Orthofix Reports Second Quarter 2024 Results and Raises Full-Year 2024 Financial Guidance
Recent Highlights
-
Second quarter 2024 net sales of
$198.6 million , an increase of 6% on a reported and constant currency basis compared to second quarter 2023 - Bone Growth Therapies (BGT) net sales growth of 12% compared to second quarter 2023, marking six consecutive quarters with double-digit net sales increases
-
U.S. Spine Fixation1 net sales growth of 12% compared to second quarter 2023, driven by distribution expansion and further penetration in existing accounts - Global Orthopedics net sales growth of 5% on a reported basis and 6% on a constant currency basis compared to second quarter 2023
-
Second quarter 2024 net loss of
$(33.4) million ; Non-GAAP adjusted EBITDA of$16.6 million , an increase of$6.7 million , with adjusted EBITDA margin expanding 310 basis points compared to second quarter 2023 - Significant improvement in cash usage, paving the way for earlier than expected positive free cash flow for the second half of 2024
- Announced appointments of four new executive team members, further strengthening the breadth and depth of the Company's leadership team
-
Increases full-year 2024 net sales guidance to
$795 million to$800 million from$790 million to$795 million ; Raises full-year 2024 non-GAAP adjusted EBITDA guidance to$64 million to$69 million from$62 million to$67 million
Second quarter net sales were
“We delivered another strong quarter driven by successful execution of our key growth priorities,” said
1 |
Spine fixation is comprised of the Company's Spinal Implants product category, excluding motion preservation product offerings |
Financial Results Overview
Second 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 |
|
$ |
59.1 |
|
|
$ |
52.7 |
|
|
|
12.3 |
% |
|
|
12.3 |
% |
Spinal Implants, Biologics and Enabling Technologies |
|
|
108.9 |
|
|
|
105.3 |
|
|
|
3.4 |
% |
|
|
3.4 |
% |
Global Spine |
|
|
168.0 |
|
|
|
158.0 |
|
|
|
6.4 |
% |
|
|
6.4 |
% |
Global Orthopedics |
|
|
30.6 |
|
|
|
29.0 |
|
|
|
5.3 |
% |
|
|
6.3 |
% |
Net sales |
|
$ |
198.6 |
|
|
$ |
187.0 |
|
|
|
6.2 |
% |
|
|
6.4 |
% |
Gross margins were 67.8% for the quarter and were 71.3% on a non-GAAP adjusted basis.
Net loss was
Liquidity
Cash, cash equivalents, and restricted cash on
Business Outlook
The Company is increasing its 2024 full-year guidance as follows:
-
Net sales are expected to range between
$795 million to$800 million , representing implied growth of 6.7% to 7.4% year-over-year on a constant currency basis, an increase from the previous guidance range of$790 million to$795 million . 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 , an increase from the previous guidance range of$62 million to$67 million . - Company now expects to be free cash flow positive for the second half of 2024.
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, 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
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
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 |
|
|
Six Months Ended |
|
||||||||||
|
|
|
|
|
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
198,620 |
|
|
$ |
187,016 |
|
|
$ |
387,228 |
|
|
$ |
362,220 |
|
Cost of sales |
|
|
63,871 |
|
|
|
67,465 |
|
|
|
125,237 |
|
|
|
132,340 |
|
Gross profit |
|
|
134,749 |
|
|
|
119,551 |
|
|
|
261,991 |
|
|
|
229,880 |
|
Sales and marketing |
|
|
100,224 |
|
|
|
99,249 |
|
|
|
200,267 |
|
|
|
193,040 |
|
General and administrative |
|
|
33,994 |
|
|
|
34,177 |
|
