Orthofix Reports Third Quarter 2022 Results
Orthofix Medical reported Q3 2022 net sales of $114.0 million, up 1% year-over-year. Global Orthopedics net sales grew 19% in constant currency, driven by new products. GAAP EPS was ($0.53), while adjusted EPS was $0.13. The company announced a merger with SeaSpine, enhancing growth prospects. Despite a decrease in gross profit to $83.4 million and a net loss of ($10.7 million), adjusted EBITDA improved to $14.3 million. Outlook for 2022 projects full-year net sales between $457-$463 million.
- Global Orthopedics net sales grew 19% in constant currency.
- Adjusted EBITDA rose to $14.3 million, or 12.5% of net sales.
- Successful launch of new products like AccelStim™ and Virtuos™ Lyograft.
- GAAP EPS of ($0.53) reflects a loss compared to previous year.
- Gross profit decreased by $0.7 million to $83.4 million.
- Net loss increased to ($10.7 million) from ($2.2 million) in the prior year.
-
Net sales of
$114.0 million 1% on a reported basis and5% on a constant currency basis over prior year -
Global Orthopedics net sales growth of
19% on a constant currency basis driven by new product and channel investments -
GAAP EPS of (
$0.53 $0.13 -
Orthofix and MTF Biologics recognized with the 2022 Spine Technology Award from Orthopedics This Week for Virtuos™ Lyograft, the first of its kind, shelf-stable and complete autograft substitute - Announced agreement to merge with SeaSpine, creating a leading global spine and orthopedics company
“New product innovation and commercial channel execution delivered a strong performance during the third quarter,” said
Continued Serbousek. “We are bullish about the future of
Financial Results Overview
The following table provides net sales by major product category by reporting segment:
|
|
Three Months Ended |
|
|||||||||||||
(Unaudited, |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Constant
|
|
||||
Bone Growth Therapies |
|
$ |
46,531 |
|
|
$ |
45,168 |
|
|
|
3.0 |
% |
|
|
3.0 |
% |
Spinal Implants |
|
|
25,857 |
|
|
|
28,151 |
|
|
|
(8.1 |
%) |
|
|
(7.1 |
%) |
Biologics |
|
|
13,798 |
|
|
|
12,806 |
|
|
|
7.7 |
% |
|
|
7.7 |
% |
Global Spine |
|
|
86,186 |
|
|
|
86,125 |
|
|
|
0.1 |
% |
|
|
0.4 |
% |
Global Orthopedics |
|
|
27,810 |
|
|
|
26,303 |
|
|
|
5.7 |
% |
|
|
19.0 |
% |
Net sales |
|
$ |
113,996 |
|
|
$ |
112,428 |
|
|
|
1.4 |
% |
|
|
4.8 |
% |
Gross profit decreased
Net loss was
EBITDA was
Liquidity
As of
Business Outlook
As of the date hereof, the Company expects the following net sales results for the year ended
|
|
Current 2022 Outlook |
|
Previous 2022 Outlook |
(Unaudited, |
|
Range |
|
Range |
Full year net sales |
|
|
|
|
Full year net sales growth rates – reported |
|
( |
|
( |
