Ladies and gentlemen, thank you for standing by, and welcome to the Enovis second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, simply press star one again. I would now like to turn the call over to Derek Leck. Please go ahead, sir.
Thank you, Paula. Good morning, everyone. Thank you for joining us today for our second quarter results conference call. I'm Derek Leck, Vice President of Investor Relations. Joining me on the call today are Matt Trerotola, CEO, Chris Hix, Executive Vice President and CFO. Also joining us this morning for a quick introduction before we get to the prepared remarks in Q&A is Ben Berry, who we previously announced will serve as Enovis' CFO when Chris retires at the end of the year. Our earnings release was issued earlier this morning and is available in the investor section of our website, enovis.com. We'll be using a slide presentation to walk you through today's call, which can also be found on our website. Both the audio and slide presentation of this call will be archived on the website later today and will be available until the next quarterly conference call.
During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. Actual results may differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. With respect to any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information relating to those measures can be found in our press release and in the appendix of today's slide presentation. You will note that we have provided reconciliation tables for each of the 2021 quarterly historical results on an adjusted standalone basis for comparability.
With that, let me turn it over to Matt for some opening remarks, and then we will start with the earnings presentation. Matt?
Thank you, Derek. About a month ago, we announced our planned transition for the Enovis CFO role, which will culminate in Chris's retirement at the end of the year and Ben taking on the role. After his retirement, Chris will remain with us in an advisory capacity through 2023 to ensure a smooth transition. Chris was one of my first hires after I joined the company as CEO back in 2015. His leadership has been pivotal to our operating improvements and to our strategic transformation to a pure-play med tech company. He also raised the bar for the global finance function and attracted great talent like Ben, which strengthened the capabilities of the team. He had been considering his retirement path for a while, and I know that he's looking forward to spending more time with his family and friends and pursuing other passions.
Ben joined us in early 2020 as the CFO of our Med Tech segment after many years of finance leadership experience in the sector. We've been impressed with how quickly he's learned the business and immediately rose to the COVID challenges that emerged as he walked in the door. Ben has made a meaningful impact to our operational performance and growth strategy in a short time, and he's a strong leader with high integrity, and I'm confident that he'll build on the strong foundation that Chris has established. I look forward to working with Ben as we establish Enovis as a high-performing med tech company. You'll get to know Ben more in the coming quarters. I've asked him to briefly introduce himself on this call. Ben?
Thanks, Matt. I'm really excited about the opportunity and the extremely bright future we have in front of us at Enovis. I've spent my entire career in the med tech space, and prior to joining Enovis, I served in a number of finance leadership roles within Novartis and Alcon, and I played a key role in the successful spin-out of Alcon in 2019. What attracted me to Enovis is the really great potential this business has with fast growth, expansion capabilities, and a great foundation and business system that was established by Colfax. Being part of the organization over the last couple of years has only strengthened my view of the significant growth opportunities we have as a company.
I really look forward to partnering with Chris during this transition and continuing to work with Matt, Brady, and the rest of the leadership team to build Enovis into a high-value growth company. Now I'll turn it back over to Matt, who will start on slide three. Matt?
Thanks, Ben. Now let's get into the Q2 discussion. We've had strong growth and solid operating performance so far this year, executing in line with our plan. We remain confident in achieving our strategic goals of sustainable high single-digit organic revenue growth, 20% Adjusted EBITDA margins, and over $2 billion in annual sales in the coming years. I want to take a moment here to acknowledge the foundation of our success, our global team of talented associates. I want to thank them for their contributions in the first half of 2022. In June, we had our first leadership conference as Enovis, and it was face-to-face. It's great to be doing things a lot more face-to-face these days. It was incredible to see the energy and excitement that we have created through the separation and the launch of Enovis.
We discussed growth plans, how we're applying our EGX toolkit throughout the company, and our purpose, values, and behaviors that shape our continuous improvement culture. I am incredibly proud of our team and confident in their ability to continue to build a fantastic growth company. Turning to slide four. We're achieving our operational goals in 2022 with double-digit top-line growth and organic growth in the solid mid-single digits. Our organic growth of just over 5% for the first half of the year has us on track for our 6%-9% full-year guide and clearly shows our capability to grow high single-digit organic in more normalized markets. On this page, you can see our second quarter highlights, including an 11% increase in sales.
