- Net sales of $187.0 million, an increase of 58% on a
reported basis and 7% on a pro forma constant currency basis over
prior year
- Bone Growth Therapies growth of 10%, marking two consecutive
quarters with double-digit net sales increases, with growth coming
from both spine and fracture commercial channels
- U.S. spinal implants, biologics, and enabling technologies
sales up 7% over prior year on a pro forma basis, driven by new
distribution and product innovation
- Global Orthopedics net sales increase of 6% on a reported
basis and 5% on a constant currency basis over prior year
- Announced full commercial launch of the following
products:
- WaveForm® A interbody for Anterior Lumbar Interbody Fusion
("ALIF") procedures
- TrueLok™ Phantom and Tornado Hinges, the latest addition to
the Orthopedics TrueLok circular frame portfolio
Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial
results for the quarter ended June 30, 2023. Net sales were $187.0
million, earnings per share (“EPS”) was $(1.07), and adjusted EPS
was $0.02.
“I am very pleased with Orthofix’s performance this quarter,
delivering 7% year-over-year growth, on a proforma basis, and once
again achieving double-digit growth in the Bone Growth Therapies
franchise,” said Keith Valentine, President and Chief Executive
Officer of Orthofix. “We have been successful in managing revenue
dis-synergy risks and capitalizing on operating expense synergy
opportunities throughout the merger process and are encouraged to
see continued market share taking in the U.S. spinal implants,
biologics and enabling technologies franchises by leveraging our
complementary product portfolios. We look forward to a strong back
half of 2023 and remain focused on meeting the needs of our
patients and providing value for other stakeholders by continuing
to deliver quality driven solutions.”
Financial Results Overview
The following table provides net sales by major product category
by reporting segment as reported:
Three Months Ended June
30,
(Unaudited, U.S. Dollars, in
millions)
2023
2022
Change
Constant Currency
Change
Bone Growth Therapies
$
52.7
$
47.8
10.3%
10.3%
Spinal Implants, Biologics and Enabling
Technologies
105.3
43.0
144.8%
144.8%
Global Spine
158.0
90.8
74.0%
74.0%
Global Orthopedics
29.0
27.3
6.4%
5.0%
Net sales
$
187.0
$
118.1
58.4%
58.1%
Further, the following table provides net sales by major product
category by reporting segment on a pro forma basis:
Three Months Ended June
30,
(Unaudited, U.S. Dollars, in
millions)
2023
2022 Pro Forma
Change
Constant Currency
Change
Bone Growth Therapies
$
52.7
$
47.8
10.3%
10.3%
Spinal Implants, Biologics and Enabling
Technologies
105.3
100.0
5.4%
5.4%
Global Spine
158.0
147.7
6.9%
6.9%
Global Orthopedics
29.0
27.3
6.4%
5.0%
Net sales
$
187.0
$
175.0
6.9%
6.6%
Gross profit increased $33.1 million to $119.6 million. Gross
margin decreased to 63.9% compared to 73.2% in the prior year
period. Adjusted gross profit increased $46.6 million to $133.9
million. Adjusted gross margin decreased to 71.6% compared to 73.9%
in the prior year period.
Net loss was $(39.4) million, or $(1.07) per share, compared to
net income of $2.5 million, or $0.12 per share in the prior year
period. Adjusted net income was $0.7 million, or $0.02 per share,
compared to adjusted net income of $4.7 million, or $0.23 per
share, in the prior year period.
Adjusted EBITDA was $9.9 million, or 5.3% of net sales, compared
to $11.4 million, or 9.7% of net sales, in the prior year
period.
Liquidity
As of June 30, 2023, cash totaled $37.6 million, compared to
$50.7 million as of December 31, 2022. As of June 30, 2023, the
Company had $51.0 million in borrowings outstanding under its five
year $175 million secured revolving credit facility. The Company
subsequently borrowed an additional $8.0 million in July 2023. On a
year-to-date basis through June 30, 2023, cash flow from operations
decreased $26.9 million to $(39.5) million, while free cash flow
decreased $39.9 million to $(64.2) million.