Full year net sales growth rates – constant currency |
|
|
|
|
|
|
|
|
|
Full year adjusted EBITDA |
|
|
|
|
Full year adjusted EBITDA as percentage of net sales 1 |
|
|
|
|
|
|
|
|
|
Full year adjusted EPS |
|
|
|
|
1 Calculated using the midpoint of estimated full year net sales |
||||
The Company is not able to provide expectations of GAAP operating income or GAAP EPS, the closest comparable
Conference Call
In a press release on,
About
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. 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 in Part I, Item 1A under the heading Risk Factors in our Annual Report on Form 10-K for the year ended
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
Condensed Consolidated Statements of Operations |
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
|
|
|
||||||||||
( |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Net sales |
|
$ |
113,996 |
|
|
$ |
112,428 |
|
|
$ |
338,484 |
|
|
$ |
339,415 |
|
Cost of sales |
|
|
30,573 |
|
|
|
28,307 |
|
|
|
90,491 |
|
|
|
81,660 |
|
Gross profit |
|
|
83,423 |
|
|
|
84,121 |
|
|
|
247,993 |
|
|
|
257,755 |
|
Sales and marketing |
|
|
55,461 |
|
|
|
56,097 |
|
|
|
169,486 |
|
|
|
164,220 |
|
General and administrative |
|
|
19,322 |
|
|
|
16,312 |
|
|
|
54,496 |
|
|
|
51,091 |
|
Research and development |
|
|
11,943 |
|
|
|
12,360 |
|
|
|
35,913 |
|
|
|
36,378 |
|
Acquisition-related amortization and remeasurement |
|
|
2,484 |
|
|
|
(335 |
) |
|
|
(9,678 |
) |
|
|
5,028 |
|
Operating income (loss) |
|
|
(5,787 |
) |
|
|
(313 |
) |
|
|
(2,224 |
) |
|
|
1,038 |
|
Interest expense, net |
|
|
(277 |
) |
|
|
(433 |
) |
|
|
(1,059 |
) |
|
|
(1,400 |
) |
Other expense, net |
|
|
(3,308 |
) |
|
|
(1,789 |
) |
|
|
(7,436 |
) |
|
|
(3,528 |
) |
Loss before income taxes |
|
|
(9,372 |
) |
|
|
(2,535 |
) |
|
|
(10,719 |
) |
|
|
(3,890 |
) |
Income tax benefit (expense) |
|
|
(1,344 |
) |
|
|
364 |
|
|
|
(1,968 |
) |
|
|
(1,677 |
) |
Net loss |
|
$ |
(10,716 |
) |
|
$ |
(2,171 |
) |
|
$ |
(12,687 |
) |
|
$ |
(5,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.53 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.63 |
) |
|
$ |
(0.28 |
) |
Diluted |
|
|
(0.53 |
) |
|
|
(0.11 |
) |
|
|
(0.63 |
) |
|
|
(0.28 |
) |
Weighted average number of common shares (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
20.1 |
|
|
|
19.8 |
|
|
|
20.0 |
|
|
|
19.6 |
|
Diluted |
|
|
20.1 |
|
|
|
19.8 |
|
|
|
20.0 |
|
|
|
19.6 |
|
Condensed Consolidated Balance Sheets |
||||||||
( |
|
|
|
|
|
|
||
|
|
(Unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
51,660 |
|
|
$ |
87,847 |
|
Accounts receivable, net of allowances of |
|
|
75,633 |
|
|
|
78,560 |
|
Inventories |
|
|
100,277 |
|
|
|
82,974 |
|
Prepaid expenses and other current assets |
|
|
19,325 |
|
|
|
20,141 |
|
Total current assets |
|
|
246,895 |
|
|
|
269,522 |
|
Property, plant, and equipment, net |
|
|
57,820 |
|
|
|
59,252 |
|
Intangible assets, net |
|
|
47,513 |
|
|
|
52,666 |
|
|
|
|
71,317 |
|
|
|
71,317 |
|
Deferred income taxes |
|
|
1,544 |
|
|
|
1,771 |
|
Other long-term assets |
|
|
24,571 |
|
|
|
22,095 |
|
Total assets |
|
$ |
449,660 |
|
|
$ |
476,623 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
28,003 |
|
|
$ |
26,459 |
|
Current portion of finance lease liability |
|
|
638 |
|
|
|
2,590 |
|
Other current liabilities |
|
|
49,007 |
|
|
|
76,781 |
|
Total current liabilities |
|
|
77,648 |
|
|
|
105,830 |
|
Long-term portion of finance lease liability |
|
|
19,407 |
|
|
|
19,890 |
|
Other long-term liabilities |
|
|
19,066 |
|
|
|
13,969 |
|
Total liabilities |
|
|
116,121 |
|
|
|
139,689 |
|
Contingencies |
|
|
|
|
|
|
||
Shareholders’ equity |
|
|
|
|
|
|
||
Common shares |
|
|
2,001 |
|
|
|
1,983 |
|
Additional paid-in capital |
|
|
328,387 |
|
|
|
313,951 |
|
Retained earnings |
|
|
8,313 |
|
|
|
21,000 |
|
Accumulated other comprehensive loss |
|
|
(5,162 |
) |
|
|
— |
|
Total shareholders’ equity |
|
|
333,539 |
|
|
|
336,934 |
|
Total liabilities and shareholders’ equity |
|
$ |
449,660 |
|
|
$ |
476,623 |
|
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
EBITDA and Adjusted EBITDA
|
|
Three Months Ended |
|
|||||||||||||
(Unaudited, |
|
Total |
|
|
Global Spine |
|
|
Global Orthopedics |
|
|
Corporate |
|
||||
Operating income (loss) |
|
$ |
(5,787 |
) |
|
$ |
5,960 |
|
|
$ |
(183 |
) |
|
$ |
(11,564 |
) |
Other income (expense), net |
|
|
(3,308 |
) |
|
|
(881 |
) |
|
|
(1,868 |
) |
|
|
(559 |
) |
Depreciation and amortization |
|
|
5,499 |
|
|
|
3,120 |
|
|
|
1,424 |
|
|
|
955 |
|
Amortization of acquired intangibles |
|
|
2,071 |
|
|
|
1,917 |
|
|
|
154 |
|
|
|
— |
|
EBITDA |
|
$ |
(1,525 |
) |
|
$ |
10,116 |
|
|
$ |
(473 |
) |
|
$ |
(11,168 |
) |
Share-based compensation |
|
|
4,720 |
|
|
|
1,927 |
|
|
|
476 |
|
|
|
2,317 |
|
Foreign exchange impact |
|
|
3,253 |
|
|
|
875 |
|
|
|
1,816 |
|
|
|
562 |
|
Strategic investments |
|
|
3,392 |
|
|
|
51 |
|
|
|
158 |
|
|
|
3,183 |
|
Acquisition-related fair value adjustments |
|
|
419 |
|
|
|
419 |
|
|
|
— |
|
|
|
— |
|
Loss on investment securities |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Legal judgments/settlements |
|
|
125 |
|
|
|
125 |
|
|
|
— |
|
|
|
— |
|
Succession and transition charges |
|
|
68 |
|
|
|
(44 |
) |
|
|
(7 |
) |
|
|
119 |
|
Medical device regulation |
|
|
2,590 |
|
|
|
1,917 |
|
|
|
678 |
|
|
|
(5 |
) |
Business interruption - COVID-19 |
|
|
1,216 |
|
|
|
1,215 |
|
|
|
— |
|
|
|
1 |
|
Adjusted EBITDA |
|
$ |
14,257 |
|
|
$ |
16,601 |
|
|
$ |
