Orthofix Medical Reports Orthofix and SeaSpine Fourth Quarter and Full-Year 2022 Results

Rhea-AI Summary

The merger of Orthofix Medical and SeaSpine Holdings became effective on January 5, 2023. For Q4 2022, Orthofix reported net sales of $122.2 million, a 2% decline year-over-year, with Bone Growth Therapies growing by 3%. SeaSpine's net sales rose 14% to $63.4 million, buoyed by a strong performance in U.S. Spinal Implants and Orthobiologics, which experienced growth of 23% and 20%, respectively. The merger aims to create synergies, although initial revenue guidance for 2023 reflects minimal impact from these synergies. Orthofix's net loss for Q4 was $(7.1) million, while SeaSpine's net loss stood at $(19.0) million.

Positive

• SeaSpine's fourth quarter net sales increased by 14%, signaling strong demand.
• Bone Growth Therapies net sales for Orthofix grew by approximately 3% due to product roll-out.
• U.S. Spinal Implants and Orthobiologics saw significant growth of 23% and 20%, respectively.

Negative

• Orthofix's fourth quarter net sales declined 2%, indicating potential revenue challenges.
• Gross margin for Orthofix decreased to 73.0% from 73.4% year-over-year.
• Orthofix's net loss was $(7.1) million, and SeaSpine's net loss widened to $(19.0) million.

LEWISVILLE, Texas--(BUSINESS WIRE)-- (NASDAQ:OFIX) The merger of Orthofix Medical Inc. ("Orthofix") and SeaSpine Holdings Corporation ("SeaSpine") became effective as of January 5, 2023. This news release includes the financial results of stand-alone Orthofix and stand-alone SeaSpine for the fourth quarter and full year ended December 31, 2022. As such, these financial results do not include any potential accounting adjustments the merger may have on future net sales or operating results.

Orthofix Fourth Quarter Highlights

• Net sales of $122.2 million, a decrease of 2% on a reported basis and flat on a constant currency basis over prior year
• Bone Growth Therapies net sales growth of approximately 3%, driven by the commercial roll-out of AccelStim™ Bone Healing Therapy and channel investments
• Global Orthopedics net sales growth of over 6% on a constant currency basis driven by new product launches and channel investments

SeaSpine Fourth Quarter Highlights

• Net sales of $63.4 million, an increase of 14% on a reported basis over prior year and an increase of 18% when adjusted to exclude the impact of SeaSpine’s exit from the European Spinal Implants market in the third quarter of 2022
• U.S. Spinal Implants and Orthobiologics net sales growth of 23% and 20%, respectively, driven by recently launched products and expanded distribution
• A record twelve 7D FLASH Technology System units placed in the fourth quarter, and the achievement of 100th unit placement milestone
  
  

“We are proud of the strong revenue results for the fourth quarter of 2022 within the legacy SeaSpine U.S. Spinal Implants and Orthobiologics portfolios as well as within the Orthofix Bone Growth Therapies and Global Orthopedics portfolios,” said Keith Valentine, President and Chief Executive Officer of Orthofix. “Following the completion of the merger on January 5^th, we have begun our focused integration of these two highly complementary businesses to realize the meaningful synergy opportunities that we identified. We will continue to deliver innovative and differentiated solutions to both our surgeon and hospital partners, helping them provide the best treatment to their patients through a full continuum of care from pre-operative planning through post-surgical recovery. Our revenue guidance for the first quarter and the full year 2023 assumes minimal realization of potential revenue synergies, which we believe will accelerate as we move into 2024.”

Fourth Quarter Financial Results Overview

Orthofix Stand-Alone Fourth Quarter Net Sales and Financial Results

		Orthofix
		Three Months Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021				Change				Constant Currency Change
Bone Growth Therapies		$	51,003			$	49,627				2.8	%			2.8	%
Spinal Implants			28,852				31,150				(7.4	%)			(6.6	%)
Biologics			13,696				15,071				(9.1	%)			(9.1	%)
Global Spine			93,551				95,848				(2.4	%)			(2.1	%)
Global Orthopedics			28,678				29,216				(1.8	%)			6.4	%
Net sales		$	122,229			$	125,064				(2.3	%)			(0.1	%)

Gross margin decreased to 73.0% compared to 73.4% in the prior year period.

Net loss was $(7.1) million, or $(0.35) per share, compared to net loss of $(32.8) million, or $(1.65) per share in the prior year period. Adjusted net income was $3.8 million, or $0.19 per share, compared to adjusted net income of $5.4 million, or $0.27 per share in the prior year period.

EBITDA was $0.7 million, compared to $10.0 million in the prior year period. Adjusted EBITDA was $15.8 million, or 12.9% of net sales, compared to $17.0 million, or 13.6% of net sales, in the prior year period.

As of December 31, 2022, Orthofix's cash totaled $50.7 million, compared to $87.8 million as of December 31, 2021. As of December 31, 2022, Orthofix had no borrowings under its five year $300 million secured revolving credit facility; however, on January 3, 2023, and March 3, 2023, Orthofix borrowed $30.0 million and $15.0 million, respectively, under this credit facility to fund (i) the repayment of the outstanding balance on SeaSpine’s credit facility, (ii) certain merger-related expenses, and (iii) working capital purposes.

SeaSpine Stand-Alone Fourth Quarter Net Sales and Financial Results

		SeaSpine
		Three Months Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021				Percentage Change
U.S. Spinal Implants and Enabling Technologies		$	30,637			$	27,315				12.2	%
U.S. Orthobiologics			27,454				22,860				20.1	%
U.S. Net Sales			58,091				50,175				15.8	%
International Net Sales			5,282				5,413				(2.4	%)
Net sales		$	63,373				55,588				14.0	%

Gross margin increased to 62.5% compared to 53.7% in the prior year period. Adjusted gross margin was 63.8% compared to 61.6% in the prior year period.

Net loss was $(19.0) million, or $(0.51) per share, compared to net loss of $(18.8) million, or $(0.52) per share in the prior year period. Adjusted EBITDA was $(5.7) million, or (9.1)% of net sales, compared to $(6.8) million, or (12.2)% of net sales in the prior year period.

As of December 31, 2022, SeaSpine's cash totaled $29.4 million, compared to $83.1 million as of December 31, 2021. As of December 31, 2022, SeaSpine had $26.2 million in borrowing outstanding under its credit facility, which was subsequently repaid in full on January 5, 2023, in connection with the merger.

Full Year Financial Results Overview

Orthofix Stand-Alone Full Year Net Sales and Financial Results

		Orthofix
		Year Ended December 31,
(U.S. Dollars, in thousands)		2022				2021				Change				Constant Currency Change
Bone Growth Therapies		$	187,247			$	187,448				(0.1	%)			(0.1	%)
Spinal Implants			109,546				115,094				(4.8	%)			(4.0	%)
Biologics			56,381				56,421				(0.1	%)			(0.1	%)
Global Spine			353,174				358,963				(1.6	%)			(1.4	%)
Global Orthopedics			107,539				105,516				1.9	%			11.0	%
Net sales		$	460,713			$	464,479				(0.8	%)			1.5	%

Gross profit decreased $12.4 million to $337.2 million. Gross margin decreased to 73.2% compared to 75.3% in the prior year period.

Net loss was $(19.7) million, or $(0.98) per share, compared to net loss of $(38.4) million, or $(1.95) per share in the prior year period. Adjusted net income was $6.0 million, or $0.30 per share, compared to adjusted net income of $17.2 million, or $0.86 per share in the prior year period.

EBITDA was $12.6 million, compared to $29.7 million in the prior year period. Adjusted EBITDA was $48.6 million, or 10.5% of net sales, compared to $61.3 million, or 13.2% of net sales, in the prior year period.

SeaSpine Stand-Alone Full Year Net Sales and Financial Results

		SeaSpine
		Year Ended December 31,
(U.S. Dollars, in thousands)		2022				2021				Percentage Change
U.S. Spinal Implants and Enabling Technologies		$	107,170			$	88,192				21.5	%
U.S. Orthobiologics			97,049				83,249				16.6	%
U.S. Net Sales			204,219				171,441				19.1	%
International Net Sales			33,312				20,010				66.5	%
Net sales		$	237,531				191,451				24.1	%

Gross profit increased $33.0 million to $147.6 million. Gross margin increased to 62.1% compared to 59.9% in the prior year period. Adjusted gross margin was 63.8% compared to 63.5% in the prior year period.

Net loss was $(65.0) million, or $(1.76) per share, compared to net loss of $(54.3) million, or $(1.62) per share in the prior year period. Adjusted EBITDA was $(21.2) million, or (8.9)% of net sales, compared to $(22.9) million, or (12.0)% of net sales in the prior year period.

Business Outlook

As of the date hereof, the combined company expects the following net sales results for the quarter ended March 31, 2023, and the year ended December 31, 2023. These expectations are based on the current foreign currency exchange rates and do not assume any additional exchange rate changes that may occur this year and exclude the 2023 revenue results for SeaSpine for the four-day period prior to the closing of the merger .

		Current 2023 Outlook
(Unaudited, U.S. Dollars, in millions)		Low				High
Expected net sales for the first quarter		$	166			$	170
Expected full year net sales			743				753

The Company expects to provide additional elements of financial guidance in the future.

Conference Call

Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the financial results for the fourth quarter and year ended December 31, 2022. Reported results include those for stand-alone Orthofix as well as stand-alone SeaSpine, which was merged into Orthofix effective January 5, 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 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. In this news release, such forward-looking statements include, but are not limited, to, statements relating to: our ability to continue to deliver innovative and differentiated solutions to both our surgeon and hospital partners and to help them provide the best treatment to their patients; and our revenue guidance for the first quarter and the full year 2023, including our belief that realization of potential revenue synergies will accelerate as we move into 2024. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict, including the risks described under the heading “Risk Factors” in Orthofix’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, as well as subsequent Quarterly Reports on Form 10-Q and other information filed with the SEC. Factors that could cause or contribute to such differences may include, but are not limited to, (i) risks related to the integration of the legacy Orthofix and SeaSpine businesses and the ability of the combined company to realize the expected long-term financial and other benefits of the merger; (i) risks relating to the effects of the COVID-19 pandemic on our business, (iii) our ability to maintain operations to support our customers and patients in the near-term and to capitalize on future growth opportunities, (iv) risks associated with acceptance of surgical products and procedures by surgeons and hospitals, (v) development and acceptance of new products or product enhancements, (vi) clinical and statistical verification of the benefits achieved via the use of our products, (vii) our ability to adequately manage inventory, (viii) our ability to recruit and retain management and key personnel (including in connection with disruptions and uncertainties that may occur as the legacy Orthofix and SeaSpine businesses are integrated and the respective management and leadership teams are combined), (ix) global economic instability and potential supply chain disruption, including as a result of Russia’s invasion of Ukraine and resulting sanctions, and (x) the other risks and uncertainties more fully described in our periodic filings with the Securities and Exchange Commission (the “SEC”).

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 inaccurate (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								Year Ended
		December 31,								December 31,
(U.S. Dollars, in thousands, except share and per share data)		2022				2021				2022				2021
		(Unaudited)
Net sales		$	122,229			$	125,064			$	460,713			$	464,479
Cost of sales			33,053				33,254				123,544				114,914
Gross profit			89,176				91,810				337,169				349,565
Sales and marketing			59,324				57,098				228,810				221,318
General and administrative			25,470				18,262				79,966				69,353
Research and development			13,152				13,243				49,065				49,621
Acquisition-related amortization and remeasurement			2,274				12,560				(7,404	)			17,588
Operating income (loss)			(11,044	)			(9,353	)			(13,268	)			(8,315	)
Interest expense, net			(229	)			(437	)			(1,288	)			(1,837	)
Other expense, net			4,286				185				(3,150	)			(3,343	)
Loss before income taxes			(6,987	)			(9,605	)			(17,706	)			(13,495	)
Income tax benefit (expense)			(75	)			(23,207	)			(2,043	)			(24,884	)
Net loss		$	(7,062	)		$	(32,812	)		$	(19,749	)		$	(38,379	)
Net loss per common share:
Basic		$	(0.35	)		$	(1.65	)		$	(0.98	)		$	(1.95	)
Diluted			(0.35	)			(1.65	)			(0.98	)			(1.95	)
Weighted average number of common shares (in millions):
Basic			20.2				19.9				20.1				19.7
Diluted			20.2				19.9				20.1				19.7

ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance Sheets
(U.S. Dollars, in thousands, except par value data)		December 31, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	50,700			$	87,847
Accounts receivable, net of allowances of $6,419 and $4,944, respectively			82,857				78,560
Inventories			100,150				82,974
Prepaid expenses and other current assets			22,283				20,141
Total current assets			255,990				269,522
Property, plant, and equipment, net			58,229				59,252
Intangible assets, net			47,388				52,666
Goodwill			71,317				71,317
Other long-term assets			25,705				23,866
Total assets		$	458,629			$	476,623
Liabilities and shareholders’ equity
Current liabilities
Accounts payable		$	27,598			$	26,459
Current portion of finance lease liability			652				2,590
Other current liabilities			55,374				76,781
Total current liabilities			83,624				105,830
Long-term portion of finance lease liability			19,239				19,890
Other long-term liabilities			18,906				13,969
Total liabilities			121,769				139,689
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 50,000 shares authorized; 20,162 and 19,837 issued and outstanding as of December 31, 2022 and 2021, respectively			2,016				1,983
Additional paid-in capital			334,969				313,951
Retained earnings			1,251				21,000
Accumulated other comprehensive loss			(1,376	)			—
Total shareholders’ equity			336,860				336,934
Total liabilities and shareholders’ equity		$	458,629			$	476,623

ORTHOFIX MEDICAL INC.
Non-GAAP Financial Measures

The following tables present reconciliations of operating income (loss), net income (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 "EBITDA," "Adjusted EBITDA," "Adjusted net income (loss)," "Adjusted EPS," and "Free cash flow" that include or exclude 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 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 Securities and Exchange Commission ("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.

EBITDA and Adjusted EBITDA

		Three Months Ended December 31, 2022
(Unaudited, U.S. Dollars, in thousands)		Total Orthofix				Global Spine				Global Orthopedics				Corporate
Operating income (loss)		$	(11,044	)		$	8,184			$	(1,901	)		$	(17,327	)
Other income (expense), net			4,286				990				2,258				1,038
Depreciation and amortization			5,348				2,784				1,440				1,124
Amortization of acquired intangibles			2,073				1,916				157				—
EBITDA		$	663			$	13,874			$	1,954			$	(15,165	)
Share-based compensation			4,917				1,980				507				2,430
Foreign exchange impact			(4,195	)			(1,052	)			(2,192	)			(951	)
Strategic investments			9,844				41				498				9,305
Acquisition-related fair value adjustments			200				200				—				—
Loss on investment securities			—				—				—				—
Legal judgments/settlements			337				156				131				50
Succession and transition charges			—				—				—				—
Medical device regulation			3,487				1,740				1,743				4
Business interruption - COVID-19			513				509				2				2
Adjusted EBITDA		$	15,766			$	17,448			$	2,643			$	(4,325	)
As a % of net sales			12.9	%			14.3	%			2.2	%			-3.5	%

		Year Ended December 31, 2022
(Unaudited, U.S. Dollars, in thousands)		Total Orthofix				Global Spine				Global Orthopedics				Corporate
Operating income (loss)		$	(13,268	)		$	43,062			$	(8,646	)		$	(47,684	)
Other income (expense), net			(3,150	)			(626	)			(2,087	)			(437	)
Depreciation and amortization			20,599				10,663				5,826				4,110
Amortization of acquired intangibles			8,420				7,550				870				—
EBITDA		$	12,601			$	60,649			$	(4,037	)		$	(44,011	)
Share-based compensation			18,334				7,318				1,836				9,180
Foreign exchange impact			3,291				860				2,136				295
Strategic investments			16,028				194				1,071				14,763
Acquisition-related fair value adjustments			(15,595	)			(15,595	)			—				—
Loss on investment securities			188				—				—				188
Legal judgments/settlements			803				397				354				52
Succession and transition charges			146				10				—				136
Medical device regulation			10,370				6,494				3,887				(11	)
Business interruption - COVID-19			2,387				2,365				20				2
Adjusted EBITDA		$	48,553			$	62,692			$	5,267			$	(19,406	)
As a % of net sales			10.5	%			13.6	%			1.1	%			-4.2	%

