Orthofix Reports First Quarter 2024 Results
Recent Highlights
-
Net sales of
$188.6 million , an increase of 7.7% on a reported basis and 7.5% on a constant currency basis over prior year - Bone Growth Therapies net sales growth of 10%, marking five consecutive quarters with double-digit net sales increases
-
U.S. Spine Fixation1 net sales growth of 16%, driven by distribution expansion and further penetration in existing accounts -
Global Orthopedics net sales growth of 5% on a reported basis, primarily driven by
U.S. Orthopedic net sales growth of 23% -
First quarter 2024 net loss of
$36 million ; Non-GAAP Adjusted EBITDA of$8 million , an increase of$4.5 million , a 220 basis point expansion over prior year -
Midpoint of full year 2024 net sales guidance raised; range narrowed to
$790.0-$795.0 million
First quarter net sales were
“Orthofix executed well on a number of key priorities in the first quarter of the year and delivered notable growth in all of its
1 |
Spine fixation is comprised of the Company's Spinal Implants product category, excluding motion preservation product offerings |
Financial Results Overview
First Quarter 2024 Net Sales and Financial Results
The following table provides net sales by major product category by reporting segment on a reporting basis:
|
Three Months Ended |
|||||||||||
(Unaudited, |
2024 |
|
2023 |
|
Change |
|
Constant
|
|||||
Bone Growth Therapies |
$ |
52.5 |
$ |
47.7 |
10.0 |
% |
10.0 |
% |
||||
Spinal Implants, Biologics and Enabling Technologies |
|
108.8 |
|
101.5 |
7.2 |
% |
7.2 |
% |
||||
Global Spine |
|
161.3 |
|
149.2 |
8.1 |
% |
8.1 |
% |
||||
Global Orthopedics |
|
27.3 |
|
26.0 |
5.1 |
% |
3.8 |
% |
||||
Net sales |
$ |
188.6 |
$ |
175.2 |
7.7 |
% |
7.5 |
% |
Gross margins were 67.5% for the quarter and were 70.3% on a non-GAAP adjusted basis.
Net loss was
Liquidity
Cash, cash equivalents, and restricted cash on
Business Outlook
The Company is providing updated 2024 full year guidance as follows:
-
Net sales to range between
$790 million to$795 million , representing implied growth of 6% to 7% year-over-year on a constant currency basis; narrowed from previous guidance of$785 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. -
Reiterating previous guidance for non-GAAP adjusted EBITDA ranging from
$62 million to$67 million - Expect to be free cash flow positive for Q4 2024
Conference Call
About
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
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 |
||||||
|
|
|
||||||
( |
2024 |
|
2023 |
|||||
|
(Unaudited) |
|||||||
Net sales |
$ |
188,608 |
|
$ |
175,204 |
|
||
Cost of sales |
|
61,366 |
|
|
64,875 |
|
||
Gross profit |
|
127,242 |
|
|
110,329 |
|
||
Sales and marketing |
|
100,043 |
|
|
93,791 |
|
||
General and administrative |
|
31,648 |
|
|
48,811 |
|
||
Research and development |
|
19,492 |
|
|
23,307 |
|
||
Acquisition-related amortization and remeasurement |
|
5,396 |
|
|
4,134 |
|
||
Operating loss |
|
(29,337 |
) |
|
(59,714 |
) |
||
Interest expense, net |
|
(4,558 |
) |
|
(1,289 |
) |
||
Other income (expense), net |
|
(1,274 |
) |
|
676 |
|
||
Loss before income taxes |
|
(35,169 |
) |
|
