Orthofix Reports First Quarter 2024 Results

May 7, 2024

Recent Highlights

  • Net sales of $188.6 million, an increase of 7.7% on a reported basis and 7.5% on a constant currency basis over prior year
  • Bone Growth Therapies net sales growth of 10%, marking five consecutive quarters with double-digit net sales increases
  • U.S. Spine Fixation1 net sales growth of 16%, driven by distribution expansion and further penetration in existing accounts
  • Global Orthopedics net sales growth of 5% on a reported basis, primarily driven by U.S. Orthopedic net sales growth of 23%
  • First quarter 2024 net loss of $36 million; Non-GAAP Adjusted EBITDA of $8 million, an increase of $4.5 million, a 220 basis point expansion over prior year
  • Midpoint of full year 2024 net sales guidance raised; range narrowed to $790.0-$795.0 million

Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the first quarter ended March 31, 2024.

First quarter net sales were $188.6 million, an increase of 7.7% on a reported basis and 7.5% on a constant currency basis. Net loss was $(36.0) million and earnings per share ("EPS") was $(0.95) on a reported basis, representing an improvement of 44% when compared to the prior year period. Non-GAAP adjusted EBITDA was $7.7 million for the first quarter, representing a 220 basis point expansion over the prior year period.

“Orthofix executed well on a number of key priorities in the first quarter of the year and delivered notable growth in all of its U.S. businesses. We saw strength in many areas of our broadening portfolio, including outsized performance in U.S. Spine Fixation, U.S. Orthopedics, and the Bone Growth Therapies fracture market, with growth of 16%, 23%, and 17%, respectively,” said Massimo Calafiore, President and Chief Executive Officer of Orthofix. “I remain confident in the fundamentals of the Company and believe we are poised to continue driving value through profitable growth, increased operating leverage, and portfolio synergies. I look forward to sustaining the first quarter’s momentum through the remainder of 2024 and taking further advantage of the many opportunities for market share gain that lie within all of our core segments.”

1

Spine fixation is comprised of the Company's Spinal Implants product category, excluding motion preservation product offerings

Financial Results Overview

First Quarter 2024 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 March 31,

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

2024

 

2023

 

Change

 

Constant

Currency

Change

Bone Growth Therapies

$

52.5

$

47.7

10.0

%

10.0

%

Spinal Implants, Biologics and Enabling Technologies

 

108.8

 

101.5

7.2

%

7.2

%

Global Spine

 

161.3

 

149.2

8.1

%

8.1

%

Global Orthopedics

 

27.3

 

26.0

5.1

%

3.8

%

Net sales

$

188.6

$

175.2

7.7

%

7.5

%

Gross margins were 67.5% for the quarter and were 70.3% on a non-GAAP adjusted basis.

Net loss was $(36.0) million, or $(0.95) per share, compared to net loss of $(60.9) million, or $(1.71) per share in the prior year period. Non-GAAP adjusted EBITDA was $7.7 million, or 4.1% of net sales, compared to non-GAAP adjusted EBITDA of $3.2 million, or 1.8% of net sales, in the prior year period.

Liquidity

Cash, cash equivalents, and restricted cash on March 31, 2024, totaled $29.5 million compared to $37.8 million on December 31, 2023. As of March 31, 2024 the Company had $125.0 million in borrowings outstanding under its four year $150.0 million Financing Agreement.

Business Outlook

The Company is providing updated 2024 full year guidance as follows:

  • Net sales to range between $790 million to $795 million, representing implied growth of 6% to 7% year-over-year on a constant currency basis; narrowed from previous guidance of $785 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.
  • Reiterating previous guidance for non-GAAP adjusted EBITDA ranging from $62 million to $67 million
  • Expect to be free cash flow positive for Q4 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 March 31, 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 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”), 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, 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

 

 

March 31,

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

2024

 

2023

 

(Unaudited)

Net sales

$

188,608

 

$

175,204

 

Cost of sales

 

61,366

 

 

64,875

 

Gross profit

 

127,242

 

 

110,329

 

Sales and marketing

 

100,043

 

 

93,791

 

General and administrative

 

31,648

 

 

48,811

 

Research and development

 

19,492

 

 

23,307

 

Acquisition-related amortization and remeasurement

 

5,396

 

 

4,134

 

Operating loss

 

(29,337

)

 

(59,714

)

Interest expense, net

 

(4,558

)

 

(1,289

)

Other income (expense), net

 

(1,274

)

 

676

 

Loss before income taxes

 

(35,169

)

 

(60,327

)

Income tax expense

 

(851

)

 

(611

)

Net loss

$

(36,020

)

$

(60,938

)

 

 

 

 

 

Net loss per common share:

 

 

 

 

Basic

$

(0.95

)

$

(1.71

)

Diluted

 

(0.95

)

 

(1.71

)

Weighted average number of common shares (in millions):

 

 

 

 

Basic

 

37.7

 

 

35.7

 

Diluted

 

37.7

 

 

35.7

 

 

ORTHOFIX MEDICAL INC.

