- In November 2023, entered into a new four-year financing
agreement with borrowing capacity of up to $150 million
- Net sales of $184.0 million, an increase of 61% on a
reported basis and an increase of 8% on a pro forma basis when
normalizing for a one-time stocking order that occurred in the
third quarter of 2022 for SeaSpine
- Bone Growth Therapies growth of 15%, marking three
consecutive quarters with double-digit net sales increases, with
growth coming from both spine and fracture portfolios
- U.S. spinal implants, biologics, and enabling technologies
sales growth of 7% on a pro forma basis over prior year
- Global Orthopedics net sales increase of 7% on a reported
basis over prior year, with 14% growth in the US
- Adjusted EBITDA of $13.5 million, or 7.3% of sales,
representing 36% sequential growth over the second quarter of
2023
Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial
results for the quarter ended September 30, 2023. Net sales were
$184.0 million, earnings per share (“EPS”) was $(0.77), and
adjusted EPS was $0.07.
“Orthofix has performed well and operated smoothly following the
announcement of our management transition. The Company saw very
strong growth across multiple business segments and product lines.
Our complementary portfolio is driving even further incremental
cross selling opportunities,” said Catherine Burzik, Chair of the
Board and Interim Chief Executive Officer of Orthofix. “Sales
momentum is strong, and we are laser focused on driving shareholder
value via profitable growth and merger synergy realization. We
expect the company to deliver much higher adjusted profits next
year and to exit 2024 cash-flow positive. I am highly confident in
the future of the company.”
Financial Results Overview
The following table provides net sales by major product category
by reporting segment as reported:
Three Months Ended September
30,
(Unaudited, U.S. Dollars, in
millions)
2023
2022
Change
Constant Currency
Change
Bone Growth Therapies
$
53.4
$
46.5
14.7
%
14.7
%
Spinal Implants, Biologics and Enabling
Technologies
101.0
39.7
154.7
%
154.5
%
Global Spine
154.4
86.2
79.1
%
79.0
%
Global Orthopedics
29.7
27.8
6.6
%
0.7
%
Net sales
$
184.0
$
114.0
61.4
%
59.9
%
Further, the following table provides net sales by major product
category by reporting segment on a pro forma basis:
Three Months Ended September
30,
(Unaudited, U.S. Dollars, in
millions)
2023
2022 Pro Forma
Change
Constant Currency
Change
Bone Growth Therapies
$
53.4
$
46.5
14.7
%
14.7
%
U.S. Spinal Implants, Biologics and
Enabling Technologies
92.4
86.7
6.6
%
6.6
%
International Spinal Implants, Biologics
and Enabling Technologies
8.6
20.8
(58.7
%)
(59.0
%)
Total Spinal Implants, Biologics and
Enabling Technologies**
101.0
107.5
(6.0
%)
(6.1
%)
Global Spine
154.4
154.0
0.2
%
0.2
%
Global Orthopedics
29.7
27.8
6.6
%
0.7
%
Net sales ***
$
184.0
$
181.8
1.2
%
0.3
%
** Pro forma net sales for 2022 for Spinal Implants, Biologics,
and Enabling Technologies include the impact of final Spinal
Implant stocking orders to European distributors prior to
SeaSpine's exit from that market. Excluding the impact of these
transactions, net sales growth for this product category was 5.8%
on a pro forma reported basis and pro forma constant currency
basis.
*** Pro forma net sales for 2022 include the impact of final
Spinal Implant stocking orders to European distributors prior to
SeaSpine's exit from that market. Excluding the impact of these
transactions, net sales growth was 8.4% on a pro forma reported
basis and 7.4% on a pro forma constant currency basis.
Gross profit increased $36.3 million to $119.8 million. Gross
margin decreased to 65.1% compared to 73.2% in the prior year
period. Adjusted gross profit increased $46.7 million to $130.7
million. Adjusted gross margin was 71.0% compared to 73.6% in the
prior year period.
Net loss was $(28.9) million, or $(0.77) per share, compared to
net loss of $(10.7) million, or $(0.53) per share in the prior year
period. Adjusted net income was $2.7 million, or $0.07 per share,
compared to adjusted net income of $6.1 million, or $0.30 per
share, in the prior year period.
Adjusted EBITDA was $13.5 million, or 7.3% of net sales,
compared to $14.3 million, or 12.5% of net sales, in the prior year
period.
