So that’ll be a this year impact and a very meaningful one, ARVIS much more of a, kind of next year and beyond impact, it’s cleared. We’re getting the market start doing cases, and getting feedback. It’s new technology and we want to make sure that, we get it, to exactly what’s going to make a big difference in shoulder. And so for sure, we’ll be iterative in terms of, launching the second half of the year and, that gets us some, some good feedback and then iterating from there in 2025 and bringing more broader functionality. But for sure, our surgeons are going to be able to see crystal clear the vision of taking our great preoperative planning, using predictive analytics, to create a great plan that can be presented inter operatively with augmented reality guidance and then capturing the data inter operatively as the surgeons are being able to use that guidance to do those shoulder procedures, we’re convinced that that’s really going to be a very exciting next wave in enabling tech for shoulders at a time that the market is ready for it.
Jason Wittes: Great. Thank you very much.
Kyle Rose: Thank you. Next question. Operator.
Operator: Our next question is coming from Vijay Kumar from Evercore ISI. Vijay, please go ahead.
Vijay Kumar: Hey, guys, thanks for taking my question. Matt, apologies if you answered this, but what was the organic performance, excluding Lima? Because I think the original Lima assumption was there would be some acquisition related disruption in Lima would be flat. It feels like Lima came in a bow and the integration related impact was on the base business. Can you just walk us through on why that impact was felt on the base business, not on Lima, and what Lima’s performance was in the quarter?
Phillip Berry: Yes, Vijay, I’ll take that one, if you don’t mind. As we contemplated the guidance for Lima, we knew that the channel integration work was going to be something that we couldn’t really predict which business it was going to come from. As we were making portfolio decisions, as we were thinking about how do we really kind of get to the selective alignment of our territories and making sure that we’ve got good participation in that. So as we think about kind of how we’ve seen it start to play out, as you’ve seen some impacts on the legacy Mathis business and the legacy Enovis business, but all of that was contemplated in the guidance that we gave with regards to the amount of revenue coming in as a result of the acquisition so we think it’s most fair to really show the pro forma view, to kind of include the all up all in view of what’s happening.
And then what we provided is our best view of, some of the discontinuations and some of the dis synergies that came within the business, which we’ve said 2 to 3%. So if you kind of strip out the underlying performance of the core business and kind of look for a traditional organic kind of definition, our view is that our organic business would have been a little over 8% in the quarter for Recon. And then you add a little bit of boost to that if you kind of take into consideration selling days as well. So that’s kind of how we’re thinking about it. Underlying performance of the core brands are still doing well. But as we think about the channel coming together, in particular in the US and some of the countries that have more overlap, that’s where it’s a little bit hard to really distinguish the difference between reported product and Lima versus legacy business.
So that’s why we think it’s most appropriate to give the pro forma view, but overall, we still see strong performance in our core technologies.
Vijay Kumar: Understood Ben. And Matt, on this, sorry, just sticking with that Recon, US Hip & Knee, getting some questions here on flattish. I know the comp is tough. Was there any integration impact here on the US Recon side? And Ben, can you just clarify? When you say the underlying Recon was about 8%, was that 8% excluding the integration impact within Recon?
Phillip Berry: Yes, yes. Excluding the integration impacts, we look at like, for like, kind of underlying performance, our view would be, a little over 8% and that would take out those impacts.
Vijay Kumar: Understood. And Matt, sorry, on this.
Matthew Trerotola: Yes, pick up your Hip & Knee question there. Yes, I mean, for sure there are some integration impacts there. Look, our Hip & Knee growth last year was 22%. And so there’s an extremely strong comp there. And, if you look over a longer time period, these, the results for this year would be for the legacy business, 50% above 2019. And, by our math, the industry in Hip & Knee is maybe mid single, maybe high single digits above 2019. So, I think that the comp certainly is an effect in terms of the picture on Hip & Knee. And with or without the integration, we would expect Q1 to be a softer growth quarter in Hip & Knee given the strength of the comp. Second, there is an effect here that Lima in the US, while it was primarily a shoulder business, it did have a small Hip & Knee business, and the primaries in the small Hip & Knee business in Lima were not a focus at all.
And that was shrinking. And that was shrinking as we exited last year. And so there’s a little bit of a tug from that Lima business as well in Hip & Knee. And then for sure, the integration effects are in Hip & Knee and shoulder and there’s some, specific accounts and surgeons that we’ve lost as part of the integration that are having an impact on Hip & Knee as well. Now, if we look forward, through the year, another tough comp there, but then from there forward, the comps get much more normal. We also, we’ll start to clear through, the, some of these integration effects, and we expect to, be able to keep ramping the revision even stronger now, as we have the lima cones, we’ve also got some additional accessories that we have coming through our pipeline on the revision side to give us broader access and revision.
We, we’ve got Arvis to ramp more aggressively as we, as we move through the year as well. And so, we’ve got plenty of confidence that our Hip & Knee growth will move back to a more normal range as we move through the year.
Vijay Kumar: Fantastic. Thanks, guys.
Kyle Rose: Thank you. Next question. Operator.
Operator: Thank you. We have a question from Mike Matten from Needham. Mike, please go ahead.
Joseph Stringer: Hey, this is Joseph on for Mike. Maybe just follow up on the Hip & Knee. Do you think there’s still kind of a backlog there for Hip & Knee procedures? You know, larger than normal backlog I guess?
