Keith Pfeil: Thanks, Ryan. It was a great question. So my messaging on mid- to high 60s gross margins for the quarter is for the year is consistent with what I communicated last quarter. But as you think about kind of where we’re at, the things that we look to knock off quickly was getting the U.S. system done, driving standardization from a warehousing perspective and going out and renegotiating contracts for things that impact supply chain around freight, things of that nature. The in-sourcing and contract renegotiation to expand manufacturing takes a little bit longer. So one of the things that you have to drive is you have to drive first bring or buying additional machinery and equipment. We’ve taken actions to do that. That – those machines have to get delivered, get put online.
That puts you into the second half of the year. You’re going to start producing as you get into Q3 and 4 as well as Q1 and 2 next year. So that basically is going to show first in terms of where you’re in-sourcing, you’re going to see inventory step up, but you’re not going to see that roll through the P&L until it pushes through the P&L. That’s why I had the comments of you’re not going to see that until you get into 2025 and 2026. But the actions that you’re taking are actions that we’ve been very aggressive with to date. I also commented in some of my earlier statements about just really focusing on spending. As we think about getting everyone commonized around one approach, one of the things that I would expect to see is more of what I call legacy Globus approach to spending and really kind of sweating a lot of the costs that are out there.
Those are all things that are going to help us really improve the gross margin. But the big savings to us doesn’t occur until really to get into next year.
Ryan Zimmerman: Very helpful. And then, Dan, one for you. I was at AA&S [ph] I got the see Excelsius Hub, some of the power tools, it was nice to see. This feels a little bit like an extension on the margin away from spine maybe into some more of the core neurosurgery. You guys have kind of had outward pushes in the past in imaging and trauma. Just curious kind of understand your view of where you want to go with the business and not to downplay the combined spine business, but it does feel almost if you’re pushing our away from core spine. And I would appreciate your thoughts on kind of the longer-term vision.
Daniel Scavilla: Thanks, Ryan. Look, one thing we’ve always said and we’ll continue to say is while we look to become a musculoskeletal technology company, meaning that we’ll go out into all those areas, we recognize that we will always be predominantly spine, and we’re never going to lose focus of being spine with what we do. These things can all enhance spine, but they also have other applications. So even to the power tools you refer to, the fact that they’re applicable to orthopedics, trauma, cranial those things help a lot. And even the hub itself, again, that can help in different areas. But again, also as applications to ASCs or in other things within spine. And I think at the end of the day, if you keep in mind that the even the capital that we’re doing is all about driving the core spine and creating those and standardizing procedural solutions that we do.
So I would tell you, we’re not trying to move away from this or signal anything with spine other than we’re all in, and we have opportunities to take great technology beyond those borders and that’s what we’re doing.
Ryan Zimmerman: Thanks, guys. Congrats on the quarter.
Daniel Scavilla: Thank you.
Operator: Thank you for your question. Please stand by for our next question. Our next question comes from the line of Steve Lichtman of Oppenheimer & Company. Your line is now open.
Steve Lichtman: Thank you. Evening, guys. I guess the first question, as we look at the U.S. Spine business, as you look at that sort of low single-digit pro forma number, how much in dissynergies would you sort of peg came through in the first quarter itself?
Daniel Scavilla: Steve, I’ll take that. We actually probably won’t disclose that. I mean there’s always different areas where things are going good or not with the area overall. But I would say it’s kind of tough to tease through what that would be to give you a whole number with it. I mean — so I don’t really have something I could honestly give you and say I know for certainty here’s what it is. At the end of the day, we’re just looking for growth everywhere, and we’ve put a lot on the U.S. team in particular. And so there’s a level of distraction when you’ve created a new team with new products, with new folks, with new procedures with a new system. And I think that’s really what we’re looking to do with this. But I really don’t have a number that I could say with certainty, here’s what’s driven from a dissynergy impact.
Steve Lichtman: Got it. And then just a follow-up on your comment about shifting the dialogue from – from adjusted EBITDA and more towards EPS and free cash flow. On the latter, can you level set us on what your expectations are for free cash flow this year and then over the medium term, whether talking about on a free cash flow conversion basis or on an absolute dollar basis, appreciating keep your comments about AR in the first half.
