CONMED Corporation

Good day and thank you for standing by and welcome to the Q4 full year 21 ComMed earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you'll need to press star 1 on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to ComMed for a brief announcement. Please stand by momentarily.

Good afternoon, everyone. Before 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 are cautioned that any such forward-looking statements are not guarantees of future events, performance, or results, and the company's 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-gap adjusted measurements during this discussion. While these figures are not a substitute for gap 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 reconciliations supporting the company's earning releases posted to the company's website. With these required announcements completed, I will turn the call over to Kurt Hartman, ConMed's Chair of the Board, President, and Chief Executive Officer, for opening remarks. Mr. Hartman?

Thank you, Julie and Justin. Good afternoon, and thank you for joining us for ConMed's 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 a year-over-year increase of 8.4% as reported and an increase of 9.1% 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 ConMed has exceeded $1 billion in revenue and and I'm proud of our team for its persistence in 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 $1.07 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. 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 cases, staffing issues, and supply and logistics disruptions. Against that backdrop, we had another great year of strengthening our business infrastructure, advancing product innovation, and elevating our digital strategy, all 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 in pursuing what is in the best interests of Convid. They 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, we'll 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 22 financial guidance. Todd? Thank you, Curt.

All sales growth numbers I referenced today will be given in constant currency. The reconciliation to gap 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 9.1%. While 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 variant 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 moved 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 percent over 2020. For the fourth quarter, our sales in the U.S. increased 5.0 percent versus the prior year quarter. For the full year, our sales in the U.S. increased 14.6 over 2020. Our international sales grew 14.3 percent for the quarter compared to the prior year, and for the full year, our international sales grew 18.4 percent over 2020. Worldwide orthopedics revenue grew 5.2% in the fourth quarter. In the U.S., orthopedic sales grew 0.7%, and internationally, orthopedic sales increased 7.9%. Total worldwide general surgery revenue increased 12.2% in the quarter. U.S. general surgery revenue grew 6.8%, 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 continued to drive improvement in our gross margin despite a challenging and inflationary supply environment. Research and development expense for the fourth quarter was 4.1 percent of total sales, 50 basis points lower than the prior year quarter. For the full year, research and development expense was 4.3 percent of total sales. The dollars invested are actually up 7.6 percent 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 percent 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 percent 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 gap net income totaled $24.4 million, an increase of 1.3% over Q4 of 2020. But largely due to the additional share count from our convertible notes, the 75 cents of earnings per diluted share this quarter was six cents 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 $1.07, an increase of 27.4 percent 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. The $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 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 $20.8 million compared to $31.5 million as of September 30th, 2021. Accounts receivable days as of December 31st 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 30th and $735 million a year ago. Our leverage ratio on December 31st, 2021 was 3.5 times, which is a reduction from 4.9 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. 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 a current COVID 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 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 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 $1.2 billion. And adjusted cash EPS we guided between $2.85 and $3.05. Of course, the virus had a much larger impact on 2021 than any of us anticipated, and yet we delivered $1.1 billion in revenue, which was at the high end of guidance, and we delivered $3.21 in 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 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 cash EPS, we expect the full year 2022 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 5 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 I'll hand it back to Justin.

And thank you. As a reminder to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by. We'll compile the Q&A roster. And we ask that you please limit yourself to one question and one follow-up. Again, that's one question and one follow-up. And our first question comes from Rick Wise, from Stiefel. Your line is now open.

All right, good afternoon to you both. Good afternoon, Rick. I guess it's hard not to be the first questioner and not ask more detail about what you're seeing out there in the field and if i heard you correctly uh 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 in parts of europe they're starting to peak in the northeast here i i'm not sure how to ask the question but any you know do you feel like you're seeing any signs geographically around the world that encourage you a little bit or no light at the end of the tunnel yet?

Yeah, good question, Rick. And 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're seeing a little bit more latitude, a little bit more operating cadence starting to return. But I don't think 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 to trends on COVID peak case on a seven-day average, hospitalizations on a seven-day average, There's some folks that are projecting those occurred in this most recent week here, and that things should start trending down from there. How long that downward slope takes, I think it'd be foolish for me to guess.

