Orthofix Reports Third Quarter 2024 Results, Reiterates Full-Year 2024 Financial Guidance, and Introduces New Three-Year Financial Targets

About this update from Orthofix Medical Inc.

Building on Positive Momentum from Compelling Combination of Profitable, Above-Market Growth with a Stronger Financial Profile LEWISVILLE, Texas --(BUSINESS WIRE)-- Orthofix Medical Inc. (NASDAQ:OFIX), a leading global medical technology company, today reported its financial results for the third quarter ended September 30, 2024 , reiterated its full-year 2024 financial guidance, and introduced new three-year financial targets. Recent Highlights Third quarter 2024 net sales of $196.6 million , an increase of 7% on a reported and constant currency basis compared to third quarter 2023 U.S. Spine Fixation1 net sales growth of 18% compared to third quarter 2023, driven by distribution expansion and further penetration in existing accounts Bone Growth Therapies (BGT) net sales growth of 9% and BGT Fracture net sales growth of 13% compared to third quarter 2023 U.S. Orthopedics delivered a record net sales quarter with net sales growth of 15% compared to third quarter of 2023 Company entered into record number of 7D FLASH™ Navigation System earnout agreements and matched record for highest number of 7D placements in any quarter to date Third quarter 2024 net loss of $(27.4) million ; Non-GAAP adjusted EBITDA of $19.2 million , an increase of $5.7 million , with adjusted EBITDA margin expanding approximately 250 basis points compared to third quarter 2023 Achieves free cash flow of $5.9 million in third quarter 2024, a significant improvement in cash usage compared to previous quarters Announces new $275 million credit facility that replaces existing financing and further optimizes the Company's capital structure to support long-term profitable growth Maintains full-year 2024 net sales guidance of $795 million to $800 million and full-year 2024 non-GAAP adjusted EBITDA guidance of $64 million to $69 million ; continue to expect positive free cash flow for the second half of 2024 Introduces new 2027 financial targets to increase transparency and maximize value creation Third quarter net sales were $196.6 million , an increase of 7% on a reported and constant currency basis. Net loss was $(27.4) million and earnings per share ("EPS") was $(0.71) on a reported basis, representing an improvement of 8% when compared to the prior year period. Non-GAAP adjusted EBITDA was $19.2 million for the third quarter, an increase of $5.7 million , representing adjusted EBITDA margin expansion of approximately 250 basis points over the prior year period. “Our third quarter net sales results were driven by focused execution of our key growth priorities, and we also delivered strong adjusted EBITDA margin expansion and positive free cash flow, all of which we believe keeps us on a clear course to achieve our 2024 and long-term financial targets,” said Massimo Calafiore , President and Chief Executive Officer. “Highlights in the quarter included year-over-year revenue growth across each of our business segments where our performance once again was led by strength in our U.S. markets, including U.S. Spine Fixation, which grew 18%, and Bone Growth Therapies, which grew 9% overall and 13% in Fracture, further highlighting the benefit of cross-selling in our integrated spine channel. Notably, our U.S. Orthopedics business delivered a record net sales quarter and grew 15% year-over-year, benefiting from strong commercial execution. In addition to reiterating our full-year 2024 financial guidance, we are also introducing our new 2027 financial targets, which reflect our confidence in sustainable growth trends, the strength of our differentiated and expanding product portfolio, which continues to win share, and our commercial strategy and execution. We are well-positioned to accelerate our positive momentum and deliver on our commitment to drive disciplined, profitable growth and innovation while increasing long-term shareholder value.” Financial Results Overview Third Quarter 2024 Net Sales and Financial Results The following table provides net sales by major product category by reporting segment: Three Months Ended September 30 , (Unaudited, U.S. Dollars, in millions) 2024 2023 Change Constant Currency Change Bone Growth Therapies $ 57.9 $ 53.4 8.6 % 8.6 % Spinal Implants, Biologics and Enabling Technologies 108.2 101.0 7.1 % 7.1 % Global Spine 166.1 154.4 7.6 % 7.6 % Global Orthopedics 30.5 29.7 2.9 % 2.5 % Net sales $ 196.6 $ 184.0 6.8 % 6.8 % Gross margins were 68.7% for the quarter and were 71.3% on a non-GAAP adjusted basis. Net loss was $(27.4) million , or $(0.71) per share, compared to net loss of $(28.9) million , or $(0.77) per share in the prior year period. Non-GAAP adjusted EBITDA was $19.2 million , or 9.8% of net sales, compared to non-GAAP adjusted EBITDA of $13.5 million , or 7.3% of net sales, in the prior year period. Liquidity Cash, cash equivalents, and restricted cash on September 30, 2024 , totaled $32.6 million compared to $28.9 million on June 30, 2024 . Orthofix Announces New Three-Year Financial Targets The Company is providing new three-year financial