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Orthofix Reports First Quarter 2022 Results

May 06, 2022
  • Net sales of $106.4 million, an increase of 1% on a reported basis and 2% on a constant currency basis over prior year
  • New product sales drive solid growth in Biologics, Spinal Implants, and Orthopedics
  • FDA grants PMA for AccelStim™ bone growth stimulator — LIPUS technology expands our indications into fresh fracture care
  • FDA clearance received for the TrueLok™ EVO Ring Fixation system, which enables clear radiographic visualization
  • Reaffirming 2022 guidance

LEWISVILLE, Texas--(BUSINESS WIRE)-- Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the quarter ended March 31, 2022. Net sales were $106.4 million, earnings per share (“EPS”) was $(0.22), and adjusted EPS was $(0.10).

“We're very pleased with our financial and operational performance in the first quarter given the COVID-19 and labor headwinds, ongoing global supply chain disruptions, and macro financial impacts stemming from political instability in Europe. The strategic investments we have made over the last two years, including a focus on new product innovation and the development of our global commercial organization, continue to pay dividends,” said Orthofix President and Chief Executive Officer Jon Serbousek. “Performance was again driven by growth in Biologics, Spinal Implants and Orthopedics with the continued adoption of innovative products such as the M6-C™ artificial cervical disc and our Fitbone™ intramedullary limb lengthening system.”

“We are extremely excited about the expansion of our bone growth stimulation portfolio with the AccelStim bone healing therapy device, which gives us access to a large new market for fresh fracture healing. Looking ahead, we expect to execute on our growth transformation and deliver mid-single digit constant currency top line growth for the full fiscal year 2022, and exit the year at high single digit growth,” continued Serbousek. “In addition to the AccelStim device, we expect that our growth will be fueled by continued disciplined investments made across the business using our strong balance sheet, particularly in areas where we have a competitive advantage, with an eye towards accelerating profitable topline growth in 2023 and beyond.”

Financial Results Overview

The following table provides net sales by major product category by reporting segment:

 

 

Three Months Ended March 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2022

 

 

2021

 

 

Change

 

 

Constant
Currency
Change

 

Bone Growth Therapies

 

$

41,948

 

 

$

42,947

 

 

 

(2.3

%)

 

 

(2.3

%)

Spinal Implants

 

 

26,615

 

 

 

25,701

 

 

 

3.6

%

 

 

4.2

%

Biologics

 

 

14,092

 

 

 

13,692

 

 

 

2.9

%

 

 

2.9

%

Global Spine

 

 

82,655

 

 

 

82,340

 

 

 

0.4

%

 

 

0.6

%

Global Orthopedics

 

 

23,763

 

 

 

23,253

 

 

 

2.2

%

 

 

7.2

%

Net sales

 

$

106,418

 

 

$

105,593

 

 

 

0.8

%

 

 

2.0

%

Gross profit decreased $1.6 million to $78.1 million. Gross margin decreased to 73.4% compared to 75.5% in the prior year period.

Net loss was $(4.5) million, or $(0.22) per share, compared to net loss of $(5.8) million, or $(0.30) per share in the prior year period. Adjusted net loss was $(2.0) million, or $(0.10) per share, compared to adjusted net income of $3.4 million, or $0.17 per share in the prior year period.

EBITDA was $3.5 million, compared to $1.8 million in the prior year period. Adjusted EBITDA was $7.1 million, or 6.7% of net sales, compared to $14.0 million, or 13.3% of net sales, in the prior year period.

Liquidity

As of March 31, 2022, cash and cash equivalents totaled $71.9 million compared to $87.8 million as of December 31, 2021. As of March 31, 2022, the Company had no borrowings under its five year $300 million secured revolving credit facility. Cash flow from operations decreased $10.2 million to $(7.7) million, while free cash flow decreased $11.0 million to $(13.4) million.

Business Outlook

The Company continues to monitor and evaluate the impact the global response to the COVID-19 pandemic has had, and will continue to have, on its operations and financial results. As of the date hereof, the Company expects the following net sales results for the year ended December 31, 2022. These expectations are based on the current foreign currency exchange rates and do not include any additional exchange rate changes that may occur this year.