2,648 |
|
|
$ |
(4,992 |
) |
As a % of net sales |
|
|
12.5 |
% |
|
|
14.6 |
% |
|
|
2.3 |
% |
|
|
-4.4 |
% |
|
|
Nine Months Ended |
|
|||||||||||||
(Unaudited, |
|
Total |
|
|
Global Spine |
|
|
Global Orthopedics |
|
|
Corporate |
|
||||
Operating income (loss) |
|
$ |
(2,224 |
) |
|
$ |
34,878 |
|
|
$ |
(6,745 |
) |
|
$ |
(30,357 |
) |
Other income (expense), net |
|
|
(7,436 |
) |
|
|
(1,616 |
) |
|
|
(4,345 |
) |
|
|
(1,475 |
) |
Depreciation and amortization |
|
|
15,251 |
|
|
|
7,879 |
|
|
|
4,386 |
|
|
|
2,986 |
|
Amortization of acquired intangibles |
|
|
6,347 |
|
|
|
5,634 |
|
|
|
713 |
|
|
|
— |
|
EBITDA |
|
$ |
11,938 |
|
|
$ |
46,775 |
|
|
$ |
(5,991 |
) |
|
$ |
(28,846 |
) |
Share-based compensation |
|
|
13,417 |
|
|
|
5,338 |
|
|
|
1,329 |
|
|
|
6,750 |
|
Foreign exchange impact |
|
|
7,486 |
|
|
|
1,912 |
|
|
|
4,328 |
|
|
|
1,246 |
|
Strategic investments |
|
|
6,186 |
|
|
|
153 |
|
|
|
573 |
|
|
|
5,460 |
|
Acquisition-related fair value adjustments |
|
|
(15,795 |
) |
|
|
(15,795 |
) |
|
|
— |
|
|
|
— |
|
Loss on investment securities |
|
|
187 |
|
|
|
— |
|
|
|
— |
|
|
|
187 |
|
Legal judgments/settlements |
|
|
466 |
|
|
|
241 |
|
|
|
223 |
|
|
|
2 |
|
Succession and transition charges |
|
|
146 |
|
|
|
10 |
|
|
|
— |
|
|
|
136 |
|
Medical device regulation |
|
|
6,883 |
|
|
|
4,754 |
|
|
|
2,144 |
|
|
|
(15 |
) |
Business interruption - COVID-19 |
|
|
1,875 |
|
|
|
1,856 |
|
|
|
18 |
|
|
|
1 |
|
Adjusted EBITDA |
|
$ |
32,789 |
|
|
$ |
45,244 |
|
|
$ |
2,624 |
|
|
$ |
(15,079 |
) |
As a % of net sales |
|
|
9.7 |
% |
|
|
13.4 |
% |
|
|
0.8 |
% |
|
|
-4.5 |
% |
|
|
Three Months Ended |
|
|||||||||||||
(Unaudited, |
|
Total |
|
|
Global Spine |
|
|
Global Orthopedics |
|
|
Corporate |
|
||||
Operating income (loss) |
|
$ |
(313 |
) |
|
$ |
10,042 |
|
|
$ |
(976 |
) |
|
$ |
(9,379 |
) |
Other income (expense), net |
|
|
(1,789 |
) |
|
|
(420 |
) |
|
|
(1,231 |
) |
|
|
(138 |
) |
Depreciation and amortization |
|
|
4,926 |
|
|
|
2,501 |
|
|
|
1,571 |
|
|
|
854 |
|
Amortization of acquired intangibles |
|
|
2,225 |
|
|
|
1,785 |
|
|
|
440 |
|
|
|
— |
|
EBITDA |
|
$ |
5,049 |
|
|
$ |
13,908 |
|
|
$ |
(196 |
) |
|
$ |
(8,663 |
) |
Share-based compensation expense |
|
|
3,839 |
|
|
|
1,590 |
|
|
|
490 |
|
|
|
1,759 |
|
Foreign exchange impact |
|
|
1,573 |
|
|
|
426 |
|
|
|
1,013 |
|
|
|
134 |
|
Strategic investments |
|
|
1,322 |
|
|
|
242 |
|
|
|
319 |
|
|
|
761 |
|
Acquisition-related fair value adjustments |
|
|
(2,300 |
) |
|
|
(2,300 |
) |
|
|
— |
|
|
|
— |
|
Legal judgments/settlements |
|
|
(321 |
) |
|
|
443 |
|
|
|
(765 |
) |
|
|
1 |
|
Succession and transition charges |
|
|
21 |
|
|
|
30 |
|
|
|
— |
|
|
|
(9 |
) |
Medical device regulation |
|
|
2,112 |
|
|
|
640 |
|
|
|
501 |
|
|
|
971 |
|
Business interruption - COVID-19 |
|
|
585 |
|
|
|
567 |
|
|
|
10 |
|
|
|
8 |
|
Adjusted EBITDA |
|
$ |
11,880 |
|
|
$ |
15,546 |
|
|
$ |
1,372 |
|
|
$ |
(5,038 |
) |
As a % of net sales |
|
|
10.6 |
% |
|
|
13.8 |
% |
|
|
1.2 |
% |
|
|
-4.5 |
% |
|
|
Nine Months Ended |
|
|||||||||||||
(Unaudited, |
|
Total |
|
|
Global Spine |
|
|
Global Orthopedics |
|
|
Corporate |
|
||||
Operating income (loss) |
|
$ |
1,038 |
|
|
$ |
32,366 |
|
|
$ |
(4,875 |
) |
|
$ |
(26,453 |
) |
Other income (expense), net |
|
|
(3,528 |
) |
|
|
(638 |
) |
|
|
(2,024 |
) |
|
|
(866 |
) |
Depreciation and amortization |
|
|
15,457 |
|
|
|
7,754 |
|
|
|
4,906 |
|
|
|
2,797 |
|
Amortization of acquired intangibles |
|
|
6,696 |
|
|
|
5,353 |
|
|
|
1,343 |
|
|
|
— |
|
EBITDA |
|
$ |
19,663 |
|
|
$ |
44,835 |
|
|
$ |
(650 |
) |
|
$ |
(24,522 |
) |
Share-based compensation expense |
|
|
11,460 |
|
|
|
4,716 |
|
|
|
1,622 |
|
|
|
5,122 |
|
Foreign exchange impact |
|
|
3,174 |
|
|
|
672 |
|
|
|
1,639 |
|
|
|
863 |
|
Strategic investments |
|
|
3,883 |
|
|
|
394 |
|
|
|
2,053 |
|
|
|
1,436 |
|
Acquisition-related fair value adjustments |
|
|
(825 |
) |
|
|
(450 |
) |
|
|
— |
|
|
|
(375 |
) |
Legal judgments/settlements |
|
|
(319 |
) |
|
|
393 |
|
|
|
(660 |
) |
|
|
(52 |
) |
Succession and transition charges |
|
|
664 |
|
|
|
452 |
|
|
|
62 |
|
|
|
150 |
|
Medical device regulation |
|
|
5,923 |
|
|
|
1,745 |
|
|
|
1,567 |
|
|
|
2,611 |
|
Business interruption - COVID-19 |
|
|
632 |
|
|
|
573 |
|
|
|
26 |
|
|
|
33 |
|
Adjusted EBITDA |
|
$ |
44,255 |
|
|
$ |
53,330 |
|
|
$ |
5,659 |
|
|
$ |
(14,734 |
) |
As a % of net sales |
|
|
13.0 |
% |
|
|
15.7 |
% |
|
|
1.7 |
% |
|
|
-4.3 |
% |
Adjusted Net Income
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
||||||||||
(Unaudited, |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net loss |
|
$ |
(10,716 |
) |
|
$ |
(2,171 |
) |
|
$ |
(12,687 |
) |
|
$ |
(5,567 |
) |
Foreign exchange impact |
|
|
3,253 |
|
|
|
1,573 |
|
|
|
7,486 |
|
|
|
3,174 |
|
Strategic investments |
|
|
3,383 |
|
|
|
1,343 |
|
|
|
6,165 |
|
|
|
3,976 |
|
Acquisition-related fair value adjustments |
|
|
419 |
|
|
|
(2,300 |
) |
|
|
(15,795 |
) |
|
|
(825 |
) |
Amortization of acquired intangibles |
|
|
2,070 |
|
|
|
2,232 |
|
|
|
6,352 |
|
|
|
6,713 |
|
Loss on investment securities |
|
|
— |
|
|
|
— |
|
|
|
188 |
|
|
|
— |
|
Legal judgments/settlements |
|
|
125 |
|
|
|
(321 |
) |
|
|
466 |
|
|
|
(319 |
) |
Succession and transition charges |
|
|
68 |
|
|
|
21 |
|
|
|
146 |
|
|
|
664 |
|
Medical device regulation |
|
|
2,594 |
|
|
|
2,112 |
|
|
|
6,890 |
|
|
|
5,923 |
|
Business interruption - COVID-19 |
|
|
1,218 |
|
|
|
587 |
|
|
|
1,881 |
|
|
|
638 |
|
Long-term income tax rate adjustment |