Business Outlook
As of the date hereof, the Company expects the following
financial results for the year ended December 31, 2023. 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.
Current 2023 Outlook
Previous 2023 Outlook
(Unaudited, U.S. Dollars, in millions,
except per share data)
Low
High
Low
High
Full year net sales
$
752
1
$
758
1
$
750
$
756
Full year adjusted EBITDA
$
42
$
46
$
40
$
45
1 Represents a year-over-year increase of
63.2% to 64.3% on a reported basis and an increase of 7.3% to 8.2%
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 second
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 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 June 30, 2023. 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) global economic
instability and potential supply chain disruption caused by
Russia’s invasion of Ukraine and resulting sanctions, 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.
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.
ORTHOFIX MEDICAL INC.
Condensed Consolidated
Statements of Operations
Three Months Ended
Six Months Ended
June 30,
June 30,
(U.S. Dollars, in thousands, except
share and per share data)
2023
2022
2023
2022
(Unaudited)
(Unaudited)
Net sales
$
187,016
$
118,070
$
362,220
$
224,488
Cost of sales
67,465
31,600
132,340
59,918
Gross profit
119,551
86,470
229,880
164,570
Sales and marketing
99,249
59,888
193,040
114,025
General and administrative
34,177
15,846
82,988
35,174
Research and development
19,424
12,758
42,731
23,970
Acquisition-related amortization and
remeasurement
3,333
(8,663
)
7,467
(12,162
)
Operating income (loss)
(36,632
)
6,641
(96,346
)
3,563
Interest expense, net
(1,266
)
(407
)
(2,555
)
(782
)
Other income (expense), net
(20
)
(3,192
)
656
(4,128
)
Income (loss) before income taxes
(37,918
)
3,042
(98,245
)
(1,347
)
Income tax expense
(1,508
)
(553
)
(2,119
)
(624
)
Net income (loss)
$
(39,426
)
$
2,489
$
(100,364
)
$
(1,971
)
Net income (loss) per common share:
Basic
$
(1.07
)
$
0.12
$
(2.77
)
$
(0.10
)
Diluted
(1.07
)
0.12
(2.77
)
(0.10
)
Weighted average number of common shares
(in millions):
Basic
36.8
20.0
36.3
20.0
Diluted
36.8
20.1
36.3
20.0
ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance
Sheets
(U.S. Dollars, in thousands, except par
value data)
June 30, 2023
December 31, 2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
37,607
$
50,700
Accounts receivable, net of allowances of
$7,015 and $6,419, respectively
112,320
82,857
Inventories
222,474
100,150
Prepaid expenses and other current
assets
26,947
22,283
Total current assets
399,348
255,990
Property, plant, and equipment, net
140,584
58,229
Intangible assets, net
126,000
47,388
Goodwill
191,727
71,317
Other long-term assets
43,628
25,705
Total assets
$
901,287
$
458,629
Liabilities and shareholders’
equity
Current liabilities
Accounts payable
$
51,349
$
27,598
Current portion of finance lease
liability
678
652
Other current liabilities
89,777
55,374
Total current liabilities
141,804
83,624
Long-term borrowings under credit
facility
51,000
—
Long-term portion of finance lease
liability
18,894
19,239
Other long-term liabilities
49,604
18,906
Total liabilities
261,302
121,769
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 100,000
shares authorized; 36,733 and 20,162 issued and outstanding as of
June 30, 2023 and December 31, 2022, respectively
3,673
2,016
Additional paid-in capital
735,533
334,969
Retained earnings (accumulated
deficit)
(99,113
)
1,251
Accumulated other comprehensive loss
(108
)
(1,376
)
Total shareholders’ equity
639,985
336,860
Total liabilities and shareholders’
equity
$
901,287
$
458,629
