Orthofix Reports Third Quarter 2024 Results, Reiterates Full-Year 2024 Financial Guidance, and Introduces New Three-Year Financial Targets
Building on Positive Momentum from Compelling Combination of Profitable, Above-Market Growth with a Stronger Financial Profile
Recent Highlights
-
Third quarter 2024 net sales of
$196.6 million , an increase of 7% on a reported and constant currency basis compared to third quarter 2023 -
U.S. Spine Fixation1 net sales growth of 18% compared to third quarter 2023, driven by distribution expansion and further penetration in existing accounts - Bone Growth Therapies (BGT) net sales growth of 9% and BGT Fracture net sales growth of 13% compared to third quarter 2023
-
U.S. Orthopedics delivered a record net sales quarter with net sales growth of 15% compared to third quarter of 2023 - Company entered into record number of 7D FLASH™ Navigation System earnout agreements and matched record for highest number of 7D placements in any quarter to date
-
Third quarter 2024 net loss of
$(27.4) million ; Non-GAAP adjusted EBITDA of$19.2 million , an increase of$5.7 million , with adjusted EBITDA margin expanding approximately 250 basis points compared to third quarter 2023 -
Achieves free cash flow of
$5.9 million in third quarter 2024, a significant improvement in cash usage compared to previous quarters -
Announces new
$275 million credit facility that replaces existing financing and further optimizes the Company's capital structure to support long-term profitable growth -
Maintains full-year 2024 net sales guidance of
$795 million to$800 million and full-year 2024 non-GAAP adjusted EBITDA guidance of$64 million to$69 million ; continue to expect positive free cash flow for the second half of 2024 - Introduces new 2027 financial targets to increase transparency and maximize value creation
Third quarter net sales were
“Our third quarter net sales results were driven by focused execution of our key growth priorities, and we also delivered strong adjusted EBITDA margin expansion and positive free cash flow, all of which we believe keeps us on a clear course to achieve our 2024 and long-term financial targets,” said
Financial Results Overview
Third Quarter 2024 Net Sales and Financial Results
The following table provides net sales by major product category by reporting segment:
|
|
Three Months Ended |
|
|||||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Constant
|
|
||||
Bone Growth Therapies |
|
$ |
57.9 |
|
|
$ |
53.4 |
|
|
|
8.6 |
% |
|
|
8.6 |
% |
Spinal Implants, Biologics and Enabling Technologies |
|
|
108.2 |
|
|
|
101.0 |
|
|
|
7.1 |
% |
|
|
7.1 |
% |
Global Spine |
|
|
166.1 |
|
|
|
154.4 |
|
|
|
7.6 |
% |
|
|
7.6 |
% |
Global Orthopedics |
|
|
30.5 |
|
|
|
29.7 |
|
|
|
2.9 |
% |
|
|
2.5 |
% |
Net sales |
|
$ |
196.6 |
|
|
$ |
184.0 |
|
|
|
6.8 |
% |
|
|
6.8 |
% |
Gross margins were 68.7% for the quarter and were 71.3% on a non-GAAP adjusted basis.
Net loss was
Liquidity
Cash, cash equivalents, and restricted cash on
Orthofix Announces New Three-Year Financial Targets
The Company is providing new three-year financial targets for 2025 through 2027:
- 6% to 7% net sales CAGR from 2025 through 2027
- Mid-teens non-GAAP adjusted EBITDA as a percent of net sales for the full-year 2027
- Positive free cash flow generation from 2025 through 2027
Calafiore concluded, “With a compelling combination of profitable, above-market growth and a stronger financial profile, I believe our focused commercial strategy and broad, differentiated technologies, combined with a robust innovation pipeline and our pace-setting, enabling technologies position us well to achieve these targets and deliver increased value to our shareholders.”
Business Outlook
The Company is reiterating its 2024 full-year guidance as follows:
-
Net sales are expected to range between
$795 million to$800 million , representing implied growth of 6.6% to 7.2% year-over year on a constant currency basis. 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. -
Non-GAAP adjusted EBITDA is expected to range from
$64 million to$69 million . - The Company expects to continue to be free cash flow positive for the remainder of 2024.
