Orthofix Reports Second Quarter 2024 Results and Raises Full-Year 2024 Financial Guidance

About this update from Orthofix Medical Inc.

LEWISVILLE, Texas --(BUSINESS WIRE)-- Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the second quarter ended June 30, 2024 and increased its full-year 2024 financial guidance. Recent Highlights Second quarter 2024 net sales of $198.6 million , an increase of 6% on a reported and constant currency basis compared to second quarter 2023 Bone Growth Therapies (BGT) net sales growth of 12% compared to second quarter 2023, marking six consecutive quarters with double-digit net sales increases U.S. Spine Fixation1 net sales growth of 12% compared to second quarter 2023, driven by distribution expansion and further penetration in existing accounts Global Orthopedics net sales growth of 5% on a reported basis and 6% on a constant currency basis compared to second quarter 2023 Second quarter 2024 net loss of $(33.4) million ; Non-GAAP adjusted EBITDA of $16.6 million , an increase of $6.7 million , with adjusted EBITDA margin expanding 310 basis points compared to second quarter 2023 Significant improvement in cash usage, paving the way for earlier than expected positive free cash flow for the second half of 2024 Announced appointments of four new executive team members, further strengthening the breadth and depth of the Company's leadership team Increases full-year 2024 net sales guidance to $795 million to $800 million from $790 million to $795 million ; Raises full-year 2024 non-GAAP adjusted EBITDA guidance to $64 million to $69 million from $62 million to $67 million Second quarter net sales were $198.6 million , an increase of 6% on a reported and constant currency basis. Net loss was $(33.4) million and earnings per share ("EPS") was $(0.88) on a reported basis, representing an improvement of 18% when compared to the prior year period. Non-GAAP adjusted EBITDA was $16.6 million for the second quarter, representing adjusted EBITDA margin expansion of 310 basis points over the prior year period. “We delivered another strong quarter driven by successful execution of our key growth priorities,” said Massimo Calafiore , President and Chief Executive Officer. “Highlights in the quarter included notable revenue growth across each of our business segments where our performance was led primarily by strength in our U.S. markets, including Bone Growth Therapies, which grew 12%, and further highlights the benefit of cross-selling in our integrated spine channel. In addition, we delivered growth of 12% in U.S. Spine fixation, more than twice the market rate. Based on continued positive momentum, the strength of our differentiated and expanding product portfolio, which continues to win share, and our confidence in sustainable growth trends, we are raising our full-year net sales and adjusted EBITDA guidance. We also are on track to achieve positive free cash flow for the second half of this year, much earlier than we originally anticipated.” 1 Spine fixation is comprised of the Company's Spinal Implants product category, excluding motion preservation product offerings Financial Results Overview Second Quarter 2024 Net Sales and Financial Results The following table provides net sales by major product category by reporting segment: Three Months Ended June 30 , (Unaudited, U.S. Dollars, in millions) 2024 2023 Change Constant Currency Change Bone Growth Therapies $ 59.1 $ 52.7 12.3 % 12.3 % Spinal Implants, Biologics and Enabling Technologies 108.9 105.3 3.4 % 3.4 % Global Spine 168.0 158.0 6.4 % 6.4 % Global Orthopedics 30.6 29.0 5.3 % 6.3 % Net sales $ 198.6 $ 187.0 6.2 % 6.4 % Gross margins were 67.8% for the quarter and were 71.3% on a non-GAAP adjusted basis. Net loss was $(33.4) million , or $(0.88) per share, compared to net loss of $(39.4) million , or $(1.07) per share in the prior year period. Non-GAAP adjusted EBITDA was $16.6 million , or 8.4% of net sales, compared to non-GAAP adjusted EBITDA of $9.9 million , or 5.3% of net sales, in the prior year period. Liquidity Cash, cash equivalents, and restricted cash on June 30, 2024 , totaled $28.9 million compared to $29.5 million on March 31, 2024 . Business Outlook The Company is increasing its 2024 full-year guidance as follows: Net sales are expected to range between $795 million to $800 million , representing implied growth of 6.7% to 7.4% year-over-year on a constant currency basis, an increase from the previous guidance range of $790 million to $795 million . 