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

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

%

Contacts

Investor Relations
Julie Dewey, Chief Investor Relations and Communications Officer
JulieDewey@Orthofix.com
(209) 613-6945

Media Relations
Denise Landry, Vice President, Global Corporate Communications
DeniseLandry@Orthofix.com
(214) 937-2529

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