over 2020.

For the fourth quarter, our sales in the U S increased 5.0% versus the prior year quarter for the full year, our sales in the U S increased $14 six over 2020.

Our international sales grew 14, 3% for the quarter compared to the prior year and for the full year. Our international sales grew 18, 4% over 2020.

Worldwide Orthopedics revenue grew five 2% in the fourth quarter in the U S. Orthopedic sales grew 0.7% and internationally orthopedic sales increased seven 9%.

Total worldwide General surgery revenue increased 12, 2% in the quarter.

U S General surgery revenue grew six 8% and internationally general surgery revenue increased 25, 3%.

Now, let's move to the expense side of the income statement.

We will discuss expenses and profitability in the fourth quarter, excluding special items, which include charges related to acquisitions and integrations restructurings amortization of intangible assets and amortization of deferred financing fees and debt discount net of tax.

Our comparisons to the full year will exclude those items as well as manufacturing consolidation plant underutilization and product rationalization costs from the height of the pandemic in Q2 of 2020.

Adjusted gross margin for the fourth quarter was 56, 9% an increase of 310 basis points over the prior year quarter.

For the full year adjusted gross margin was 56, 2% an increase of 90 basis points over the prior year.

As we expected our product and channel mix continue to drive improvement in our gross margin, despite a challenging and inflationary supply environment.

Research and development expense for the fourth quarter was four 1% of total sales 50 basis points lower than the prior year quarter for.

For the full year research and development expense was four 3% of total sales.

The dollars invested are actually up seven 6% year over year, but on higher sales the ratio declined by 40 basis points from 2020 to 2021.

Fourth quarter SG&A expenses on an adjusted basis were 36, 7% of sales an increase of 90 basis points from Q4 2020 due to the recent expansion of our sales force.

For the full year SG&A expenses on an adjusted basis were 38, 3% of sales, which was 90 basis points lower than the full year 2020.

On an adjusted basis interest expense was $4 $2 million in the fourth quarter and $21 5 million for the full year.

The adjusted effective tax rate was 19, 2% in Q4 and 18, 4% for the full year.

Throughout the year, we benefited from the excess tax benefit from stock plans and the resolution of audits, we do not expect that same level of benefit in 2022.

Fourth quarter GAAP net income totaled $24 4 million, an increase of one 3% over Q4 of 2020.

But largely due to the additional share count from our convertible notes. The <unk> 75 of earnings per diluted share. This quarter was <unk> <unk> lower than the prior year quarter.

Excluding the impact of special items discussed earlier, we reported adjusted net income of $33 $4 million, an increase of 33, 5% compared to the fourth quarter of 2020.

Our fourth quarter adjusted diluted net earnings per share was $1 seven an increase of 27, 4% compared to the prior year quarter.

For the full year GAAP net income totaled $62 5 million compared to just $9 5 million in 2020.

$1 94 of 2021 GAAP earnings per diluted share was significantly better than 32 cents for the full year of 2020.

Excluding the impact of special items, we reported adjusted net income of $99 $4 million for the full year, an increase of 54, 8% compared to 2020.

Our full year adjusted diluting diluted net earnings per share was $3 21.

An increase of 47, 2% compared to the prior year.

Turning to the balance sheet, our cash balance at the end of the quarter was $28 million compared to $31 $5 million as of September 32021.

Accounts receivable days as of December 31 were 60 days consistent with September 30th and better than the 63 days at the end of 2020.

Inventory days at quarter end were 177.

Which was an improvement from the 193 days at the end of Q3. However, we are holding more inventory than the 150 days from last December as we are focused on mitigating supply chain challenges to serve our customers.

Long term debt at the end of the quarter was $672 million versus $703 million at September 30.

And $735 million a year ago.

Our leverage ratio on December 31, two.

2021 was three five times, which is a reduction from four nine times a year ago.

Cash flow provided from operations for the quarter was $33 8 million.

And capital expenditures in the fourth quarter were $3 2 million.

Cash flow provided from operations for the year was a record $111 $8 million.

Compared to $64 $5 million in 2020.

And capital expenditures for the full year were $14 9 million.

Compared to $13.0 million in 2020.

Adjusted EBITDA was a record $59.0 million in Q4 of 2021 compared to $47 $9 million in Q4 of 2020.

For the full year, adjusted EBITDA was $197 $2 million compared to $156 $1 million in 2020.

As a percentage of revenue adjusted EBITDA margin was 21, 5% in Q4 and 19, 5% for the full year 2021.

Okay.

Now, let's turn to financial guidance.

We're still a week away from Groundhog day, but this situation of guiding the full year in the midst of the current COVID-19 surge seems very familiar.

A year ago, we framed our assumptions on how the year would play out and provided a wider than normal range for our full year guidance that.

That will be our approach again today.

I think it's constructive and a testament to our management of the business during a prolonged storm to review, how 2021 and turned out compared to our full year guidance last January .

We had identified 2021 as an anticipated transition year with each sequential quarter being less impacted by the virus.

With that framework, we guided revenue to be between $975 million and $1 billion 20.

And adjusted cash EPS, we guided between $2 85 and $3 five.

Yeah.

Of course, the virus had a much larger impact on 2021 than any of us anticipated and yet we delivered $1 billion 11 in revenue, which was at the high end of guidance and we delivered $3 21, and adjusted cash EPS, which was well above our original guidance.

We are very pleased with the way our teams have navigated this challenging year as.

As we look to the future we are encouraged by the strength of our business and our positioning with our customers.

We are projecting revenue guidance for the full year 2022 to be between 1.075 billion and $1 125 billion.

We expect currency to be immaterial to 2022 that means we are expecting revenue growth in the high single digits to double digits in 2022 compared to 2021.

For adjusted.

<unk> cash EPS, we expect our full year 2020 to be between $3 60.

And $3 85.

This is inclusive of what we expect to be a higher share count due to the new accounting rules for convertible notes.

Without this rule change our adjusted cash EPS guidance would have been five to 10 cents higher so on an organic basis, we are projecting a minimum of 15% growth in adjusted cash EPS and that is despite what we expect to be a significant headwind in the tax rate between.

2021 and 2022.

As I explained earlier, we do not project the same level of tax benefits. We saw in 2021 and are assuming our adjusted effective tax rate in 2022 will be between 24% and 25%.

Beyond that as we did last year, we won't be guiding to the individual lines of the income statement today as we will again be agile and responsive to the environment to plan to serve our customers appropriately strengthen the business for the long term and meet our commitments to shareholders.

As we transition out of the pandemic, we believe customers will continue to reward our actions as valued partners with increased trust and market share.

And as the macro environment stabilizes, we believe the work we've been doing on the margin profile will become clearer and more obvious.

With that we'd like to open the call to your questions and ill hand, it back to Justin.

And thank you.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Please standby, we compile the Q&A roster.

And we ask that you. Please limit yourself to one question and one follow up again Thats one question and one follow up and our first question comes from Rick Wise from Stifel. Your line is now open.

Good afternoon to you both.

Athene.

It's hard.

Not to be the first questioner.

Not at.

More detail about what youre seeing out there in the field and if I heard you correctly.

Todd I mean, it sounds like.

Late December trends have continued into January and yet as I read the newspapers it seems like.

Cases are down significantly and parts of Europe .

It's starting to peak in the North East here.

I'm not sure how to ask the question but.

Do you feel like Youre seeing any signs.

Graphically around the world.

Encourage you a little bit or no light at the end of the tunnel yet.

Yes, good question Rick.

It's a tough question because it is varied across different geographies as omicron has moved around the globe. There are some markets.

That are still pretty locked up at this point in time as recently as conversations. This morning, there are some other parts.

That you are seeing a little bit more latitude a little bit more operating cadence starting to return.

But but I don't think were.

We're excited by where things are this late in the month of January we'd like to see a much faster recovery.

I was looking at some data earlier that showed relative.

Relative to <unk>.

Trends in.

Covid Pk's on a seven day average hospitalizations on a seven day average there are some folks that are projecting those occurred.

This most recent week here.

And that things should start trending down from there how long that downward slope takes.

I think it would be foolish for me to guess.

Yes.

And.

You haven't been idle during.

The past year or so in terms of thank you into the future as you.

As I've heard you talk a number of times now you have a new ortho leader you've revamped the offering there you've expanded the sales force thats come up several times.

I'm sure they're pipeline products.

<unk> launched our launching still launching.

Maybe help us.

Think about the impact.

Separate from Covid, whatever happens with Covid.

Impact.

Of all of these initiatives and Im sure Theyre more maybe you want to talk about it but let's think about the impact on the business.

As COVID-19 at some point is going to receive.

Do we expect you to return to sort of move.

Okay.

Pre COVID-19 upper single digit kind of performance or are these initiatives potentially setting you up as you recover.

As the environment recovers.

Growing even faster how would you have to think about it.

There's a lot in that question, Rick I'd, probably start with the guide and Todd's comments that the revenue represents the guide range represents a low of six 4% up 211, three so so that 11 three is clearly on the higher end and.

I think that reflects all the work we've put into the company not only last year, but in the years, leading up to that as these things kind of build on themselves.

I would just point out.

Covid.

Really slowed down tomorrow, there's still another dynamic at play and that's called the healthcare worker.

So short staffed they are fatigued.

Most recent wave has just added to that condition and.

They're not going to say, while COVID-19 is over on Friday, let's get back to 100% on Monday, there's going to be a ramp up that has to occur.

As things get back to normal in the health care facility in the health care delivery settings.

So.

I would like to believe that all the work we've done has us well positioned to <unk>.

Capitalize on wherever and whenever that recovery occurs.

But theres a lot of factors that go into making that statement and we're just going to have to be patient and watch what happens is as the environment does improve.

Thank you very much.

You said to only be there. Thank you very much thanks Rick.

And thank you Andrew.

And our next question comes from Robbie Marcus from Jpmorgan.

Oh, great. Thanks rich.

Thanks for taking the question.

Maybe first on margins for 2022.

It seems like guidance implies something like just under a 100 basis points of operating margin expansion.

First question is that right and second.

It's pretty healthy how do we think about where those areas of improvement are coming from.

Yes, Ravi I appreciate the question I know you guys want more granularity on the P&L, we're just going to start this year like we did last year.

And do top and bottom.

There's a lot of uncertainty out there we're not exactly sure how this plays out.

Got supply chain challenges.

And so we're going to kind of stay nimble and agile and responsive.

We're just not going to get more granular on the different pieces of the P&L at this point.

Well, let me ask it another way is there anything non operating that we should be aware of because we could do the math from top to bottom.

The only one other component is some significant non operating and it sounds like taxes going to be stepping up a bit from 'twenty one yes.

Yes taxes, a headwind interest rate I gave you the quarterly interest expense I think that's a pretty good run rate going forward of course that if there is.

If theres rate hikes that would affect that and of course, we're not projecting the quarterly debt balance, but but I think.

Q4 interest expense gets you in the ballpark of that run rate. So other than that I can't think of any non operational.

Issues.

Got it Okay, and then just a quick follow up on Buffalo filter.

How has that been trending I think Ed two weeks ago, you said it was about 25% to 30% of sales so grown faster than the rest of the business in 'twenty. One how should we think about just the runway still in 2022 and beyond how much has that impacted by slower procedures.

<unk> here.

And any tailwind that you can see in the markets where there are.

<unk>.

Rules backing usage.

Yes, there is no change in our in our bullish view of the opportunity for Buffalo filter and <unk> together so.

We did update the chart in the Investor deck.

You get your protractor out you can see that it's a little better than 25% of the company's revenue at the end of the year. That's the full year 2021 on that chart.

And it is growing faster obviously than the rest of the portfolio. So that will continue to increase.

And yes, we remain bullish that on an annual basis, those two products together should grow greater than 20%.

They are impacted by procedural growth we saw that in Q3, we saw that again in Q4 so.

You can have some some ebbs and flows but we believe you take a broader look and if you look annually.

Those products growing north of 20%, we feel pretty confident in.

Great. Thanks for taking my questions.

And thank you.

Our next question comes from Matthew O'brien from Piper Sandler.

Your line is now open.

Afternoon, Thanks for taking the question and congrats on getting to the $1 billion threshold on the top line.

Kurt.

The I guess.

The results today are certainly welcome to see given some of the commentary I think you just provided at a recent conference you have missed a little bit, but maybe 1% on the top line versus what people were thinking you're guiding kind of in range and the range of what the street's modeling for 'twenty two.

So clearly underneath the surface outside of the labor shortages and omicron impacts you are seeing some real improvements.

Where are those coming from are you taking market share in specific accounts that you hadn't been in the past are the sales reps that youre, adding.

Coming up the curve faster.

What are you seeing that it's still allowing you to put up pretty good results, even despite all the headwinds that youre seeing around the globe.

Number one thanks, Matt for the comment on the $1 billion.

It's a number of factors.

I think I would pin it on any one thing.

We obviously have done sales force expansions, we obviously have commented that over the last couple of years innovation remains very important and we did launch some new products in the calendar year, just completed and.