Matthew Trerotola: Yes. So, again, I think whether you look at the US or you look outside the US, the cumulative growth since 2019 is still, significantly less than five years of growth. And so that does certainly suggest that there are unserved patients there. You know, if you look at early last year, the first, four or five months of last year, things went really hot in the US and some countries outside the US. And I think that was indicative of that backlog that lies there and sort of a high utilization environment that enabled higher rates. And so I think it seems reasonable that there is still backlog to be worked off in Hip & Knee that can create some tailwind maybe later this year in the years to come. But clearly, clearly in the first quarter, looking at, looking at what we understand about our results and looking at the other results that have been posted this was a, kind of a slower growth quarter rich and ease in the US than where things were last year.
And so clearly that backlog is not being worked off right now. And, and I think, we saw and understood that working through the quarter that there were just various effects that were constraining kind of surgical supply, like I said, whether it was storms or flu and different things. And that’s what used to be pretty normal, that in any given year, there were parts of the year where there were some crimps that were being put on supply. And so better months, better, worse months, better quarters, worse quarters, and we might be back into a more normal environment, and there’ll be periods where things can run white hot because that backlog is there and the surgical capacity is very available, and there’ll be periods where the capacity is a bit constrained and that sits there.
Joseph Stringer: Okay, great. Yes, that makes sense. And then maybe just another quick one on Arvis, if you do have anything more to add. Appreciate the color so far, but I guess any metrics in terms of adoption or placements would be really helpful. Understand it’s still early ramp, but, yeah, anything else would be great.
Matthew Trerotola: Yes. So, as I’ve shared before on me, we’ve got a few, sort of a few dozen surgeons using it right now by design. You know, we got it to a number of surgeons, and we’re really focusing on, kind of having them use it a lot, and making sure that all of them get ramped up in terms of utilization rates and that we learn things that we need to in terms of how people are using it, to make sure that as we move to, taking it broadly into the marketplace, that it’s, it’s going to be successful both in terms of helping us to gain business and grow, but also that the surgeons will be using at high rates. You know, if you look at some of the technologies that are out there, some are being used at high rates and some are not.
And we want to make sure that Arvis is used at high rates. And so this controlled launch, I think, I think, puts us in a place to be able to make sure that happens as we work through this year, definitely expect it to have a good, positive impact on our knee business as we work through this year and get beyond that first, that first couple of dozen surgeons into a broader marketplace, and then kind of years to come of opportunity to have good, strong impact from Arvis and me. And also, we continue to work on additional technology to add beyond Arvis in terms of making that Hip & Knee value proposition stronger and stronger in the enabling tech workflow area on the shoulder front. Just getting started this year, we’ve been working on that, obviously, for a little bit here because we just cleared the regulatory with 510(k).
But it’ll be just a very initial launch here in the second half of the year to get really good feedback on the software and the hardware and the instruments, and then make sure that we make whatever adjustments we need to moving into next year. And there’s also kind of multiple waves of technologies that we can bring through Arvis there into the shoulder. I’m going to get a good strong start this year and then build on that in ’25 and beyond.
Joseph Stringer: Okay, great. Thanks for taking our questions.
Operator: [Operator instructions] We have a follow up question from Vijay Kumar from Evercore ISI. Vijay, you may proceed.
Vijay Kumar: Hey, guys, thanks for the follow up here.
Matthew Trerotola: You get a bonus, Vijay?
Vijay Kumar: Yes, I do. I wanted to touch on margin performance in the quarter. The gross margins were gross margins in line with your expectations right? Because my understanding is Lima had, somewhere in the seventies gross margin. So sequentially, when I’m looking at this, the mix improved rate, the dollar contribution from Recon improved, but gross margins flattish. But operating margin came in well above. So just talk about the margin performance and how we should think about for the back half? Does this give increased confidence in the back half margin ramp?
Matthew Trerotola: Yes. Vijay, I think that the number that you’re thinking about with, with Lima is not a US GAAP number, it’s an IFRS number. So, if you really translate Lima historical numbers into US GAAP, there’s some shift between gross margin and operating expenses. So, the kind of underlying gross margin and the US GAAP kind of translation is more in the higher sixties than it is kind of into the seventies. So that, plus some of the mix of the business where we’re getting some of the sales, I’d say kind of gross margins were kind of largely in line with what our expectations were. As I said earlier, I would expect to see some acceleration of the company’s gross margins kind of as we go through the course of the year.
And overall, I mean, still excited about the opportunities of kind of potential synergies down the road as we improve our, kind of our Recon, globalization and supply chain, there’s lots of opportunity for us to continue to really embed EGX, to look at opportunities to expand our gross margins to continue to shape the mix of the business in the right way that’ll help us to accelerate there. So, like we’ve said, we still see the Recon business right now we’re in kind of a high sixties gross margin. We see opportunity to kind of get that well into the seventies, call it, closer to the mid seventies over time. But this year it’d be just kind of, I’d say, relatively steady progress. Looking at where we are in Q1 and maybe seeing a slight acceleration or as we go through the course of the year.
Vijay Kumar: Sorry. At the operating margin, line item, were there any timing impact of OpEx? Are synergies, cost synergies coming in above plan? Because it just feels like execution was slightly above.
Matthew Trerotola: Yes, I mean, we’re happy with the start. I mean, we were able, like we’ve said, we were able to, really identify what the go forward work structure was going to look like if we closed the deal. So we’re able to capitalize on some synergies right away, maybe slightly above kind of our kind of initial expectations in the first quarter, but again, still well within kind of our expectations of what we’ve said for the year is where we’re currently thinking. And like I said, there’s this shift between, kind of OpEx versus gross margin, which is, kind of again aligned with what our expectations were.