Once again, both of our business segments outperformed their markets, leveraging our innovation and commercial muscle to gain share and providing reliable service to customers despite the supply chain challenges. We also achieved 11% growth in EBITDA, and we held the line on EBITDA margins even with the unprecedented inflation and some lingering COVID-related market impacts, such as delayed surgeries and pressure on staffing. We had 30 basis points of margin improvement in the first half and still expect to have strong improvement for the full year that is a solid step towards our 20% strategic goal. We completed two acquisitions in the quarter, Insight Medical Systems and 360 Med Care. On slide five, I wanna highlight the ARVIS technology that we acquired via Insight. ARVIS is a key element of our surgical enabling technologies ecosystem.
As part of our strategic focus on delivering measurably better outcomes, we are focused on creating technology-enabled workflows for surgeons that are tailored to their procedures and to their operating environment. In shoulder, our MatchPoint Solution is used broadly by surgeons to digitally plan their surgery and create a 3D-printed patient-specific instrument to enable greater efficiency and precision. In hip and knee, there is strong surgeon demand for guidance and positioning to drive repeatable outcomes and for the marketing benefits of having the newest technologies for patients. Existing guidance and robotic platforms improve accuracy, but can be costly and consume quite a bit of time in the procedure and too much space in the operating theater. Our strategic focus has been on delivering even higher accuracy and efficiency in a smaller footprint and at a lower cost.
We partnered with Insight for the past three years to accelerate the development and commercialization of their breakthrough guidance technology. With the acquisition of Insight, we are launching our state-of-the-art augmented reality surgical guidance solution, ARVIS, with initial focus on hip and knee. ARVIS is a cutting-edge, easy-to-use technology that is highly precise and accessible at a lower cost and footprint than current assisted surgery offerings in the marketplace. The ARVIS headset provides the surgeon with critical real-time data while leaving an unobstructed view so the surgeon never takes their eyes off the patient. With a single instrument set and no need for preoperative scans, ARVIS is a streamlined and efficient part of the overall surgical procedure. The feedback from our first 200 cases has been fantastic, with surgeons at the world's top institutions, like the Mayo Clinic, already seeing great success using this technology.
Even more exciting, the small, lightweight, self-contained nature of ARVIS is a perfect solution for the high-growth ASC segment. ARVIS is just the fuel our teams need to continue our strong share gain in knee and hip implants in the U.S., and also generate additional high-margin revenue streams. We also see potential for extension into extremities and for globalization. Turning to slide six, we summarize our 47% Recon segment growth that includes high single-digit organic growth up against a tough comp. This performance is well above market growth rates again and includes 14% growth in U.S., hips and knees and 8% growth in U.S., extremities, with double-digit growth in shoulder. Our year-to-date organic growth overall in U.S. Recon is 10%, which we believe is about three times the market.
Our Mathys business pro forma organic growth was about 10% in Q2, and we've only just begun to see the synergy benefits we expect as we proceed through the second half. As we commented last quarter, we're seeing some short-term fluctuations at this stage of the COVID recovery, but we remain encouraged by the continued growth in elective surgery volumes around the world. Our Prevention and Recovery business also demonstrated attractive growth, as shown on slide seven Our 4% sales per day growth was better than underlying markets and in line with our three-year plan to create a consistent mid-single-digit grower in this segment. In this quarter, we grew faster in international P&R markets as U.S., growth moderated a bit due to a strong comp and some short-term market pressure.
Our global bracing business also grew mid-single digits, and we have a strong pipeline of new product launches ahead, which will support solid mid-teens Vitality Index. We saw additional supply chain and wage inflation in Q2 in P&R and are deploying additional price increases to offset it. We remain confident in our ability to pull back the significant price-cost compression we saw in this business over the past few years as inflation stabilizes.
With that, I'll turn the call over to Chris, who will unpack our financial results a little further, starting on slide eight. Chris?