(60,327 |
) |
||
Income tax expense |
|
(851 |
) |
|
(611 |
) |
||
Net loss |
$ |
(36,020 |
) |
$ |
(60,938 |
) |
||
|
|
|
|
|
||||
Net loss per common share: |
|
|
|
|
||||
Basic |
$ |
(0.95 |
) |
$ |
(1.71 |
) |
||
Diluted |
|
(0.95 |
) |
|
(1.71 |
) |
||
Weighted average number of common shares (in millions): |
|
|
|
|
||||
Basic |
|
37.7 |
|
|
35.7 |
|
||
Diluted |
|
37.7 |
|
|
35.7 |
|
||
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
( |
|
|
||||||
|
(Unaudited) |
|
|
|||||
Assets |
|
|
|
|
||||
Current assets |
|
|
|
|
||||
Cash and cash equivalents |
$ |
26,964 |
|
$ |
33,107 |
|
||
Restricted Cash |
|
2,500 |
|
|
4,650 |
|
||
Accounts receivable, net of allowances of |
|
125,617 |
|
|
128,098 |
|
||
Inventories |
|
219,076 |
|
|
222,166 |
|
||
Prepaid expenses and other current assets |
|
24,821 |
|
|
32,422 |
|
||
Total current assets |
|
398,978 |
|
|
420,443 |
|
||
Property, plant, and equipment, net |
|
158,132 |
|
|
159,060 |
|
||
Intangible assets, net |
|
112,761 |
|
|
117,490 |
|
||
|
|
194,934 |
|
|
194,934 |
|
||
Other long-term assets |
|
41,245 |
|
|
33,388 |
|
||
Total assets |
$ |
906,050 |
|
$ |
925,315 |
|
||
Liabilities and shareholders’ equity |
|
|
|
|
||||
Current liabilities |
|
|
|
|
||||
Accounts payable |
$ |
57,147 |
|
$ |
58,357 |
|
||
Current portion of long-term debt |
|
3,125 |
|
|
1,250 |
|
||
Current portion of finance lease liability |
|
724 |
|
|
708 |
|
||
Other current liabilities |
|
89,625 |
|
|
104,908 |
|
||
Total current liabilities |
|
150,621 |
|
|
165,223 |
|
||
Long-term debt |
|
115,071 |
|
|
93,107 |
|
||
Long-term portion of finance lease liability |
|
18,345 |
|
|
18,532 |
|
||
Other long-term liabilities |
|
51,698 |
|
|
49,723 |
|
||
Total liabilities |
|
335,735 |
|
|
326,585 |
|
||
Contingencies |
|
|
|
|
||||
Shareholders’ equity |
|
|
|
|
||||
Common shares |
|
3,741 |
|
|
3,717 |
|
||
Additional paid-in capital |
|
753,398 |
|
|
746,450 |
|
||
Accumulated deficit |
|
(186,164 |
) |
|
(150,144 |
) |
||
Accumulated other comprehensive loss |
|
(660 |
) |
|
(1,293 |
) |
||
Total shareholders’ equity |
|
570,315 |
|
|
598,730 |
|
||
Total liabilities and shareholders’ equity |
$ |
906,050 |
|
$ |
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 |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Gross profit |
$ |
127,242 |
|
$ |
110,329 |
|
||
Share-based compensation expense |
|
537 |
|
|
471 |
|
||
|
|
1,303 |
|
|
703 |
|
||
Strategic investments |
|
65 |
|
|
180 |
|
||
Acquisition-related fair value adjustments |
|
3,047 |
|
|
11,636 |
|
||
Amortization/depreciation of acquired long-lived assets |
|
318 |
|
|
— |
|
||
Medical device regulation |
|
— |
|
|
629 |
|
||
Adjusted gross profit |
$ |
132,512 |
|
$ |
123,948 |
|
||
Adjusted gross margin |
|
70.3 |
% |
|
70.7 |
% |
Adjusted EBITDA |
||||||||
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
2023 |
||||||
Loss before income taxes |
$ |
(35,169 |
) |
$ |
(60,327 |
) |
||
Interest expense, net |
|
4,558 |
|
|
1,289 |
|
||
Depreciation and amortization |
|
14,862 |
|
|
12,670 |
|
||
Share-based compensation expense |
|
8,800 |
|
|
13,020 |
|
||
Foreign exchange impact |
|
1,588 |
|
|
(583 |
) |
||
|
|
4,520 |
|
|
20,740 |
|
||
Strategic investments |
|
120 |
|
|
661 |
|
||
Acquisition-related fair value adjustments |
|
4,217 |
|
|
11,636 |
|
||
Litigation and investigation costs |
|
2,260 |
|
|
469 |
|
||
Succession charges |
|
2,210 |
|
|
— |
|
||
Medical device regulation |
|
— |
|
|
3,629 |
|
||
All other |
|
(301 |
) |
|
— |
|
||
Adjusted EBITDA |
$ |
7,665 |
|
$ |
3,204 |
|
||
Adjusted EBITDA as a percentage of net sales |
|
4.1 |
% |
|
1.8 |
% |
Cash Flow and Free Cash Flow |
||||||||
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Net cash from operating activities |
$ |
(18,595 |
) |
$ |
(34,020 |
) |
||
Net cash from investing activities |
|
(10,867 |
) |
|
17,084 |
|
||
Net cash from financing activities |
|
21,453 |
|
|
15,983 |
|
||
Effect of exchange rate changes on cash |
|
(284 |
) |
|
221 |
|
||
Net change in cash and cash equivalents |
$ |
(8,293 |
) |
$ |
(732 |
) |
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Net cash from operating activities |
$ |
(18,595 |
) |
$ |
(34,020 |
) |
||
Capital expenditures |
|
(10,817 |
) |
|
(11,835 |
) |
||
Free cash flow |
$ |
(29,412 |
) |
$ |
(45,855 |
) |
Reconciliation of Non-GAAP Financial Measures to Reported Operating Expenses |
||||||||
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Net sales |
$ |
188,608 |
|
$ |
175,204 |
|
||
Sales and marketing, as reported |
|
100,043 |
|
|
93,791 |
|
||
Reconciling items impacting sales and marketing: |
|
|
|
|
||||
Strategic investments |
|
(2,219 |
) |
|
(2,099 |
) |
||
Litigation and investigation costs |
|
— |
|
|
(105 |
) |
||
Medical device regulation |
|
— |
|
|
(5 |
) |
||
Amortization/depreciation of acquired long-lived assets |
|
(178 |
) |
|
— |
|
||
Sales and marketing, as adjusted |
$ |
97,646 |
|
$ |
91,582 |
|
||
Sales and marketing as a percentage of net sales, as adjusted |
|
51.8 |
% |
|
52.3 |
% |
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Net sales |
$ |
188,608 |
|
$ |
175,204 |
|
||
General and administrative, as reported |
|
31,648 |
|
|
48,811 |
|
||
Reconciling items impacting general and administrative: |
|
|
|
|
||||
Strategic investments |
|
(1,211 |
) |
|
(17,298 |
) |
||
Amortization/depreciation of acquired long-lived assets |
|
(70 |
) |
|
— |
|
||
Litigation and investigation costs |
|
(2,260 |
) |
|
(364 |
) |
||
Succession charges |
|
(2,210 |
) |
|
— |
|
||
General and administrative, as adjusted |
$ |
25,897 |
|
$ |
31,149 |
|
||
General and administrative as a percentage of net sales, as adjusted |
|
13.7 |
% |
|
17.8 |
% |
|
Three Months Ended |
|||||||
(Unaudited, |
2024 |
|
2023 |
|||||
Net sales |
$ |
188,608 |
|
$ |
175,204 |
|
||
Research and development, as reported |
|
19,492 |
|
|
23,307 |
|
||
Reconciling items impacting research and development: |
|
|
|
|
||||
Strategic investments |
|
(236 |
) |
|
(1,884 |
) |
||
Medical device regulations |
|
— |
|
|
(2,990 |
) |
||
Research and development, as adjusted |
$ |
19,256 |
|
$ |
18,433 |
|
||
Research and development as a percentage of net sales, as adjusted |
|
10.2 |
% |
|
10.5 |
% |
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Company Contact
ir@orthofix.com
Source: