Welcome to the fourth quarter of fiscal year 2022 earnings conference call for Merit Medical Systems, Inc.. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems Founder, Chairman, and Chief Executive Officer. Please go ahead, sir. Thank you. Welcome everyone to Merit Medical Systems fourth quarter of fiscal year 2022 earnings conference call. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer, and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind taking us through our safe harbor provision? Thanks, Fred. I would like to remind everyone that this presentation contains forward-looking statements that receive safe harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to unknown risks and uncertainties. The realization of any of these risks or uncertainties, as well as extraordinary events or transactions impacting our company, could cause actual results to differ materially from those currently anticipated. In addition, any forward-looking statements represent our views only as of today, February 22nd, 2023, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements except as required by applicable law. Please refer to the section entitled Cautionary Statement regarding forward-looking statements in today's presentation for important information regarding such statements. Refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ from these forward-looking statements. Our financial statements are prepared in accordance with accounting principles, which are generally accepted in the United States. We believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable US GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K. Please refer to the section of our presentation entitled Non-GAAP Financial Measures for important information regarding non-GAAP financial measures discussed on this call. Readers should consider non-GAAP financial measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled measures of other companies. Both today's press release and our presentation are available on the investors page of our website. I will now turn the call back to Fred. Well, thank you, Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with an overview of our strong revenue results for the fourth quarter. After my opening remarks, Raul will provide you with a more in-depth review of our quarterly financial results and the formal financial guidance for 2023 that we introduced in today's press release, as well as a summary of our balance sheet and financial condition as of December 31, 2022. Following that, we will open the call for your questions. Now beginning with a review of our fourth quarter revenue performance. We reported total GAAP revenue of $293 million in the fourth quarter, up 5% year-over-year. Our total GAAP revenue growth was driven by 7% growth in the U.S. and 3% growth in international sales. Our total revenue increased 8% year-over-year in the fourth quarter on an organic constant currency basis, excluding the headwind to our GAAP revenue growth related to changes in exchange rates compared to the prior year period. We delivered constant currency revenue results at the high end of our growth expectations that we discussed in our quarter three earnings call. Specifically, we shared our expectations for constant currency revenue growth in the range of 6%-8% year-over-year in the fourth quarter. Quarter four constant currency revenue results were a result of solid execution from our team and were primarily driven by a more favorable than anticipated international sales trend, particularly in the EMEA region. Demand in the United States that was in line with the growth expectations we outlined in our third quarter call. Let me provide you with a more detailed review of our revenue results in the fourth quarter, beginning with a sales performance in each of our primary reportable product categories. Unless otherwise stated, all growth rates are approximated on our year-over-year and constant currency basis. We have included reconciliations from our GAAP reported results to the related non-GAAP item in our press release and presentation available on our website. Fourth quarter total revenue growth was driven by 9% growth in our cardiovascular segment, offset partially by a 6% decline in our endoscopy segment. Cardiovascular growth exceeded the high end of our expectations in Q4, and endoscopy growth came in within the range of our expectations in quarter four. Sales of our peripheral intervention products increased 9%, representing the largest driver of total cardiovascular segment growth again this quarter. Within the PI product category, sales of our embolics and access products increased 14% and 15% respectively, and together represented roughly 44% of our total PI growth. Sales of our radar localization, angiography, and biopsy products each increased in the low double digits year-over-year and together represented roughly 41% of our total PI growth in quarter four. Cardiac intervention product sales increased 10% in Q4, representing the second-largest contributor to total cardiovascular segment growth year-over-year. Within our cardiac intervention business, the three largest contributors in the fourth quarter were 16% growth in sales of angiography products, 6% growth in sales of interventional products, and 19% growth in the sales of EPCRM products. Angiography products growth was driven by impressive growth results in our InQwire diagnostic guide wires. Intervention products growth was driven by another strong quarter of demand for our PhD Hemostasis Valve products. EPCRM products growth was driven by strong demand for our SNAP Sheaths and our HeartSpan Sheaths. Sales of our OEM products increased 16%, exceeding the high end of our expectations in Q4, which we attribute to continued improving demand from larger customers in multiple categories, including Merit Coatings, kits, and angiography products. Finally, sales of our CPS products increased 2%, and sales in our endoscopy segment decreased 6%, both of which were largely in line with the range of growth assumptions supporting our Q4 revenue expectations. Now turning to a brief summary of our sales performance on a geographic basis. Our fourth quarter sales in the U.S. increased 