Orthofix Reports Fourth Quarter and Full Year 2023 Results

About this update from Orthofix Medical Inc.

Recent Highlights Fourth quarter 2023 net sales of $200.4 million , an increase of 64% on a reported basis and 7% on a pro forma constant currency basis Bone Growth Therapies net sales growth of 15% for the fourth quarter of 2023, marking four consecutive quarters with double-digit net sales increases, representing the strongest quarter of Bone Growth Therapies sales in the history of Orthofix U.S. Orthopedic net sales growth of 11% for the full year 2023 U.S. spine fixation1 net sales growth of 13.5% in Q4 2023 with net distributor additions since the third quarter of 2023 Fourth quarter 2023 net loss of $22 million ; Non-GAAP Adjusted EBITDA of $20 million , or 10% of sales, representing 96% growth over the fourth quarter of 2022 Achieved $32 million in annualized merger-related synergies for the full year ended December 31, 2023 LEWISVILLE, Texas --(BUSINESS WIRE)-- Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the fourth quarter and year ended December 31, 2023 , and issued guidance for the full year 2024. Fourth quarter net sales were $200.4 million , an increase of 64% on a reported basis and 7% on a pro forma constant currency basis. Net loss was $(22.2) million and earnings per share ("EPS") was $(0.59) on a reported basis, representing an improvement of 19% when compared to pro forma results for the prior year period. Non-GAAP adjusted EBITDA was $19.6 million for the fourth quarter, representing 96% growth over pro forma results for the fourth quarter of 2022. Full year net sales were $746.6 million , an increase of 62% on a reported basis and 6% on a pro forma constant currency basis. Net loss was $(151.4) million and EPS was $(4.12) . Non-GAAP adjusted EBITDA was $46.3 million for the full year, representing 69% growth over pro forma results for the full year of 2022. “We are pleased to report another quarter of strong performance as Orthofix completes its first full year as a combined company with SeaSpine . We delivered accelerated growth exiting 2023 and demonstrated resilience, increased internal efficiencies and cost synergies,” said Massimo Calafiore , President and Chief Executive Officer of Orthofix . “I am thrilled to join Orthofix at such a pivotal moment in the Company’s story, wherein the business fundamentals are strong, we are well positioned to deliver profitable growth in 2024, and we are continuing to accelerate our leverage on revenue. After reflecting on my first two months in this role, it is evident that Orthofix’s balanced and complementary product mix offers a differentiated advantage across multiple markets. I look forward to leveraging that unique portfolio platform to drive future value through profitable growth.” 1 Spine fixation is comprised of the Company's Spinal Implants product category, excluding motion preservation product offerings Financial Results Overview Fourth Quarter 2023 Net Sales and Financial Results The following table provides net sales by major product category by reporting segment on a reporting basis: Three Months Ended December 31 , (Unaudited, U.S. Dollars, in millions) 2023 2022 Change Constant Currency Change Bone Growth Therapies $ 58.8 $ 51.0 15.3 % 15.3 % Spinal Implants, Biologics, and Enabling Technologies 111.0 42.5 161.2 % 160.7 % Global Spine 169.8 93.5 81.6 % 81.4 % Global Orthopedics 30.6 28.7 6.8 % 2.7 % Net sales $ 200.4 $ 122.2 64.0 % 62.9 % Further, the following table provides net sales by major product category by reporting segment on a pro forma basis: Three Months Ended December 31 , (Unaudited, U.S. Dollars, in millions) 2023 2022 Pro Forma Change Constant Currency Change Bone Growth Therapies $ 58.8 $ 51.0 15.3 % 15.3 % U.S. Spinal Implants, Biologics and Enabling Technologies 100.6 96.4 4.4 % 4.4 % International Spinal Implants, Biologics, and Enabling Technologies 10.4 10.3 0.7 % 0.1 % Total Spinal Implants, Biologics, and Enabling Technologies 111.0 106.7 4.0 % 4.0 % Global Spine 169.8 157.7 7.7 % 7.6 % Global Orthopedics 30.6 28.7 6.8 % 2.7 % Net sales $ 200.4 $ 186.4 7.5 % 6.9 % Gross margins were 68.2% for the fourth quarter ended December 31, 2023 and were 72.2% on a non-GAAP adjusted basis compared to pro-forma non-GAAP adjusted gross margin of 68.9% in the prior year period. Net loss was $(22.2) million , or $(0.59) per share, compared to pro forma net loss of $(26.0) million , or $(0.73) per share in the prior year period. Non-GAAP adjusted EBITDA was $19.6 million , or 9.8% of net sales, compared to pro forma non-GAAP adjusted EBITDA of $10.0 million , or 5.4% of pro forma net sales, in the prior year period. Full Year 2023 Net Sales and Financial Results The following table provides net sales by major product category by reporting segment on a reporting basis: Year Ended December 31 , (Unaudited, U.S. Dollars, in millions) 2023 2022 Change Constant Currency Change Bone Growth Therapies $ 212.5 $ 187.2 13.5 % 13.5 % Spinal Implants, Biologics, and Enabling Technologies 418.8 166.0 152.4 % 152.4 % Global Spine 631.3 353.2 78.8 % 78.7 % Global Orthopedics 115.3 107.5 7.2 % 5.2 % Net sales $ 746.6 $ 460.7 62.1 % 61.6 % Further, the following table provides net sales by major product category by reporting segment on a pro forma basis: Year Ended December 31 , (Unaudited, U.S. Dollars, in millions) 2023 2022 Pro Forma Change Constant Currency Change Bone Growth Therapies $ 212.5 $ 187.2 13.5 % 13.5 % U.S. Spinal Implants, Biologics and Enabling Technologies 379.4 352.5 7.6 % 7.6 % International Spinal Implants, Biologics, and Enabling Technologies 39.4 53.6 (26.5 %) (26.6 %) Total Spinal Implants, Biologics, and Enabling Technologies** 418.8 406.0 3.1 % 3.1 % Global Spine 631.3 593.3 6.4 % 6.4 % Global Orthopedics 115.3 107.5 7.2 % 5.2 % Net sales*** $ 746.6 $ 700.8 6.5 % 6.2 % ** Pro forma net sales for 2022 for Spinal Implants, Biologics, and Enabling Technologies include the impact of final Spinal Implant stocking orders to European distributors prior to SeaSpine's exit from that market. Excluding the impact of these transactions, net sales growth for this product category was 6.3% on a pro forma reported basis and pro forma constant currency basis. *** Pro forma net sales for 2022 include the impact of final Spinal Implant stocking orders to European distributors prior to SeaSpine's exit from that market. Excluding the impact of these transactions, net sales growth was 8.4% on a pro forma reported basis and 8.1% on a pro forma constant currency basis. Gross margins were 65.1% and were 71.4% on a non-GAAP adjusted basis compared to pro forma non-GAAP adjusted gross margin of 68.7% in the prior year. Net loss was $(151.4) million , or $(4.12) per share, compared to pro forma net loss of $(84.8) million , or $(2.39) per share in the prior year. Non-GAAP adjusted EBITDA was $46.3 million , or 6.2% of net sales, compared to pro forma non-GAAP adjusted EBITDA of $27.4 million , or 3.9% of pro forma net sales, in the prior year period. Liquidity As of December 31, 2023 , cash, cash equivalents, and restricted cash totaled $37.8 million compared to $50.7 million on December 31, 2022 . As of December 31, 2023 , the Company had $100.0 million in borrowings outstanding under its four year $150.0 million Financing Agreement. The Company subsequently borrowed an additional $15.0 million in January 2024 . Business Outlook The Company is providing 2024 full year guidance as follows: Net sales to range between $785 million to $795 million , representing implied growth of 5% to 7% year-over-year on a constant currency basis. These expectations are based on the current foreign currency exchange rates and do not take into account any additional potential exchange rate changes that may occur this year. Non-GAAP adjusted EBITDA of $62 million to $67 million , representing a $15.7 million to $20.7 million increase, over the full year 2023 Exit Q4 2024 free cash flow positive Conference Call Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company's financial results for the year ended December 31, 2023 . Interested parties may access the conference call by dialing (888) 330-2508 in the U.S. and