|
|
65,642 |
|
|
|
82,988 |
|
Research and development |
|
|
18,049 |
|
|
|
19,424 |
|
|
|
37,541 |
|
|
|
42,731 |
|
Acquisition-related amortization and remeasurement |
|
|
7,388 |
|
|
|
3,333 |
|
|
|
12,784 |
|
|
|
7,467 |
|
Operating loss |
|
|
(24,906 |
) |
|
|
(36,632 |
) |
|
|
(54,243 |
) |
|
|
(96,346 |
) |
Interest expense, net |
|
|
(4,943 |
) |
|
|
(1,266 |
) |
|
|
(9,501 |
) |
|
|
(2,555 |
) |
Other income (expense), net |
|
|
(2,510 |
) |
|
|
(20 |
) |
|
|
(3,784 |
) |
|
|
656 |
|
Loss before income taxes |
|
|
(32,359 |
) |
|
|
(37,918 |
) |
|
|
(67,528 |
) |
|
|
(98,245 |
) |
Income tax expense |
|
|
(1,084 |
) |
|
|
(1,508 |
) |
|
|
(1,935 |
) |
|
|
(2,119 |
) |
Net loss |
|
$ |
(33,443 |
) |
|
$ |
(39,426 |
) |
|
$ |
(69,463 |
) |
|
$ |
(100,364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.88 |
) |
|
$ |
(1.07 |
) |
|
$ |
(1.84 |
) |
|
$ |
(2.77 |
) |
Diluted |
|
|
(0.88 |
) |
|
|
(1.07 |
) |
|
|
(1.84 |
) |
|
|
(2.77 |
) |
Weighted average number of common shares (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
38.0 |
|
|
|
36.8 |
|
|
|
37.8 |
|
|
|
36.3 |
|
Diluted |
|
|
38.0 |
|
|
|
36.8 |
|
|
|
37.8 |
|
|
|
36.3 |
|
Condensed Consolidated Balance Sheets |
||||||||
( |
|
|
|
|
|
|
||
|
|
(Unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
26,366 |
|
|
$ |
33,107 |
|
Restricted Cash |
|
|
2,500 |
|
|
|
4,650 |
|
Accounts receivable, net of allowances of |
|
|
125,361 |
|
|
|
128,098 |
|
Inventories |
|
|
210,040 |
|
|
|
222,166 |
|
Prepaid expenses and other current assets |
|
|
21,798 |
|
|
|
32,422 |
|
Total current assets |
|
|
386,065 |
|
|
|
420,443 |
|
Property, plant, and equipment, net |
|
|
154,111 |
|
|
|
159,060 |
|
Intangible assets, net |
|
|
108,310 |
|
|
|
117,490 |
|
|
|
|
194,934 |
|
|
|
194,934 |
|
Other long-term assets |
|
|
38,578 |
|
|
|
33,388 |
|
Total assets |
|
$ |
881,998 |
|
|
$ |
925,315 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
50,362 |
|
|
$ |
58,357 |
|
Current portion of long-term debt |
|
|
4,688 |
|
|
|
1,250 |
|
Current portion of finance lease liability |
|
|
734 |
|
|
|
708 |
|
Other current liabilities |
|
|
100,183 |
|
|
|
104,908 |
|
Total current liabilities |
|
|
155,967 |
|
|
|
165,223 |
|
Long-term debt |
|
|
113,315 |
|
|
|
93,107 |
|
Long-term portion of finance lease liability |
|
|
18,160 |
|
|
|
18,532 |
|
Other long-term liabilities |
|
|
48,552 |
|
|
|
49,723 |
|
Total liabilities |
|
|
335,994 |
|
|
|
326,585 |
|
Contingencies |
|
|
|
|
|
|
||
Shareholders’ equity |
|
|
|
|
|
|
||
Common shares |
|
|
3,804 |
|
|
|
3,717 |
|
Additional paid-in capital |
|
|
764,538 |
|
|
|
746,450 |
|
Accumulated deficit |
|
|
(219,607 |
) |
|
|
(150,144 |
) |
Accumulated other comprehensive loss |
|
|
(2,731 |
) |
|
|
(1,293 |
) |
Total shareholders’ equity |
|
|
546,004 |
|
|
|
598,730 |
|
Total liabilities and shareholders’ equity |
|
$ |
881,998 |
|
|
$ |
925,315 |
|
|
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, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Gross profit |
|
$ |
134,749 |
|
|
$ |
119,551 |
|
|
$ |
261,991 |
|
|
$ |
229,880 |
|
Share-based compensation expense |
|
|
497 |
|
|
|
482 |
|
|
|
1,034 |
|
|
|
953 |
|
|
|
|
3,115 |
|
|
|
3,782 |
|
|
|
4,418 |
|
|
|
4,486 |
|
Strategic investments |
|
|
63 |
|
|
|
29 |
|
|
|
128 |
|
|
|
210 |
|
Acquisition-related fair value adjustments |
|
|
3,047 |
|
|
|
9,449 |
|
|
|
6,094 |
|
|
|
21,085 |
|
Amortization/depreciation of acquired long-lived assets |
|
|
209 |
|
|
|
544 |
|
|
|
527 |
|
|
|
544 |
|
