Orthofix Reports Second Quarter 2023 Results and Raises Revenue and Adjusted EBITDA Guidance
- Net sales increased by 58% YoY
- Bone Growth Therapies saw 10% growth
- U.S. spinal implants, biologics, and enabling technologies up 7% YoY
- Gross margin decreased to 63.9%
- Net loss of $(39.4) million
-
Net sales of
$187.0 million 58% on a reported basis and7% 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 up7% 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 and5% 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
“I am very pleased with Orthofix’s performance this quarter, delivering
Financial Results Overview
The following table provides net sales by major product category by reporting segment as reported:
|
|
Three Months Ended June 30, |
|||||||||||
(Unaudited, |
|
2023 |
|
|
2022 |
|
Change |
|
Constant
|
||||
Bone Growth Therapies |
|
$ |
52.7 |
|
|
$ |
47.8 |
|
|
|
|
|
|
Spinal Implants, Biologics and Enabling Technologies |
|
|
105.3 |
|
|
|
43.0 |
|
|
|
|
|
|
Global Spine |
|
|
158.0 |
|
|
|
90.8 |
|
|
|
|
|
|
Global Orthopedics |
|
|
29.0 |
|
|
|
27.3 |
|
|
|
|
|
|
Net sales |
|
$ |
187.0 |
|
|
$ |
118.1 |
|
|
|
|
|
|
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, |
|
2023 |
|
|
2022 Pro Forma |
|
Change |
|
Constant
|
||||
Bone Growth Therapies |
|
$ |
52.7 |
|
|
$ |
47.8 |
|
|
|
|
|
|
Spinal Implants, Biologics and Enabling Technologies |
|
|
105.3 |
|
|
|
100.0 |
|
|
|
|
|
|
Global Spine |
|
|
158.0 |
|
|
|
147.7 |
|
|
|
|
|
|
Global Orthopedics |
|
|
29.0 |
|
|
|
27.3 |
|
|
|
|
|
|
Net sales |
|
$ |
187.0 |
|
|
$ |
175.0 |
|
|
|
|
|
|
Gross profit increased
Net loss was
Adjusted EBITDA was
Liquidity
As of June 30, 2023, cash totaled
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, |
|
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 |
||||||||||||
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
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
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
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, |
||||||||||||
( |
|
|
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 |
||||||||
( |
|
June 30,
|
|
December 31,
|
||||
|
|
(Unaudited) |
|
|
||||
Assets |
|
|
|
|
||||
Current assets |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
37,607 |
|
|
$ |
50,700 |
|
Accounts receivable, net of allowances of |
|
|
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 |
|
|
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
Adjusted Gross Profit and Adjusted Gross Margin |
||||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Unaudited, |
|
|
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
|
|
Six Months Ended
|
||||||||||||
(Unaudited, |
|
|
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
|
|
Six Months Ended
|
||||||||||||
(Unaudited, |
|
|
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
|
|
Six Months Ended
|
||||||||||||
(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, |
|
|
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, |
|
|
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
Source: Orthofix Medical Inc.