Those are helpful.

When sales reps are able to talk to customers and when customers have have the capacity to to get into.

Clinical evaluations.

Look at new products, which.

As Covid cases, ebb and flow those windows open and close.

The retention gets very focused on COVID-19 patients and Thats <unk>.

Not a great time to show new products.

We have some some great historical platforms out there that our teams are running with.

If you go around the globe, our international business, which is north of 40% of revenue had a very good year.

Pretty much start to finish.

Some ebbs and flows in the international markets as Covid happened, but.

We got a diversified business there and it's it's getting bigger and bigger on the general surgery side, It's got a strong.

Orthopedic side has for a long time now and you can see that growth rate.

And in the U S. We've got a couple of businesses that make up general surgery and both of those were growing.

So it's a little bit of everything in a lot of the work that has accumulated over the last several years.

I think that's probably where I'd leave it at that.

Okay appreciate that and Todd.

Just to just to push a little bit more on the.

Margin question that you just had.

Can you talk a little bit about some of the pressures that youre expecting from an inflationary perspective here in 'twenty, two because to <unk> point that the bottom line guidance is again impressive versus what I think we were expecting given the new sales reps that youre, adding plus all the inflationary pressures. So what other pressures are you seeing.

And SG&A or elsewhere.

This year that.

Hopefully you'll lap somewhat as we head into 'twenty three.

Yes, the two foundational kind of built in tailwind that we have are mix, which is certainly goes in our favor right. All of our products that are growing faster are also margin accretive.

And.

And then our infrastructure it still remains true I have been saying this for a few years our infrastructure.

Can support a much higher revenue base.

And obviously, we're going to continue to build out infrastructure, but at a slower rate than we grow revenue. So both of those kind of inherent characteristics of the business model are favorable to margins.

As everybody knows there is significant pressure right now there is a supply chain.

Tightness out there there is.

Freight is multiples of what it was a couple of years ago and so I think those are the areas that have the most concerned.

And what I would so again, we're not guiding to the specific lines, we definitely expect.

Focusing on gross margin for just a minute we definitely do expect gross margin to be positive and.

To improve 20 to over 21, despite these challenges.

We're not guiding because.

There is enough uncertainty that we're not exactly sure how the pieces play out in the duration or the timing we do expect.

Along with Chairman Powell today, we expect some.

Some easing in the supply chain.

As the year goes on so hopefully that becomes true.

But so I would tell folks, but we do have a little bit of a.

Seasonality or cadence to our gross margin and so we.

We expect it to be growth over the prior year quarters each quarter.

But not growth sequentially right, that's not how our seasonality usually plays out and so.

<unk>.

I think thats as much help as I can give you today Matt.

Okay I appreciate that thank you.

Thank you.

And our next question comes from young Li from UBS. Your line is now open.

Okay.

Alright, great.

And thanks for taking my question.

Maybe.

Got it.

Showing up.

Some questions wanted to hear a little bit.

More about how you approach thinking about setting guidance for the year.

Obviously, a lot of moving parts and a lot of things you can't control.

<unk> had been one of the more conservative management team.

With your views about the pandemic.

Can you maybe help us understand a little bit more about your.

Thoughts on how the year progresses, maybe.

Maybe you can comment on quarterly cadence seasonality if we can.

And young.

I understood everything you said, except for what specific financial guidance, where you're looking at.

The top line.

The revenue guidance okay.

We're not providing quarterly phasings here today, obviously as Kurt outlined.

The year, our customers are actually starting 2022, and a worse place than they were in 2021 right. So.

January has not been a good start.

We do expect.

Got to get better obviously, we don't expect this level of disruption at hospitals to persist.

But depending on how the current storm plays out.

We wouldn't be surprised to see Q1.

Flattish with last year actually we don't know.

We're going to remain responsive to our customers.

Going to be good partners.

But we do expect that things should get better when this surge receives.

And that throughout the year.

Again, if you go quarter over quarter and look at the normal seasonality of our business, we would expect kind of improving growth as we move through the year.

And I think Thats probably.

Probably as good as I can do for you.

Okay great.

That's very helpful color.

I guess maybe two.

Sure.

A follow up a little bit.

On the guidance.

In terms of the <unk>.

<unk>.

Providing the wider range, but.

Alright.

Flattish Q1, maybe.

That will be addressed.

Healthy brand.

On the rest of the year.

Wondering if you can talk a little bit about what gets you to the high end of guidance.