Medical device regulation |
|
|
— |
|
|
|
41 |
|
|
|
— |
|
|
|
669 |
|
Adjusted gross profit |
|
$ |
141,680 |
|
|
$ |
133,878 |
|
|
$ |
274,192 |
|
|
$ |
257,827 |
|
Adjusted gross margin |
|
|
71.3 |
% |
|
|
71.6 |
% |
|
|
70.8 |
% |
|
|
71.2 |
% |
Adjusted EBITDA
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
(33,443 |
) |
|
$ |
(39,426 |
) |
|
$ |
(69,463 |
) |
|
$ |
(100,364 |
) |
Income tax expense (benefit) |
|
|
1,084 |
|
|
|
1,508 |
|
|
|
1,935 |
|
|
|
2,119 |
|
Interest expense, net |
|
|
4,943 |
|
|
|
1,266 |
|
|
|
9,501 |
|
|
|
2,555 |
|
Depreciation and amortization |
|
|
14,032 |
|
|
|
13,327 |
|
|
|
28,894 |
|
|
|
25,997 |
|
Share-based compensation expense |
|
|
9,959 |
|
|
|
13,246 |
|
|
|
18,759 |
|
|
|
26,266 |
|
Foreign exchange impact |
|
|
851 |
|
|
|
(269 |
) |
|
|
2,439 |
|
|
|
(852 |
) |
|
|
|
5,897 |
|
|
|
8,206 |
|
|
|
10,376 |
|
|
|
28,946 |
|
Strategic investments |
|
|
311 |
|
|
|
309 |
|
|
|
431 |
|
|
|
970 |
|
Acquisition-related fair value adjustments |
|
|
6,117 |
|
|
|
8,149 |
|
|
|
10,334 |
|
|
|
19,785 |
|
Interest and loss on investments |
|
|
1,813 |
|
|
|
— |
|
|
|
1,553 |
|
|
|
— |
|
Litigation and investigation costs |
|
|
(277 |
) |
|
|
1,291 |
|
|
|
1,983 |
|
|
|
1,760 |
|
Succession charges |
|
|
5,346 |
|
|
|
262 |
|
|
|
7,556 |
|
|
|
262 |
|
Medical device regulation |
|
|
— |
|
|
|
2,050 |
|
|
|
— |
|
|
|
5,679 |
|
Adjusted EBITDA |
|
$ |
16,633 |
|
|
$ |
9,919 |
|
|
$ |
24,298 |
|
|
$ |
13,123 |
|
Adjusted EBITDA as a percentage of net sales |
|
|
8.4 |
% |
|
|
5.3 |
% |
|
|
6.3 |
% |
|
|
3.6 |
% |
Adjusted Net Income |
||||||||||||||||
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
(33,443 |
) |
|
$ |
(39,426 |
) |
|
$ |
(69,463 |
) |
|
$ |
(100,364 |
) |
Share-based compensation expense |
|
|
9,959 |
|
|
|
13,246 |
|
|
|
18,759 |
|
|
|
26,266 |
|
Foreign exchange impact |
|
|
851 |
|
|
|
(269 |
) |
|
|
2,439 |
|
|
|
(852 |
) |
|
|
|
5,967 |
|
|
|
8,049 |
|
|
|
10,815 |
|
|
|
30,353 |
|
Strategic investments |
|
|
371 |
|
|
|
348 |
|
|
|
497 |
|
|
|
1,046 |
|
Acquisition-related fair value adjustments |
|
|
6,117 |
|
|
|
8,149 |
|
|
|
10,334 |
|
|
|
19,785 |
|
Amortization/depreciation of acquired long-lived assets |
|
|
4,648 |
|
|
|
5,810 |
|
|
|
9,440 |
|
|
|
9,944 |
|
Litigation and investigation costs |
|
|
(277 |
) |
|
|
1,291 |
|
|
|
1,983 |
|
|
|
1,760 |
|
Succession charges |
|
|
5,346 |
|
|
|
262 |
|
|
|
7,556 |
|
|
|
262 |
|
Medical device regulation |
|
|
— |
|
|
|
2,055 |
|
|
|
— |
|
|
|
5,689 |
|
Interest and loss on investments |
|
|
1,764 |
|
|
|
— |
|
|
|
1,504 |
|
|
|
— |
|
Long-term income tax rate adjustment |
|
|
416 |
|
|
|
1,224 |
|
|
|
3,112 |
|
|
|
3,238 |
|
Adjusted net income (loss) |
|
$ |
1,719 |
|
|
$ |
739 |
|
|
$ |
(3,024 |
) |
|
$ |
(2,873 |
) |
Cash Flow and Free Cash Flow |
||||||||
|
|
Six Months Ended |
|
|||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
||
Net cash from operating activities |
|
$ |
(9,611 |
) |
|
$ |
(39,536 |
) |
Net cash from investing activities |
|
|
(20,583 |
) |
|
|
4,265 |
|
Net cash from financing activities |
|
|
21,678 |
|
|
|
21,791 |
|
Effect of exchange rate changes on cash |
|
|
(375 |
) |
|
|
387 |
|
Net change in cash and cash equivalents |
|
$ |
(8,891 |
) |
|
$ |
(13,093 |
) |
|
|
Six Months Ended |
|
|||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
||
Net cash from operating activities |
|
$ |
(9,611 |
) |
|
$ |
(39,536 |
) |
Capital expenditures |
|
|
(20,533 |
) |
|
|
(24,654 |
) |
Free cash flow |
|
$ |
(30,144 |
) |
|
