And we’re going to use that amazing Blueprint technology to feed Mako, and that will just be icing on the cake on an upper extremity business that is cooking on gas right now with amazing growth quarter after quarter after quarter.
Operator: We’ll take our next question from Shagun Singh with RBC.
Shagun Singh: I was just wondering if you could refresh us on your capital allocation priorities and M&A just in terms of deal size valuation in areas of interest? And then on the product side, if you could just touch on trauma and what’s driving the strong growth there and the durability? Thank you.
Kevin Lobo: Yes, sure. So as we’ve said in the past, we — our first focus on capital allocation right now is paying down debt, given the debt that we built up on Wright Medical as well as Vocera. That does not stop us from doing little deals. We did one small deal within instruments, and then we close on Cerus. So we’re still looking at tuck-ins primarily this year. But the deal teams are all very active. They’re having discussions. They’re out building their lists and they’re all really having nice pipelines. And so as our cash position gets strong, again, we’ll be back on offense. That will be the first use of our cash. I mean, we’ve had a really terrific track record of M&A, and we can’t wait to be able to get back on offense with M&A. But first priority is certainly paying down debt at the moment, and we’re doing that. So, what’s the second part?
Jason Beach: Trauma.
Kevin Lobo: Yes. So trauma, I’ll tell you this Wright Medical acquisition has been spectacular. The upper extremities business growing very strong double-digit growth every quarter. Foot and Ankle really starting to pick up. So we’re really excited about the performance this quarter was terrific in Foot and Ankle with strong double-digit growth. And then core trauma has actually been a big beneficiary of Wright Medical. So in the past, our core trauma business was really diluted in its focus. It was focusing on Foot and Ankle, focusing more on extremities because they’re faster growing. And we were sort of not paying as much attention to core trauma. We have a great leadership team on core trauma with now dedicated focused R&D resources.
And obviously, they launched Gamma4. We had the T2 Alpha product launch. We’re going to have PeriPRO products launch soon, excited about some other innovations we plan to show at OTA later in the fall. So, really refreshing the portfolio, great focus on core trauma and they had a really excellent quarter as well. So, all three business units performed very well in the quarter. And again, the Wright Medical deal, it’s not just benefiting our extremities business, it’s actually providing more focus core trauma, which is fueling terrific growth in core trauma. So trauma, we expect to continue to be a very high-growth business for a long time to come.
Operator: We’ll take our next question from Josh Jennings with TD Cowen.
Eric Anderson: This is Eric on for Josh. I was curious to hear your thoughts around smart implants. One of your competitors is moving closer to a full launch of a smart implant technology, and I was just curious to hear your updated thoughts there. And if there are any updates to share from your work around OrthoSensor, that would be great to hear as well.
Kevin Lobo: Yes. Listen, I think smart implants is interesting. We obviously have MotionSense which is a wearable on the outside to measure basically similar dynamics that are going to be measured from the smart implant. So I think range of motion, all these factors, it’s interesting. We’re not quite sure yet what to do with that data. How compelling that will be, will that affect patient selection? Will it affect approaches to procedure? So I would call it something that is more investigational and more of a learning that we’re going to have. And — but I do think it’s something that could be important in the future. So not discounting it. I don’t have anything more to share on OrthoSensor other than we are — we have launched MotionSense, which is the wearable which attaches to both the femur as well as tibia to track mobility and a range of other metrics.
And we’re going to learn a lot, we will and so others in the industry about what is it that really matters that you’re measuring in the post-surgery period, and really how does that affect the patient care, patient — maybe patient selection, maybe what implants they should be using, is there a feedback loop that’s meaningful. We don’t know — we don’t have answers. We have a lot of questions, and it’s going to give us new data that we can then learn from. So that’s how I’d characterize at the moment.
Operator: We’ll take our next question from Matt Miksic with Barclays.
Matt Miksic: I wanted to ask a question on Mako, one of the comments that you made, and I apologize if this came up already, hoping back and forth really, because a lot of folks tonight and different calls. But you mentioned an increase in deal mix, I guess, an increase in rental deal mix affecting the dollar revenues that came in from Mako in other — this quarter. And that’s something we’ve heard from other folks as well as you’re I’m sure aware in terms of robots, more sort of hospitals taking a flexible option to leasing or as-you-go arrangements for robots. First, I’m wondering how tightly correlated that with sort of growth in the ASC? And the second, in the past, Kevin, I think you talked about like early on, well, some hospitals are capital rich, some hospitals are operating in commercial and have endowments or whatever, there’s different hospitals have a different preference on how they want to pay for — that was sort of like how we used to think about this.
I’m curious whether you’re seeing sort of hybridization of that? In other words, we want to know Mako, you could pay for it, but let’s scale into it, with a lease arrangement or something. I’m wondering if you’re seeing that kind of shift in the market. And I have one follow-up, if I could.
Kevin Lobo: Yes, sure. Thanks. So what I would tell you is the ASC’s growth is obviously increasing in the ASCs with Mako and virtually all of the ASC deals are financed because physician ownership is part of the ASC scenario. They don’t have the capital budgets the hospitals do. So yes, as ASC penetration increases, more financing, rental type deals are automatically going to happen because they’re virtually all financed, the ASC. Your question around the hospital dynamic, I think it’s just if you have competitive systems that are not sort of being charged for, then the hospital says, well, maybe I don’t need to spend the capital, even if I have the capital and maybe I — let me talk to you about what you do. And so, we offer them the full suite.
And yes, some are opting to go for the financing route that maybe in the past would have purchased, but we have a healthy order book, and we’re not really agnostic to whether they want to buy cash or where they want to finance it. It really doesn’t matter to us because we get the value from that. Whether we get the value on cash on day one and get the cash over time doesn’t really concern us, and it certainly has been fuel for our strong implant growth.
Matt Miksic: That’s great. And just quickly on — you mentioned endoscopy later in the camera and not really having an effect yet, but quite differentiated and quite different this cycle with the sort of opportunity to test surgical margins around tumors and things that really represent kind of a new phase of sort of camera and imaging functionality. Any sense — I know it’s early but — of what that does to the shape of this product cycle versus what we’ve experienced in the past? I mean fluorescence imaging was pretty big for you in the last launch, this sort of takes that up a notch, just any color you can provide in terms of what your expectations are and the early interest, et cetera, on the camera side.
Kevin Lobo: Yes. Thanks. Look, it’s a little early still for me to get too ahead of myself, but the fluorescence imaging was a big deal, right, first in 1588 and then 1688 when you had the overlay from fluorescence where you didn’t have to toggle between black and white and fluorescence. That was pretty meaningful. So those are pretty big steps. But you’re right, this — with the tumor margin ability — the ability to use new dies beyond ICG, wildly exciting to get into lung, to get into bladder. This is really, really exciting with pharmacological agents. It’s also a camera that is extremely good in neuro and sports where historically, we weren’t as strong. We had — it was fabulous for general surgery, but not quite as good.