The contribution from the new hires.

What are some of the variables that gets you to the high end.

Well, it's pretty simple young.

If the virus is more persistent and has more waves that are impactful.

That's where we see the lower end of the range and if it.

If it's less impactful as the year goes out and we get more to a kind of truly post pandemic environment, then that's where the higher end of the range comes into play.

It's that simple.

I would add on that higher end of the range obviously.

Sales force expansion new products all of those contribute it sitting here today, it's very difficult to say how much each one of those individually would contribute.

But.

Todd's message plus you add those other factors and you start seeing yourself closer to that high end of the range.

Okay, Great I appreciate the thoughts.

Thank you.

And our next question comes from Matthew <unk> from Keybanc.

Your line is now open.

Good afternoon, and thank you for taking the questions.

Can you talk about innovation as a driver.

Talk about new product launch cadence.

What you launched in 'twenty one.

What you think youre going to be able to launch in 'twenty two.

And anything you'd kind of call out over like the last year or two that might have been masked.

By the macro that you're excited about.

Yes.

Great question Matt.

I don't have the.

Full list in front of me.

To do this as best I can for memory, but.

We started.

Kind of first quarter second quarter of 2021, launching a new large bone power tool system and a new video platform and we've been pleased with both of those on a on a global basis.

We introduced in the middle of the year some products in our advanced endoscopic business.

You may have seen some of those in social media.

They get into the sterility and.

Clean.

Single use categories, and we've had good market reception on those and within.

Advanced surgical where <unk> and Buffalo filter reside.

Launched.

Our new.

Port for Air Seal in collaboration with.

The folks at intuitive that we think is.

A real homerun product and so far the market has agreed with us on that as well and we've got.

Some other products that are on the doorstep right now in that business. So we've had a good cadence that cadence will continue and in the new year.

And.

If people are at Academy, you might see some new stuff at Academy.

Some of the other general surgery trade shows, you'll probably see some new stuff this year as well so.

I would just call it as a steady stream.

It's really hard to predict what's going to be a homerun, what's not you don't know until customers vote with their purchasing dollars in there.

External environment makes that a little more drug out because there is just some customers don't have the the.

The capacity right now and candidly for most of <unk> 21 to look at new products, because everything they've got going on and there is others that have had longer periods of COVID-19 free periods, where they could look at new products. So you've kind of taken these bits and pieces from around the global geographies and saying is this one going to <unk>.

Get us where we want to go or is it not what we thought it was going to be and we just keep running that offense.

<unk>.

This is Todd and I have said very decentralized, we let our commercial teams or marketing R&D teams work with the customers figure out what's needed and put it into their pipeline.

Deliberate in a manner that makes sense for the sales portion of where the sales forces from our focus and attention standpoint.

Okay, and then just a follow up for Todd I was a little surprised that you said that FX was going to be immaterial. This year is that just your mix of currencies and the way it came out already.

The hedging program is still intact.

Yes, so both right.

As we look at.

Our currencies and the weight and mix of those combined with our hedging program.

There's very little difference between.

How we see the reported revenue and constant currency revenue.

In 2022, given the rates if the rates stay where they are now which of course is a big if but.

The same way, we always calculate it and we've been pretty good at forecasting those impacts.

It looks it looks immaterial to us.

Rates stay where they are.

Okay. Thank you.

Okay.

And thank you.

And our next question comes from Mike Matson from Needham <unk> Company. Your line is now open.

Yes, thanks for taking my questions.

When asked about the sales force expansion you just given the results it looks like it has gone well, but just wanted to get an update there in terms of where you think those new reps are in terms of getting up the productivity curve and then what is the plan for 2022, because I think you normally do these things in the early part of the year.

Was that really just a pull forward of the 2021 or are you going to add even more in 2022.

Yes, so talk about what we did in 'twenty one.

We're pleased with our progress obviously not as straight line as a normal environment would offer as you've had these kind of ebbs and flows with account access, but pleased with the progress and really excited to.

To start the year fresh and.

Kind of let those folks hit the ground running.

And it's interesting to see where we are the geographies have been open we are seeing that traction that we would hope to see and where it's been a little more hit or Miss it's taken us a little bit longer, but we had a good expansion in 'twenty. One we're pleased with that as we start 2002, I would say our sales force expansion is going to be more modest out of the gate here.

And I think that's a reflection of the current environment, we want to digest, what we did in 'twenty one.