Hey, thanks, Matt, and thank you for the kind words earlier. Ben, it's great, absolutely great to have you as our future CFO. I'm really excited for you and the future of the company as the finance chief for the business. Thank you. We had another quarter of double-digit sales growth in Q2, including strong contributions from our recent acquisitions. Year-over-year currency headwinds stiffened from 1 point last quarter to 3 points in the second quarter. As previously discussed, we had about 2 points of lower sales from fewer selling days, and our Q2 sales per day growth of 5% was similar to Q1 and about in line with our expectations for the upcoming third quarter. Matt covered other sales details earlier, including the impact from COVID on procedures and staffing and our continued significant outperformance versus the market.
Gross margins were down 40 basis points versus the prior year due to the higher levels of inflation that ran through this quarter. As a reminder, the inflation pressures that started with COVID had accumulated to about $30 million by the start of this year, and we had realized about $10 million of pricing increases through our sales channels. This $20 million of net pressure has further increased in the first half of this year. We continue to deploy pricing adjustments, and we are seeing signs of inflation stabilization that should lead to margin relief as we get deeper into the second half of the year. Our EBITDA grew in line with revenue and margins were consistent with our previous guidance. Despite inflationary pressures, our existing businesses expanded margins by 70 basis points due to a combination of sales growth and structural cost reductions.
This margin expansion would have been greater except for the inflation and currency translation impacts. As the U.S., dollar strengthened, we incurred a $2 million currency translation reduction in our EBITDA in the second quarter. In the second quarter, we also executed a tax planning project that created a one-time benefit and reduced our Q2 adjusted rate down to 9%. We are expecting the rate to be in the low- to mid-20s% for the remainder of the year and in the low 20s% for the full year. Our Q2 adjusted EPS includes about $0.02 from the currency translation impact and $0.10 of tax benefit. You put these together and that would normalize to about $0.51, which is in line with expectations. Overall, we delivered against our operating forecast for the quarter and dealt with some FX pressures.
Let's turn to slide nine and talk about our outlook for the full year and some of the key contributing factors. Our organic growth range remains unchanged at 6%-9%, which allows for a range of outcomes related to the COVID recovery pace. Our current trajectory likely points us toward the middle of that range. As observed throughout the med tech space, July was a slower month, but we are seeing signals of an acceleration into the remainder of the quarter and are confident of again achieving mid-single digit organic growth in Q3. We continue to expect further acceleration in the fourth quarter, in part due to easier comps. As commented earlier, we are experiencing an increased level of currency translation pressures and have updated our full year outlook for this factor with another 2-3 points of pressure.
Overall reported growth is now expected to be 8%-12%. Acquisitions continue to be on track with earlier expectations. Our currency impacts are affecting both the top line and profitability. I mentioned that we took a $2 million hit to EBITDA in Q2 because of this, and the full year impact is expected to be $10 million. We have been successfully battling the challenges in our operating environment and feel that it's prudent to leave our operating forecast in place, but we are shifting our overall guidance by $10 million to reflect this large currency impact. We're now targeting $235 million-$255 million of EBITDA in 2022. Our full year EPS range has shifted $0.05 to reflect the net effects from currency and the tax benefit discussed earlier.
For the third quarter, we expect sequentially lower revenue from Q2 to account for the slower July start and the vacation season. Despite this, we're expecting Q3 EBITDA margins to be in line with the second quarter due to increasing momentum of our cost and pricing actions. Wrapping up on slide 10, we're pleased that our strategy for organic growth outperformance continues to clearly read through in our results. Our businesses are well positioned in their markets with robust innovation pipelines and effective operations that serve our customers well while managing through dynamic business conditions. Our operating execution is complemented by our proven M&A program, and we continue to acquire the right businesses and technologies to further strengthen our growth profile. With that, Paula, let's go ahead and open up the call for questions.
Thank you. The floor is now open for your questions. To ask a question at this time, please press star one on your telephone keypad. If at any point you would like to withdraw from the queue, please press star one again. Your first question comes from the line of Jeff Johnson of Baird.
Thank you. Good morning, guys. Can you hear me okay?
Yeah.
Yeah, Jeff, good morning.
Morning, Jeff.
Hey, Matt. Hey, Chris. Derek, how are you? All right, just a couple questions here. I think you did a good job kind of explaining the pacing here that we should expect on organic growth over the next few quarters. That was gonna be my first question. Let me shift instead, I guess. On Recon, I just wanna understand, you put up 8% selling day adjusted growth. You did talk about 8% extremities growth in the U.S., 14% hip and knee. With hip and knee 14% and U.S., extremities up 8%, what pulled you down then to 8% overall for Recon? I'm assuming maybe that's some OUS of your own business that's being de-emphasized as Mathys kind of scales up. Just kinda help us understand the differential there. Thanks.
