- Net sales of $118.1 million, a decrease of 3% on a reported basis and flat on a constant currency basis over prior year
- Global Orthopedics net sales growth of 11% on a constant currency basis driven by new products and channel investments
- GAAP EPS of $0.12 and adjusted EPS of $0.08
- Executed partnership with CGBio to commercialize Novosis™ rhBMP-2 growth factor in the U.S. and Canada
- Limited launch of Virtuos™ Lyograft, a first-of-its-kind, shelf-stable and complete autograft substitute
- Full year revenue guidance of $455 to $465, which represents flat to 2% growth on a constant currency basis over prior year
August 5, 2022
LEWISVILLE, Texas–(BUSINESS WIRE)–Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the quarter ended June 30, 2022. Net sales were $118.1 million, earnings per share (“EPS”) was $0.12, and adjusted EPS was $0.08.
“We’re pleased with our execution in the second quarter, which was led by double digit growth in our global orthopedic business as well as early commercial traction of new spine products. In addition, we made significant progress on our innovation initiatives, highlighted by the successful launches of the AccelStim™ Bone Healing Therapy and Virtuos Lyograft, as well as our recent partnerships with LimaCorporate and CGBio,” said Orthofix President and Chief Executive Officer Jon Serbousek. “We had solid operational execution, despite the challenges that macro headwinds continue to present, including continued hospital staffing shortages, complex spine procedure softness, and patients deferring care due to economic pressures. In addition, currency fluctuations during the quarter dampened reported revenue results.”
Continued Serbousek, “We remain incredibly bullish on the long-term opportunity here at Orthofix. While the macro environment is causing near-term volatility, we are fully committed to driving accelerated topline growth in the high single digits and continuing to execute towards increasing profitability. With the strength of our balance sheet as well as organic and inorganic investments made throughout the organization, we will work to continue to drive growth over the near term from key new product launches and channel expansion.”
Financial Results Overview
The following table provides net sales by major product category by reporting segment:
| Three Months Ended June 30, | |||||||
| (Unaudited, U.S. Dollars, in thousands) | 2022 | 2021 | Change | ConstantCurrencyChange | |||
| Bone Growth Therapies | $47,765 | $49,706 | (3.9%) | (3.9%) | |||
| Spinal Implants | 28,222 | 30,092 | (6.2%) | (5.4%) | |||
| Biologics | 14,795 | 14,852 | (0.4%) | (0.4%) | |||
| Global Spine | 90,782 | 94,650 | (4.1%) | (3.8%) | |||
| Global Orthopedics | 27,288 | 26,744 | 2.0% | 11.4% | |||
| Net sales | $118,070 | $121,394 | (2.7%) | (0.5%) | |||
Gross profit decreased $7.5 million to $86.5 million. Gross margin decreased to 73.2% compared to 77.4% in the prior year period.
Net income was $2.5 million, or $0.12 per share, compared to net income of $2.4 million, or $0.12 per share in the prior year period. Adjusted net income was $1.5 million, or $0.08 per share, compared to adjusted net income of $6.3 million, or $0.32 per share in the prior year period.
EBITDA was $10.0 million, compared to $12.8 million in the prior year period. Adjusted EBITDA was $11.4 million, or 9.7% of net sales, compared to $18.4 million, or 15.1% of net sales, in the prior year period.
Liquidity
As of June 30, 2022, cash and cash equivalents totaled $59.5 million, compared to $87.8 million as of December 31, 2021. As of June 30, 2022, the Company had no borrowings under its five year $300 million secured revolving credit facility. Cash flow from operations decreased $12.9 million to $(12.6) million, while free cash flow decreased $14.8 million to $(24.3) million.
CGBio Exclusive Recombinant Bone Growth Protein Partnership
On August 2, 2022, we announced our new long-term strategic license and distribution agreement with CGBio, a developer of innovative, synthetic bone grafts currently approved and commercially available in South Korea, Southeast Asia, Mexico, and India. The agreement grants us the exclusive right to conduct pre-clinical and clinical studies, commercialize, promote, market, and sell the Novosis (rhBMP-2) recombinant bone growth protein in the U.S. and Canada. Novosis is a novel composite bone graft material that is flowable and provides moldable handling characteristics that are unique compared to what is currently on the market in the U.S. and Canada and represents the next evolution of bone growth factor technology.
Business Outlook
As of the date hereof, the Company expects the following net sales results for the year ended December 31, 2022. These expectations are based on the current foreign currency exchange rates and do not include any additional exchange rate changes that may occur this year.
| Current 2022 Outlook | Previous 2022 Outlook | |
| (Unaudited, U.S. Dollars, in millions, except per share data) | Range | Range |
| Full year net sales | $455 – $465 | $475 – $490 |
| Full year net sales growth rates – reported | (2%) – 0% | 2% – 5% |
| Full year net sales growth rates – constant currency | 0% – 2% | 4% – 7% |
| Full year adjusted EBITDA | $53 – $57 | $56 – $61 |
| Full year adjusted EBITDA as percentage of net sales 1 | 12% | 12% – 13% |
| Full year adjusted EPS | $0.45-$0.55 | $0.58-$0.73 |
| 1 Calculated using the midpoint of estimated full year net sales |
The Company is not able to provide expectations of operating income or GAAP EPS, the closest comparable U.S. GAAP measures to Adjusted EBITDA and Adjusted EPS, respectively (each of which are non-GAAP measures), on a forward-looking basis because the Company is unable to predict without unreasonable efforts the ultimate outcome of matters (including legal proceedings, acquisition-related expenses, accounting fair value adjustments, and other such items) that will determine the quantitative amount of the items excluded from the applicable non-GAAP measure, 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 U.S. GAAP.
Conference Call
Orthofix will host a conference call today at 8:30 AM Eastern time to discuss the Company’s financial results for the second quarter of 2022. Interested parties may access the conference call by dialing (844) 200-6205 in the U.S. and Canada, and (929) 526-1599 all other locations, and referencing the access code 135199. A replay of the call will be available for three weeks by dialing (866) 813-9403 in the U.S. and Canada, and (929) 458-6194 in all other locations, and entering the access code 312854. A webcast of the conference call may be accessed at ir.Orthofix.com.
About Orthofix
Orthofix Medical Inc. is a global medical device company with a spine and orthopedics focus. The Company’s mission is to deliver innovative, quality-driven solutions while partnering with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedics products are distributed in more than 60 countries via the Company’s sales representatives and distributors. For more information, please visit www.orthofix.com.
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 December 31, 2021 (the “2021 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, 2022. Factors that could cause or contribute to such differences may include, but are not limited to, (i) risks relating to the effects of the COVID-19 pandemic on our business, (ii) our ability to maintain operations to support our customers and patients in the near-term and to capitalize on future growth opportunities, (iii) risks associated with acceptance of surgical products and procedures by surgeons and hospitals, (iv) development and acceptance of new products or product enhancements, (v) clinical and statistical verification of the benefits achieved via the use of our products, (vi) our ability to adequately manage inventory, (vii) our ability to recruit and retain management and key personnel, (viii) global economic instability and potential supply chain disruption caused by Russia’s unlawful invasion of Ukraine and resulting sanctions, and (ix) the other risks and uncertainties more fully described in our periodic filings with the Securities and Exchange Commission (the “SEC”). To the extent that the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in Part I, Item 1A under the heading Risk Factors in our 2021 Form 10-K, such as our ability to generate sufficient cash flows to run our business and our ability to protect our information technology networks and infrastructure from unauthorized access, misuse, malware, phishing and other events that could have a security impact as a result of our remote working environment or otherwise. As a result of these various risks, our actual outcomes and results may differ materially from those expressed in these forward-looking statements.
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.