But again, we will do some sales force expansion. This year, that's already underway, but it will be more modest than what a normal year over year cadence might have been.

Okay got it and then.

Yeah.

Question on the debt.

So.

How much of your debt is has a variable rate and what did you assume what's going the way it was going to do in the guidance ranges that you gave I mean have you I mean, because rates are clearly going up here. So this year. So I mean is that how.

How much of a headwind would that could that be to your to your interest expense.

Yeah, Great question Mike.

So we ended the year with $672 million in long term debt.

345 of that is the convert.

Which is at a fixed rate.

And so the rest of that is that they are variable rate.

And we've assumed.

The published scenarios.

The range of published scenarios in our in our bottom line guidance.

Okay, meaning the kind of set guidance or whatever.

Yes, Okay alright.

That's all I have thank you.

Yes.

Thank you and we have a follow up question.

From Matthew O'brien from Piper Sandler.

Your line is now open.

No I appreciate it just wanted to follow up maybe Todd with the comment about flat Q1.

Sales versus.

Last year and I again, I know, it's a fluid situation, but if you guys are flat in Q1.

Any big pickup and to get.

To the midpoint of the range given the high end of the range and it seems like saying it could be a possibility so.

Why not kind of direct people more towards the low end of the range given some of the pressures you are seeing here in.

Q1 versus the mid to upper end of the range.

If theres backlog, you are considering or other things, but just any kind of clarity on those points I think it would be helpful. Thank you.

Yes, Matt is just a function of having to give you guidance today and like I said, our customers are under more pressure.

Our operating in a tougher environment.

<unk>.

This January than they were last January .

Yes.

We're not going to be.

And the business of predicting week by week when that changes. So what I said was I wouldnt be surprised if it ended up there we have to wait and see how Q1 plays out right I certainly hope it doesn't end up there but.

Wouldn't surprise me if it did.

And then if that were true then.

Obviously that would.

And require more growth if you want to get the same number right, but that's why we gave you a range.

Four of outcomes on the revenue line and so.

We'll have to see how the year plays out.

The good news I guess is the back half of 2021 was a little softer because of the macro.

The issues in the Delta surge and then omicron behind that there was a little softer than it should be so if the back half of 2022 can not repeat those.

Those same characteristics then you've got some easy comps but.

We're not providing quarterly guidance because I don't think anybody can predict exactly how this plays out.

We took a similar approach to last year in a period of high uncertainty in January of 2021.

And we came out looking pretty good versus those ranges and so we're taking the same approach. This year, we're going to stay nimble agile and responsive to our customers.

And we'll see how the year plays out.

Okay, and I'm, sorry to keep asking questions, but if things stabilize coming out of out of March.

Even if Q1 is basically flat versus last year. You think you can get to that theres. So much underlying fundamental strength of the business you still feel comfortable getting into the midpoint of the range if that were to happen.

Yes, we do.

Give you ranges, we're not comfortable with.

Okay. Okay. Thank you so much.

Okay.

And thank you.

And I am showing no further questions.

I would now like to turn the call back over to Mr. Hartman for any closing remarks, Mr. Hartman.

Thank you Justin Thank you everybody for your time today, and we look forward to speaking with you during our next earnings call. Thank you and good night.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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Okay.

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Okay.

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Good day, and thank you for standing by and welcome to the Q Q4 full year 'twenty One comment earnings conference call. At this time, all participants are in a listen only mode.

The speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star Zero I would now like to hand, the conference over to Con Ed Corporation now please.

Please standby momentarily.

Good afternoon, everyone.

For the conference call begins let me remind you that during this call management will be making comments and statements regarding its financial outlook and its plans and objectives, which represent forward looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws investors.

The company disclaims any obligation to update any forward looking statements that may be discussed during this call, except as maybe required by applicable law.

You will also hear management refer to certain non-GAAP adjusted measurements. During this discussion while these figures are not a substitute for GAAP measurements management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology.

These adjusting items are specified in the reconciliation supporting the company's earning releases posted to the company's website.

With these required announcements completed I will turn the call over to Curt Hartman <unk> chair of the board President and Chief Executive Officer for opening remarks, Mr. Hartman.

Yeah.

Thank you Julian Justin Good afternoon, and thank you for joining us for <unk> fourth quarter and full year 2021 earnings call.

With me on the call is Todd Garner Executive Vice President and Chief Financial Officer.

Turning to our results total sales for the fourth quarter were $274 million.