 

 

Current 2022 Outlook

 

 

(Unaudited, U.S. Dollars, in millions, except per share data)

 

Low

 

 

 

High

 

 

Net sales

 

$

475.0

 

1

 

$

490.0

 

1

Adjusted EBITDA

 

$

56.0

 

2

 

$

61.0

 

2

Adjusted EPS

 

$

0.58

 

3

 

$

0.73

 

3

1 Represents a year-over-year increase of 2% to 5% on a reported basis and increase of 4% to 7% on a constant currency basis

2 Represents a year-over-year decrease of 9% to 0%

3 Represents a year-over-year decrease of 33% to 15%

The Company is not able to provide expectations of operating income, the closest comparable GAAP measure to Adjusted EBITDA and Adjusted EPS (each of which are non-GAAP measures), on a forward-looking basis because the Company is unable to predict without unreasonable efforts the ultimate outcome of matters (including legal proceedings, acquisition-related expenses, accounting fair value adjustments, and other such items) that will determine the quantitative amount of the items excluded from the applicable non-GAAP measure, 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 U.S. GAAP.

Conference Call

Orthofix will host a conference call today at 8:30 AM Eastern time to discuss the Company's financial results for the first quarter of 2022. Interested parties may access the conference call by dialing (844) 200-6205 in the U.S., (833) 950-0062 in Canada, and (929) 526-1599 all other locations, and referencing the access code 428610. A replay of the call will be available for three weeks by dialing (866) 813-9403 in the U.S., 0204 525 0658 in the U.K., (226) 828-7578 in Canada or +44 (204) 525-0658 all other locations, and entering the access code 122503. A webcast of the conference call may be accessed at ir.Orthofix.com.

About Orthofix

Orthofix Medical Inc. is a global medical device company with a spine and orthopedics focus. The Company’s mission is to deliver innovative, quality-driven solutions while partnering with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedics products are distributed in more than 60 countries via the Company's sales representatives and distributors. 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. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions 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, 2021 (the “2021 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 March 31, 2022. Factors that could cause or contribute to such differences may include, but are not limited to, (i) risks relating to the effects of the COVID-19 pandemic on our business, (ii) our ability to maintain operations to support our customers and patients in the near-term and to capitalize on future growth opportunities, (iii) risks associated with acceptance of surgical products and procedures by surgeons and hospitals, (iv) development and acceptance of new products or product enhancements, (v) clinical and statistical verification of the benefits achieved via the use of our products, (vi) our ability to adequately manage inventory, (vii) our ability to recruit and retain management and key personnel, (viii) global economic instability and potential supply chain disruption caused by Russia’s unlawful invasion of Ukraine and resulting sanctions, and (ix) the other risks and uncertainties more fully described in our periodic filings with the Securities and Exchange Commission (the “SEC”). To the extent that the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in Part I, Item 1A under the heading Risk Factors in our 2021 Form 10-K, such as our ability to generate sufficient cash flows to run our business and our ability to protect our information technology networks and infrastructure from unauthorized access, misuse, malware, phishing and other events that could have a security impact as a result of our remote working environment or otherwise. 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.

 

 

ORTHOFIX MEDICAL INC.
Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

 

March 31,

 

(U.S. Dollars, in thousands, except share and per share data)

 

2022

 

 

2021

 

 

 

(unaudited)

 

Net sales

 

$

106,418

 

 

$

105,593

 

Cost of sales

 

 

28,318

 

 

 

25,914

 

Gross profit

 

 

78,100

 

 

 

79,679

 

Sales and marketing

 

 

54,137

 

 

 

50,785

 

General and administrative

 

 

19,328

 

 

 

16,444

 

Research and development

 

 

11,212

 

 

 

10,897

 

Acquisition-related amortization and remeasurement

 

 

(3,499

)

 

 

4,469

 

Operating loss

 

 

(3,078

)

 

 

(2,916

)

Interest expense, net

 

 

(375

)

 

 

(417

)

Other expense, net

 

 

(936

)

 

 

(2,690

)

Loss before income taxes

 

 

(4,389

)

 

 

(6,023

)

Income tax benefit (expense)

 

 

(71

)

 

 

207

 

Net loss

 

$

(4,460

)

 

$

(5,816

)

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(0.22

)

 

$

(0.30

)

Diluted

 

 

(0.22

)

 

 

(0.30

)

Weighted average number of common shares:

 

 

 

 

 

 

Basic

 

 

19,897,695

 

 

 

19,526,872

 

Diluted

 

 

19,897,695

 

 

 

19,526,872

 

 

 

ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance Sheets

 

(U.S. Dollars, in thousands, except share data)

 

March 31,
2022

 

 

December 31,
2021

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

71,917

 

 