targets for 2025 through 2027: 6% to 7% net sales CAGR from 2025 through 2027 Mid-teens non-GAAP adjusted EBITDA as a percent of net sales for the full-year 2027 Positive free cash flow generation from 2025 through 2027 Calafiore concluded, “With a compelling combination of profitable, above-market growth and a stronger financial profile, I believe our focused commercial strategy and broad, differentiated technologies, combined with a robust innovation pipeline and our pace-setting, enabling technologies position us well to achieve these targets and deliver increased value to our shareholders.” Business Outlook The Company is reiterating its 2024 full-year guidance as follows: Net sales are expected to range between $795 million to $800 million , representing implied growth of 6.6% to 7.2% 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 is expected to range from $64 million to $69 million . The Company expects to continue to be free cash flow positive for the remainder of 2024. These guidance ranges do not contemplate any potential impact to elective procedures as a result of IV fluid shortages or other hurricane-related effects. An investor presentation for the Company's third quarter 2024 financial results, corporate strategy and new three-year financial targets is available in the "Investors" section of Orthofix's website at https://ir.orthofix.com/events-and-presentations . 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 September 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 global medical technology company headquartered in Lewisville, Texas . By providing medical technologies that heal musculoskeletal pathologies, we deliver exceptional experiences and life-changing solutions to patients around the world. Orthofix offers a comprehensive portfolio of spinal hardware, bone growth therapies, specialized orthopedic solutions, biologics and enabling technologies, including the 7D FLASH™ navigation system. To learn more, visit Orthofix.com and follow on LinkedIn . 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, intentions, plans, 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 , and its three-year financial targets for 2025 through 2027. 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 September 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, (vii) our success in defending legal proceedings brought against us, 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. 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 Nine Months Ended September 30 , September 30 , (Unaudited, U.S. Dollars, in thousands, except share and per share data) 2024 2023 2024 2023 Net sales $ 196,606 $ 184,006 $ 583,834 $ 546,226 Cost of sales 61,553 64,243 186,790 196,583 Gross profit 135,053 119,763 397,044 349,643 Sales and marketing 96,576 94,947 296,843 287,987 General and administrative 33,561 27,136 99,203 110,124 Research and development 17,294 18,559 54,835 61,290 Acquisition-related amortization and remeasurement 6,521 3,570 19,305 11,037 Operating loss (18,899 ) (24,449 ) (73,142 ) (120,795 ) Interest expense, net (5,210 ) (1,576 ) (14,711 ) (4,131 ) Other expense, net (2,528 ) (2,360 ) (6,312 ) (1,704 ) Loss before income taxes (26,637 ) (28,385 ) (94,165 ) (126,630 ) Income tax expense (751 ) (472 ) (2,686 ) (2,591 ) Net loss $ (27,388 ) $ (28,857 ) $ (96,851 ) $ (129,221 ) Net loss per common share: Basic $ (0.71 ) $ (0.77 ) $ (2.55 ) $ (3.53 ) Diluted (0.71 ) (0.77 ) (2.55 ) (3.53 ) Weighted average number of common shares (in millions): Basic 38.5 37.2 37.9 36.6 Diluted 38.5 37.2 37.9 36.6 ORTHOFIX MEDICAL INC. Condensed Consolidated Balance Sheets ( U.S. Dollars, in thousands, except par value data) September 30 , 2024 December 31 , 2023 (Unaudited) Assets Current assets Cash and cash equivalents $ 30,054 $ 33,107 Restricted Cash 2,500 4,650 Accounts receivable, net of allowances of $7,878 and $7,130 , respectively 124,845 128,098 Inventories 205,812 222,166 Prepaid expenses and other current assets 23,003 32,422 Total current assets 386,214 420,443 Property, plant, and equipment, net 146,685 159,060 Intangible assets, net 104,546 117,490 Goodwill 194,934 194,934 Other long-term assets 35,493 33,388 Total assets $ 867,872 $ 925,315 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 47,060 $ 58,357 Current portion of long-term debt 6,250 1,250 Current portion of finance lease liability 743 708 Other current liabilities 107,845 104,908 Total current liabilities 161,898 165,223 Long-term debt 112,215 93,107 Long-term portion of finance lease liability 18,027 18,532 Other long-term liabilities 49,808 49,723 Total liabilities 341,948 326,585 Contingencies Shareholders’ equity Common shares $0.10 par value; 100,000 shares authorized; 38,209 and 37,165 issued and outstanding as of September 30 , 2024, and December 31, 2023 , respectively 3,821 3,717 Additional paid-in capital 770,000 746,450 Accumulated deficit (246,995 ) (150,144 ) Accumulated other comprehensive loss (902 ) (1,293 ) Total shareholders’ equity 525,924 598,730 Total liabilities and shareholders’ equity $ 867,872 $ 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 September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Gross