Yeah, Jeff, there are two things. One, there's a little bit of effect from the little bit of OUS business that we had that you're correct is being in a couple of places that are under some pressure and is being migrated from a Mathys standpoint. That's a small effect. The other thing is that in the US we have very strong growth in hip and knee and in shoulder. You know, in foot and ankle, you know, we're on a good path on that business. As we've talked about before, there's a couple things going on there.
We actually, you know, have, you know, very strong growth in our MedShape business and in some of the key technologies in that business. Overall, the MedShape and Trilliant businesses that we acquired are growing at or above market rates. But the STAR business we've talked about before is going through a period of, you know, some work that we have to do to get the business on the right course in terms of some, you know, some regulatory work. So STAR is not contributing to growth in that business right now.
We also, in the first half of the year, late last year and the first half of the year, were working through a channel consolidation to create one aligned strong channel for our foot and ankle business. With that came, you know, some additions and some subtractions in the channel, which resulted in, you know, a little bit of short-term churn in the first half of the year, particularly in the second quarter. Foot and ankle is the single-digit part that offsets all those other double-digit parts. That puts us very much on track to build this Recon portfolio to be a consistent double-digit performer at this larger scale based on the pieces that are already there.
the clear path we have in foot and ankle, we expect to be well into the double digits in the back half of the year in foot and ankle. We're feeling good about the path there.
All right. That's helpful. Thank you. Maybe just two clarifying questions. One, you pointed to the market pressure on the P&R side. You know, we kind of think about P&R often being driven by, you know, travel, trauma that happens, car accidents, sports, things like that. You know, obviously the world is opening back up. What's the market pressure there? You said you've seen some signs of inflationary pressure stabilizing. You know, I think you'd be one of the first companies to acknowledge that. Any insight on stabilization there that you're seeing would be helpful. Thanks.
Yeah, sure. Yeah, first of all, in terms of P&R market pressure, one, a piece of that business is driven off of elective surgery, and with a you know little bit of a delay there. Even some of the Q1 pressure there was on elective surgery closed into Q2 market pressure for us in that business. That's you know particularly in the U.S., you know there's a little bit of impact on that elective surgery part of that business. You know there are some parts of that business that are very clinic heavy and also you know serve much older parts.
Our foot care business there really focuses in on, you know, diabetics and a higher, more aged, aging population. I think there were some drops in clinic visits, you know, through the second quarter as well in that business. Those are really the two sources of pressure in P&R, both of which, you know, as elective surgery continues to expand and as, you know, we get to the other side of COVID, those should fully clear. Now the second was about inflation. You asked about stabilization of inflation. Yeah, if we go back, you know, six to nine months, you know, we still would, you know, every month find about new inflation, right?
We'd have the next supplier coming to us with an increase, you know, with all the reasons or, you know, another increase in freight rates or a fuel surcharge on freight rates. We were in a period, you know, where things kinda kept going up, and that even lasted into the first quarter of the year. You know, we had expected some stabilization, but we continued to see some more increases coming through. In the last three months, really there is a different, you know, kind of different texture to that. You know, we don't see the kinda week-in, week-out increases coming through. We're seeing much more flattening of input prices, and freight rates.
You know, in some cases we've seen you know some small reductions like freight rates out of China spiked, and then they've come down a little bit. In some cases we're starting to get a little bit of a decrease. Maybe we sourced a second supplier, and now we're in a position you know with a little different market and a second supplier, we're in a position to start bringing things back down. We're not calling it in terms of things coming back down. We certainly you know can't be certain that they won't go up again.
We do see, you know, a stabilization that, you know, we expect should enable us to start to pull back a little bit of price cost in the back half of the year, particularly as we get to Q4, because we have put, you know, quite a bit of price through that business, and, you know, have the opportunity to turn that into some margin reversal at the gross margin level.
All right. Very helpful. Thank you.
Thanks, Jeff.
Your next question. One moment. Your next question comes from the line of Vik Chopra of Wells Fargo.