$

87,847

 

Accounts receivable, net of allowances of $5,389 and $4,944, respectively

 

 

72,466

 

 

 

78,560

 

Inventories

 

 

88,832

 

 

 

82,974

 

Prepaid expenses and other current assets

 

 

21,888

 

 

 

20,141

 

Total current assets

 

 

255,103

 

 

 

269,522

 

Property, plant and equipment, net

 

 

58,513

 

 

 

59,252

 

Intangible assets, net

 

 

50,171

 

 

 

52,666

 

Goodwill

 

 

71,317

 

 

 

71,317

 

Deferred income taxes

 

 

1,930

 

 

 

1,771

 

Other long-term assets

 

 

24,959

 

 

 

22,095

 

Total assets

 

$

461,993

 

 

$

476,623

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

27,448

 

 

$

26,459

 

Current portion of finance lease liability

 

 

610

 

 

 

2,590

 

Other current liabilities

 

 

60,152

 

 

 

76,781

 

Total current liabilities

 

 

88,210

 

 

 

105,830

 

Long-term portion of finance lease liability

 

 

19,730

 

 

 

19,890

 

Other long-term liabilities

 

 

18,478

 

 

 

13,969

 

Total liabilities

 

 

126,418

 

 

 

139,689

 

Contingencies

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common shares $0.10 par value; 50,000,000 shares authorized;
19,841,822 and 19,836,937 issued and outstanding as of March 31,
2022 and December 31, 2021, respectively

 

 

1,984

 

 

 

1,983

 

Additional paid-in capital

 

 

318,213

 

 

 

313,951

 

Retained earnings

 

 

16,540

 

 

 

21,000

 

Accumulated other comprehensive loss

 

 

(1,162

)

 

 

 

Total shareholders’ equity

 

 

335,575

 

 

 

336,934

 

Total liabilities and shareholders’ equity

 

$

461,993

 

 

$

476,623

 

ORTHOFIX MEDICAL INC.
Non-GAAP Financial Measures

The following tables present reconciliations of operating income (loss), net income (loss), EPS, and net cash from operating activities, in each case calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), to, as applicable, non-GAAP financial measures, referred to as "EBITDA," "Adjusted EBITDA," "Adjusted net income (loss)," "Adjusted EPS," and "Free cash flow" that exclude 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. A more detailed explanation of the items excluded from these non-GAAP financial measures, as well as why management believes the non-GAAP financial measures are useful to them, is included following the reconciliations. The non-GAAP adjusted results shown below and within this press release, which exclude the items specified in the reconciliation tables below, should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP results.

EBITDA and Adjusted EBITDA

 

 

Three Months Ended March 31, 2022

 

(Unaudited, U.S. Dollars, in thousands)

 

Total Orthofix

 

 

Global Spine

 

 

Global Orthopedics

 

 

Corporate

 

Operating income (loss)

 

$

(3,078

)

 

$

11,367

 

 

$

(4,272

)

 

$

(10,173

)

Other income (expense), net

 

 

(936

)

 

 

75

 

 

 

(741

)

 

 

(270

)

Depreciation and amortization

 

 

5,291

 

 

 

2,622

 

 

 

1,521

 

 

 

1,148

 

Amortization of acquired intangibles

 

 

2,225

 

 

 

1,829

 

 

 

396

 

 

 

 

EBITDA

 

$

3,502

 

 

$

15,893

 

 

$

(3,096

)

 

$

(9,295

)

Share-based compensation

 

 

4,248

 

 

 

1,454

 

 

 

601

 

 

 

2,193

 

Foreign exchange impact

 

 

1,242

 

 

 

373

 

 

 

711

 

 

 

158

 

Strategic investments

 

 

970

 

 

 

63

 

 

 

145

 

 

 

762

 

Acquisition-related fair value adjustments

 

 

(5,500

)

 

 

(5,500

)

 

 

 

 

 

 

Loss on investment securities

 

 

65

 

 

 

 

 

 

 

 

 

65

 

Legal judgments/settlements

 

 

193

 

 

 

6

 

 

 

184

 

 

 

3

 

Succession and transition charges

 

 

10

 

 

 

10

 

 

 

 

 

 

 

Medical device regulation

 

 

2,036

 

 

 

1,406

 

 

 

636

 

 

 

(6

)

Business interruption - COVID-19

 

 

343

 

 

 

328

 

 

 

15

 

 

 

 

Adjusted EBITDA

 

$

7,109

 