|
|
292 |
|
|
|
(1,096 |
) |
|
|
1,111 |
|
|
|
(2,658 |
) |
Adjusted net income |
|
$ |
2,706 |
|
|
$ |
1,980 |
|
|
$ |
2,203 |
|
|
$ |
11,719 |
|
Adjusted EPS
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
||||||||||
(Unaudited, per diluted share) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
EPS |
|
$ |
(0.53 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.63 |
) |
|
$ |
(0.28 |
) |
Foreign exchange impact |
|
|
0.16 |
|
|
|
0.08 |
|
|
|
0.37 |
|
|
|
0.16 |
|
Strategic investments |
|
|
0.17 |
|
|
|
0.07 |
|
|
|
0.31 |
|
|
|
0.20 |
|
Acquisition-related fair value adjustments |
|
|
0.02 |
|
|
|
(0.12 |
) |
|
|
(0.79 |
) |
|
|
(0.04 |
) |
Amortization of acquired intangibles |
|
|
0.10 |
|
|
|
0.11 |
|
|
|
0.32 |
|
|
|
0.34 |
|
Loss on investment securities |
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
Legal judgments/settlements |
|
|
0.01 |
|
|
|
(0.02 |
) |
|
|
0.02 |
|
|
|
(0.02 |
) |
Succession and transition charges |
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
0.03 |
|
Medical device regulation |
|
|
0.13 |
|
|
|
0.11 |
|
|
|
0.34 |
|
|
|
0.30 |
|
Business interruption - COVID-19 |
|
|
0.06 |
|
|
|
0.03 |
|
|
|
0.09 |
|
|
|
0.03 |
|
Long-term income tax rate adjustment |
|
|
0.01 |
|
|
|
(0.05 |
) |
|
|
0.06 |
|
|
|
(0.13 |
) |
Adjusted EPS |
|
$ |
0.13 |
|
|
$ |
0.10 |
|
|
$ |
0.11 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of diluted common shares (treasury stock method, in millions) |
|
|
20.1 |
|
|
|
20.0 |
|
|
|
20.1 |
|
|
|
19.9 |
|
Cash Flow and Free Cash Flow
|
|
Nine Months Ended |
|
|||||
(Unaudited, |
|
2022 |
|
|
2021 |
|
||
Net cash from operating activities |
|
$ |
(13,886 |
) |
|
$ |
6,696 |
|
Net cash from investing activities |
|
|
(18,634 |
) |
|
|
(14,031 |
) |
Net cash from financing activities |
|
|
(1,576 |
) |
|
|
(5,673 |
) |
Effect of exchange rate changes on cash |
|
|
(2,091 |
) |
|
|
(598 |
) |
Net change in cash and cash equivalents |
|
$ |
(36,187 |
) |
|
$ |
(13,606 |
) |
|
|
Nine Months Ended |
|
|||||
(Unaudited, |
|
2022 |
|
|
2021 |
|
||
Net cash from operating activities |
|
$ |
(13,886 |
) |
|
$ |
6,696 |
|
Capital expenditures |
|
|
(17,260 |
) |
|
|
(12,781 |
) |
Free cash flow |
|
$ |
(31,146 |
) |
|
$ |
(6,085 |
) |
Constant Currency
Constant currency is a non-GAAP measure, which we calculate by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.
EBITDA
EBITDA is a non-GAAP financial measure, which we calculate by adding interest income (expense), net; income tax expense (benefit); and depreciation and amortization to net income. EBITDA provides management with additional insight to its results of operations. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing our business.
Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS
These non-GAAP financial measures provide management with additional insight to its results of operations and reflect the exclusion of the following items:
-
Share-based compensation expense – costs related to our share-based compensation plans, which include stock options, restricted stock, performance-based or market-based restricted stock, and our stock purchase plan; see the share-based compensation footnote in our Form 10-Q for the quarter ended
September 30, 2022 for an allocation of these costs by consolidated statement of operations line item; note that certain share-based compensation costs are instead included within medical device regulation for 2021 and 2022 - Foreign exchange impact – gains and losses related to foreign currency transactions, which are recorded as other income (expense), net
- Strategic investments – costs related to our strategic investments, such as due diligence and integration costs, which are primarily recorded as general and administrative expenses
- Acquisition-related fair value adjustments – comprised of (i) gains and losses related to remeasurement of contingent consideration to fair value, which are recorded as operating expenses and (ii) recognized costs related to acquired in-process research and development assets, which were expensed immediately
- Amortization of acquired intangibles – amortization of intangible assets acquired in business combinations or asset acquisitions, including items such as developed technologies, customer relationships, trade names, manufacturing agreements, and other intangible assets, which are recorded in cost of sales or operating expenses
- Loss on investment securities – net gains or losses recognized (realized or unrealized) within other income (expense), net relating to certain of our investments
- Legal judgments/settlements – adverse or favorable legal judgments or negotiated legal settlements, which are recorded as general and administrative expenses
- Succession and transition charges – costs related to the transition of certain named executive officers and certain targeted restructuring costs, including any cessation and onboarding amounts, accelerated share-based compensation expense, consulting services, and other related expenses, which are primarily recorded as general and administrative expenses
-
Medical device regulation – incremental costs incurred (i) to establish initial compliance with the regulations set forth by the European Union Medical Device Regulation (“MDR”) and the
U.S. Food and Drug Administration related to our currently-approved medical devices, which are recorded primarily as research and development expenses, and (ii) related to rationalization of certain product lines that we do not expect to continue to market subsequent to the effective date of these regulations, which are recorded primarily as costs of sales - Business interruption – COVID-19 – gains and losses related to the realized effects the COVID-19 pandemic has had on our business operations, which consist primarily of (i) certain legislative relief received as a result of the COVID-19 pandemic, (ii) costs associated with the redesign of certain products in response to supply chain disruption, and (iii) incremental costs incurred to enhance the safety and sanitation of our facilities
-
Long-term income tax rate adjustment – reflects management’s expectation of a long-term normalized effective tax rate of
27% for 2021 and28% for the fiscal year 2022 results and outlook, which is based on current tax law and current expected adjusted income; actual reported tax expense will ultimately be based on GAAP earnings and may differ from the expected long-term normalized effective tax rate due to a variety of factors, including the resolutions of issues arising from tax audits with various tax authorities, the ability to realize deferred tax assets, and the tax impact of certain reconciling items that are excluded in determining Adjusted Net Income and Adjusted EPS
Free Cash Flow
Free cash flow is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operating activities. Free cash flow is an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow to measure progress on its capital efficiency and cash flow initiatives.
Usefulness and Limitations of Non-GAAP Financial Measures
Management uses non-GAAP measures to evaluate performance period-over-period, analyze the underlying trends in our business, assess performance relative to competitors, and establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures as the basis for evaluating the ability of the underlying operations to generate cash. In addition, management uses these non-GAAP measures to further its understanding of the performance of our business units.
Material Limitations Associated with the Use of Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost and can have a material effect on cash flows. Similarly, certain non-cash expenses, such as share-based compensation, do not directly impact cash flows, but are part of total compensation costs accounted for under GAAP.
Compensation for Limitations Associated with Use of Non-GAAP Financial Measures
We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. The GAAP results provide management with the ability to further understand our performance based on a defined set of criteria. Management believes that the non-GAAP measures reflect the underlying operating results of our businesses and provide an important measure of our overall performance. We provide detailed reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures above and encourage investors to review these reconciliations.
Usefulness of Non-GAAP Financial Measures to Investors
We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to our historical operating results and internally evaluate the effectiveness of our operating strategies. We believe that disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221103005445/en/
P: 214-937-3190
E: alexahuerta@orthofix.com
Source:
FAQ
What were Orthofix's net sales for Q3 2022?
What is the adjusted EPS for Orthofix in Q3 2022?
How does the merger with SeaSpine affect Orthofix's future?
What was the gross profit margin for Orthofix in Q3 2022?
What is the financial outlook for Orthofix for 2022?