Hey, good morning, and thanks for taking the question, two for me. I just wanted to dig in a little bit deeper on the procedure volume trends that you saw. Can you talk about the impact that staffing shortages have had on procedure volumes across both P&R and Recon? I had a follow-up. Thanks.
Yeah, sure, Vik. You know, for volume trends, again, I think, you know, it's been talked about a lot out there, and I'll just give our version. Certainly, you know, the year started slow, you know, kind of building off of the slow finish to last year. You know, as we kind of headed through and into March and even April, you know, there was really good momentum building there. You know, you heard very little about cancellations and staffing shortages and things like that.
As we made our way through the second quarter, late in the quarter, kind of late May, early June, you know, we started to hear again about higher cancellation rates, you know, related usually to COVID testing, sometimes to staffing issues. We also have, you know, seen, you know, isolated areas of what we call staffing pressure, but in some cases it's really longer vacations. I think we've got some people that, you know, whether it's the surgeons or their staffs that, you know, have been kinda not doing a whole lot of vacation in the last few years.
I think in June and July, we saw in some cases, you know, kind of more significant, you know, vacation downtime than we have in the past in those months. Those are, you know, some of the things that we've seen in the elective surgery area, really speaking about the U.S. We also have gotten really good signals about what's expected to happen in August and September. You know, there's, you know, kind of a better short-term trend in terms of cancellations.
The scheduling, you know, is suggesting that, you know, there's gonna be a, you know, nice trend through the quarter in terms of people getting kind of back aggressively into a ramp of elective surgery. Then certainly there's plenty of pent-up demand that people wanna get at as we come down the stretch of the year here. You know, on the P&R side, you know, we again get the secondary impact of those elective surgery trends on a part of that business.
I think there's been a smaller effect that you know you do have you know some staffing pressure on you know different clinics out there that you know it was probably a little bit of a factor you know in the market in the first couple quarters of the year as well.
Thanks for that comprehensive answer. Super helpful. My follow-up question was on M&A. You've closed a number of deals in the past couple of years, two tuck-in acquisitions this quarter as well. Just given the recent pullback in the market, should we expect a larger deal from you guys, or is the focus going to remain on these tuck-in M&A late-stage technology deals? Thanks so much.
Yeah. Thanks, Vik. Yeah. I think you know we've been consistent in saying that the kind of things we've done over the past few years are in fact very representative of you know the kind of things that we expect to do in the next couple years. We've done you know a set of highly strategic deals that in some cases bring great technologies that accelerate the growth of our business and/or open up you know new applications and segments. In some cases we've brought new market landscape whether it's geographic like the Mathys deal or whether it's it's you know getting into a new segment like the foot and ankle deals.
Those have all been driven off a strategy, and they've made our company better. They've you know, created a higher organic growth profile, a higher gross margin profile, opportunities to get at synergies and scaling that drive us up the EBITDA margin curve. That collection of things that you've seen us do over the past couple years is very representative of what we'd expect to do in the coming years. Those were deals that range from deals with no revenue to almost $150 million of revenue. There's lots of possibilities for us over the next couple years that would be similar to those.
We've obviously got, you know, great balance sheet room in order to do those. Clearly, there are also, you know, a little bit larger things that we can think about over time, and, you know, we'll always be considering those and how they could, you know, accelerate our strategy, move our company forward, create a lot of value for our shareholders. We've got a, you know, great capability to do deals and integrate them well. I'd still say, you know, in the short term, expect to see more of the same, because there's a lot of it in our pipeline. Obviously a little different climate in terms of valuation and opportunity there to maybe get a little more reasonable valuations than in the past.
We're really excited about the M&A opportunities in the next couple years here, Vik.
Your next question comes from the line of Matthew Mishan of KeyBank.
Hey, good morning, and congratulations, Chris, on retirement. I just wanted to start with EBITDA in the move down, the revision of $10 million, you know, distinctly for FX. Is the way to think about it that you're seeing you know, incremental supply chain logistics inflation pressure, but your ability to kind of offset those is keeping the range just to what FX looks like, given like organic growth seemingly is coming in, you know, in line with what your expectations are.