5% year-over-year. Sales to U.S. customers came in at the midpoint of our growth expectations and represented 34% of our total company constant currency growth this quarter. International sales increased 12% year-over-year, which is strong performance in light of the challenging global macro environment in certain international markets in Q4. All three of our major regions posted growth at the high end or above the high end of our expectations in the fourth quarter. Specifically, sales in EMEA, APAC, and the rest of the world regions increased 15, 11, and 9% respectively year-over-year. While all three regions were strong in Q4, we saw the most upside versus expectations in the EMEA region, driven primarily by demand from Germany, France, the United Kingdom, and Eastern Europe. APAC growth was driven primarily by high single-digit growth in China, where we are seeing strong demand for PI and CI products which is more than offsetting the continued headwinds related to volume-based purchasing. Low double-digit growth in Japan also contributed to strong growth in the APAC region in Q4. Lastly, in our rest of the world region, we delivered 9% growth year-over-year, which was also ahead of expectations driven by 20% growth in Canada and mid-teens growth in Latin America and Mexico, partially offset by high single-digit declines in Brazil compared to the prior year period. In summary, we're encouraged by the solid growth trends and proud of our team's strong execution despite another quarter marked by a challenging operating environment, particularly in international markets. Now, before turning the call over to Raul, I want to comment on a few other noteworthy items in the quarter. First, we delivered another quarter of profitability improvement, margin expansion, and free cash flow generation in Q4. Our non-GAAP gross profit, non-GAAP operating profit, and non-GAAP net income increased 4%, 8%, and 13% year-over-year, respectively in Q4. Our non-GAAP operating margin increased 47 basis points year-over-year to 17.8%, and we generated $15.5 million of free cash flow in the quarter. We believe our financial results in the fourth quarter represent a continuation of the strong performance that we've delivered throughout fiscal year 2022. Importantly, we believe our financial results this year represent clear evidence that we are executing towards our goal of enhancing Merit's long-term growth and profitability profile. Specifically, in fiscal year 2022, we delivered more than 9% constant currency revenue growth, improvements in our profitability profile with a 17% non-GAAP operating margin, a 91 basis point improvement year-over-year, and we generated strong free cash flow of nearly $70 million. We remain committed to the financial targets that we were outlined in the Foundations for Growth program for the 3-year period ending December 31, 2023, which by the way, of reminder, called for constant currency organic revenue to increase at a CAGR of at least 5%, non-GAAP operating margins of at least 18%, and cumulative free cash flow generated of more than $300 million. Second, I wanted to highlight another area where our team has been executing well towards one of our key strategic initiatives, specifically the development, clearance, and commercialization of new products. Throughout fiscal year 2022, we highlighted via press releases our progress, including 8 new product launches, a FDA 510(k) clearance, and a breakthrough designation from the FDA. I'm proud of the team's continued commitment to this strong execution in the areas of development, clearance, and commercialization of new products in 2022. Finally, we also made progress in recent months towards our strategic initiative to expand the body of clinical evidence for our products. Specifically, our clinical study, the WAVE study of the WRAPSODY Endovascular Stent Graft, an investigational device being studied for the treatment of stenosis or occlusion within dialysis outflow circuits continues to progress. We have 42 clinical sites actively enrolling patients, and we are targeting full enrollment of the first cohort by the end of quarter three of 2023. We were pleased to begin enrollment in Brazil in the fourth quarter as well. The WRAP study is underway with 27 sites selected in 10 countries around the world. Roughly half of these sites have already been enrolling patients in a study designed to evaluate the clinical benefits associated, excuse me, with the use of WRAPSODY Cell-Impermeable Endoprosthesis in patients receiving hemodialysis that experience a narrowing or stenosis or blockage of blood vessels required for dialysis. The STREAMLINE study is progressing towards a startup phase in the coming months, and we are working through site selection for this Canadian registry study, intended to demonstrate the utility of the SCOUT Surgical Guidance System to improve workflow and efficiency in Canadian centers diagnosing and treating breast cancer. Finally, we have 4 sites enrolling patients in our prospective observational study of EmboCube embolization gelatin used to control bleeding or hemorrhage. This study is designed to enroll 100 patients across multiple centers in Australia and France, and represents a key step towards expanding our clinical portfolio of embolic agents that provide critical relief to diverse patient populations worldwide. With that, let me turn the call over now to Raul, who will take you through a detailed review of our fourth quarter financial results and our 2023 financial guidance, which we introduced in today's press release. Raul. Thank you, Fred. Given Fred's detailed discussion of our revenue results, I will begin with a review of our financial performance across the rest of the P&L. For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the fourth quarter of fiscal year 2022. We have included reconciliations from our GAAP reported results to the related non-GAAP items in our press release and presentation available on our website. Gross profit increased approximately 4% year-over-year in the fourth quarter. Our gross margin for the fourth quarter was 49.5% compared to 50% in the prior year period. The 57 basis point decrease in gross margins year-over-year