Yeah. And, you know, Kurt, you haven't been idle during the past year or so in terms of Thank you at the future. 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. It's come up several times. I'm sure there are pipeline products that have launched, are launching, still launching. Maybe help us think about the impact separate from COVID, whatever happens with COVID, but the impact of all these initiatives, and I'm sure there are more maybe you want to talk about, but help us think about the impact on the business as COVID at some point is going to recede. Do we expect you to return to sort of the pre-COVID upper single digit kind of performance, or are these initiatives potentially setting you up as you recover, as the environment recovers, to grow even faster. How would you have us think about it?

Oh, 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 6.4% up to 11.3%. So that 11.3% 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 if COVID really slowed down tomorrow, there's still another dynamic at play, and that's called the healthcare worker. They're short-staffed. They're fatigued. This most recent wave has just added to that condition, and they're not going to say, while COVID's 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 healthcare facility and the healthcare delivery setting. So I would like to believe that all the work we've done has us well positioned to capitalize on wherever and whenever that recovery occurs. but there's a lot of factors that go into making that statement, and we're just going to have to be patient and watch what happens as the environment does improve.

Thank you very much. You said, too, I'll leave it there. Thank you very much.

Thanks, Rick.

And thank you. And our next question comes from Robbie Marcus from J.P. Morgan.

Oh, great. Thanks for taking the question. Maybe first on margins for 2022. Seems like guidance implies something like just under 100 basis points of operating margin expansion. First question, is that right? And second, you know, it's pretty healthy. How do we think about where those areas of improvement are coming from?

Yeah, Robbie, I appreciate the question, and 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. We've got supply chain challenges. And so we're going to kind of stay nimble and agile and responsive, and 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 other component is some significant non-operating, and it sounds like tax is going to be stepping up a bit from 21.

Yeah, tax is a headwind. Interest rate, you know, I gave you the quarterly interest expense. I think that's a pretty good run rate going forward, of course. if there's rate hikes, that would affect that. And, of course, we're not projecting the quarterly debt balance. But I think the Q4 interest expense gets you in the ballpark of that run rate. So other than that, I can't think of any non-operational big issues.

Got it. Okay. And then just a quick follow-up on Buffalo Filter. You know, how has that been trending? I think two weeks ago you said it was about 25% to 30% of sales, so grown faster than the rest of the business in 21. How should we think about, you know, just the runway still in 2022 and beyond? How much is that impacted by slower procedure use here? And any tailwind that you can see in the markets where there are legislative changes rules backing usage. Thanks.

Yeah, there is no change in our bullish view of the opportunity for Buffalo Filter and AirSeal together. So, you know, we did update the chart in the investor deck. And if 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, yeah, we remain bullish that on an annual basis, those two products together should grow greater than 20%. You know, they are impacted by procedural growth. We saw that in Q3. We saw that again in Q4. So, you know, you can have some ebbs and flows, but we believe, you know, 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 the questions.

And thank you. And our next question comes from Matthew O'Brien from Piper Sandler. Your line is now open.

Good afternoon. Thanks for taking the question, and congrats on getting to the billion-dollar threshold on the top line. Kurt, I guess the results today are certainly welcome to see, given some of the commentary. I think you just provided a recent conference. You've missed a little bit, but maybe 1% on the top line versus what people were thinking. You're guiding kind of in the range of what the street's modeling for 22. So clearly underneath the surface, outside of the labor shortages and Omicron impacts, you're seeing some real improvements here. Where are those coming from? Are you taking market share and specific accounts that you had in the past? Are the sales reps that you're adding coming up the curve faster? What are you seeing that is still allowing you to put up pretty good results, even despite all the headwinds that you're seeing around the globe?