These guidance ranges do not contemplate any potential impact to elective procedures as a result of IV fluid shortages or other hurricane-related effects.
An investor presentation for the Company's third quarter 2024 financial results, corporate strategy and new three-year financial targets is available in the "Investors" section of
Conference Call
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, intentions, plans, 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, adjusted EBITDA, and free cash flow for the year ended
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.
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.
|
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
|
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
196,606 |
|
|
$ |
184,006 |
|
|
$ |
583,834 |
|
|
$ |
546,226 |
|
Cost of sales |
|
|
61,553 |
|
|
|
64,243 |
|
|
|
186,790 |
|
|
|
196,583 |
|
Gross profit |
|
|
135,053 |
|
|
|
119,763 |
|
|
|
397,044 |
|
|
|
349,643 |
|
Sales and marketing |
|
|
96,576 |
|
|
|
94,947 |
|
|
|
296,843 |
|
|
|
287,987 |
|
General and administrative |
|
|
33,561 |
|
|
|
27,136 |
|
|
|
99,203 |
|
|
|
110,124 |
|
Research and development |
|
|
17,294 |
|
|
|
18,559 |
|
|
|
54,835 |
|
|
|
61,290 |
|
Acquisition-related amortization and remeasurement |
|
|
6,521 |
|
|
|
3,570 |
|
|
|
19,305 |
|
|
|
11,037 |
|
Operating loss |
|
|
(18,899 |
) |
|
|
(24,449 |
) |
|
|
(73,142 |
) |
|
|
(120,795 |
) |
Interest expense, net |
|
|
(5,210 |
) |
|
|
(1,576 |
) |
|
|
(14,711 |
) |
|
|
(4,131 |
) |
Other expense, net |
|
|
(2,528 |
) |
|
|
(2,360 |
) |
|
|
(6,312 |
) |
|
|
(1,704 |
) |
Loss before income taxes |
|
|
(26,637 |
) |
|
|
(28,385 |
) |
|
|
(94,165 |
) |
|
|
(126,630 |
) |
Income tax expense |
|
|
(751 |
) |
|
|
(472 |
) |
|
|
(2,686 |
) |
|
|
(2,591 |
) |
Net loss |
|
$ |
(27,388 |
) |
|
$ |
(28,857 |
) |
|
$ |
(96,851 |
) |
|
$ |
(129,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.71 |
) |
|
$ |
(0.77 |
) |
|
$ |
(2.55 |
) |
|
$ |
(3.53 |
) |
Diluted |
|
|
(0.71 |
) |
|
|
(0.77 |
) |
|
|
(2.55 |
) |
|
|
(3.53 |
) |
Weighted average number of common shares (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
38.5 |
|
|
|
37.2 |
|
|
|
37.9 |
|
|
|
36.6 |
|
Diluted |
|
|
38.5 |
|
|
|
37.2 |
|
|
|
37.9 |
|
|
|
36.6 |
|
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
( |
|
|
|
|
|
|
||
|
|
(Unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
30,054 |
|
|
$ |
33,107 |
|
Restricted Cash |
|
|
2,500 |
|
|
|
4,650 |
|
Accounts receivable, net of allowances of |
|
|
124,845 |
|
|
|
128,098 |
|
Inventories |
|
|
205,812 |
|
|
|
222,166 |
|
Prepaid expenses and other current assets |
|
|
23,003 |
|
|
|
32,422 |
|
Total current assets |
|
|
386,214 |
|
|
|
420,443 |
|
Property, plant, and equipment, net |
|
|
146,685 |
|
|
|
159,060 |
|
Intangible assets, net |
|
|
104,546 |
|
|
|
117,490 |
|
|
|
|
194,934 |
|
|
|
194,934 |
|
Other long-term assets |
|
|
35,493 |
|
|
|
33,388 |
|
Total assets |
|
$ |
867,872 |
|
|
$ |
925,315 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
47,060 |
|
|
$ |
58,357 |
|
Current portion of long-term debt |
|
|
6,250 |
|
|
|
1,250 |
|
Current portion of finance lease liability |
|
|
743 |
|
|
|
708 |
|
Other current liabilities |
|
|
107,845 |
|
|
|
104,908 |
|
Total current liabilities |
|
|
161,898 |
|
|
|
165,223 |
|
Long-term debt |
|
|
112,215 |
|
|
|
93,107 |
|
Long-term portion of finance lease liability |
|
|
18,027 |
|
|
|
18,532 |
|
Other long-term liabilities |
|
|
49,808 |
|
|
|
49,723 |
|
Total liabilities |
|
|
341,948 |
|
|
|
326,585 |
|
Contingencies |
|
|
|
|
|
|
||
Shareholders’ equity |
|
|
|
|
|
|
||
Common shares |
|
|
3,821 |
|
|
|
3,717 |
|
Additional paid-in capital |
|
|
770,000 |
|
|
|
746,450 |
|
Accumulated deficit |
|
|
(246,995 |
) |
|
|
(150,144 |
) |
Accumulated other comprehensive loss |
|
|
(902 |
) |
|
|
(1,293 |
) |
Total shareholders’ equity |
|
|
525,924 |
|
|
|
598,730 |
|
Total liabilities and shareholders’ equity |
|
$ |
867,872 |
|
|
$ |
925,315 |
|
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 |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Gross profit |
|
$ |
135,053 |
|
|
$ |
119,763 |
|
|
$ |
397,044 |
|
|
$ |
349,643 |
|
Share-based compensation expense |
|
|
557 |
|
|
|
463 |
|
|
|
1,591 |
|
|
|
1,416 |
|
|
|
|
1,161 |
|
|
|
2,161 |
|
|
|
5,579 |
|
|
|
6,647 |
|
Strategic investments |
|
|
32 |
|
|
|
55 |
|
|
|
160 |
|
|
|
264 |
|
Acquisition-related fair value adjustments |
|
|
3,047 |
|
|
|
7,922 |
|
|
|
9,141 |
|
|
|
29,007 |
|
Amortization/depreciation of acquired long-lived assets |
|
|
313 |
|
|
|
280 |
|
|
|
840 |
|
|
|
824 |
|
Medical device regulation |
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
676 |
|
Adjusted gross profit |
|
$ |
140,163 |
|
|
$ |
130,650 |
|
|
$ |
414,355 |
|
|
$ |
388,477 |
|
Adjusted gross margin |
|
|
71.3 |
% |
|
|
71.0 |
% |
|
|
71.0 |
% |
|
|
71.1 |
% |
Adjusted EBITDA |
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
(27,388 |
) |
|
$ |
(28,857 |
) |
|
$ |
(96,851 |
) |
|
$ |
(129,221 |
) |
Income tax expense (benefit) |
|
|
751 |
|
|
|
472 |
|
|
|
2,686 |
|
|
|
2,591 |
|
Interest expense, net |
|
|
5,210 |
|
|
|
1,576 |
|
|
|
14,711 |
|
|
|
4,131 |
|
Depreciation and amortization |
|
|
15,173 |
|
|
|
13,097 |
|
|
|
44,067 |
|
|
|
39,094 |
|
Share-based compensation expense |
|
|
6,531 |
|
|
|
6,274 |
|
|
|
25,290 |
|
|
|
32,540 |
|
Foreign exchange impact |
|
|
(1,176 |
) |
|
|
1,909 |
|
|
|
1,263 |
|
|
|
1,057 |
|
|
|
|
2,616 |
|
|
|
5,416 |
|
|
|
12,992 |
|
|
|
34,362 |
|
Strategic investments |
|
|
39 |
|
|
|
484 |
|
|
|
470 |
|
|
|
1,454 |
|
Acquisition-related fair value adjustments |
|
|
5,017 |
|
|
|
7,122 |
|
|
|
15,351 |
|
|
|
26,907 |
|
Interest and loss on investments |
|
|
3,567 |
|
|
|
429 |
|
|
|
5,120 |
|
|
|
429 |
|