		Three Months Ended December 31, 2021
(Unaudited, U.S. Dollars, in thousands)		Total Orthofix				Global Spine				Global Orthopedics				Corporate
Operating income (loss)		$	(9,353	)		$	9,016			$	(9,484	)		$	(8,885	)
Other income (expense), net			185				(279	)			(233	)			697
Depreciation and amortization			5,189				2,613				1,557				1,019
Amortization of acquired intangibles			14,013				1,829				12,184				—
EBITDA		$	10,034			$	13,179			$	4,024			$	(7,169	)
Share-based compensation expense			3,956				1,645				523				1,788
Foreign exchange impact			807				294				564				(51	)
Strategic investments			1,817				429				276				1,112
Acquisition-related fair value adjustments			(1,190	)			(1,195	)			—				5
(Gain) loss on investment securities			(643	)			—				—				(643	)
Legal judgments/settlements			352				69				279				4
Succession and transition charges			75				30				8				37
Medical device regulation			2,111				1,008				545				558
Business interruption - COVID-19			(312	)			2,297				(2,618	)			9
Adjusted EBITDA		$	17,007			$	17,756			$	3,601			$	(4,350	)
As a % of net sales			13.6	%			14.2	%			2.9	%			-3.5	%

		Year Ended December 31, 2021
(Unaudited, U.S. Dollars, in thousands)		Total Orthofix				Global Spine				Global Orthopedics				Corporate
Operating income (loss)		$	(8,315	)		$	41,382			$	(14,359	)		$	(35,338	)
Other income (expense), net			(3,343	)			(917	)			(2,257	)			(169	)
Depreciation and amortization			20,647				10,367				6,464				3,816
Amortization of acquired intangibles			20,708				7,182				13,526				—
EBITDA		$	29,697			$	58,014			$	3,374			$	(31,691	)
Share-based compensation expense			15,416				6,361				2,145				6,910
Foreign exchange impact			3,981				966				2,203				812
Strategic investments			5,700				823				2,329				2,548
Acquisition-related fair value adjustments			(2,015	)			(1,645	)			—				(370	)
(Gain) loss on investment securities			(643	)			—				—				(643	)
Legal judgments/settlements			33				462				(381	)			(48	)
Succession and transition charges			739				482				70				187
Medical device regulation			8,034				2,753				2,112				3,169
Business interruption - COVID-19			320				2,870				(2,592	)			42
Adjusted EBITDA		$	61,262			$	71,086			$	9,260			$	(19,084	)
As a % of net sales			13.2	%			15.3	%			2.0	%			-4.1	%

Adjusted Net Income

		Three Months Ended December 31,								Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021				2022				2021
Net loss		$	(7,062	)		$	(32,812	)		$	(19,749	)		$	(38,379	)
Foreign exchange impact			(4,195	)			807				3,291				3,981
Strategic investments			9,841				1,837				16,006				5,813
Acquisition-related fair value adjustments			200				(1,190	)			(15,595	)			(2,015	)
Amortization of acquired intangibles			2,073				14,019				8,425				20,732
(Gain) loss on investment securities			—				(643	)			188				(643	)
Legal judgments/settlements			337				352				803				33
Succession and transition charges			—				75				146				739
Medical device regulation			3,491				2,111				10,381				8,034
Business interruption - COVID-19			514				(310	)			2,395				328
Long-term income tax rate adjustment			(1,402	)			21,195				(291	)			18,537
Adjusted net income		$	3,797			$	5,441			$	6,000			$	17,160

Adjusted EPS

		Three Months Ended December 31,								Year Ended December 31,
(Unaudited, per diluted share)		2022				2021				2022				2021
EPS		$	(0.35	)		$	(1.65	)		$	(0.98	)		$	(1.95	)
Foreign exchange impact			(0.21	)			0.04				0.16				0.20
Strategic investments			0.49				0.09				0.79				0.29
Acquisition-related fair value adjustments			0.01				(0.06	)			(0.77	)			(0.10	)
Amortization of acquired intangibles			0.10				0.70				0.42				1.04
Loss on investment securities			—				(0.03	)			0.01				(0.03	)
Legal judgments/settlements			0.02				0.02				0.04				—
Succession and transition charges			—				—				0.01				0.04
Medical device regulation			0.17				0.11				0.52				0.40
Business interruption - COVID-19			0.03				(0.02	)			0.12				0.02
Long-term income tax rate adjustment			(0.07	)			1.07				(0.02	)			0.95
Adjusted EPS		$	0.19			$	0.27			$	0.30			$	0.86
Weighted average number of diluted common shares (treasury stock method, in millions)			20.3				20.0				20.1				20.0

Cash Flow and Free Cash Flow

		Year Ended December 31,
(U.S. Dollars, in thousands)		2022				2021
Net cash from operating activities		$	(11,538	)		$	18,475
Net cash from investing activities			(24,534	)			(23,013	)
Net cash from financing activities			(78	)			(3,621	)
Effect of exchange rate changes on cash			(997	)			(815	)
Net change in cash and cash equivalents		$	(37,147	)		$	(8,974	)

		Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021
Net cash from operating activities		$	(11,538	)		$	18,475
Capital expenditures			(23,160	)			(19,592	)
Free cash flow		$	(34,698	)		$	(1,117	)

SEASPINE HOLDINGS CORPORATION
Condensed Consolidated Statements of Operations
		Three Months Ended								Year Ended
		December 31,								December 31,
(U.S. Dollars, in thousands, except share and per share data)		2022				2021				2022				2021
		(Unaudited)
Net sales		$	63,373			$	55,589			$	237,531			$	191,451
Cost of sales			23,780				25,727				89,920				76,864
Gross profit			39,593				29,862				147,611				114,587
Sales and marketing			36,208				30,886				131,726				107,299
General and administrative			16,137				10,889				54,035				42,944
Research and development			6,625				6,388				24,720				22,006
Intangible amortization			855				739				3,423				3,316
Operating loss			(20,232	)			(19,040	)			(66,293	)			(60,978	)
Other (expense) income, net			(55	)			(157	)			(1,031	)			5,532
Loss before income taxes			(20,287	)			(19,197	)			(67,324	)			(55,446	)
Income tax benefit			1,329				411				2,315				1,100
Net loss		$	(18,958	)		$	(18,786	)		$	(65,009	)		$	(54,346	)
Net loss per common share:
Basic		$	(0.51	)		$	(0.52	)		$	(1.76	)		$	(1.62	)
Diluted			(0.51	)			(0.52	)			(1.76	)			(1.62	)
Weighted average number of common shares (in millions):
Basic			37.0				36.5				37.0				33.6
Diluted			37.0				36.5				37.0				33.6

SEASPINE HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(U.S. Dollars, in thousands, except par value data)		December 31, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	29,418			$	83,106
Accounts receivable, net of allowances of $137 and $74, respectively			42,311				36,231
Inventories			84,580				72,299
Prepaid expenses and other current assets			4,404				4,328
Total current assets			160,713				195,964
Property, plant, and equipment, net			62,379				46,892
Right of use assets			16,019				6,948
Intangible assets, net			46,985				42,056
Goodwill			84,595				84,595
Long-term trade receivable			4,203				—
Other assets			1,465				812
Total assets		$	376,359			$	377,267
Liabilities and shareholders’ equity
Current liabilities
Accounts payable		$	20,724			$	20,301
Accrued compensation			12,695				8,769
Accrued commissions			13,537				9,877
Short-term lease liability			2,463				2,234
Deferred revenue			2,180				1,545
Other accrued expenses and current liabilities			10,114				10,255
Total current liabilities			61,713				52,981
Long-term borrowings under credit facility			26,240				—
Long-term lease liability			14,787				5,866
Deferred tax liability, net			1,746				4,308
Contingent consideration liabilities			11,579				83
Other long-term liabilities			—				1,665
Total liabilities			116,065				64,903
Contingencies
Shareholders’ equity
Common stock, $0.01 par value; 120,000 authorized; 38,205 and 36,584 shares issued and outstanding at December 31, 2022 and 2021, respectively			382				366
Additional paid-in capital			597,308				584,031
Accumulated other comprehensive income			1,216				1,570
Accumulated deficit			(338,612	)			(273,603	)
Total shareholders’ equity			260,294				312,364
Total liabilities and shareholders’ equity		$	376,359			$	377,267

SEASPINE HOLDINGS CORPORATION
Non-GAAP Financial Measures

SeaSpine presents two financial measures in this press release not reported in accordance with GAAP: adjusted gross margin and adjusted EBITDA loss. Adjusted gross margin represents GAAP gross margin excluding the impact of the following items recorded to cost of goods sold: technology-related intangible asset amortization expense, nonrecurring, fixed NanoMetalene supplier processing charge, and purchase accounting inventory fair market value adjustment charges. Adjusted EBITDA loss represents earnings (loss) before interest, taxes, depreciation and amortization and excludes the impact of: other income / expense, fixed NanoMetalene supplier processing charge, spinal set instrument replacement and impairment expenses, stock-based compensation, non-recurring employee severance and other charges related to the restructuring of SeaSpine’s European sales and marketing organization, litigation special charges, purchase accounting inventory fair market value adjustment charges, acquisition and integration-related charges, and charges associated with SeaSpine's business combination with Orthofix. A reconciliation of GAAP gross margin to adjusted gross margin and of GAAP net loss to adjusted EBITDA loss for all periods presented in this press release appears in the financial tables below.

The Company believes that the presentation of SeaSpine's adjusted gross margin and adjusted EBITDA loss provides important supplemental information to management and investors regarding financial and business trends relating to legacy SeaSpine's historical results of operations. For further information regarding 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 EBITDA

		Three Months Ended December 31,								Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021				2022				2021
GAAP net loss		$	(18,958	)		$	(18,786	)		$	(65,009	)		$	(54,346	)
Non-GAAP adjustments:
Depreciation and intangible asset amortization expense			4,349				3,653				17,187				13,933
Other expense (income)			55				157				1,031				(5,532	)
Income tax (benefit) provision			(1,329	)			(411	)			(2,315	)			(1,100	)
Fixed NanoMetalene supplier processing charge			—				3,704				—				3,704
Spinal set instrument replacement expense			2,630				1,239				7,179				3,904
Stock-based compensation			3,412				3,065				13,584				11,856
European sales and marketing organization restructuring			426				161				984				1,826
Litigation special charges			1,066				—				1,610				—
Purchase accounting inventory fair market value adjustments			—				125				208				542
Acquisition and integration-related charges (7D Surgical)			(16	)			305				362				2,302
Business combination charges related to Orthofix			2,616				—				4,028				—
Adjusted EBITDA loss			(5,749	)			(6,788	)			(21,151	)			(22,911	)

Adjusted Gross Profit and Adjusted Gross Margin

		Three Months Ended December 31,								Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021				2022				2021
Net sales		$	63,373			$	55,589			$	237,531			$	191,451
Less: Cost of sales			23,780				25,727				89,920				76,864
Gross profit			39,593				29,862				147,611				114,587
Add back:
Technology-related intangible asset amortization			864				551				3,821				2,718
Fixed NanoMetalene supplier processing charge			—				3,704				—				3,704
Purchase accounting inventory fair market value adjustments			—				125				208				542
Adjusted gross profit			40,457				34,242				151,640				121,551
Adjusted gross margin (Adjusted gross profit / Net sales)			63.8	%			61.6	%			63.8	%			63.5	%

Cash Flow and Free Cash Flow

		Year Ended December 31,
(U.S. Dollars, in thousands)		2022				2021
Net cash from operating activities		$	(38,157	)		$	(33,512	)
Net cash from investing activities			(40,325	)			(55,358	)
Net cash from financing activities			24,654				95,545
Effect of exchange rate changes on cash			140				(382	)
Net change in cash and cash equivalents		$	(53,688	)		$	6,293

		Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)		2022				2021
Net cash from operating activities		$	(38,157	)		$	(33,512	)
Capital expenditures			(37,752	)			(26,041	)
Free cash flow		$	(75,909	)		$	(59,553	)

 

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Orthofix Medical Inc.

Alexa Huerta

P: 214-937-3190

E: alexahuerta@orthofix.com

Source: Orthofix Medical Inc.

FAQ

What were Orthofix's Q4 2022 financial results?

Orthofix reported Q4 2022 net sales of $122.2 million, a 2% decrease from the previous year.

What were SeaSpine's Q4 2022 financial results?

SeaSpine's net sales for Q4 2022 were $63.4 million, up 14% year-over-year.

What is the outlook for Orthofix's revenue in 2023?

Orthofix expects net sales for Q1 2023 between $166 million and $170 million, with full year guidance of $743 million to $753 million.

When did the merger between Orthofix and SeaSpine take effect?

The merger became effective on January 5, 2023.

What drove the growth in SeaSpine's revenue for Q4 2022?

SeaSpine's revenue growth was primarily driven by expanded distribution and new product launches in U.S. Spinal Implants and Orthobiologics.