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 is expected to range from $64 million to $69 million , an increase from the previous guidance range of $62 million to $67 million . Company now expects to be free cash flow positive for the second half of 2024. Conference Call Orthofix will host a conference call today at 8:30 AM Eastern time to discuss the Company's financial results for the quarter ended June 30, 2024 . Interested parties may access the conference call by dialing (888) 330-2508 in the U.S. , 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 (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 , 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, adjusted EBITDA, and free cash flow 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”), and in Part II, Item 1A under the heading Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 . 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, and (vii) 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 Six Months Ended June 30 , June 30 , (Unaudited, U.S. Dollars, in thousands, except share and per share data) 2024 2023 2024 2023 Net sales $ 198,620 $ 187,016 $ 387,228 $ 362,220 Cost of sales 63,871 67,465 125,237 132,340 Gross profit 134,749 119,551 261,991 229,880 Sales and marketing 100,224 99,249 200,267 193,040 General and administrative 33,994 34,177 65,642 82,988 Research and development 18,049 19,424 37,541 42,731 Acquisition-related amortization and remeasurement 7,388 3,333 12,784 7,467 Operating loss (24,906 ) (36,632 ) (54,243 ) (96,346 ) Interest expense, net (4,943 ) (1,266 ) (9,501 ) (2,555 ) Other income (expense), net (2,510 ) (20 ) (3,784 ) 656 Loss before income taxes (32,359 ) (37,918 ) (67,528 ) (98,245 ) Income tax expense (1,084 ) (1,508 ) (1,935 ) (2,119 ) Net loss $ (33,443 ) $ (39,426 ) $ (69,463 ) $ (100,364 ) Net loss per common share: Basic $ (0.88 ) $ (1.07 ) $ (1.84 ) $ (2.77 ) Diluted (0.88 ) (1.07 ) (1.84 ) (2.77 ) Weighted average number of common shares (in millions): Basic 38.0 36.8 37.8 36.3 Diluted 38.0 36.8 37.8 36.3 ORTHOFIX MEDICAL INC. Condensed Consolidated Balance Sheets ( U.S. Dollars, in thousands, except par value data) June 30 , 2024 December 31 , 2023 (Unaudited) Assets Current assets Cash and cash equivalents $ 26,366 $ 33,107 Restricted Cash 2,500 4,650 Accounts receivable, net of allowances of $8,368 and $7,130 , respectively 125,361 128,098 Inventories 210,040 222,166 Prepaid expenses and other current assets 21,798 32,422 Total current assets 386,065 420,443 Property, plant, and equipment, net 154,111 159,060 Intangible assets, net 108,310 117,490 Goodwill 194,934 194,934 Other long-term assets 38,578 33,388 Total assets $ 881,998 $ 925,315 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 50,362 $ 58,357 Current portion of long-term debt 4,688 1,250 Current portion of finance lease liability 734 708 Other current liabilities 100,183 104,908 Total current liabilities 155,967 165,223 Long-term debt 113,315 93,107 Long-term portion of finance lease liability 18,160 18,532 Other long-term liabilities 48,552 49,723 Total liabilities 335,994 326,585 Contingencies Shareholders’ equity Common shares $0.10 par value; 100,000 shares authorized; 38,039 and 37,165 issued and outstanding as of June 30 , 2024, and December 31, 2023 , respectively 3,804 3,717 Additional paid-in capital 764,538 746,450 Accumulated deficit (219,607 ) (150,144 ) Accumulated other comprehensive loss (2,731 ) (1,293 ) Total shareholders’ equity 546,004 598,730 Total liabilities and shareholders’ equity $ 881,998 $ 925,315 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 June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Gross profit $ 134,749 $ 119,551 $ 261,991 $ 229,880 Share-based compensation expense 497 482 1,034 953 SeaSpine merger-related costs 3,115 3,782 4,418 4,486 Strategic investments 63 29 128 210 Acquisition-related fair value adjustments 3,047 9,449 6,094 21,085 Amortization/depreciation of acquired long-lived assets 209 544 527 544 Medical device regulation — 41 — 669 Adjusted gross profit $ 141,680 $ 133,878 $ 274,192 $ 257,827 Adjusted gross margin 71.3 % 71.6 % 70.8 % 71.2 % Adjusted EBITDA Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Net loss $ (33,443 ) $ (39,426 ) $ (69,463 ) $ (100,364 ) Income tax expense (benefit) 1,084 1,508 1,935 2,119 Interest expense, net 4,943 1,266 9,501 2,555 Depreciation and amortization 14,032 13,327 28,894 25,997 Share-based compensation expense 9,959 13,246 18,759 26,266 Foreign exchange impact 851 (269 ) 2,439 (852 ) SeaSpine merger-related costs 5,897 8,206 10,376 28,946 Strategic investments 311 309 431 970 Acquisition-related fair value adjustments 6,117 8,149 10,334 19,785 Interest and loss on investments 1,813 — 1,553 — Litigation and investigation costs (277 ) 1,291 1,983 1,760 Succession charges 5,346 262 7,556 262 Medical device regulation — 2,050 — 5,679 Adjusted EBITDA $ 16,633 $ 9,919 $ 24,298 $ 13,123 Adjusted EBITDA as a percentage of net sales 8.4 % 5.3 % 6.3 % 3.6 % Adjusted Net Income Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Net loss $ (33,443 ) $ (39,426 ) $ (69,463 ) $ (100,364 ) Share-based compensation expense 9,959 13,246 18,759 26,266 Foreign exchange impact 851 (269 ) 2,439 (852 ) SeaSpine merger-related costs 5,967 8,049 10,815 30,353 Strategic investments 371 348 497 1,046 Acquisition-related fair value adjustments 6,117 8,149 10,334 19,785 Amortization/depreciation of acquired long-lived assets 4,648 5,810 9,440 9,944 Litigation and investigation costs (277 ) 1,291 1,983 1,760 Succession charges 5,346 262 7,556 262 Medical device regulation — 2,055 — 5,689 Interest and loss on investments 1,764 — 1,504 — Long-term income tax rate adjustment 416 1,224 3,112 3,238 Adjusted net income (loss) $ 1,719 $ 739 $ (3,024 ) $ (2,873 ) Cash Flow and Free Cash Flow Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 Net cash from operating activities $ (9,611 ) $ (39,536 ) Net cash from investing activities (20,583 ) 4,265 Net cash from financing activities 21,678 21,791 Effect of exchange rate changes on cash (375 ) 387 Net change in cash and cash equivalents $ (8,891 ) $ (13,093 ) Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 Net cash from operating activities $ (9,611 ) $ (39,536 ) Capital expenditures (20,533 ) (24,654 ) Free cash flow $ (30,144 ) $ (64,190 ) Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Sales and marketing expense, as reported $ 100,224 $ 99,249 $ 200,267 $ 193,040 Reconciling items impacting sales and marketing: Strategic investments (1,193 ) (1,422 ) (3,412 ) (3,521 ) Litigation and investigation costs — (752 ) — (857 ) Medical device regulation — — — (5 ) Amortization/depreciation of acquired long-lived assets (119 ) (297 ) (297 ) (297 ) Sales and marketing expense, as adjusted $ 98,912 $ 96,778 $ 196,558 $ 188,360 Sales and marketing expense as a percentage of net sales, as adjusted 49.8 % 51.7 % 50.8 % 52.0 % Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 General and administrative expense, as reported $ 33,994 $ 34,177 $ 65,642 $ 82,988 Reconciling items impacting general and administrative: Strategic investments (1,623 ) (2,694 ) (2,834 ) (19,992 ) Amortization/depreciation of acquired long-lived assets (2 ) (336 ) (72 ) (336 ) Litigation and investigation costs 277 (538 ) (1,983 ) (902 ) Succession charges (5,346 ) (262 ) (7,556 ) (262 ) General and administrative expense, as adjusted $ 27,300 $ 30,347 $ 53,197 $ 61,496 General and administrative expense as a percentage of net sales, as adjusted 13.7 % 16.2 % 13.7 % 17.0 % Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Research and development expense, as reported $ 18,049 $ 19,424 $ 37,541 $ 42,731 Reconciling items impacting research and development: Strategic investments (340 ) (490 ) (576 ) (2,374 ) Medical device regulation — (2,027 ) — (5,017 ) Research and development expense, as adjusted $ 17,709 $ 16,907 $ 36,965 $ 35,340 Research and development expense as a percentage of net sales, as adjusted 8.9 % 9.0 % 9.5 % 9.8 % Reconciliation of Non-GAAP Financial Measures to Reported Non-Operating (Income) Expense Three Months Ended June 30 , Six Months Ended June 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Non-operating expense $ 7,453 $ 1,286 $ 13,285 $ 1,899 Reconciling items impacting non-operating expense: Foreign exchange impact (851 ) 269 (2,439 ) 852 Strategic investments — (15 ) — (895 ) Interest and (gain) loss on investments (1,787 ) 30 (1,504 ) 60 Non-operating expense, as adjusted $ 4,815 $ 1,570 $ 9,342 $ 1,916 Non-operating expense as a percentage of net sales, as adjusted 2.4 % 0.8 % 2.4 % 0.5 % View source version on businesswire.com : https://www.businesswire.com/news/home/20240806732152/en/ Investor Relations Julie Dewey , Chief Investor Relations and Communications Officer [email protected] (209) 613-6945 Media Relations Denise Landry , Vice President, Global Corporate Communications [email protected] (214) 937-2529 Source: Orthofix Medical Inc.

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