Litigation and investigation costs |
|
|
8,335 |
|
|
|
3,851 |
|
|
|
10,318 |
|
|
|
5,611 |
|
Succession charges |
|
|
505 |
|
|
|
(92 |
) |
|
|
8,061 |
|
|
|
170 |
|
Medical device regulation |
|
|
— |
|
|
|
1,840 |
|
|
|
— |
|
|
|
7,519 |
|
Adjusted EBITDA |
|
$ |
19,180 |
|
|
$ |
13,521 |
|
|
$ |
43,478 |
|
|
$ |
26,644 |
|
Adjusted EBITDA as a percentage of net sales |
|
|
9.8 |
% |
|
|
7.3 |
% |
|
|
7.4 |
% |
|
|
4.9 |
% |
Adjusted Net Income |
||||||||||||||||
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
(27,388 |
) |
|
$ |
(28,857 |
) |
|
$ |
(96,851 |
) |
|
$ |
(129,221 |
) |
Share-based compensation expense |
|
|
6,531 |
|
|
|
6,274 |
|
|
|
25,290 |
|
|
|
32,540 |
|
Foreign exchange impact |
|
|
(1,176 |
) |
|
|
1,909 |
|
|
|
1,263 |
|
|
|
1,057 |
|
|
|
|
2,619 |
|
|
|
5,247 |
|
|
|
13,434 |
|
|
|
35,600 |
|
Strategic investments |
|
|
69 |
|
|
|
525 |
|
|
|
566 |
|
|
|
1,631 |
|
Acquisition-related fair value adjustments |
|
|
5,017 |
|
|
|
7,122 |
|
|
|
15,351 |
|
|
|
26,907 |
|
Amortization/depreciation of acquired long-lived assets |
|
|
5,046 |
|
|
|
5,026 |
|
|
|
14,486 |
|
|
|
14,970 |
|
Litigation and investigation costs |
|
|
8,335 |
|
|
|
3,851 |
|
|
|
10,318 |
|
|
|
5,611 |
|
Succession charges |
|
|
505 |
|
|
|
(94 |
) |
|
|
8,061 |
|
|
|
168 |
|
Medical device regulation |
|
|
— |
|
|
|
1,842 |
|
|
|
— |
|
|
|
7,531 |
|
Interest and loss on investments |
|
|
3,567 |
|
|
|
399 |
|
|
|
5,071 |
|
|
|
339 |
|
Long-term income tax rate adjustment |
|
|
(335 |
) |
|
|
(569 |
) |
|
|
2,777 |
|
|
|
2,669 |
|
Adjusted net income (loss) |
|
$ |
2,790 |
|
|
$ |
2,675 |
|
|
$ |
(234 |
) |
|
$ |
(198 |
) |
Cash Flow and Free Cash Flow |
||||||||
|
|
Nine Months Ended |
|
|||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
||
Net cash from operating activities |
|
$ |
2,060 |
|
|
$ |
(39,059 |
) |
Net cash from investing activities |
|
|
(26,445 |
) |
|
|
(18,078 |
) |
Net cash from financing activities |
|
|
19,222 |
|
|
|
40,042 |
|
Effect of exchange rate changes on cash |
|
|
(40 |
) |
|
|
58 |
|
Net change in cash and cash equivalents |
|
$ |
(5,203 |
) |
|
$ |
(17,037 |
) |
|
|
Nine Months Ended |
|
|||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
||
Net cash from operating activities |
|
$ |
2,060 |
|
|
$ |
(39,059 |
) |
Capital expenditures |
|
|
(26,345 |
) |
|
|
(46,997 |
) |
Free cash flow |
|
$ |
(24,285 |
) |
|
$ |
(86,056 |
) |
Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses |
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Sales and marketing expense, as reported |
|
$ |
96,576 |
|
|
$ |
94,947 |
|
|
$ |
296,843 |
|
|
$ |
287,987 |
|
Reconciling items impacting sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
65 |
|
|
|
(1,680 |
) |
|
|
(3,347 |
) |
|
|
(5,201 |
) |
Litigation and investigation costs |
|
|
377 |
|
|
|
— |
|
|
|
377 |
|
|
|
(857 |
) |
Medical device regulation |
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