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 June
30,
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Gross profit
$
119,551
$
86,470
$
229,880
$
164,570
Share-based compensation expense
482
204
953
414
SeaSpine merger-related costs
3,783
—
4,486
—
Strategic investments
28
566
209
591
Acquisition-related fair value
adjustments
9,449
—
21,085
—
Amortization/Depreciation of Acquired
Long-Lived Assets
544
—
544
224
Medical device regulation
41
8
670
14
Adjusted gross profit
$
133,878
$
87,248
$
257,827
$
165,813
Adjusted gross margin
71.6
%
73.9
%
71.2
%
73.9
%
Adjusted EBITDA
Three Months Ended June
30,
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Income (loss) before income taxes
$
(37,918
)
$
3,042
$
(98,245
)
$
(1,347
)
Interest expense, net
1,266
407
2,555
782
Depreciation and amortization
13,327
6,512
25,997
14,028
Share-based compensation expense
13,246
4,460
26,266
8,792
Foreign exchange impact
(269
)
2,991
(852
)
4,233
SeaSpine merger-related costs
8,206
—
28,946
—
Strategic investments
309
1,824
970
2,794
Acquisition-related fair value
adjustments
8,149
(10,714
)
19,785
(16,214
)
Legal judgments/settlements
1,291
148
1,760
341
Medical device regulation
2,050
2,248
5,679
4,198
Business interruption - COVID-19
—
316
—
659
All other
262
189
262
266
Adjusted EBITDA
$
9,919
$
11,423
$
13,123
$
18,532
Adjusted Net Income (Loss)
Three Months Ended June
30,
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Net income (loss)
$
(39,426
)
$
2,489
$
(100,364
)
$
(1,971
)
Share-based compensation expense
13,246
4,460
26,266
8,792
Foreign exchange impact
(269
)
2,991
(852
)
4,233
SeaSpine merger-related costs
8,049
—
30,353
—
Strategic investments
348
1,817
1,046
2,782
Acquisition-related fair value
adjustments
8,149
(10,714
)
19,785
(16,214
)
Amortization of acquired intangibles
5,810
2,051
9,944
4,282
Legal judgments/settlements
1,291
148
1,760
341
Medical device regulation
2,055
2,251
5,689
4,202
Business interruption - COVID-19
—
318
—
663
All other
262
190
262
266
Long-term income tax rate adjustment
1,224
(1,283
)
3,238
(1,616
)
Adjusted net income (loss)
$
739
$
4,718
$
(2,873
)
$
5,760
Adjusted EPS
Three Months Ended June
30,
Six Months Ended June
30,
(Unaudited, per diluted share)
2023
2022
2023
2022
EPS
$
(1.07
)
$
0.12
$
(2.77
)
$
(0.10
)
Share-based compensation expense
0.36
0.22
0.72
0.44
Foreign exchange impact
(0.01
)
0.15
(0.02
)
0.21
SeaSpine merger-related costs
0.22
—
0.84
—
Strategic investments
0.01
0.09
0.03
0.14
Acquisition-related fair value
adjustments
0.22
(0.53
)
0.55
(0.81
)
Amortization of acquired intangibles
0.16
0.10
0.27
0.21
Legal judgments/settlements
0.03
0.01
0.05
0.02
Medical device regulation
0.06
0.11
0.16
0.21
Business interruption - COVID-19
—
0.02
—
0.03
All other
0.01
0.01
0.01
0.01
Long-term income tax rate adjustment
0.03
(0.07
)
0.08
(0.07
)
Adjusted EPS
$
0.02
$
0.23
$
(0.08
)
$
0.29
Weighted average number of diluted common
shares (treasury stock method, in millions)
37.1
20.1
36.3
20.1
Cash Flow and Free Cash Flow
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(39,536
)
$
(12,622
)
Net cash from investing activities
4,265
(13,161
)
Net cash from financing activities
21,791
(1,324
)
Effect of exchange rate changes on
cash
387
(1,204
)
Net change in cash and cash
equivalents
$
(13,093
)
$
(28,311
)
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(39,536
)
$
(12,622
)
Capital expenditures
(24,654
)
(11,703
)
Free cash flow
$
(64,190
)
$
(24,325
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808593784/en/
Louisa Smith, Gilmartin Group ir@orthofix.com
Orthofix Medical (NASDAQ:OFIX)
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