was primarily due to unfavorable manufacturing variances, specifically purchase price variances. As expected, our fourth quarter gross margins were impacted by the inflationary headwinds we are seeing in freight, logistics, labor, and increasingly in raw materials. Despite the continued challenging operating environment, we were pleased to deliver gross margin results at the high end of the expectations we outlined on our Q3 call, which called for gross margins to be flat to up 100 basis points on a quarter-over-quarter basis. Fourth quarter operating expenses increased 2% compared to the fourth quarter of 2021. The year-over-year increase in operating expenses was driven by a 7% increase in SG&A expense, offset partially by a 16% decrease in R&D expense compared to the prior year period. Our operating expense performance in Q4 was largely in line with expectations and reflects continued prudent expense management, offset partially by continued investments to support our future growth initiatives. Total operating income in the fourth quarter increased $4 million or 8% year-over-year to $52.3 million. Our operating margin for Q4 was 17.8% compared to 17.4% in the prior year period. The 47 basis point increase in the operating margin was driven by a 104 basis point reduction in our non-GAAP operating expense margin compared to the prior year period, offset partially by the 57 basis point decrease in our non-GAAP gross margin. Fourth quarter other expense net was $0.1 million compared to $1.6 million last year. The change in other expense net was primarily related to decreased expense from realized and unrealized foreign currency losses compared to the prior year period, partially offset by increased interest expense due to higher effective interest rates year-over-year. Fourth quarter net income was $46 million or $0.79 per share, compared to $40.8 million or $0.71 per share in the prior year period. We are pleased with our profitability performance in the fourth quarter, where we delivered low double-digit growth year-over-year in both non-GAAP net income and diluted earnings per share, exceeding the high end of our expectations. Turning to a brief review of our financial results for fiscal year 2022. Total revenue for the 12 months ended December 31st was $1.15 billion, up $76.2 million year-over-year or 9.3% growth on a constant currency basis. Gross profit increased 6% year-over-year to approximately $561 million, representing 48.8% of sales, compared to 49.3% of sales in the prior year period, a 50 basis point decrease year-over-year. Note, compared to fiscal year 2021, we estimate that we have experienced incremental headwinds to our gross margin of approximately 240 basis points related to inflationary pressures in raw materials, freight, and logistics. The early benefits we are seeing as a result of the team's hard work and dedication to our Foundations for Growth program are the primary reasons we have managed to offset the majority of these inflationary headwinds to our gross margins in fiscal year 2022. Operating profit increased 13% year-over-year to $195.1 million, representing 17% of sales, compared to 16% of sales in the prior year period. A 91 basis point increase year-over-year. We are driving strong operating leverage through prudent expense management in our FFG program, which resulted in operating profit growing notably faster than revenue growth in fiscal year 2022. Net income increased 14% year-over-year to $155.8 million or $2.70 per share, compared to $136.2 million or $2.37 per share in the prior year period. Turning to a review of our balance sheet and financial condition. As of December 31st, 2022, we had cash and cash equivalents of $58.4 million, total debt obligations of approximately $198 million, and available borrowing capacity of approximately $523 million. This compares to cash on hand of $67.8 million, total debt obligations of approximately $243 million, and available borrowing capacity of approximately $490 million as of December 31st, 2021. Our net leverage ratio as of December 31st was 0.6 times on an adjusted basis. With respect to our cash flow generation in the fourth quarter, our solid profitability performance in the fourth quarter of 2022, combined with strategic working capital investments, resulted in strong free cash flow generation of $15.5 million in the quarter. As expected, our use of cash for working capital increased compared to the prior year period. In recent quarters, we have discussed our strategy to proactively invest in our inventory balances to build the requisite safety stock and ensure high customer service levels. We generated $69 million of free cash flow during the 12 months ended December 31st, 2022. This was modestly below our target of $75 million due to higher cash taxes year-over-year and continued proactive investment in our inventory balances as part of our strategy to build the requisite safety stock to ensure we can meet customer demand amidst the ongoing challenges and disruptions in the global supply chain environment. Turning to a review of our fiscal year 2023 financial guidance, which we introduced in today's press release. For the 12 months ended December 31, 2023, we expect GAAP net revenue growth of approximately 4%-5% year-over-year. This GAAP net revenue range assumes a headwind from the changes in foreign currency exchange rates of approximately $10 million-$11 million, representing a headwind of approximately 90-100 basis points to our forecasted GAAP growth rate this year. The GAAP net revenue guidance range now assumes net revenue growth of approximately 3%-5% in our cardiovascular segment and net revenue growth of approximately 14%-16% in our endoscopy segment. Note the midpoint of our 2023 constant currency sales growth expectation assumes approximately 5% growth year-over-year in the U.S. and approximately 6% growth year-over-year in OUS markets. With respect to profitability guidance for 2023, we expect GAAP net income in the range of approximately $100 million-$105 million, or $1.72-$1.80 per diluted share, and non-GAAP net income in the range of approximately $163 million-$168 million, or $2.80-$2.89 per diluted share. For modeling purposes, our fiscal