 

$

14,033

 

 

$

(804

)

 

$

(6,120

)

 

 

Three Months Ended March 31, 2021

 

(Unaudited, U.S. Dollars, in thousands)

 

Total Orthofix

 

 

Global Spine

 

 

Global Orthopedics

 

 

Corporate

 

Operating income (loss)

 

$

(2,916

)

 

$

8,112

 

 

$

(2,862

)

 

$

(8,166

)

Other income (expense), net

 

 

(2,690

)

 

 

(616

)

 

 

(1,438

)

 

 

(636

)

Depreciation and amortization

 

 

5,208

 

 

 

2,615

 

 

 

1,620

 

 

 

973

 

Amortization of acquired intangibles

 

 

2,235

 

 

 

1,784

 

 

 

451

 

 

 

 

EBITDA

 

$

1,837

 

 

$

11,895

 

 

$

(2,229

)

 

$

(7,829

)

Share-based compensation

 

 

3,721

 

 

 

1,508

 

 

 

526

 

 

 

1,687

 

Foreign exchange impact

 

 

2,662

 

 

 

624

 

 

 

1,401

 

 

 

637

 

Strategic investments

 

 

1,411

 

 

 

 

 

 

1,100

 

 

 

311

 

Acquisition-related fair value adjustments

 

 

2,564

 

 

 

2,564

 

 

 

 

 

 

 

Loss on investment securities

 

 

 

 

 

 

 

 

 

 

 

 

Legal judgments/settlements

 

 

(59

)

 

 

(51

)

 

 

46

 

 

 

(54

)

Succession and transition charges

 

 

30

 

 

 

30

 

 

 

 

 

 

 

Medical device regulation

 

 

1,824

 

 

 

503

 

 

 

507

 

 

 

814

 

Business interruption - COVID-19

 

 

21

 

 

 

2

 

 

 

6

 

 

 

13

 

Adjusted EBITDA

 

$

14,011

 

 

$

17,075

 

 

$

1,357

 

 

$

(4,421

)

Adjusted Net Income (Loss)

 

 

Three Months Ended
March 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2022

 

 

2021

 

Net loss

 

$

(4,460

)

 

$

(5,816

)

Foreign exchange impact

 

 

1,242

 

 

 

2,662

 

Strategic investments

 

 

965

 

 

 

1,452

 

Acquisition-related fair value adjustments

 

 

(5,500

)

 

 

2,564

 

Amortization of acquired intangibles

 

 

2,231

 

 

 

2,239

 

Loss on investment securities

 

 

65

 

 

 

 

Legal judgments/settlements

 

 

193

 

 

 

(59

)

Succession and transition charges

 

 

10

 

 

 

30

 

Medical device regulation

 

 

2,036

 

 

 

1,824

 

Business interruption - COVID-19

 

 

345

 

 

 

23

 

Long-term income tax rate adjustment

 

 

856

 

 

 

(1,479

)

Adjusted net income (loss)

 

$

(2,017

)

 

$

3,440

 

Adjusted EPS

 

 

Three Months Ended
March 31,

 

(Unaudited, per diluted share)

 

2022

 

 

2021

 

EPS

 

$

(0.22

)

 

$

(0.30

)

Foreign exchange impact

 

 

0.06

 

 

 

0.13

 

Strategic investments

 

 

0.05

 

 

 

0.07

 

Acquisition-related fair value adjustments

 

 

(0.28

)

 

 

0.13

 

Amortization of acquired intangibles

 

 

0.11

 

 

 

0.11

 

Loss on investment securities

 

 

 

 

 

 

Legal judgments/settlements

 

 

0.01

 

 

 

 

Succession and transition charges

 

 

 

 

 

 

Medical device regulation

 

 

0.10

 

 

 

0.09

 

Business interruption - COVID-19

 

 

0.02

 

 

 

 

Long-term income tax rate adjustment

 

 

0.05

 

 

 

(0.06

)

Adjusted EPS

 

$

(0.10

)

 

$

0.17

 

 

 

 

 

 

 

 

Weighted average number of diluted common shares (treasury stock method)

 

 

19,897,695

 

 

 

19,950,740

 

Free Cash Flow

 

 

Three Months Ended
March 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Net cash from operating activities

 

$

(7,709

)

 

$

2,441

 

Capital expenditures

 

 

(5,667

)

 

 

(4,781

)

Free cash flow

 

$

(13,376

)

 

$

(2,340

)

Constant Currency

Constant currency is a non-GAAP measure, which we calculate by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

EBITDA

EBITDA is a non-GAAP financial measure, which we calculate by adding interest income (expense), net; income tax expense (benefit); and depreciation and amortization to net income. EBITDA provides management with additional insight to its results of operations. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing our business.