Condensed Consolidated Balance Sheets

 

(U.S. Dollars, in thousands, except par value data)

March 31,

2024

December 31,

2023

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

$

26,964

 

$

33,107

 

Restricted Cash

 

2,500

 

 

4,650

 

Accounts receivable, net of allowances of $8,398 and $7,130, respectively

 

125,617

 

 

128,098

 

Inventories

 

219,076

 

 

222,166

 

Prepaid expenses and other current assets

 

24,821

 

 

32,422

 

Total current assets

 

398,978

 

 

420,443

 

Property, plant, and equipment, net

 

158,132

 

 

159,060

 

Intangible assets, net

 

112,761

 

 

117,490

 

Goodwill

 

194,934

 

 

194,934

 

Other long-term assets

 

41,245

 

 

33,388

 

Total assets

$

906,050

 

$

925,315

 

Liabilities and shareholders’ equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

$

57,147

 

$

58,357

 

Current portion of long-term debt

 

3,125

 

 

1,250

 

Current portion of finance lease liability

 

724

 

 

708

 

Other current liabilities

 

89,625

 

 

104,908

 

Total current liabilities

 

150,621

 

 

165,223

 

Long-term debt

 

115,071

 

 

93,107

 

Long-term portion of finance lease liability

 

18,345

 

 

18,532

 

Other long-term liabilities

 

51,698

 

 

49,723

 

Total liabilities

 

335,735

 

 

326,585

 

Contingencies

 

 

 

 

Shareholders’ equity

 

 

 

 

Common shares $0.10 par value; 100,000 shares authorized; 37,410 and 37,165 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

3,741

 

 

3,717

 

Additional paid-in capital

 

753,398

 

 

746,450

 

Accumulated deficit

 

(186,164

)

 

(150,144

)

Accumulated other comprehensive loss

 

(660

)

 

(1,293

)

Total shareholders’ equity

 

570,315

 

 

598,730

 

Total liabilities and shareholders’ equity

$

906,050

 

$

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 March 31,

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

2024

 

2023

Gross profit

$

127,242

 

$

110,329

 

Share-based compensation expense

 

537

 

 

471

 

SeaSpine merger-related costs

 

1,303

 

 

703

 

Strategic investments

 

65

 

 

180

 

Acquisition-related fair value adjustments

 

3,047

 

 

11,636

 

Amortization/depreciation of acquired long-lived assets

 

318

 

 

 

Medical device regulation

 

 

 

629

 

Adjusted gross profit

$

132,512

 

$

123,948

 

Adjusted gross margin

 

70.3

%

 

70.7

%

Adjusted EBITDA

 

 

Three Months Ended March 31,

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

2024

2023

Loss before income taxes

$

(35,169

)

$

(60,327

)

Interest expense, net

 

4,558

 

 

1,289

 

Depreciation and amortization

 

14,862

 

 

12,670

 

Share-based compensation expense

 

8,800

 

 

13,020

 

Foreign exchange impact

 

1,588

 

 

(583

)

SeaSpine merger-related costs

 

4,520

 

 

20,740

 

Strategic investments

 

120

 

 

661

 

Acquisition-related fair value adjustments

 

4,217

 

 

11,636

 

Litigation and investigation costs

 

2,260

 

 

469

 

Succession charges

 

2,210

 

 

 

Medical device regulation

 

 

 

3,629

 

All other

 

(301

)

 

 

Adjusted EBITDA

$

7,665

 

$

3,204

 

Adjusted EBITDA as a percentage of net sales

 

4.1

%

 

1.8

%

Cash Flow and Free Cash Flow

 

 

Three Months Ended March 31,

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

2024

 

2023

Net cash from operating activities

$

(18,595

)

$

(34,020

)

Net cash from investing activities

 

(10,867

)

 

17,084

 

Net cash from financing activities

 

21,453

 

 

15,983

 

Effect of exchange rate changes on cash

 

(284

)

 

221

 

Net change in cash and cash equivalents

$

(8,293

)

$

(732

)

 

Three Months Ended March 31,

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

2024

 

2023

Net cash from operating activities

$

(18,595

)

$

(34,020

)

Capital expenditures

 

(10,817

)

 

(11,835

)

Free cash flow

$

(29,412

)

$

(45,855

)

Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses

 

 

Three Months Ended March 31,

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

2024

 

2023

Net sales

$

188,608

 

$

175,204

 

Sales and marketing, as reported

 

100,043

 

 

93,791

 

Reconciling items impacting sales and marketing:

 

 

 

 

Strategic investments

 

(2,219

)

 

(2,099

)

Litigation and investigation costs

 

 

 

(105

)

Medical device regulation

 

 

 

(5

)

Amortization/depreciation of acquired long-lived assets

 

(178

)

 

 

Sales and marketing, as adjusted

$

97,646

 

$

91,582

 

Sales and marketing as a percentage of net sales, as adjusted

 

51.8

%

 

52.3

%

 

Three Months Ended March 31,

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

2024

 

2023

Net sales

$

188,608

 

$

175,204

 

General and administrative, as reported

 

31,648

 

 

48,811

 

Reconciling items impacting general and administrative:

 

 

 

 

Strategic investments

 

(1,211

)

 

(17,298

)

Amortization/depreciation of acquired long-lived assets

 

(70

)

 

 

Litigation and investigation costs

 

(2,260

)

 

(364

)

Succession charges

 

(2,210

)

 

 

General and administrative, as adjusted

$

25,897

 

$

31,149

 

General and administrative as a percentage of net sales, as adjusted

 

13.7

%

 

17.8

%

 

Three Months Ended March 31,

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

2024

 

2023

Net sales

$

188,608

 

$

175,204

 

Research and development, as reported

 

19,492

 

 

23,307

 

Reconciling items impacting research and development:

 

 

 

 

Strategic investments

 

(236

)

 

(1,884

)

Medical device regulations

 

 

 

(2,990

)

Research and development, as adjusted

$

19,256

 

$

18,433

 

Research and development as a percentage of net sales, as adjusted

 

10.2

%

 

10.5

%

 

Company Contact

Louisa Smith, Gilmartin Group

ir@orthofix.com

Source: Orthofix Medical Inc.