year 2023 financial guidance assumes non-GAAP gross margins in a range of approximately 50.4%-51%. Non-GAAP operating margins in the range of approximately 18%-18.2%. GAAP and non-GAAP other expense of approximately $7.6 million and $7 million, respectively. Non-GAAP tax rate of approximately 21% and diluted shares outstanding of approximately 58 million. We expect CapEx in the range of $55 million-$60 million and free cash flow of approximately $115 million. Given the continued uncertainty in the global macro environment, we would like to provide additional transparency related to our growth and profitability expectations for the first quarter of 2023. We expect our total revenue to increase in the range of approximately 1%-3% year-over-year on a GAAP basis and up approximately 3%-5% year-over-year on a constant currency basis. Note the midpoint of our first quarter constant currency sales growth expectations assumes approximately 7% growth year-over-year in the U.S. and approximately 1% growth year-over-year in OUS markets. With respect to our profitability expectations for the first quarter, we expect to see non-GAAP gross margins increase in the range of 90-190 basis points year-over-year. We also expect to see non-GAAP operating margin in a range of down 10 basis points to up 80 basis points year-over-year. These margin expectations, combined with higher interest expense assumptions, are expected to drive a year-over-year change in both our non-GAAP net income and non-GAAP EPS in the range of down 1% year-over-year on the low end to up high single digits year-over-year on the high end of the range. With that, I'll turn the call back to Fred. Thanks, Raul. In closing, our fourth quarter growth and profitability performance came in at the high end of our expectations and importantly capped off a great year of results in 2022. We believe this is a direct result of our team's continued strong execution and relentless focus on our strategic initiatives. We would like to thank all of the team members around the world that made our performance in fiscal year 2022 possible. Our 2023 financial guidance reflects our confidence in our team's ability to deliver continued strong execution despite the operating environment around the world. We intend to build upon the significant progress we have made during the first two years of our Foundations for Growth program, and we may remain committed to the financial targets that we outlined for the three-year period ending December 31, 2023. That wraps up our prepared remarks. We would like to now turn, open up the line for questions. Thank you. Thank you, sir. If you'd like to ask a question, please signal by pressing star one one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one one. Our first question will come from Steven Lichtman with Oppenheimer. You may proceed. Thank you. Evening, guys. Thanks, Steven. I guess I'll ask my one and follow up around the area of cash. Looks like you're implying, you know, a nice step up in free cash flow conversion in 2023. I guess, Raul, can you talk a little bit about, you know, beyond margin expansion, you know, some of the dynamics there and your confidence in that growth? Looks like you're also stepping up CapEx. Wondering, you know, some of the moving parts there. Just as a follow-up to that, you know, just given the cash position, balance sheet position, Fred, I was just wondering if you could sort of update us on your views on M&A. Could we see you know, getting a little bit more aggressive on that front in 2023? You could just talk about that environment overall. Thanks, guys. All right. Raul? Yes. Thanks, Steve. Yeah, look, I think the step up is really around the working capital piece. If you remember at the beginning of the year, we made a, you know, bigger investment in inventory as we brought inventory back to normal levels. As we progressed throughout the year, we also saw an investment in inventory to meet the demand that we were seeing, specifically as you saw kind of the logistics issues happening and also the supply chain. We wanted to make sure that we made that investment. We're not expecting to have as big of an investment this year, which feeds into that. Obviously, we're gonna be more profitable, which will also help. Those are the two things kind of, you know, driving the increase in the free cash flow. Steve, let me go to the M&A. I mean, you can see where we are in terms of our balance sheet. It's very strong. I think it's really a matter of patience and finding the right businesses that, you know, that meet the need of our sales point, gross margins, that are complementary to our Foundations for Growth. You know, you heard me kind of really emphasize that commitment to Foundations for Growth. But it has to be the right thing. We've been spending time, we've been looking and when we find it, we'll move, but we're not in any hurry. Yeah, I still think, by the way, personally, values are still a little high. There's no rush, but at the same time, I mean, we're in the best position we've ever been in. We're looking, we're spending time. I think we're better organized in terms of internal with Greg Fredde, and with JoAnne Alkire, you know, working on all that, and Chris Durham. We're organized. We have our views. Raul and I look at them, we meet, we'll discuss. Patience and doing the right thing is more important than doing anything. There's a lot of deals out there. There are a lot of deals. Yeah. You know, many of them are early, that's somewhat problematic because it conflicts. I'm going on and on, but I think you can get the theme of what I'm trying to say, and that is that there will be deals and opportunities. There'll be divestitures from larger companies. There'll be opportunities, but we just have to make sure it's the right deal. That's my best way to answer your question. Thank you. Thank you. That's helpful color. Thanks, guys. Thank you. Our next question comes from Jayson Bedford with Raymond James. You may proceed. Hi, good afternoon, and congrats on the success this year. Thanks. Thanks, Jayson. You're welcome. I'll just kind of keep it to the two. You talked about high single digit growth in China off what I remember was a pretty strong comp. You also mentioned that the growth was offset by VBP measures. I just wanted to confirm that, you know, I heard that correctly, and that you're facing and fighting through ongoing VBP measures in your business. Yeah, Jayson, we continue to see volume-based purchasing, you know, that'll impact us. The way we're kind of looking at it just, you know, to give a little bit of color is really, you know, hopefully we can kind of get through the, you know, the bulk of it here through, you know, early 2024, and then kind of that becomes the, you know, the low end or, you know, of volume-based purchasing, and we can kind of get past it. As of now, we do have it. It, you know, it's in our guidance. We don't call it out specifically. We will say that China's a big, you know, material driver of, you know, the 6%-7% in constant currency growth that we're expecting in the APAC region. We continue to be high in China. We've been able to, you know, offset some of that growth just by the delivery and execution by our sales force there and leadership. If I can just add that we continue to register products... Yep. -that we think give us an advantage that may not exist or produced locally, and that takes time, but we continue to do that, and we think that will pay as part of our strategy going forward. Okay. And I hate to waste my other question on other expense, but I feel like it's kind of notable. The $7 million in other expense, Raul, it seems like a pretty big step up from what you did in 2022. Can you just walk us through why the step up? Yeah. A portion of that is interest expense, obviously with the higher interest rates. There's also we did pick up some, you know, some exchange rate, foreign exchange, you know, gain that flew through there. We're not expecting that big of a benefit this year, as rates kind of reset to, you know, normalized levels. Those are really the two primary things that hit that line item. Okay. I'll keep it to two and go back in the queue. Okay. Hey, Jayson. Thank you. Thank you, Jayson. Thank you. Our next question comes from Michael Matson with Needham & Company. You may proceed. Yeah. Thanks for taking my questions. I guess I'll start with the, just on WRAPSODY. You have the two trials going on, WAVE and WRAP. I think the WAVE trial is the pivotal for U.S. FDA approval. Can you maybe just talk about when you think we could potentially see data from that? You know, what's the latest expectation around the timing of a FDA approval? Yeah. The WAVE study continues to progress. As you recall, Mike, there's 3 cohorts. Any one of those will trigger the opportunity to prepare and file a PMA. We have one segment of that. I'm not gonna get specific into which cohort, but we have one that's kind of leading the way there. I think that we're using a, if I recall, is it the end of the 3rd quarter. For 2023. 2023 of this year that we'll have, we think at least 1 cohort, possibly 2, that will be completed. It has accelerated from, you know, when, you know, just coming out of COVID and contrast issues. I think we're making a lot of progress. I mean, we're getting there and, we've had, you know, all the sites are enrolled. I think it's going to be just fine. You just file a PMA. I think it's a 1-year follow-up, if I recall, on the data, Raul. I think that's correct. We're getting there, Mike. In the meantime, as you'll recall that's kind of where we're gonna stick for right now. We, we are pleased that we began enrollment in Brazil in the fourth quarter. Of course, as you will all recall, we also continue to sell the product in Europe and Brazil and other locations. As we all know, the U.S. is the big plum and we're just working diligently to get down the road. That's the update that we're gonna provide today. No, that's fine. I just wanna make sure I'm understanding that. You're saying that the enrollment would be completed in the third quarter of this year, and then you have like a one-year follow-up period, and then after that, you'd be able to submit to the FDA the PMA? That's my understanding. Incidentally, in that third quarter, we'll have at least one cohort, not the entire study. The centrals, there's, you know, I'm not gonna go through all of them because for competitive and other reasons. Yeah, I understand. ... there's three cohorts. We'll have at least one of those that will be finished in the third quarter. When you say finished, you just mean the enrollment, not the follow-up. That's correct. That's correct. That's correct. Yeah. Okay. All right. I guess my other question would just be around, apologize if you went through this, but the, you know, growth margin kind of guidance for 2023, what have you assumed in terms of currency inflation impact there? Raul, I'm gonna let you go ahead and pick that one up. Yeah. On the gross margin, you know, obviously, you know, it's a little more robust than it was this last year. We're looking at, you know, the low end of the guidance is about 170 basis points, up to 220 basis points. You know, obviously we don't expect as many headwinds as we had in 2022 related to. You know, the pricing, the raw materials, you know, freight and logistics. As we, as we move forward, we think we can, you know, make some headway there. We're really focused on our FFG initiatives there, on pricing, and also leveraging our fixed costs. So a lot of initiatives around, you know, operations and really leveraging that gross margin line so we can make some investments in OpEx. We will have some tailwinds related to FX. We're also expecting some tailwinds related to the freights and logistics as we get back to ocean shipping versus air. Okay. Got it. Thank you. Great. Thanks, Mike. Thank you. Our next question comes from James Sidoti with Sidoti & Company. You may proceed. Good afternoon, thanks for taking the question. Thanks, Jimmy. If you look, at least on a GAAP basis, the R&D expense over the last couple years has gone up, fairly substantially. Is that primarily European regulatory costs, clinical trials? You know, how soon do you think that some of those investments start to turn into sales? Well, that's the funny thing about MDR, right? I mean, you're registering products that are currently being sold. You're absolutely right, Jim. That's a lot of the expense, you know, the increase there. It's reregistering of those products and getting them up to the new standard. You know, obviously we expect that expense to trickle down, you know, to normalize levels here over the next, you know, couple years, I would say. There is just additional upkeep that comes with MDR that we'll have to absorb. Those products are being sold right now, and it's really just to maintain those sales going forward. It's one of the unfortunate parts. As far as the inflationary costs, are you starting to see those come down now? Or do you think that it'll be another six or eight months before you start to see things like shipping and freight costs come down? I think it'll get gradually better, you know, through the year. All right. Thank you. Yeah. Thanks, Jimmy. Thank you. Our next question comes from Lawrence Biegelsen with Wells Fargo. You may proceed. Hey, Fred. Hey, Raul. How are you? Good, Larry. Thanks for taking the question. H ey, could you talk a little bit about price, in 2022 and what your expectations are for 2023, please? Yeah. Well, listen, I will answer that by saying that price is one of our strategic initiatives as part of FFG. It's, you know, as you recall from our previous conversations, we hired an experienced person to do that. Some of this will be layered in as we have national accounts come due. You know, so we picked up some, but some of them will be expiring. I think we've been extremely vigilant in terms of changing dramatically the way that we look at the business and how we price, whether they be for new products coming out in the U.S. or what we're doing in terms of taking advantage of the opportunities. By the way, as you guys all know, I mean, we were not immune to inflationary costs ourselves. We've been doing pass-ons, and that program continues. It's not just a 1-year program. It was something that started from the beginning. It took a little time to get started. I think we had a very positive year. Do you want to add some of that, Raul? Yeah. I was just gonna say, really our pricing, you know, initiative for Foundations for Growth is really about just maturing the company, you know, to a different level than we were at before. We have better tools. We have, you know, better visibility, better transparency around what we're doing. As Fred mentioned, this is kind of a multi-year approach as we get through contracts, you know, both here in the US and globally. There's a lot of work. I think we were pretty happy with what we were able to accomplish in the first year of its initiative in, you know, last year. There's more work to be done to get to where we wanna be. Yeah, there's a lot of opportunities- I get- A lot of opportunities still here. I mean, A lot of them. Is pricing a net positive for you guys? Are you willing to say how much? We're not gonna quantify it, Larry, but we will say that it's a net positive. Is it positive, Raul? It is. It's positive. Yeah. It's positive, yes. Thank you. On two of the businesses, Fred, OEM was extremely strong in 2022. Could you talk about the sustainability there? Endoscopy, what drives the acceleration in the guidance in 2023? Thanks for taking the questions. Listen on the OEM, you know, we of course, exceeded the high end, which we attribute to the improving demand from larger customers going away from, I'll call it the just in time. People are starting to make sure they have enough product. You know, we all know that everybody was cutting it close. It includes Merit Coatings, kits, angiography. It's a dynamic business. We are this next year roll up. I think we called it out, didn't we? Yeah, it's high single digits, you know, for 23, Larry. I think what we're seeing is a lot of opportunity in the OEM business, especially as people struggle with their logistics and supply chain. I think we're becoming, you know, We've been very fortunate and be able to deliver to our customers because of our vertical integration. I think there's a lot of, you know, customers that, you know, continue to come to us and explore new opportunities, you know, for us to be their supplier. We are, I would say temporary that, you know, growth. I mean, again, high single digits is what we're expecting for 23. I think that's. Endoscopy. You know, personally, I think to go to your question, the sustainability of that at that high single digit is historically where we've been at, and we think that it has that sustainability. Let me go on to the endoscopy. That's really quite simple. I mean, it was, you know, we had a problem with a vendor. We've qualified three out of four. There's still some supply chain issues, but it is improving and will continue to improve. I think if you look at what we call out this year for the full year, it's dramatically up from last year. 14%-16%. Yeah. I mean, that's significant. In the script, it talks about that, the 14 to 16 versus down 6. It's just, we're on the back end of that challenge. We've done a lot of work to solve that and bring it onshore, Larry, and I think it's gonna be a big contributor going forward. It's a great business. All right. Thank you. You bet. Thank you. Our next question comes from Michael Petusky with Barrington Research. You may proceed. Hey, good evening. Thank you. I don't think you've touched on this. The free cash flow, sort of the cadence in 2022 was sort of all over the board. I'm just curious, Raul, if you have any commentary, you know, whether it's by first half, second half or anything else. I assume Q1 will probably be relatively low, but, you know, will it sort of jump around or you think it's gonna be a little bit more consistent in 2023? It'll definitely be paced by the FFG initiatives, but thank you for calling that out, Mike, because I don't think I did a very good job last year of giving the cadence. Just as a reminder, Q1 will be kind of just, you know, it's probably the low end. We do have, you know, bonus payments that go out, tax payments, and we also have additional expense. You know, that flows through specifically this year as we ramp up on the sales meetings that we haven't had in, you know, 2 years. You know, there will be a cadence to it. I think it will typically line up with our cadence, you know, for earnings, but Q1 will be the low point. Well, if I could add, you know, the $115 million that we're calling out is the full year target, and that's impressive. I mean, it's a big deal. Again, the focus, Mike, is to finish what we committed to, and that's what we'll do. You know, I just have to tell you, it's got everybody's attention, and it's also tied to compensation. There's a lot of incentives to make sure that people are paying attention and the discipline of saying no and trying to prioritize. Yeah. I think, I think we've done a good job, but at the end of the day, there's 1 more year. Yeah. just as a reminder, you know, for everybody listening, we, you know, we said FFG would deliver a minimum of $300 million in free cash flow. that's what we're focused on. Yeah, yeah. I third- Over the three-year period. I have to say, I did like that 0.06 leverage ratio. Leverage ratio. Yeah, that 0.6, whatever it is. I mean, it just continues to improve. You know, these are things that people were calling out 2 or 3 years ago, and we listened to what you said. Mike, we listened to you because you were 1 of the guys that was speaking to it, so thank you. In fact, you were the loudest voice, for heaven's sake. Well, I don't, I don't know about that, but anyway, thank you. I'll take credit where no credit is due whatsoever. I'll say. I did wanna ask also, Fred, you know, you guys, you know, during the last few years have sort of tried to streamline your R&D projects and really focus on what you thought was the highest, you know, potential, you know, ROIs, et cetera. I guess, just in sort of, you know, looking at it right now, I mean, do you feel like that's worked in terms of, "Hey, yeah, I feel like we've picked the right projects?" Or have there been some sort of misses and some things that maybe were eliminated initially and you've gone back to? I'm just curious how that's sort of. Yeah. played out in practice. Well, let me just say that in terms of the availability of ideas, there's plenty of them out there. I think what has happened, going back to the previous question, is sitting down with a team and prioritizing those and make sure that they're budgeted for so that we can afford to pay them and afford them, I think has been very important. You'll recall, Mike, a couple of years ago, we talked about, we may have had, in fact, we did have too many things going. It was spread out a lot, and it ate up a lot of capital, and it slowed things down. I think I'd always like to have more money for R&D. That money has to be earned. I think it's budgeted for, and I think we have the priorities because it's not just me. I've got Joe Wright, who's our Chief Commercial Officer, JoAnne Alkire. I've got Jim Mottola in our sales force. We sit and meet and talk about, you know, the things that you need, the things that we fit into our franchise, the things that will give us the competitive advantage. To go to your question, I think it's much more disciplined and much more focused, and there has to be a buy-in. Again, I don't have to have everybody nodding their head, but it's nice if we're all on the same page. Okay. Very good. Well, congratulations on a great 2022. Thanks. Great. Thank you, sir. Thank you. Our next question comes from Jason Bednar with Piper Sandler. You may proceed. Hey, guys. Good afternoon. thanks for taking the questions, and another congrats here on the results. Thank you. First, you know, apologies in advance if any of these have been covered. I've been hopping between calls. But maybe as a follow-up to some prior questions, I'd be curious if you could talk about whether, you know, maybe in response to Larry's questions, you're expecting greater price contributions in 2023 versus 2022. It sounds that way, but maybe if you could confirm that. Then, kind of on a related point, just trying to grow faster in 2023 than what we saw last year, now that we're on the other side of the zero COVID policy and, you know, procedure volumes, presumably accelerate here this year. Okay, I'll let you pick the China one up, and I'll come back to the other question. Go ahead. Yeah, I mean, I think you know, from our China perspective, you know, it is a contributor to our APAC growth. It's one of the largest contributors. You know, we're not gonna call out the specific country growth. Just know that, you know, we're excited about what it's contributing, and it is a material driver to that 6%-7% organic constant currency growth in the APAC region. Now that I've listened to him, Jason, you gotta restate the question. Pricing. Pricing. Hey, we don't spell it out. It is a key initiative, and it is part of our compensation. I think that answers the question. Yeah. There you go. It's an FFG initiative. It's FFG, and it's got our attention, and it's got a lot of our attention. I'll answer it that way. Yeah. Maybe to clarify, I mean, any reason to think it's not as good as it was in 2022? Jason, Jason. I think I answered the question. Thank you very much for asking again. Okay. All right. He's good at this. He's really good at this. I'll follow up maybe then, a couple on just on the margin side. Maybe can you discuss with where you're at with your transition efforts down to Mexico? As you do transition back to more of a normal structure of air and ocean freight, can you throw a dart at where you'd anticipate a normalized logistics structure this year? I mean, you know, getting back to 80% ocean, 20% air, does that happen 2Q, 3Q, 4Q? Just trying to figure out if it's reasonable to think we should see some margin benefits from that initiative this year. It is an initiative, you know, Jason. You know, we are not gonna share the specifics on, you know, the cadence of how we're gonna get there. You know, I just think it just, you know, confuses things, you know, too much. It is an initiative. It's part of our Foundations for Growth, that it's an initiative for expansion of our gross margin this year, and it's got our focus on it. As far as Mexico, you know, we continue. You know, it's not a 1-year initiative, right? I mean, we've spent the last 5 years moving stuff to Mexico. I would say that, you know, there's been things that have moved, you know, you know, ahead of plan, at plan, and behind plan. I mean, that's just the way it works. You know, we continue to move stuff down there, continue to analyze our business for things that make sense. We'll continue to do so over the years. And just in conclusion to that thought and those comments, it's been a great success overall and continues to have our focus going forward and you know. Again, as Raul pointed out, it's not perfect. There's this and that. Transferring, particularly on the early parts when you're going through COVID, were very difficult. I think that has smoothed out in most cases. Yeah. At the same time, you know, little things pop up from time to time. You know, we actually had a board meeting down there about 3 months ago, and it was impressive to be there, and particularly to have the board there as well. I think whenever the board goes someplace, that speaks volumes. Yeah. Okay. Yeah, no, definitely. Maybe I'll try one more time with a clarifying follow-up here. You know, on the, on the ocean air, I mean, or normalizing that structure, is it right to think that we should have that complete by the end of this year? Well, it is an initiative, you know, for our gross margin as we called out. You know, we're looking to get 170-220 basis points for the year. It'll definitely be a tailwind to our gross margin as we increase that percentage towards OUS. Okay. Thank you. Okay. Thanks, Jason. He's good. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. Our next question comes from William Plovanic with Canaccord. You may proceed. Hey, Bill. Hey, thanks. Good evening. Hey, Fred. Hey, Raul. You know, you've done a tremendous job growing the top line, and this kind of folds into the original M&A question earlier. You know, as we think of 2023 and beyond and that, you know, 5% growth that you've targeted, and you've definitely been growing beyond that, you know, is that something that you can maintain organically, or do you need to meet or exceed 5% on a longer term basis, M&A, to help augment what you have? Yeah, listen, we understand what the street's focusing on, what is next for our growth and profitability. You know, again, we're 100% focused on the FFG and those targets. Listen, the race isn't over until you cross the line. We may be seeming a little bit stubborn, but what we have been doing and what we said we would do and the commitments we've made, we've kept up with that. In terms of the numbers that you have up there that we've given, of course, that's all organic when we talk about this year. If you look at the history, and I'll let you do that work, Bill, but if you look at the history, you'll see that it's well within what we've done for many years. You have a better finely tuned company, that has been growing for a long time, and I think if you just quickly look at that back and look back at that growth rate. I wanna say something. You said we've been doing great at growing the top line, and I think we've done fine. You know, take a look at that bottom line and what we've improved there over the last two to three years, and that is extraordinary as well. I just can't have one part of it without talking about the other. Yeah. I mean, I think if you look at the operating margin and the expansion that we've done over the last, you know, couple years, you know, last few years, to be honest, it's just been, you know, anything but impressive. I mean, I think there's a lot of hard work that goes into it from our employees. You know, I'd hate to not have you call that out. Yeah, I had to. I mean, I, you know. Again, that's if you take a look at the objectives. The growth, 5% to 7%. If you take a look at the operating margin and the free cash flow, they speak to top and bottom. Yeah. I think lastly to Bill, you know, I know there's a lot of, you know, people wanna focus on beyond 2023, but, you know, we still have a lot of work to do in 2023. It's the final year of FFG, you know, and we just wanna make sure that we can deliver what we. Promised. promised. We don't wanna lose sight of that, but, you know, we've got more work to do, but we've got a solid game plan. We do have a solid game plan. You took the second half of my question, which is, where does the incremental operating margin really leverage come from outside of gross margin? If we talk about OpEx, you know, you've spent a couple of years really optimizing the organization. You know, where do you see the real incremental improvements in terms of leverage on the OpEx standpoint driving from? Is it just, you know, scale and R&D, or is it really a more of a leverage of the G&A line? How do we think about it? I think it's a, it's a great question, and I can't wait to discuss it when we get to 2024 and we finish 2023. We're just focused on delivering FFG and, you know, it's a great question, and I understand the question, you know, the reasoning behind it, but we're just not gonna get ahead of ourselves. I do wanna go back and say this, if I could, and that is, we said that we were gonna leverage every aspect of that income statement. That's always been the goal, and just wanna bring that back to your attention. Great. Thanks for taking my questions. Welcome. Thank you. That concludes our Q&A session. I'd now like to turn the call back over to Mr. Fred Lampropoulos for any closing remarks. Yeah. Well, again, thank you very much. Incidentally, just for a point of interest, we're inviting you all out to Utah. We've had a major blizzard and we've got two feet of snow outside, and I think they're doing that up in Minneapolis today, I heard as well. All that being said, thank you for your interest. I think you can hear our commitment. It's been solid. It hasn't changed. We have work to do. We'll complete this program, and then next year, about this time, we'll tell you about where we're going from there. We have a lot of work to do and a lot of exciting opportunities in this company. We appreciate your interest. We thank you for your time today, and we'll sign off from a snowy blizzard in Salt Lake City, Utah. Have a good evening. Good night. Thank you. That does conclude our conference call for today. Thank you for your participation.