profit $ 135,053 $ 119,763 $ 397,044 $ 349,643 Share-based compensation expense 557 463 1,591 1,416 SeaSpine merger-related costs 1,161 2,161 5,579 6,647 Strategic investments 32 55 160 264 Acquisition-related fair value adjustments 3,047 7,922 9,141 29,007 Amortization/depreciation of acquired long-lived assets 313 280 840 824 Medical device regulation — 6 — 676 Adjusted gross profit $ 140,163 $ 130,650 $ 414,355 $ 388,477 Adjusted gross margin 71.3 % 71.0 % 71.0 % 71.1 % Adjusted EBITDA Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Net loss $ (27,388 ) $ (28,857 ) $ (96,851 ) $ (129,221 ) Income tax expense (benefit) 751 472 2,686 2,591 Interest expense, net 5,210 1,576 14,711 4,131 Depreciation and amortization 15,173 13,097 44,067 39,094 Share-based compensation expense 6,531 6,274 25,290 32,540 Foreign exchange impact (1,176 ) 1,909 1,263 1,057 SeaSpine merger-related costs 2,616 5,416 12,992 34,362 Strategic investments 39 484 470 1,454 Acquisition-related fair value adjustments 5,017 7,122 15,351 26,907 Interest and loss on investments 3,567 429 5,120 429 Litigation and investigation costs 8,335 3,851 10,318 5,611 Succession charges 505 (92 ) 8,061 170 Medical device regulation — 1,840 — 7,519 Adjusted EBITDA $ 19,180 $ 13,521 $ 43,478 $ 26,644 Adjusted EBITDA as a percentage of net sales 9.8 % 7.3 % 7.4 % 4.9 % Adjusted Net Income Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Net loss $ (27,388 ) $ (28,857 ) $ (96,851 ) $ (129,221 ) Share-based compensation expense 6,531 6,274 25,290 32,540 Foreign exchange impact (1,176 ) 1,909 1,263 1,057 SeaSpine merger-related costs 2,619 5,247 13,434 35,600 Strategic investments 69 525 566 1,631 Acquisition-related fair value adjustments 5,017 7,122 15,351 26,907 Amortization/depreciation of acquired long-lived assets 5,046 5,026 14,486 14,970 Litigation and investigation costs 8,335 3,851 10,318 5,611 Succession charges 505 (94 ) 8,061 168 Medical device regulation — 1,842 — 7,531 Interest and loss on investments 3,567 399 5,071 339 Long-term income tax rate adjustment (335 ) (569 ) 2,777 2,669 Adjusted net income (loss) $ 2,790 $ 2,675 $ (234 ) $ (198 ) Cash Flow and Free Cash Flow Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 Net cash from operating activities $ 2,060 $ (39,059 ) Net cash from investing activities (26,445 ) (18,078 ) Net cash from financing activities 19,222 40,042 Effect of exchange rate changes on cash (40 ) 58 Net change in cash and cash equivalents $ (5,203 ) $ (17,037 ) Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 Net cash from operating activities $ 2,060 $ (39,059 ) Capital expenditures (26,345 ) (46,997 ) Free cash flow $ (24,285 ) $ (86,056 ) Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Sales and marketing expense, as reported $ 96,576 $ 94,947 $ 296,843 $ 287,987 Reconciling items impacting sales and marketing: Strategic investments 65 (1,680 ) (3,347 ) (5,201 ) Litigation and investigation costs 377 — 377 (857 ) Medical device regulation — (6 ) — (11 ) Amortization/depreciation of acquired long-lived assets (178 ) (178 ) (475 ) (475 ) Sales and marketing expense, as adjusted $ 96,840 $ 93,083 $ 293,398 $ 281,443 Sales and marketing expense as a percentage of net sales, as adjusted 49.3 % 50.6 % 50.3 % 51.5 % Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 General and administrative expense, as reported $ 33,561 $ 27,136 $ 99,203 $ 110,124 Reconciling items impacting general and administrative: Strategic investments (1,420 ) (1,522 ) (4,254 ) (21,514 ) Amortization/depreciation of acquired long-lived assets (4 ) (201 ) (76 ) (537 ) Litigation and investigation costs (8,712 ) (3,852 ) (10,695 ) (4,754 ) Succession charges (505 ) 93 (8,061 ) (169 ) General and administrative expense, as adjusted $ 22,920 $ 21,654 $ 76,117 $ 83,150 General and administrative expense as a percentage of net sales, as adjusted 11.7 % 11.8 % 13.0 % 15.2 % Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Research and development expense, as reported $ 17,294 $ 18,559 $ 54,835 $ 61,290 Reconciling items impacting research and development: Strategic investments (69 ) (356 ) (645 ) (2,730 ) Medical device regulation — (1,837 ) — (6,854 ) Research and development expense, as adjusted $ 17,225 $ 16,366 $ 54,190 $ 51,706 Research and development expense as a percentage of net sales, as adjusted 8.8 % 8.9 % 9.3 % 9.5 % Reconciliation of Non-GAAP Financial Measures to Reported Non-Operating (Income) Expense Three Months Ended September 30 , Nine Months Ended September 30 , (Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023 Non-operating expense $ 7,738 $ 3,936 $ 21,023 $ 5,835 Reconciling items impacting non-operating expense: Foreign exchange impact 1,176 (1,909 ) (1,263 ) (1,057 ) Strategic investments — — — (895 ) Interest and loss on investments (3,566 ) (399 ) (5,070 ) (339 ) Non-operating expense, as adjusted $ 5,348 $ 1,628 $ 14,690 $ 3,544 Non-operating expense as a percentage of net sales, as adjusted 2.7 % 0.9 % 2.5 % 0.6 % View source version on businesswire.com : https://www.businesswire.com/news/home/20241107805269/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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