Matthew O’Brien: Okay. And then, on the margin side of things, again, backing off here a little bit too for the full year, it’s just — the Q1 number is well below what I was expecting from a gross margin perspective. So maybe just talk about line-of-sight on improving that metric so dramatically throughout the course of this year. And then, I know you said approaching 60% next year, but that 250 number is — was kind of where that number for me in my head. Is it another situation where it could be more like, A, it’s 200 to 250 next year, and I guess why not just go ahead and back-off that number now? What is it that you see in the business that we can’t see that gets you there? Thank you.
Todd Garner: Yeah, I mean, I think we’ve been very transparent with all of those assumptions. So, there is always seasonality, right? I mean, we all love for Q1 to — we’d love for Q4 of the prior year to be the jumping-off point and everything, always be up into the right, but that’s not how seasonality in margins work. So, if you compare Q1 to Q1, we’re guiding today to a 100 basis points of improvement. I don’t know how many companies are guiding that. So, but you are correct, that it is lower than we thought 12 months ago. 12 months ago, we said 150 basis points should be the expectation for 2024. This morning we’re seeing 100 basis points to 150 basis points — I’m sorry, this afternoon. And it builds throughout the year, because of these challenges we have on the Ortho business.
And I’ll just remind you the Ortho business is accretive to the company margins, especially the Foot and Ankle side of that business, it’s in the 80s. And we have to make some — we hoped that our operations and manufacturing would make more progress in ’23 than we did. So, there’s still more work to do there. So, it is slower and backing off a little bit of how we thought 2024 would look 12 months ago, but we’re still in the ballpark. And as I said, if Q4 is going to be a 150 bps better, then that puts you at 58%. And so, maybe we don’t get all the way to 60% by the end of 2025, but we should be very close and easily get there in the following quarters. So, you are accurate, that it is a back-off a little bit of what we said, but not much is how I would frame it.
Matthew O’Brien: Understood. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Kristen Stewart from CL King. Your question, please.
Kristen Stewart: Hi, thanks for taking the question. I just wanted to go back to AirSeal, not to beat a dead horse, but just to get a little bit better understanding of the exposure there to the business. How much of your AirSeal business today is tied to Intuitive Surgical? And what was the conversion rate that I guess you were tracking at today? And what gives you confidence that you’re modeling a worst-case scenario going forward?
Todd Garner: Yeah, thank you, Kristen. AirSeal is definitely not a dead horse, and unfortunately the narrative of this competitive threat is not a dead horse. I can’t tell you — we have disclosed in the past that about — we estimate that about 60% of our AirSeal revenue is currently associated with Intuitive Surgical procedures. So, we’re about 60% today. To be clear, that doesn’t mean we’re assuming 30%, that’s not the 50% cut. What we’re talking about is our historical trend of attachment of new conversions to the robot. That’s what we’re cutting half. We’re not sharing that rate with you today. But we shared the 50% reduction to try and demonstrate that we’ve taken this seriously, we haven’t been dismissive of it. Frankly I think we’ve been very — I think it’s highly conservative.
I think it’s unlikely that there’s that much disruption in those new systems. But the market is clearly very concerned about it, and we did not think it was wise or helpful to provide guidance that ignored it. And so, we’ve tried to be as generous as we thought was rational and kind of build that allowance in. But that’s as much as I’m going to share with you about the details of that model.
Kristen Stewart: Okay. And I guess getting back to the gross margin of going close to 60% for 2025, is that also under the assumption of a worst-case scenario of a 50% reduction as well?
Todd Garner: Yes.
Kristen Stewart: Or do you think if that — okay, so you still think that you can get there with 50%?
Todd Garner: Yeah, we’re not guiding to 2025 today, obviously, but that margin improvement story is very strong and is bigger than this issue. I would tell you — I’ll give you a little more color into that model. Like I said, we’ve assumed that that’s pretty disruptive to us out of the gates, if that all plays out how the narrative is on the Street. We also know that if that were to materialize that non-robotic procedures are 10 times the robotic procedures, right? So, we would adjust energy resources away from robotic procedures and to non-robotic procedures, if that theory were to materialize. That takes time, obviously, it’s a longer sales cycle. So, I would tell you the disruption assumed in the model is bigger early than it is late, because the longer we have to adjust and kind of change our sales focus, there’s less disruptive to the overall business it is. And so, the out years, I’m less worried about than earlier, from that perspective.