Yeah, Matt, you've peeled that apart pretty well, I think. There's two separate things that we're dealing with. There is the inflation that we've had, the supply chain challenges in the business that Matt spoke to in his, and I guess I referred to a bit in my comments as well. What we've seen on that is that, you know, there's a pressure curve that was building all through, you know, since COVID initiated. We started some pricing actions, late, you know, sort of last year and into this year, that's helped to ameliorate some of that. We've still been, you know, we still have that curve, that's on us.
Now, as we see the inflation stabilizing and these price increases are reading through better, we expect that pressure in particular will continue to you know be contained and maybe moderate. There's a question there about exactly how that'll play out, but if the stabilization that we see and the price increases that we're working on are all realized, we should get to a better position, and we expect to get to a better position on margins. The separate issue is with respect to currency, and you know that is something that we just don't have as much control over, and we thought it was important to make sure that folks see that we're executing our operating plan in line with what we'd expected.
There is that inflation pressure and the pricing dynamic that keeps us from moving up in our original guidance. At the same time, we've got to deal with this and recognize, acknowledge the currency pressure that's coming through. The operating plan, operating effectively, our team, I think our teams are doing a really good job in a difficult environment. Then we do have to adjust the guidance range for the currency impacts.
Okay. I think that's fair. Just switching over to the M&A you've completed. I just wanna make sure that the revenue expected from those two are immaterial to guidance for 2022. On ARVIS, is it agnostic to the different implants, or is this a proprietary surgical platform for your Enovis?
Yeah. Yeah, Matt, let me take those. One thing I do wanna put a point on in Chris's comments is that the $10 million of FX pressure is since we set the guidance, right? We have $10 million of new FX pressure beyond our original guidance, and that's why we're changing the range, just for the avoidance of doubt there. You know, the revenues from the new acquisitions, yeah, they'll be, you know, sort of just a handful of million dollars of impact in this year. It's, you know, and on the ARVIS side, you know, there'll be some costs coming in, and so, you know, no real profit contribution there in the year.
You know, to your question about ARVIS, well, I will say, certainly those will both ramp nicely as we move into next year and beyond, both support the growth in existing parts of the business, and also bring some additional revenue as well. As far as ARVIS, you know, this is a terrific technology that we think is gonna hit a real need. Obviously, there's an appetite for these kinds of technologies, you know, now that it's very well established in the industry.
ARVIS is, you know, designed to be more precise, but very importantly, also designed to be, you know, much smaller, more streamlined, and particularly for the ASC environment, just a terrific fit. It is an implant agnostic solution. You know, from a business model standpoint, we're looking to use it to, you know, serve our existing surgeons and help them and, you know, grow in a strong way with them and also get some recurring revenue coming from their use of this product, you know, in their processes.
We do definitely see ARVIS as a great opportunity for us to use as part of how we continue to attract competitive surgeons. You know, as we do that, you know, we'll have a business model that certainly encourages them, you know, if they're excited about the technology to be also bringing their implant volume over to us over time and also a great recurring revenue stream on the ARVIS product as well.
Okay. Actually look forward to a demo.
Thanks.
Your next question comes from Jason Wittes of Loop Capital.
Hi, thanks for taking the questions. First off, you mentioned you're implementing price increases. I'm wondering, you know, where you think you're gonna have success. You've got, you know, somewhat of a wide range of orthopedic products in different markets, such as hips and knees versus extremities and obviously the physical therapy business. Could you give us some color in terms of where you think you're seeing success, or where you think you can get success or where you're seeing success right now?
Yeah, Jason. It's, you know, our P&R segment is, you know, where we had the most inflation come the earliest and where we've done a lot of price, and we continue to do more price. You know, there's different pieces of that segment, but the bracing business is the largest part of that segment. There's a range from Medicare-mandated price increases we're working through with the other insurers, you know, getting increases that help our reimbursement business there.
We've been able to several times now make direct price increases into the clinics and our distributors, and then some of the, you know, changes from Medicare and insurers create some relief on that front. We've made some traction on GPO price increases there. It is something we have to do, you know, channel by channel and sometimes customer by customer. It's been building over time. That's, you know, in the bracing business. Whereas like in our rehab business, that's something we can just put a price increase through 'cause it's a product that's sold into rehabilitation clinics.