Liquidity
As of September 30, 2023, cash totaled $33.7 million, compared
to $50.7 million as of December 31, 2022. As of September 30, 2023,
the Company had $70.0 million in borrowings outstanding under its
five year $175 million secured revolving credit facility. The
Company subsequently borrowed an additional $9.0 million in October
2023. On a year-to-date basis through September 30, 2023, cash flow
from operations decreased $25.2 million to $(39.1) million, while
free cash flow decreased $54.9 million to $(86.1) million.
Subsequent to the quarter, on November 6, 2023, the Company
entered into a Financing Agreement (the “Financing Agreement”) with
Blue Torch Finance LLC, as administrative agent and collateral
agent, and certain lenders party thereto. The Financing Agreement
provides for a $100 million senior secured term loan, a $25 million
senior secured delayed draw term loan facility, and a $25 million
senior secured revolving credit facility, each of which mature on
November 6, 2027. In connection with entering into the Financing
Agreement, the Company repaid in full amounts outstanding and
terminated all commitments under the Company’s prior $175 million
senior secured revolving credit facility. For additional discussion
of the Financing Agreement, see the Company's Current Report on
Form 8-K as filed with the SEC on November 8, 2023.
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)
Low
High
Low
High
Full year net sales
$
739
1
$
744
1
$
752
$
758
Full year adjusted EBITDA
$
42
$
46
$
42
$
46
1 Represents a year-over-year increase of 60.4% to 61.5% on a
reported basis and an increase of 5.4% to 6.2% on a pro forma
basis.
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.
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern
time to discuss the Company's financial results for the third
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, California, 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, California; Toronto,
Canada; Sunnyvale, California; Wayne, Pennsylvania; Olive Branch,
Mississippi; Maidenhead, United Kingdom; Munich, Germany; Paris,
France; and Sao 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, 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 September 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
Nine Months Ended
September 30,
September 30,
(U.S. Dollars, in thousands, except
share and per share data)
2023
2022
2023
2022
(Unaudited)
(Unaudited)
Net sales
$
184,006
$
113,996
$
546,226
$
338,484
Cost of sales
64,243
30,573
196,583
90,491
Gross profit
119,763
83,423
349,643
247,993
Sales and marketing
94,947
55,461
287,987
169,486
General and administrative
27,136
19,322
110,124
54,496
Research and development
18,559
11,943
61,290
35,913
Acquisition-related amortization and
remeasurement
3,570
2,484
11,037
(9,678
)
Operating loss
(24,449
)
(5,787
)
(120,795
)
(2,224
)
Interest expense, net
(1,576
)
(277
)
(4,131
)
(1,059
)
Other expense, net
(2,360
)
(3,308
)
(1,704
)
(7,436
)
Loss before income taxes
(28,385
)
(9,372
)
(126,630
)
(10,719
)
Income tax expense
(472
)
(1,344
)
(2,591
)
(1,968
)
Net loss
$
(28,857
)
$
(10,716
)
$
(129,221
)
$
(12,687
)
Net loss per common share:
Basic
$
(0.77
)
$
(0.53
)
$
(3.53
)
$
(0.63
)
Diluted
(0.77
)
(0.53
)
(3.53
)
(0.63
)
Weighted average number of common shares
(in millions):
Basic
37.2
20.1
36.6
20.0
Diluted
37.2
20.1
36.6
20.0
ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance
Sheets
(U.S. Dollars, in thousands, except par
value data)
September 30, 2023
December 31, 2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
33,663
$
50,700
Accounts receivable, net of allowances of
$7,090 and $6,419, respectively
114,118
82,857
Inventories
221,745
100,150
Prepaid expenses and other current
assets
24,170
22,283
Total current assets
393,696
255,990
Property, plant, and equipment, net
152,689
58,229
Intangible assets, net
121,021
47,388
Goodwill
194,767
71,317
Other long-term assets
43,479
25,705
Total assets
$
905,652
$
458,629
Liabilities and shareholders’
equity
Current liabilities
Accounts payable
$
53,261
$
27,598
Current portion of finance lease
liability
693
652
Other current liabilities
98,576
55,374
Total current liabilities
152,530
83,624
Long-term borrowings under credit
facility
70,000
—
Long-term portion of finance lease
liability
18,715
19,239
Other long-term liabilities
48,924
18,906
Total liabilities
290,169
121,769
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 100,000
shares authorized; 36,750 and 20,162 issued and outstanding as of
September 30, 2023 and December 31, 2022, respectively
3,675
2,016
Additional paid-in capital
741,638
334,969
Retained earnings (accumulated
deficit)
(127,970
)
1,251
Accumulated other comprehensive loss
(1,860
)
(1,376
)
Total shareholders’ equity
615,483
336,860
Total liabilities and shareholders’
equity
$
905,652
$
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 September
30,
Nine Months Ended September
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Gross profit
$
119,763
$
83,423
$
349,643
$
247,993
Share-based compensation expense
463
195
1,416
610
SeaSpine merger-related costs
2,161
—
6,647
—
Strategic investments
55
304
264
895
Acquisition-related fair value
adjustments
7,922
—
29,007
—
Amortization/Depreciation of Acquired
Long-Lived Assets
280
—
824
224
Medical device regulation
6
1
676
14
Adjusted gross profit
$
130,650
$
83,923
$
388,477
$
249,736
Adjusted gross margin
71.0
%
73.6
%
71.1
%
73.8
%
Adjusted EBITDA
Three Months Ended September
30,
Nine Months Ended September
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Loss before income taxes
$
(28,385
)
$
(9,372
)
$
(126,630
)
$
(10,719
)
Interest expense, net
1,576
277
4,131
1,059
Depreciation and amortization
13,097
7,570
39,094
21,598
Share-based compensation expense
6,274
4,729
32,540
13,521
Foreign exchange impact
1,909
3,253
1,057
7,486
SeaSpine merger-related costs
5,416
2,937
34,362
2,937
Strategic investments
913
453
1,883
3,247
Acquisition-related fair value
adjustments
7,122
419
26,907
(15,795
)
Legal judgments/settlements
3,851
125
5,611
466
Medical device regulation
1,840
2,590
7,519
6,883
Business interruption - COVID-19
—
1,215
—
1,874
All other
(92
)
59
170
230
Adjusted EBITDA
$
13,521
$
14,255
$
26,644
$
32,787
Adjusted Net Income
(Loss)
Three Months Ended September
30,
Nine Months Ended September
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
2023
2022
Net loss
$
(28,857
)
$
(10,716
)
$
(129,221
)
$
(12,687
)
Share-based compensation expense
6,274
4,729
32,540
13,521
Foreign exchange impact
1,909
3,253
1,057
7,486
SeaSpine merger-related costs
5,247
2,937
35,600
2,937
Strategic investments
924
446
1,970
3,228
Acquisition-related fair value
adjustments
7,122
419
26,907
(15,795
)
Amortization of acquired intangibles
5,026
2,071
14,970
6,352
Legal judgments/settlements
3,851
125
5,611
466
Medical device regulation
1,842
2,594
7,531
6,890
Business interruption - COVID-19
—
1,218
—
1,881
All other
(94
)
59
168
229
Long-term income tax rate adjustment
(569
)
(1,030
)
2,669
(2,644
)
Adjusted net income (loss)
$
2,675
$
6,105
$
(198
)
$
11,864
Adjusted EPS
Three Months Ended September
30,
Nine Months Ended September
30,
(Unaudited, per diluted share)
2023
2022
2023
2022
EPS
$
(0.77
)
$
(0.53
)
$
(3.53
)
$
(0.63
)
Share-based compensation expense
0.17
0.24
0.89
0.67
Foreign exchange impact
0.05
0.16
0.03
0.37
SeaSpine merger-related costs
0.14
0.15
0.97
0.15
Strategic investments
0.02
0.02
0.05
0.16
Acquisition-related fair value
adjustments
0.19
0.02
0.74
(0.79
)
Amortization of acquired intangibles
0.13
0.10
0.41
0.32
Legal judgments/settlements
0.10
0.01
0.15
0.02
Medical device regulation
0.05
0.13
0.21
0.34
Business interruption - COVID-19
—
0.06
—
0.09
All other
—
—
—
0.01
Long-term income tax rate adjustment
(0.01
)
(0.06
)
0.07
(0.12
)
Adjusted EPS
$
0.07
$
0.30
$
(0.01
)
$
0.59
Weighted average number of diluted common
shares (treasury stock method, in millions)
37.5
20.1
36.6
20.1
Cash Flow and Free Cash Flow
Nine Months Ended September
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(39,059
)
$
(13,886
)
Net cash from investing activities
(18,078
)
(18,634
)
Net cash from financing activities
40,042
(1,576
)
Effect of exchange rate changes on
cash
58
(2,091
)
Net change in cash and cash
equivalents
$
(17,037
)
$
(36,187
)
Nine Months Ended September
30,
(Unaudited, U.S. Dollars, in
thousands)
2023
2022
Net cash from operating activities
$
(39,059
)
$
(13,886
)
Capital expenditures
(46,997
)
(17,260
)
Free cash flow
$
(86,056
)
$
(31,146
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108095464/en/
Louisa Smith, Gilmartin Group ir@orthofix.com
Orthofix Medical (NASDAQ:OFIX)
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