Number one, thanks, Matt, for the comment on the billion. It's a number of factors. I don't think I would pin it on any one thing. We obviously have done Salesforce 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 the capacity to get into clinical evaluations and look at new products, which, you know, as COVID cases ebb and flow, those windows open and close. You know, their attention gets very focused on COVID patients, and that's not a great time to show new products. We have some great historical platforms out there that our teams are running with. You know, if you go around the globe, our international business, which is, you know, north of 40% of revenue, had a very good year. pretty much start to finish. There were some ebbs and flows in the international markets as COVID happened, but we've got a diversified business there, and 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 businesses that make up general surgery, and both of those were growing So it's a little bit of everything and a lot of the work that has accumulated over the last several years. I think that's probably where I'd leave it, Matt.

Okay, appreciate that. And, Todd, you know, 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 you're expecting from an inflationary perspective here in 22? Because, you know, to Robbie's point, the The bottom line guidance is, again, impressive versus what I think we were expecting given the new sales reps that you're adding plus all the inflationary pressures. So what other pressures are you seeing, you know, in SG&A or elsewhere this year that, you know, that hopefully will lapse somewhat as we head into 23?

Yeah, the two foundational kind of built-in tailwinds that we have are mixed. which certainly goes in our favor. Our products, they're growing faster, are also margin accretive. And then our infrastructure, it still remains true. I've 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 that 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 um as everybody knows there's significant pressure right now there's a supply chain uh tightness out there there's you know freight is multiples of what it was a couple of years ago and um so i think those are the areas that have us the most concerned um and you know 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 22 over 21 despite these challenges. We're not guiding because there's 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 easing in the supply chain as the year goes on. So hopefully that becomes true. So I would tell folks, you know, but we do have a little bit of a seasonality or cadence to our gross margin. And so 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... I think that's as much help as I can give you today, Matt.

Okay.

Appreciate that. Thank you.

Thank you. And our next question comes from Young Lee from UBS. Your line is now open.

All right, great. Hey, Kurt and Todd. Thanks for taking our questions. Maybe just to start following up on some of the guidance questions, Wanted to hear a little bit more about how you approach thinking about and setting guidance for the year. There's obviously a lot of moving parts and a lot of things you can't control. You have been one of the more conservative management teams with your views about the pandemic. So can you maybe help us understand a little bit more about, you know, your thoughts on how the year progresses? Maybe some comments on quarterly cadence and seasonality if you can.

And, Young, you know, I understood everything you said except for what specific financial guidance were you looking at? The top five. Oh, the revenue guidance. Okay. You know, we're not providing quarterly phasings here today. Obviously, as Kurt outlined, the year, you know, our customers are actually starting 2022 in a worse place than they were in 2021, right? So... January has not been a good start. We do expect that 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 kind of flattish with last year, actually. We don't know. we're going to remain responsive to our customers. We're going to be good partners. But we do expect that things should get better when this surge recedes and that throughout the year, you know, 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 that's probably as good as I can do for you.

Okay, great. Yeah, that's very helpful color. I guess maybe to follow up a little bit on the on the guidance as well. In terms of the, you know, appreciate you providing the wider range, but, you know, with a sort of flattish q1, maybe, you know, that obviously suggests some healthy ramps that for the rest of the year. I was wondering if you can talk a little bit about, you know, what gets you to the high end of guidance? You know, is it contribution from the new hires? You know, 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'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.

And I would add on that higher end of the range, obviously, Salesforce expansion, new products, all of those contribute. Sitting here today, it's very difficult to say how much each one of those individually would contribute. But to Todd's message, plus you add those other factors in, you start seeing yourself closer to that high end of the range.

Okay, great. Yeah, appreciate the thought.

Thank you. And our next question comes from Matthew from KeyBank. Your line is now open.

Thank you. Good afternoon, and thank you for taking the questions. Okay. you're talking about innovation as a driver. So you could just, um, talk about new product launch cadence, you know, maybe what you launched in 21 and what you think you're going to be able to launch in, in, in 22. Um, and anything you'd kind of call out over like the last year or two that might've been masked, um, you know, by the macro that you're excited about.