Keith Pfeil: Yes. So I think the way to look at this – thanks for the question, first off. If I look at fiscal ’23, I want to say we generated, give or take, $180 million of free cash. The way I think about that over the longer term is we also identified $170 million of synergies. So you kind of put those two numbers together, that’s where you kind of see yourself going over the long term. Near term, the focus is on really driving cash savings that are going to contribute to EPS. So I would again look at last year and think about some of the things that I commented on related to the synergies that we realized this year.
Steve Lichtman: Thanks, guys.
Operator: Thank you for your question. Please stand by for our next question. The next question comes from the line of Vik Chopra of Wells Fargo. Your line is now open.
Unidentified Analyst: This is Simran on for Vig. Thank you for taking the questions and congrats on a great quarter. Maybe just starting off on the robotics side. I don’t think I heard a latest update on the ReconRobotics [ph] So what are the latest time lines there?
Daniel Scavilla: That’s a great question. Thanks for asking. We actually filed the recon robotics with the FDA. And so we’re at a stage now where we’re waiting approval. What we’re doing while we’re waiting approvals, we’re building inventory, getting ready to roll it out. So we’re always waiting for the FDA. I don’t have an exact data I could give you. My thought would be the second half of the year, probably towards the later part of the third quarter is really what we’re looking for. But that remains, again, beyond the power tools. So one of the most exciting things I think we’ll get out the door this year.
Unidentified Analyst: That’s great. Very helpful color. And maybe just how should we think about growth in your Enabling Technologies business in 2024? And how are you thinking about seasonality across that business?
Daniel Scavilla: I think that the growth – I mean, the growth is going to be consistent with bringing the NuVasive business into the fold. I mean the seasonality or the pipeline doesn’t really change. We still expect Q2 and Q4 to be the key drivers. But from a growth perspective, you would expect to convert some of the legacy NUVA customers into that EGPS portfolio or Excelsius portfolio and drive the business going forward. I mean, when you think about the robot, you have E3D, and then you have new products coming. So the cadence for that business in terms of long-term growth should be very positive. I know you’d expect it to grow at a higher rate than the overall business.
Unidentified Analyst: Great. Thank you.
Operator: Thank you for your question. [Operator Instructions] Our next question comes from the line of Craig Bijou of Bank of America Securities. Your line is now open.
Craig Bijou: Good afternoon, guys. Thanks for taking the questions. So I wanted to start with your comments on the integration going better than expected. And maybe Keith or Dan, just trying to understand when you guys may feel more comfortable either taking down that 150 number or that you’re not going to see or essentially that you’ve kind of moved past some of the potential disruption areas with the integration of the sales force?
Daniel Scavilla: Craig, my first thought was December 31. But what I would tell you is, again, as we get through and get the cadence going, I think you’ll see us get more comfortable, really happy with where we are for the first quarter. I would think we’re going to feel the same way for the second quarter. But again, you just don’t know. So we’re trying to be responsible to the shareholders and make sure that we get through these phases. But personally, I would think that deep into the third quarter, when I personally will feel better.
Keith Pfeil: Yes. And I would agree with Dan. As we get through the year, we remain positive with where we’re at so far here entering the second quarter. I would feel probably most comfortable as we get through the third quarter.
Craig Bijou: Got it. That’s helpful. And as a follow-up, on the enabling tech, obviously, the revenue is pretty good revenue, very good, one of the highest quarters you guys have ever had and you typically don’t see that in Q1. And I know you’ve talked a little bit about it, but what are some of the drivers? Are you seeing just more adoption by surgeons using robotic technology and that’s kind of driving the capital acquisitions by hospitals. I mean anything that you’re seeing kind of on the ground that may be pushing robotics a little bit more – a little bit deeper within Spine?
Daniel Scavilla: I would say the answer to that is yes. I mean as we think about the last couple of quarters, one of the things we consistently saw was even when we were just still stand-alone Globus, the pipeline was strong and the pipelines remain strong. There’s a lot of interest. The capital sales force is very active in their accounts, not only on Excelsius, but also E3D. And as we look forward, you’re bringing in those NuVasive customers. These deals haven’t closed yet, but the pipeline for the new – the legacy Nuvo [ph] customer is now adding to the legacy Globus pipeline. So as we look ahead, we see a lot of positivity in having that business grow in the next couple of quarters.