Canada , and (240) 789-2735 in all other locations, and referencing the access code 9556380. A replay of the call will be available for three weeks by dialing (800) 770-2030 in the U.S. and Canada , and (647) 362-9199 in all other locations, and entering the access code 9556380. A webcast of the conference call may be accessed at ir.Orthofix.com . About Orthofix Orthofix is a leading global spine and orthopedics company with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions and a leading surgical navigation system. Its products are distributed in more than 60 countries worldwide. The Company is headquartered in Lewisville, Texas and has primary offices in Carlsbad, CA , with a focus on spine and biologics product innovation and surgeon education, and Verona, Italy , with an emphasis on product innovation, production, and medical education for orthopedics. The combined company’s global R&D, commercial and manufacturing footprint also includes facilities and offices in Irvine, CA , Toronto, Canada , Sunnyvale, CA , Wayne, PA , Olive Branch, MS , Maidenhead, UK , Munich, Germany , Paris, France , and São Paulo, Brazil . For more information, please visit www.orthofix.com . Forward-Looking Statements This communication contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. Forward-looking statements in this communication include the Company's expectations regarding net sales and adjusted EBITDA for the year ended December 31, 2024 . Forward-looking statements are not guarantees of our future performance, are based on our current expectations and assumptions regarding our business, the economy and other future conditions, and are subject to risks, uncertainties and changes in circumstances that are difficult to predict, including the risks described in Part I, Item 1A under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Factors that could cause future results to differ from those expressed by forward-looking statements include, but are not limited to, (i) our ability to maintain operations to support our customers and patients in the near-term and to capitalize on future growth opportunities, (ii) risks associated with acceptance of surgical products and procedures by surgeons and hospitals, (iii) development and acceptance of new products or product enhancements, (iv) clinical and statistical verification of the benefits achieved via the use of our products, (v) our ability to adequately manage inventory, (vi) our ability to recruit and retain management and key personnel, (vii) global economic instability and potential supply chain disruption caused by Russia’s invasion of Ukraine and resulting sanctions, and (viii) the other risks and uncertainties more fully described in our periodic filings with the Securities and Exchange Commission (the “SEC”). As a result of these various risks, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. This list of risks, uncertainties, and other factors is not complete. We discuss some of these matters more fully, as well as certain risk factors that could affect our business, financial condition, results of operations, and prospects, in reports we file from time-to-time with the SEC , which are available to read at www.sec.gov . Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. We undertake no obligation to update, and expressly disclaim any duty to update, our forward-looking statements, whether as a result of circumstances or events that arise after the date hereof, new information, or otherwise, except as required by law. The Company is unable to provide expectations of GAAP income (loss) before income taxes, the closest comparable GAAP measures to Adjusted EBITDA (which is a non-GAAP measure), on a forward-looking basis because the Company is unable to predict without unreasonable efforts the ultimate outcome of matters (including acquisition-related expenses, accounting fair value adjustments, and other such items) that will determine the quantitative amount of the items excluded in calculating Adjusted EBITDA, which items are further described in the reconciliation tables and related descriptions below. These items are uncertain, depend on various factors, and could be material to the Company’s results computed in accordance with GAAP. ORTHOFIX MEDICAL INC. Condensed Consolidated Statements of Operations Three Months Ended Year Ended December 31 , December 31 , ( U.S. Dollars, in thousands, except share and per share data) 2023 2022 2023 2022 (Unaudited) Net sales $ 200,415 $ 122,229 $ 746,641 $ 460,713 Cost of sales 63,785 33,053 260,368 123,544 Gross profit 136,630 89,176 486,273 337,169 Sales and marketing 97,749 59,324 385,736 228,810 General and administrative 34,535 25,470 144,659 79,966 Research and development 18,941 13,152 80,231 49,065 Acquisition-related amortization and remeasurement 3,720 2,274 14,757 (7,404 ) Operating loss (18,315 ) (11,044 ) (139,110 ) (13,268 ) Interest expense, net (4,500 ) (229 ) (8,631 ) (1,288 ) Other income (expense), net 766 4,286 (938 ) (3,150 ) Loss before income taxes (22,049 ) (6,987 ) (148,679 ) (17,706 ) Income tax expense (125 ) (75 ) (2,716 ) (2,043 ) Net loss $ (22,174 ) $ (7,062 ) $ (151,395 ) $ (19,749 ) Net loss per common share: Basic $ (0.59 ) $ (0.35 ) $ (4.12 ) $ (0.98 ) Diluted (0.59 ) (0.35 ) (4.12 ) (0.98 ) Weighted average number of common shares (in millions): Basic 37.3 20.2 36.7 20.1 Diluted 37.3 20.2 36.7 20.1 ORTHOFIX MEDICAL INC. Condensed Consolidated Balance Sheets ( U.S. Dollars, in thousands, except par value data) December 31, 2023 December 31, 2022 Assets Current assets Cash and cash equivalents $ 33,107 $ 50,700 Restricted cash 4,650 — Accounts receivable, net of allowances of $7,130 and $6,419 , respectively 128,098 82,857 Inventories 222,166 100,150 Prepaid expenses and other current assets 32,422 22,283 Total current assets 420,443 255,990 Property, plant, and equipment, net 159,060 58,229 Intangible assets, net 117,490 47,388 Goodwill 194,934 71,317 Other long-term assets 33,388 25,705 Total assets $ 925,315 $ 458,629 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 58,357 $ 27,598 Current portion of long-term debt 1,250 — Current portion of finance lease liability 708 652 Other current liabilities 104,908 55,374 Total current liabilities 165,223 83,624 Long-term debt 93,107 — Long-term portion of finance lease liability 18,532 19,239 Other long-term liabilities 49,723 18,906 Total liabilities 326,585 121,769 Contingencies Shareholders’ equity Common shares $0.10 par value; 100,000 shares authorized; 37,165 and 20,162 issued and outstanding as of December 31, 2023 and 2022, respectively 3,717 2,016 Additional paid-in capital 746,450 334,969 Retained earnings (accumulated deficit) (150,144 ) 1,251 Accumulated other comprehensive loss (1,293 ) (1,376 ) Total shareholders’ equity 598,730 336,860 Total liabilities and shareholders’ equity $ 925,315 $ 458,629 ORTHOFIX MEDICAL INC. Non-GAAP Financial Measures The following tables present reconciliations of various financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), to various non-GAAP financial measures that exclude (or in the case of free cash flow, include) items specified in the tables. The GAAP measures shown in the tables below represent the most comparable GAAP measure to the applicable non-GAAP measure(s) shown in the table. For further information regarding the nature of these exclusions, why the Company believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company's Current Report on Form 8-K regarding this press release filed today with the SEC available on the SEC's website at www.sec.gov and on the “Investors” page of the Company’s website at www.orthofix.com . Adjusted Gross Profit and Adjusted Gross Margin Three Months Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Gross profit $ 136,630 $ 89,176 $ 38,515 $ 127,691 Share-based compensation expense 462 217 102 319 SeaSpine merger-related costs 214 — — — Strategic investments 125 439 — 439 Acquisition-related fair value adjustments 7,037 — — — Amortization/Depreciation of Acquired Long-Lived Assets 372 — — — Medical device regulation (72 ) 1 — 1 Adjusted gross profit $ 144,768 $ 89,833 $ 38,617 $ 128,450 Adjusted gross margin 72.2 % 73.5 % 60.2 % 68.9 % Year Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Gross profit $ 486,273 $ 337,169 $ 141,834 $ 479,003 Share-based compensation expense 1,878 827 365 1,192 SeaSpine merger-related costs 6,861 — — — Strategic investments 389 1,334 — 1,334 Acquisition-related fair value adjustments 36,044 — 208 208 Amortization/Depreciation of Acquired Long-Lived Assets 1,196 — — — Medical device regulation 604 15 — 15 Adjusted gross profit $ 533,245 $ 339,345 $ 142,407 $ 481,752 Adjusted gross margin 71.4 % 73.7 % 59.3 % 68.7 % Adjusted EBITDA Three Months Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Loss before income taxes $ (22,049 ) $ (6,987 ) $ (20,287 ) $ (27,274 ) Interest expense, net 4,500 229 202 431 Depreciation and amortization 13,969 7,421 4,349 11,770 Share-based compensation expense 3,167 4,923 3,412 8,335 Foreign exchange impact (2,638 ) (4,195 ) (147 ) (4,342 ) SeaSpine merger-related costs 2,261 9,073 2,616 11,689 Strategic investments 389 771 (16 ) 755 Acquisition-related fair value adjustments 6,486 200 — 200 (Gain) loss on investments 1,781 — — — Litigation and investigation costs 8,842 337 1,066 1,403 Medical device regulation 1,927 3,481 — 3,481 Business interruption - COVID-19 — 513 — 513 Succession charges 1,006 — — — Spinal set instrument replacement expense — — 2,630 2,630 European sales and marketing organization restructuring — — 426 426 Adjusted EBITDA $ 19,641 $ 15,766 $ (5,749 ) $ 10,017 Year Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Loss before income taxes $ (148,679 ) $ (17,706 ) $ (67,324 ) $ (85,030 ) Interest expense, net 8,631 1,288 644 1,932 Depreciation and amortization 53,063 29,019 17,187 46,206 Share-based compensation expense 35,707 18,443 13,584 32,027 Foreign exchange impact (1,581 ) 3,291 387 3,678 SeaSpine merger-related costs 36,623 12,010 4,028 16,038 Strategic investments 2,272 4,018 362 4,380 Acquisition-related fair value adjustments 33,393 (15,595 ) 208 (15,387 ) (Gain) loss on investments 1,781 188 — 188 Litigation and investigation costs 14,453 803 1,610 2,413 Medical device regulation 9,446 10,261 — 10,261 Business interruption - COVID-19 — 2,387 — 2,387 Succession charges 1,176 146 — 146 Spinal set instrument replacement expense — — 7,179 7,179 European sales and marketing organization restructuring — — 984 984 Adjusted EBITDA $ 46,285 $ 48,553 $ (21,151 ) $ 27,402 Cash Flow and Free Cash Flow Year Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Net cash from operating activities $ (45,753 ) $ (11,538 ) $ (38,157 ) $ (49,695 ) Net cash from investing activities (33,131 ) (24,534 ) (40,325 ) (64,859 ) Net cash from financing activities 65,322 (78 ) 24,654 24,576 Effect of exchange rate changes on cash 619 (997 ) 140 (857 ) Net change in cash, cash equivalents, and restricted cash $ (12,943 ) $ (37,147 ) $ (53,688 ) $ (90,835 ) Year Ended December 31 , (Unaudited, U.S. Dollars, in thousands) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Net cash from operating activities $ (45,753 ) $ (11,538 ) $ (38,157 ) $ (49,695 ) Capital expenditures (62,050 ) (23,160 ) (37,752 ) (60,912 ) Free cash flow $ (107,803 ) $ (34,698 ) $ (75,909 ) $ (110,607 ) Net Income and EPS Three Months Ended December 31 , (Unaudited, U.S. Dollars, in thousands, except share and per share data) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Net loss $ (22,174 ) $ (7,062 ) $ (18,958 ) $ (26,020 ) Weighted average shares outstanding (in millions) 37.3 20.2 15.4 35.6 EPS $ (0.59 ) $ (0.35 ) $ (1.23 ) $ (0.73 ) Year Ended December 31 , (Unaudited, U.S. Dollars, in thousands, except share and per share data) 2023 Orthofix 2022 SeaSpine 2022 Pro Forma 2022 Net loss $ (151,395 ) $ (19,749 ) $ (65,009 ) $ (84,758 ) Weighted average shares outstanding 36.7 20.1 15.4 35.5 EPS $ (4.12 ) $ (0.98 ) $ (4.22 ) $ (2.39 ) View source version on businesswire.com : https://www.businesswire.com/news/home/20240305883308/en/ Company Contact Louisa Smith , Gilmartin Group [email protected] Source: Orthofix Medical Inc.

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