$ |
(64,190 |
) |
Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Sales and marketing expense, as reported |
|
$ |
100,224 |
|
|
$ |
99,249 |
|
|
$ |
200,267 |
|
|
$ |
193,040 |
|
Reconciling items impacting sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
(1,193 |
) |
|
|
(1,422 |
) |
|
|
(3,412 |
) |
|
|
(3,521 |
) |
Litigation and investigation costs |
|
|
— |
|
|
|
(752 |
) |
|
|
— |
|
|
|
(857 |
) |
Medical device regulation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Amortization/depreciation of acquired long-lived assets |
|
|
(119 |
) |
|
|
(297 |
) |
|
|
(297 |
) |
|
|
(297 |
) |
Sales and marketing expense, as adjusted |
|
$ |
98,912 |
|
|
$ |
96,778 |
|
|
$ |
196,558 |
|
|
$ |
188,360 |
|
Sales and marketing expense as a percentage of net sales, as adjusted |
|
|
49.8 |
% |
|
|
51.7 |
% |
|
|
50.8 |
% |
|
|
52.0 |
% |
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
General and administrative expense, as reported |
|
$ |
33,994 |
|
|
$ |
34,177 |
|
|
$ |
65,642 |
|
|
$ |
82,988 |
|
Reconciling items impacting general and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
(1,623 |
) |
|
|
(2,694 |
) |
|
|
(2,834 |
) |
|
|
(19,992 |
) |
Amortization/depreciation of acquired long-lived assets |
|
|
(2 |
) |
|
|
(336 |
) |
|
|
(72 |
) |
|
|
(336 |
) |
Litigation and investigation costs |
|
|
277 |
|
|
|
(538 |
) |
|
|
(1,983 |
) |
|
|
(902 |
) |
Succession charges |
|
|
(5,346 |
) |
|
|
(262 |
) |
|
|
(7,556 |
) |
|
|
(262 |
) |
General and administrative expense, as adjusted |
|
$ |
27,300 |
|
|
$ |
30,347 |
|
|
$ |
53,197 |
|
|
$ |
61,496 |
|
General and administrative expense as a percentage of net sales, as adjusted |
|
|
13.7 |
% |
|
|
16.2 |
% |
|
|
13.7 |
% |
|
|
17.0 |
% |
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development expense, as reported |
|
$ |
18,049 |
|
|
$ |
19,424 |
|
|
$ |
37,541 |
|
|
$ |
42,731 |
|
Reconciling items impacting research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic investments |
|
|
(340 |
) |
|
|
(490 |
) |
|
|
(576 |
) |
|
|
(2,374 |
) |
Medical device regulation |
|
|
— |
|
|
|
(2,027 |
) |
|
|
— |
|
|
|
(5,017 |
) |
Research and development expense, as adjusted |
|
$ |
17,709 |
|
|
$ |
16,907 |
|
|
$ |
36,965 |
|
|
$ |
35,340 |
|
Research and development expense as a percentage of net sales, as adjusted |
|
|
8.9 |
% |
|
|
9.0 |
% |
|
|
9.5 |
% |
|
|
9.8 |
% |
Reconciliation of Non-GAAP Financial Measures to Reported Non-Operating (Income) Expense |
||||||||||||||||
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
(Unaudited, |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Non-operating expense |
|
$ |
7,453 |
|
|
$ |
1,286 |
|
|
$ |
13,285 |
|
|
$ |
1,899 |
|
Reconciling items impacting non-operating expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange impact |
|
|
(851 |
) |
|
|
269 |
|
|
|
(2,439 |
) |
|
|
852 |
|
Strategic investments |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
|
|
(895 |
) |
Interest and (gain) loss on investments |
|
|
(1,787 |
) |
|
|
30 |
|
|
|
(1,504 |
) |
|
|
60 |
|
Non-operating expense, as adjusted |
|
$ |
4,815 |
|
|
$ |
1,570 |
|
|
$ |
9,342 |
|
|
$ |
1,916 |
|
Non-operating expense as a percentage of net sales, as adjusted |
|
|
2.4 |
% |
|
|
0.8 |
% |
|
|
2.4 |
% |
|
|
0.5 |
% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240806732152/en/
Investor Relations
JulieDewey@Orthofix.com
(209) 613-6945
Media Relations
DeniseLandry@Orthofix.com
(214) 937-2529
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