We've had a couple price increases into our rehab business that are just, you know, change the price, let's get it through the system, you know, as well. We had about, in that billion-dollar P&R platform, just about 1% of price, you know, already last year, and we expect to have, in the range of 2% of price this year. And that, you know, if we get stabilization in our inputs and our freight rates, that's what, as Chris talked about in the back half of the year, gets us to start pulling back some gross margin, particularly in Q4.
We would pull back more next year, you know, in that kind of a scenario. If we get more inflation, we do now have a lot of clear kind of muscle and process and experience to be able to get to the places where we can get it through. On the Recon side, it's a very different dynamic. There, you know, definitely is a different price climate in Recon. You know, we have, you know, seen some specific instances here in the U.S., and some specific countries in Europe, where, you know, we've been able to get some positive price.
There also, you know, has been a trend in that Recon business to typically have a couple percent price down every year. I'd say, there's definitely gonna be a lot of price dialogue in Recon, you know, this year and next year. There was some last year. I think most indications are that that's probably gonna result in more of a, you know, a flattening or maybe a modest increase for a little bit of time rather than, you know, the normal couple perceent a year. In our business, with the high growth we've got, if we get flattening of price, with nice operating leverage, I think that'd be a good environment to be in, you know, say, next year.
Thanks. That's very helpful. Then also, in terms of your longer term EBITDA margin improvements, I think you've put a pretty decent goal out there. I think it's 500 basis points by 2024. How does inflation and FX and all those other pressures work into that assumption? Are those sort of pressures that may delay you getting to that level or was that already built in when you kind of put out those numbers or that expectation?
Yeah. Yeah, we shared a kind of very clear plan for how we're gonna get those 500 basis points, and I think that plan is still fully intact. I'm very confident that we can get that improvement and get to 20%+ EBITDA margins. I'm also confident that we'll take a you know a good healthy step forward on that here this year. That's 'cause you know the key elements of it are still very much intact. We've taken out some of the structural costs as we did the separation, and we've had some other cost actions underway you know this year and plans for next year.
We are, you know, getting the growth and the operating leverage and the productivity that we can get, you know, with that growth. We've got clear plans for how to scale those acquisitions that came in at low margin levels, but high gross margin levels. You know, we've got clear plans for how, starting as we exit this year and into the coming years, we scale those acquisitions. All that's intact and we're getting price. We're getting a lot of price. The opportunity to eventually pull the price-cost pressure back in our P&R business is very real. I still feel very confident in that 500 basis point.
I think we've clearly got a short-term challenge in terms of, you know, a little bit of delays in getting the stabilization on inflation and a little bit of FX pressure, you know, that's creating a little bit of headwind against that initial sharp start. The entire plan to get 500 basis points is still very secure.
Thank you. That's very helpful. Then I guess one sort of housekeeping type question. Can you give us a little color in terms of what the hip and knee growth breakout was, and any kind of qualitative information in terms of what's driving that growth?
So we shared the hip and knee that we shared on the page there is U.S., Hip and knee, 'cause we don't yet have Mathys in our core numbers. As we shared, we're kind of well into the double digits there. Certainly you know the knee part of that is the strongest. It's you know we grow very strongly in knee many times market, and that's partly driven by how successful we're being in the ASC with our tremendous EMPOWR Knee product. Also in hips, we're confident that we grew it at multiple times market.
You know, well into the double digits for our hip and knee and as we said, double digits as well for shoulder. You know, in our Mathys business, our hip growth, you know, they're a real leader in hip, and their hip growth was very strong, well above market. We've shared previously that we expect, you know, that products will bring in from the U.S., our AltiVate product. And our EMPOWR to, you know, significantly improve their knee and shoulder growth. You know, we're feeling very good about Mathys being 10% pro forma in the quarter on the back of strong hip growth. We've got, you know, the products needed coming through to get the other parts very strong.
You know, really good arc in our Recon business.
Very helpful. Thanks. I'll jump back in queue.
Mm-hmm.
At this time, this does conclude today's question and answer session for today's call. I will now turn the floor back over to management for any additional or closing remarks.
Well, thank you everyone. Thanks for joining us. If you have any further questions, please contact Investor Relations. Have a great day.
Thanks, everybody.
Ladies and gentlemen, this does conclude today's call. Thank you for your participation. You may now disconnect.