Yeah, no, it's a, it's a great question, man. I, I don't have the, uh, the full list in front of me. So I'll, I'll try to do this as best I can from memory, but you know, we started, uh, 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. Um, we, we introduced in the middle of the year, some products in our advanced endoscopic business, um, 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 AirSeal and Buffalo Filter reside, we launched a new port for AirSeal in collaboration with the folks at Intuitive that we think is a a real home run product. And so far the market has agreed with us on that as well. And we've got some, some other products that are on the doorstep right now in that business. So we've had a good cadence. That cadence will continue in, in the new year. And if people are at Academy, you might see some new stuff at Academy and some of the other general surgery trade shows, you'll probably see some new stuff this year as well. So it, I would just call it a steady stream. It's really hard to predict what's going to be a home run, what's not. You don't know until customers vote with their purchasing dollars, and the external environment makes that a little more drug out because there's just some customers don't have the capacity right now and candidly for most of 21 to look at new products because of everything they've got going on, and there's others that have had longer periods of... COVID-free periods where they could look at new products. So you're kind of taking these bits and pieces from around the global geographies and saying, is this one going to 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. And we, as Todd and I have said, very decentralized. We let our commercial teams, their marketing R&D teams work with the customers, figure out what's needed, and put it into their pipeline. and deliver it in a manner that makes sense for the sales force and where the sales force is from a focus and attention standpoint.

Okay. And then just to follow up for Todd, I was, 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 or is it, or is the hedging program still intact?

Yeah. So both, right. Um, 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 reported revenue and constant currency revenue in 2022, given if the rates stay where they are now, which of course is a big F. But the same way we always calculate it, And we've been pretty good at forecasting those impacts. It looks immaterial to us if rates stay where they are.

Thank you.

And thank you. And our next question comes from Mike Mattson from Needham & Company. Your line is now open.

Yeah, thanks for taking my questions. I want to ask about the Salesforce expansion. 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 2022 one, or are you going to add even more in 2022?

Yeah, so talk about what we did in 21. 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 start the year fresh. And Kind of let those folks hit the ground running. And it's interesting to see where 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 21. We're pleased with that. As we start 22, I would say our Salesforce 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 21. But again, we will do some Salesforce 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 just a question on your debt. So... How much of your debt has a variable rate, and what did you assume the rate was going to do in the guidance ranges that you gave? I mean, because rates are clearly going up here this year. So, I mean, how much of a headwind could that be to your interest expense?

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 at the variable rate. And, you know, we've assumed, you know, the published scenarios, the range of published scenarios in our bottom line guidance.

Okay, meaning the, you know, the kind of Fed guidance or whatever? Right. Yeah, okay. All right. That's all I have. Thank you.

Thank you. And we have a follow-up question from Matthew O'Brien from Piper Sandler. The line is now open.

Appreciate it. Just wanted to follow up, maybe, Todd, with the comment about flat Q1 sales versus, you know, last year. And, again, I know it's a fluid situation, but if you guys are flat in Q1, it's a pretty big pickup then to get, you know, to the midpoint of the range or even the high end of the range. And it seems like Kurt's saying it could be a possibility. So, you know, why not, you know, kind of direct people more towards the low end of the range given, you know, some of the pressures you're seeing here in Q1? Q1 versus the mid to upper end of the range. I don't know if there's backlog you're considering or other things, but just any kind of clarity on those points I think would be helpful.

Thank you. Yeah, Matt, it's just a function of having to give you guidance today. And like I said, our customers are under more pressure and are operating in a tougher environment this January than they were last January. And we're not going to be in the business of predicting week by week when that changes. So what I said was I wouldn't 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 it wouldn't surprise me if it did. And then if that were true, then obviously that would require more growth if you want to hit the same number, right? But that's why we gave you a range of outcomes on the revenue line. And so we'll have to see how the year plays out. And the good news, I guess, is the back half of 2021 was a little softer because of the macro issues and the Delta surge and then Omicron behind that. It 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, you know, 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, you know, we came out looking pretty good versus those ranges. And so, We're taking the same approach this year. We're gonna stay nimble, agile, 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 March, even if Q1 is basically flat versus last year, you think you can get to the, there's so much underlying fundamental strength in the business, you still feel comfortable getting to the midpoint of the range if that were to happen.

Yes. We don't give you ranges we're not comfortable with. Okay. Okay. Thank you so much.

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.