- Net sales of $175.2 million, an increase of 65% on a
reported basis and 12% on a pro forma constant currency basis over
prior year
- Bone Growth Therapies growth of 14%, with growth coming from
both spine and fracture commercial channels
- U.S. spinal implant sales up 18% over prior year on a pro
forma basis, driven by new distribution and product
innovation
- Continued double-digit growth in Global Orthopedics over
prior year on a constant currency basis
- Announced the full commercial launch of the Lattus™ Lateral
Access System and the Fathom™ Pedicle-Based Retractor System, which
addresses an estimated $1.8 billion market related to minimally
invasive spine procedures
Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial
results for the quarter ended March 31, 2023. Net sales were $175.2
million, earnings per share (“EPS”) was $(1.71), and adjusted EPS
was $(0.10).
“Orthofix delivered an exceptionally strong quarter with 12%
year-over-year growth on a proforma basis and by minimizing any
disruption associated with the business combination in January,”
said Keith Valentine, President and Chief Executive Officer of
Orthofix. “We are encouraged by the meaningful pro forma growth
we’ve seen across all channels in the combined company and remain
enthusiastic about the opportunities afforded by our complementary
portfolios. Our team was successful in leveraging cross-selling
strategies throughout the quarter and we believe these initiatives
will promote meaningful market share gains in the future.”
Financial Results Overview
The following table provides net sales by major product category
by reporting segment as reported:
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Change
Constant Currency
Change
Bone Growth Therapies
$
47.7
$
41.9
13.7
%
13.7
%
Spinal Implants and Enabling
Technologies
60.9
26.6
128.7
%
129.1
%
Biologics
40.6
14.1
188.3
%
188.3
%
Global Spine
149.2
82.7
80.5
%
80.6
%
Global Orthopedics
26.0
23.8
9.4
%
13.6
%
Net sales
$
175.2
$
106.4
64.6
%
65.7
%
Further, the following table provides net sales by major product
category by reporting segment on a pro forma basis:
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022 Pro Forma
Change
Constant Currency
Change
Bone Growth Therapies
$
47.7
$
41.9
13.7
%
13.7
%
Spinal Implants and Enabling
Technologies
60.9
54.0
12.6
%
12.8
%
Biologics
40.6
37.9
7.1
%
7.1
%
Global Spine
149.2
133.9
11.4
%
11.5
%
Global Orthopedics
26.0
23.8
9.4
%
13.6
%
Net sales
$
175.2
$
157.7
11.1
%
11.8
%
Gross profit increased $32.2 million to $110.3 million. Gross
margin decreased to 63.0% compared to 73.4% in the prior year
period. Adjusted gross profit increased $45.6 million to $123.9
million. Adjusted gross margin decreased to 70.7% compared to 73.6%
in the prior year period.
Net loss was $(60.9) million, or $(1.71) per share, compared to
net loss of $(4.5) million, or $(0.22) per share in the prior year
period. Adjusted net loss was $(3.6) million, or $(0.10) per share,
compared to adjusted net income of $1.0 million, or $0.05 per
share, in the prior year period.
Adjusted EBITDA was $3.2 million, or 1.8% of net sales, compared
to $7.1 million, or 6.7% of net sales, in the prior year
period.
Liquidity
As of March 31, 2023, cash totaled $50.0 million, compared to
$50.7 million as of December 31, 2022. As of March 31, 2023, the
Company had $45.0 million in borrowings outstanding under its five
year $300 million secured revolving credit facility. For the first
three months of 2023, cash flow from operations decreased $26.3
million to $(34.0) million, while free cash flow decreased $32.5
million to $(45.9) million.
Business Outlook
As of the date hereof, the Company expects the following net
sales results for the year ended December 31, 2023. 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 2023 Outlook
Previous 2023 Outlook
(Unaudited, U.S. Dollars, in millions,
except per share data)
Low
High
Low
High
Full year net sales
$
750
1
$
756
1
$
743
$
753
Full year adjusted EBITDA
$
40
$
45
N/A
N/A
1
Represents a year-over-year increase of
62.8% to 64.1% on a reported basis and an increase of 7.0% to 7.9%
on a pro forma basis
The Company is unable to provide expectations of GAAP operating
income (loss), 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.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern
time to discuss the Company's financial results for the first
quarter of 2023. Interested parties may access the conference call
by dialing (888) 330-2508 in the U.S. and Canada, 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 Canada, 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
The newly merged Orthofix-SeaSpine organization 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 approximately 68 countries
worldwide. The Company intends to announce a new name for the
Orthofix-SeaSpine organization in the future, but in the interim
will continue to operate under the Orthofix name.
The Company is headquartered in Lewisville, Texas, and has
primary offices in Carlsbad, CA, with a focus on spinal product
innovation and surgeon education, and Verona, Italy, with an
emphasis on product innovation, production, and medical education
for Orthopedics. The Orthofix-SeaSpine organization’s global
R&D, commercial and manufacturing footprint also includes
facilities and offices in Irvine, CA, Toronto, Canada, Sunnyvale,
CA, Wayne, PA, Olive Branch, MS, Maidenhead, UK, Munich, Germany,
Paris, France, and Sao Paolo, 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 belief
regarding future market share gains and the Company's expectations
regarding net sales and adjusted EBITDA for the year ended December
31, 2023. 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, 2022
(the “2022 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, 2023. Factors that could cause future results to
differ from those expressed by forward-looking statements 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 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 the 2022 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)
2023
2022
(Unaudited)
Net sales
$
175,204
$
106,418
Cost of sales
64,875
28,318
Gross profit
110,329
78,100
Sales and marketing
93,791
54,137
General and administrative
48,811
19,328
Research and development
23,307
11,212
Acquisition-related amortization and
remeasurement
4,134
(3,499
)
Operating loss
(59,714
)
(3,078
)
Interest expense, net
(1,289
)
(375
)
Other income (expense), net
676
(936
)
Loss before income taxes
(60,327
)
(4,389
)
Income tax expense
(611
)
(71
)
Net loss
$
(60,938
)
$
(4,460
)
Net loss per common share:
Basic
$
(1.71
)
$
(0.22
)
Diluted
(1.71
)
(0.22
)
Weighted average number of common shares
(in millions):
Basic
35.7
19.9
Diluted
35.7
19.9
ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance
Sheets
(U.S. Dollars, in thousands, except par
value data)
March 31, 2023
December 31, 2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
49,968
$
50,700
Accounts receivable, net of allowances of
$6,691 and $6,419, respectively
113,313
82,857
Inventories
221,933
100,150
Prepaid expenses and other current
assets
24,827
22,283
Total current assets
410,041
255,990
Property, plant, and equipment, net
136,818
58,229
Intangible assets, net
122,129
47,388
Goodwill
202,711
71,317
Other long-term assets
45,437
25,705
Total assets
$
917,136
$
458,629
Liabilities and shareholders’
equity
Current liabilities
Accounts payable
$
45,875
$
27,598
Current portion of finance lease
liability
664
652
Other current liabilities
91,029
55,374
Total current liabilities
137,568
83,624
Long-term borrowings under credit
facility
45,000
-
Long-term portion of finance lease
liability
19,068
19,239
Other long-term liabilities
51,341
18,906
Total liabilities
252,977
121,769
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 50,000
shares authorized; 36,463 and 20,162 issued and outstanding as of
March 31, 2023 and December 31, 2022, respectively
3,647
2,016
Additional paid-in capital
721,145
334,969
Retained earnings (accumulated
deficit)
(59,687
)
1,251
Accumulated other comprehensive loss
(946
)
(1,376
)
Total shareholders’ equity
664,159
336,860
Total liabilities and shareholders’
equity
$
917,136
$
458,629
ORTHOFIX MEDICAL INC. Non-GAAP
Financial Measures
The following tables present reconciliations of gross profit,
loss before income taxes, net 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 "Adjusted
gross profit," "Adjusted gross margin," "Adjusted EBITDA,"
"Adjusted net income (loss)," "Adjusted EPS," and "Free cash flow"
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)
2023
2022
Gross profit
$
110,329
$
78,100
Share-based compensation expense
471
211
SeaSpine merger-related costs
703
—
Strategic investments
181
25
Acquisition-related fair value
adjustments
11,636
—
Medical device regulation
629
6
Adjusted gross profit
$
123,949
$
78,342
Adjusted gross margin
70.7
%
73.6
%
Adjusted EBITDA
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Loss before income taxes
$
(60,327
)
$
(4,389
)
Interest expense, net
1,289
375
Depreciation and amortization
12,670
7,516
Share-based compensation expense
13,020
4,332
Foreign exchange impact
(583
)
1,242
SeaSpine merger-related costs
20,740
—
Strategic investments
661
970
Acquisition-related fair value
adjustments
11,636
(5,500
)
Legal judgments/settlements
469
193
Medical device regulation
3,629
1,952
Business interruption - COVID-19
—
343
All other
—
75
Adjusted EBITDA
$
3,204
$
7,109
Adjusted Net Income (Loss)
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net loss
$
(60,938
)
$
(4,460
)
Share-based compensation expense
13,020
4,333
Foreign exchange impact
(583
)
1,242
SeaSpine merger-related costs
22,304
—
Strategic investments
698
965
Acquisition-related fair value
adjustments
11,636
(5,500
)
Amortization of acquired intangibles
4,134
2,231
Legal judgments/settlements
469
193
Medical device regulation
3,634
1,951
Business interruption - COVID-19
—
345
All other
—
75
Long-term income tax rate adjustment
2,014
(333
)
Adjusted net income (loss)
$
(3,612
)
$
1,042
Adjusted EPS
Three Months Ended March
31,
(Unaudited, per diluted share)
2023
2022
EPS
$
(1.71
)
$
(0.22
)
Share-based compensation expense
0.36
0.22
Foreign exchange impact
(0.02
)
0.06
SeaSpine merger-related costs
0.62
—
Strategic investments
0.02
0.05
Acquisition-related fair value
adjustments
0.33
(0.28
)
Amortization of acquired intangibles
0.12
0.11
Legal judgments/settlements
0.01
0.01
Medical device regulation
0.10
0.10
Business interruption - COVID-19
—
0.02
All other
—
—
Long-term income tax rate adjustment
0.07
(0.02
)
Adjusted EPS
$
(0.10
)
$
0.05
Weighted average number of diluted common
shares (treasury stock method, in millions)
35.7
19.9
Cash Flow and Free Cash Flow
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(34,020
)
$
(7,709
)
Net cash from investing activities
17,084
(5,667
)
Net cash from financing activities
15,983
(2,233
)
Effect of exchange rate changes on
cash
221
(321
)
Net change in cash and cash
equivalents
$
(732
)
$
(15,930
)
Three Months Ended March
31,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(34,020
)
$
(7,709
)
Capital expenditures
(11,835
)
(5,667
)
Free cash flow
$
(45,855
)
$
(13,376
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509005900/en/
Orthofix Medical Inc. Alexa Huerta P: 214-937-3190 E:
alexahuerta@orthofix.com
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