Adjusted EBITDA, Adjusted Net Income and Adjusted EPS

These non-GAAP financial measures provide management with additional insight to its results of operations and reflect the exclusion of the following items:

  • Share-based compensation expense – costs related to our share-based compensation plans, which include stock options, restricted stock, performance-based or market-based restricted stock awards, and our stock purchase plan; see the share-based compensation footnote in our Form 10-Q for the quarter ended March 31, 2022 for an allocation of these costs by consolidated statement of income line item; note that certain share-based compensation costs are instead included within medical device regulation for 2021 and 2022
  • Foreign exchange impact – gains and losses related to foreign currency transactions, which are recorded as other income (expense), net
  • Strategic investments – costs related to our strategic investments, such as due diligence and integration costs, which are primarily recorded as general and administrative expenses
  • Acquisition-related fair value adjustments – comprised of (i) gains and losses related to remeasurement of contingent consideration to fair value, which are recorded as operating expenses and (ii) recognized costs related to acquired in-process research and development assets, which were expensed immediately.
  • Amortization of acquired intangibles – amortization of intangible assets acquired in business combinations or asset acquisitions, including items such as developed technologies, customer relationships, trade names, manufacturing agreements, and other intangible assets, which are recorded in cost of sales or operating expenses
  • Loss on investment securities – net gains or losses recognized (realized or unrealized) within other income (expense), net relating to certain of our investments
  • Legal judgments/settlements – adverse or favorable legal judgments or negotiated legal settlements, which are recorded as general and administrative expenses
  • Succession and transition charges – costs related to the transition of certain named executive officers and certain targeted restructuring costs, including any cessation and onboarding amounts, accelerated share-based compensation expense, consulting services, and other related expenses, which are primarily recorded as general and administrative expenses
  • Medical device regulation – incremental costs incurred (i) to establish initial compliance with the regulations set forth by the European Union Medical Device Regulation (“MDR”) and the U.S. Food and Drug Administration related to our currently-approved medical devices, which are recorded primarily as research and development expenses, and (ii) related to rationalization of certain product lines that we do not expect to continue to market subsequent to the effective date of these regulations, which are recorded primarily as costs of sales
  • Business interruption – COVID-19 – gains and losses related to the realized effects the COVID-19 pandemic has had on our business operations, which consist primarily of (i) certain legislative relief received as a result of the COVID-19 pandemic, (ii) costs associated with the redesign of certain products in response to supply chain disruption, and (iii) incremental costs incurred to enhance the safety and sanitation of our facilities
  • Long-term income tax rate adjustment – reflects management’s expectation of a long-term normalized effective tax rate of 27% for 2021 and 28% for the fiscal year 2022 results and outlook, which is based on current tax law and current expected adjusted income; actual reported tax expense will ultimately be based on GAAP earnings and may differ from the expected long-term normalized effective tax rate due to a variety of factors, including the resolutions of issues arising from tax audits with various tax authorities, the ability to realize deferred tax assets, and the tax impact of certain reconciling items that are excluded in determining Adjusted Net Income and Adjusted EPS

Free Cash Flow

Free cash flow is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operating activities. Free cash flow is an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Usefulness and Limitations of Non-GAAP Financial Measures

Management uses non-GAAP measures to evaluate performance period-over-period, to analyze the underlying trends in our business, to assess performance relative to competitors and to establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures as the basis for assessing the ability of the underlying operations to generate cash. In addition, management uses these non-GAAP measures to further its understanding of the performance of our business units.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost and can have a material effect on cash flows. Similarly, certain non-cash expenses, such as share-based compensation, do not directly impact cash flows, but are part of total compensation costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures

We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. The GAAP results provide management with the ability to further understand our performance based on a defined set of criteria. Management believes that the non-GAAP measures reflect the underlying operating results of our businesses and provide an important measure of our overall performance. We provide detailed reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures above and encourage investors to review these reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to our historical operating results and internally evaluate the effectiveness of our operating strategies. We believe that disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

Orthofix Medical Inc.
Alexa Huerta
P: 214-937-3190
E: alexahuerta@orthofix.com

Source: Orthofix Medical Inc.

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