Another area is in our Spine business. This is an industry that’s being completely redefined by enabling technology — transformed and redefined by enabling technology. And we talk about robotics and imaging and navigation and powered instruments, but AI is a key piece of this and we have thousands of surgeries in our AI — that’s powering our AI algorithm. And with each — and Spine is a complicated surgery, especially whether it be degen, or [for sure] (ph), deformity complex cases. Highly reliant on surgeon training. And the AI is really just improving outcomes here, especially when it’s combined with enabling technology. I could go on, cardiac rhythm in our monitoring, our LINQ monitoring business there, we are cutting down false positives for — in detecting AFib by 50% using AI, and that’s creating multiple hours of productivity for these clinics around the country and given — so and this really driving the deployment of that technology.
So I’d say it’s a huge opportunity. It’s a differentiator. I mentioned we hired a new head of technology, Ken Washington, to really help us scale this across all our businesses and better partner with some big tech companies. We’ve talked about our partnership with NVIDIA. And in the end, I’d say what we’re going to see over the next couple of years is you may not be replacing — AI is not going to be replacing surgeons, but I’ll tell you what, surgeons who use AI will be replacing surgeons that don’t and we are going to be right in the middle of that mix.
Chris Pasquale: Thanks. Those are great examples. Karen, you mentioned price as a contributor to the gross margin strength in the quarter. Could you just give us a sense for what price looks like across the company today? Maybe how it compares to where you were a couple of years ago? And if you think that it’s sustainable as we move into a less inflationary environment going forward?
Karen Parkhill: Yes. Thanks for the question. As you’ve heard us talk about, we have been building a pretty strong muscle around pricing. And we’re focused on ensuring that we price for the value that we deliver. Typically, historically, pre-COVID, we would experience up to 200 basis points of pricing pressure every year. And we’ve been able to neutralize that these last couple of years, including this quarter. We obviously have had VBP pressure this year, and last year, we were able to neutralize that as well at the total company level. By quarter, it may not be fully neutralized depending on how VBP hits us. But we do believe that this pricing muscle that we’ve built is going to be lasting. And we fully intend to continue to track, monitor, talk about pricing, so that even as we move into a lower inflationary environment, we’re focused on continuing this pricing muscle that we’ve built.
Geoff Martha: I just want to reemphasize that last point there on kind of — we’ll start on margins. On gross margins, and there was a question earlier, Karen went into detail, I’m not going to repeat that. But on gross margins, the pricing muscle that we’ve been building. I think we intend that to be enduring. And then Karen mentioned the cost of goods sold improvements that we’re making, productivity around our cost of goods sold line, really driven by our new structure, strategy and capabilities in our global operations and supply chain. That will all help gross margin. And as you get down the P&L, we’re really focused on getting leverage from SG&A and excited about stabilizing and then improving the margins over time.
Ryan Weispfenning: Okay. Thanks Chris. We’ll take the next question please, Brad.
Brad Welnick: The next question comes from Jayson Bedford at Raymond James. Jayson, please go ahead.
Jayson Bedford: Good morning. Can you hear me okay?
Geoff Martha: Yeah, Jayson. We can hear you.
Jayson Bedford: All right. Thanks. So not to make this a call all around gross margin, but I did have a question. You mentioned stabilization. I just wanted to put a little context around that. What is the expected gross margin for fiscal ’24?
Karen Parkhill: At this point — when we gave our guidance back in May, we said we expected it to be around 65.25%. And at this point, we’re expecting it to be about 65.50%. We’ve seen some improvement in the first quarter, and we’re carrying some of that through.
Jayson Bedford: Okay. And just, Karen, the drop down for the rest of the year versus first quarter levels, revenue is higher. Is this just strictly a function of the VBP impact hitting more in the back half?