|
|
(11 |
) |
Amortization/depreciation of acquired long-lived assets |
|
|
(178 |
) |
|
|
(178 |
) |
|
|
(475 |
) |
|
|
(475 |
) |
Sales and marketing expense, as adjusted |
|
$ |
96,840 |
|
|
$ |
93,083 |
|
|
$ |
293,398 |
|
|
$ |
281,443 |
|
Sales and marketing expense as a percentage of net sales, as adjusted |
|
|
49.3 |
% |
|
|
50.6 |
% |
|
|
50.3 |
% |
|
|
51.5 |
% |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
General and administrative expense, as reported |
|
$ |
33,561 |
|
|
$ |
27,136 |
|
|
$ |
99,203 |
|
|
$ |
110,124 |
|
Reconciling items impacting general and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
(1,420 |
) |
|
|
(1,522 |
) |
|
|
(4,254 |
) |
|
|
(21,514 |
) |
Amortization/depreciation of acquired long-lived assets |
|
|
(4 |
) |
|
|
(201 |
) |
|
|
(76 |
) |
|
|
(537 |
) |
Litigation and investigation costs |
|
|
(8,712 |
) |
|
|
(3,852 |
) |
|
|
(10,695 |
) |
|
|
(4,754 |
) |
Succession charges |
|
|
(505 |
) |
|
|
93 |
|
|
|
(8,061 |
) |
|
|
(169 |
) |
General and administrative expense, as adjusted |
|
$ |
22,920 |
|
|
$ |
21,654 |
|
|
$ |
76,117 |
|
|
$ |
83,150 |
|
General and administrative expense as a percentage of net sales, as adjusted |
|
|
11.7 |
% |
|
|
11.8 |
% |
|
|
13.0 |
% |
|
|
15.2 |
% |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development expense, as reported |
|
$ |
17,294 |
|
|
$ |
18,559 |
|
|
$ |
54,835 |
|
|
$ |
61,290 |
|
Reconciling items impacting research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
(69 |
) |
|
|
(356 |
) |
|
|
(645 |
) |
|
|
(2,730 |
) |
Medical device regulation |
|
|
— |
|
|
|
(1,837 |
) |
|
|
— |
|
|
|
(6,854 |
) |
Research and development expense, as adjusted |
|
$ |
17,225 |
|
|
$ |
16,366 |
|
|
$ |
54,190 |
|
|
$ |
51,706 |
|
Research and development expense as a percentage of net sales, as adjusted |
|
|
8.8 |
% |
|
|
8.9 |
% |
|
|
9.3 |
% |
|
|
9.5 |
% |
Reconciliation of Non-GAAP Financial Measures to Reported Non-Operating (Income) Expense
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Non-operating expense |
|
$ |
7,738 |
|
|
$ |
3,936 |
|
|
$ |
21,023 |
|
|
$ |
5,835 |
|
Reconciling items impacting non-operating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange impact |
|
|
1,176 |
|
|
|
(1,909 |
) |
|
|
(1,263 |
) |
|
|
(1,057 |
) |
Strategic investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(895 |
) |
Interest and loss on investments |
|
|
(3,566 |
) |
|
|
(399 |
) |
|
|
(5,070 |
) |
|
|
(339 |
) |
Non-operating expense, as adjusted |
|
$ |
5,348 |
|
|
$ |
1,628 |
|
|
$ |
14,690 |
|
|
$ |
3,544 |
|
Non-operating expense as a percentage of net sales, as adjusted |
|
|
2.7 |
% |
|
|
0.9 |
% |
|
|
2.5 |
% |
|
|
0.6 |
% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241107805269/en/
Investor Relations
JulieDewey@Orthofix.com
(209) 613-6945
Media Relations
DeniseLandry@Orthofix.com
(214) 937-2529
Source: