Orthofix Medical Inc
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
OFIX$7.87-11.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000950170-24-053966
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000950170-24-091200
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 149 current paragraphs.
55 unchanged; 38 reworded; 38 added; 16 removed; 0 previous and 18 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
Significant improvement in cash usage, paving the way for earlier than expected positive free cash flow for the second half of 2024
Current report
Announced appointments of four new executive team members, further strengthening the breadth and depth of the Company's leadership team
Current report
Net sales of $168.0 million, an increase of $10.1 million or 6.4%
Current report
Net sales of $329.3 million, an increase of $22.1 million or 7.2%
Current report
Net sales of $30.6 million, an increase of $1.5 million or 5.3%
Current report
International growth of $1.3 million, or 5.9% on a constant currency basis, primarily driven by recent product launches in Europe
Current report
Net sales of $57.9 million, an increase of $2.9 million or 5.2%
Current report
International growth of 1.9% on a constant currency basis, driven by recent product launches in Europe and offset by the timing of certain stocking distributor orders
Current report
Gross profit increased $15.2 million
Current report
Increase of $2.1 million driven by a reduction in certain inventory-related charges, primarily due to rationalization decisions made in the prior year related to the Merger
Current report
Gross profit increased $32.1 million
Current report
Increase of $2.8 million driven by a reduction in certain inventory-related charges, primarily due to rationalization decisions made in the prior year related to the Merger
Current report
Sales and marketing expense increased $1.0 million
Current report
Partially offset by a decrease of $2.9 million in other compensation expenses, including share-based compensation, primarily due to the realization of synergies following the Merger
Current report
Sales and marketing expense increased $7.2 million
Current report
Partially offset by a decrease of $2.6 million in other compensation expenses, including share-based compensation, primarily due to the realization of synergies following the Merger
Current report
General and administrative expense decreased $0.2 million
Current report
Reduction in general and administrative expenses by the realization of Merger-related synergies, primarily from headcount
Current report
Decrease of $0.8 million driven by a favorable change in litigation and investigation related costs, including the release of a $2.5 million accrual in the second quarter of 2024
Current report
General and administrative expense decreased $17.3 million
Current report
Reduction in general and administrative expenses by the realization of Merger-related synergies, primarily from headcount
Current report
Further offset by an increase of $1.1 million driven by an unfavorable change in litigation and investigation related costs
Current report
Research and development expense decreased $1.4 million
Current report
Partially offset by an increase in product development and clinical expenses
Current report
Research and development expense decreased $5.2 million
Current report
Partially offset by an increase in product development and clinical expenses
Current report
Acquisition-related amortization and remeasurement increased $4.1 million
Current report
Partially offset by a decrease of $0.3 million in amortization expense of intangible assets acquired in the Merger
Current report
Acquisition-related amortization and remeasurement increased $5.3 million
Current report
Partially offset by a decrease of $0.2 million in amortization expense of intangible assets acquired in the Merger
Current report
Decrease of $0.2 million of interest income resulting from the conversion of the convertible loan with Neo Medical into preferred equity securities in the second quarter of 2024
Current report
Decrease of $1.4 million associated with the impairment of certain investments measured at fair value
Current report
Decrease of $0.3 million of interest income resulting from the conversion of the convertible loan with Neo Medical into preferred equity securities in the second quarter of 2024
Current report
Decrease of $1.4 million associated with the impairment of certain investments measured at fair value
Current report
The decrease in tax expense compared to the prior year period is primarily due to withholding tax of $0.6 million that did not recur in the same period in 2024
Current report
The decrease in tax expense compared to the prior year period is partially attributable to amortization expense on long lived intangible assets offset by withholding tax in the prior year of $0.6 million that did not recur in 2024
Current report
Decrease of $2.1 million in debt issuance costs associated with the Financing Agreement with Blue Torch Financing LLC
Current report
Further offset by an increase in net proceeds of $0.2 million from the issuance of common shares and from the payment of a contingent consideration milestone of $0.9 million in the prior year
Removed paragraphs (16)
Previous report
First quarter 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
Previous report
Net sales of $161.3 million, an increase of $12.1 million or 8.1%
Previous report
Net sales of $27.3 million, an increase of $1.3 million or 5.1%
Previous report
International sales were flat compared to prior year due to healthcare provider strikes in the UK and timing of certain stocking distributors' orders
Previous report
Gross profit increased $16.9 million
Previous report
Sales and marketing expense increased $6.3 million
Previous report
General and administrative expense decreased $17.2 million
Previous report
Research and development expense decreased $3.8 million
Previous report
Acquisition-related amortization and remeasurement increased $1.3 million
Previous report
Offset by a decrease of $0.6 million attributable to an early termination prepayment penalty associated with the payoff of the assumed indebtedness of SeaSpine as of the close of the Merger recorded in 2023
Previous report
Segment Review
Previous report
The Company has two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the Company is adjusted earnings before interest, tax, depreciation, and amortization ("Adjusted EBITDA", a non-GAAP financial measure) (which is described further in Note 11 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein).
Previous report
The following table presents adjusted EBITDA by segment and reconciles consolidated adjusted EBITDA to loss before income taxes:
Previous report
Partially offset by $1.5 million in debt issuance costs and other financing activities
Previous report
Adjusted EBITDA
Previous report
Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization and excludes the impact of share-based compensation, gains and losses related to changes in foreign exchange rates, charges related to the SeaSpine merger and other strategic investments, acquisition-related fair value adjustments, interest and gains and losses on investments, litigation and investigation costs, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and succession charges. Adjusted EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business.
Reworded paragraphs (38)
Previous wording
Notable financial metrics in the first quarter of 2024 and recent achievements include the following:
Current wording
Notable financial metrics in the second quarter of 2024 and recent achievements include the following:
Previous wording
Net sales of $188.6 million, an increase of 7.7% on a reported and 7.5% on a constant currency basis over prior year
Current wording
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
Previous wording
Bone Growth Therapies net sales growth of 10.0%, marking five consecutive quarters with double-digit net sales increases
Current wording
Bone Growth Therapies net sales growth of 12% compared to second quarter 2023, marking six consecutive quarters with double-digit net sales increases
Previous wording
U.S. Spine Fixation net sales growth of 16%, driven by distribution expansion and further penetration in existing accounts
Current wording
U.S. Spine Fixation net sales growth of 12%, driven by distribution expansion and further penetration in existing accounts
Previous wording
Global Orthopedics net sales growth of 5% on a reported basis, primarily driven by U.S. Orthopedic net sales growth of 23%
Current wording
Global Orthopedics net sales growth of 5% on a reported basis and 6% on a constant currency basis compared to second quarter 2023
Previous wording
The following tables provide net sales by major product category by reporting segment:
Current wording
Our operations are managed through two reporting segments: Global Spine and Global Orthopedics. The following tables provide net sales by product category by reporting segment:
Previous wording
Bone Growth Therapies net sales increased $4.8 million, or 10.0%, largely driven by (i) an increase in gross order volumes resulting from our continued investment in our direct sales channel for both the spine and fracture markets and (ii) continued growth and adoption of our AccelStim, which is used in the healing of fresh and nonunion fractures
Current wording
Bone Growth Therapies net sales increased $6.5 million, or 12.3%, largely driven by (i) an increase in gross order volumes resulting from our continued investment in our direct sales channel for both the spine and fracture markets, (ii) capitalization of cross-selling opportunities, and (iii) continued growth and adoption of AccelStim, which is used in the healing of fresh and nonunion fractures
Previous wording
Spinal Implants, Biologics, and Enabling Technologies net sales increased $7.3 million, or 7.2%, primarily due to increased sales growth from new and existing high-volume distribution partners, particularly within Spinal Implants, which saw growth in each of our cervical, interbody, and thoracolumbar franchises
Current wording
Spinal Implants, Biologics, and Enabling Technologies net sales increased $3.6 million, or 3.4%, primarily due to increased sales growth from new and existing high-volume distribution partners, particularly within Spinal Implants and Biologics, which saw growth in each of our cervical, interbody, thoracolumbar, and demineralized bone matrices franchises
Previous wording
U.S. growth of $1.5 million or 22.9%, largely due to investments made in recent product launches, commercial execution within our sales channel, and from our comprehensive surgeon education program
Current wording
U.S. growth of $2.0 million, or 14.7%, largely due to investments made in recent product launches, commercial execution within our sales channel, and from our comprehensive surgeon education program
Previous wording
Increase of $0.3 million due to movement in foreign currency exchange rates, which had a favorable impact on net sales in 2024
Current wording
Increase of $0.1 million due to movement in foreign currency exchange rates, which had a favorable impact on net sales in 2024
Previous wording
Increase of $8.6 million driven by a reduction of amortization of the inventory fair value step-up recognized in the Merger, which is being amortized over the expected sales cycles of the acquired inventory
Current wording
Increase of $6.4 million driven by a reduction of amortization of the inventory fair value step-up recognized in the Merger, which is being amortized over the expected sales cycles of the acquired inventory
Previous wording
Increase of $3.4 million in variable compensation expenses, including commissions, largely resulting from changes in sales volume and sales mix; this increase was partially offset by realization of synergies achieved following the Merger
Current wording
Increase of $2.5 million in variable compensation expenses, including commissions, largely resulting from changes in sales volume and sales mix
Previous wording
Increase of $2.9 million in depreciation expense related to an increase in deployed instrumentation to support increased sales demand
Current wording
Increase of $1.4 million in depreciation expense related to an increase in deployed instrumentation to support increased sales demand
Previous wording
Decrease of $3.6 million in share-based compensation expense primarily due to accelerated vesting of certain equity-based awards as a result of the Merger recorded in 2023
Current wording
Decrease of $1.7 million in share-based compensation expense primarily due to accelerated vesting of certain equity-based awards as a result of the Merger recorded in 2023
Previous wording
Decrease in integration-related expenses of $16.2 million compared to prior year comprised professional and advisor fees and severance and retention costs. In addition, general and administrative expenses were further reduced by the realization of Merger-related synergies
Current wording
Decrease in integration-related expenses of $1.1 million compared to prior year comprised professional and advisor fees and severance and retention costs. In addition, general and administrative expenses were further reduced by the realization of Merger-related synergies
Previous wording
Partially offset by an increase of $2.2 million in succession charges as a result of recent changes in executive leadership positions
Current wording
Partially offset by an increase of $5.1 million in succession charges as a result of recent changes in executive leadership positions
Previous wording
Decrease of $2.3 million in costs to comply with the European Union Medical Device Regulations
Current wording
Decrease of $1.7 million in costs to comply with the European Union Medical Device Regulations
Previous wording
Decrease of $1.4 million related to merger and integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses were further reduced by the realization of Merger-related synergies. This was partially offset by an increase in our clinical spend related to the ongoing clinical study for the M6-C artificial disc
Current wording
Decrease of $0.4 million related to merger and integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses were further reduced by the realization of Merger-related synergies.
Previous wording
Increase of $1.2 million recognized in 2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger
Current wording
Increase of $4.4M recognized in 2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger
Previous wording
Interest expense, net increased $3.3 million
Current wording
Interest expense, net increased $3.7 million
Previous wording
Increase of $3.6 million attributable to an increase in outstanding indebtedness as part of our Financing Agreement in 2024 compared to prior year
Current wording
Increase of $3.5 million attributable to an increase in outstanding indebtedness as part of our Financing Agreement in 2024 compared to prior year
Previous wording
Other income (expense), net decreased $2.0 million
Current wording
Other income (expense), net decreased $2.5 million
Previous wording
Decrease of $2.2 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ($1.6 million) in 2024 compared to a gain of $0.6 million in 2023
Current wording
Decrease of $3.3 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ($2.4 million) in 2024 compared to a gain of $0.9 million in 2023
Previous wording
Partially offset by a $0.3 million increase associated with the reversal of expected credit loss recognized on the Neo Medical convertible loan
Current wording
Partially offset by a $0.3 million increase associated with the reversal of a previously recognized estimate of expected credit losses recognized on the Neo Medical convertible loan
Previous wording
The primary factor affecting our tax expense for the first quarter of 2024 was tax amortization on certain acquired intangibles
Current wording
The primary factor affecting our tax expense through the second quarter of 2024 compared to the prior year period was tax amortization on certain acquired intangibles and financial statement losses not benefitted
Previous wording
The increase in tax expense compared to the prior year period was primarily a result of changes in valuation allowances and tax amortization on certain acquired intangibles
Current wording
The primary factor affecting our tax expense through the second quarter of 2024 compared to the prior year period was tax amortization on certain acquired intangibles and financial statement losses not benefitted
Previous wording
Cash, cash equivalents, and restricted cash at March 31, 2024, totaled $29.5 million compared to $37.8 million at December 31, 2023. The following table presents the net change in cash, cash equivalents, and restricted cash for the three months ended March 31, 2024, and 2023, respectively:
Current wording
Cash, cash equivalents, and restricted cash at June 30, 2024, totaled $28.9 million compared to $37.8 million at December 31, 2023. The following table presents the net change in cash, cash equivalents, and restricted cash for the six months ended June 30, 2024, and 2023, respectively:
Previous wording
Cash flows from operating activities increased $15.4 million
Current wording
Cash flows from operating activities increased $29.9 million
Previous wording
Favorable change in net loss of $24.9 million
Current wording
Favorable change in net loss of $30.9 million
Previous wording
Unfavorable change of $7.7 million associated with non-cash gains and losses, largely related to amortization of the inventory fair value step up recognized in the Merger, share-based compensation expense, depreciation and amortization expenses, changes in the fair value of contingent consideration, provisions for expected credit losses, and inventory reserve expenses
Current wording
Unfavorable change of $6.5 million associated with non-cash gains and losses, such as for the amortization of the inventory fair value step-up recognized in the Merger, inventory reserve expenses, remeasurement of contingent consideration obligations, and share-based compensation expense
Previous wording
Unfavorable change of $1.8 million relating to changes in working capital accounts, primarily attributable to changes in inventories, accounts receivable, and other current liabilities
Current wording
Favorable change of $5.6 million relating to changes in working capital accounts, primarily attributable to changes in inventories, trade accounts payable, and other current assets
Previous wording
Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 61 days at March 31, 2024, compared to 58 days at March 31, 2023 (calculated using first quarter net sales and ending accounts receivable). Inventory turns improved to 1.2 times as of March 31, 2024 compared to 0.7 times as of March 31, 2023.
Current wording
Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 57 days at June 30, 2024, compared to 55 days at June 30, 2023 (calculated using second quarter net sales and ending accounts receivable). Inventory turns improved to 1.2 times as of June 30, 2024 compared to 0.9 times as of June 30, 2023 (calculated using trailing twelve month cost of goods sold and ending net inventories).
Previous wording
Cash flows from investing activities decreased $28.0 million
Current wording
Cash flows from investing activities decreased $24.8 million
Previous wording
Partially offset by a decrease in spend of $1.0 million in capital expenditures and $0.5 million in other investing activities in 2024 compared to 2023
Current wording
Partially offset by a decrease in spend of $4.1 million in capital expenditures and $0.5 million in other investing activities
Previous wording
Cash flows from financing activities increased $5.5 million
Current wording
Cash flows from financing activities decreased $0.1 million
Previous wording
Increase of $6.9 million associated with net borrowing activities related to our credit facilities and from our assumption of SeaSpine's outstanding indebtedness at the time of the Merger
Current wording
Offset by an increase of $0.9 million associated with net borrowing activities related to our credit facilities and from our assumption of SeaSpine's outstanding indebtedness at the time of the Merger
Previous wording
Under the terms of a contingent consideration obligation in a purchase agreement assumed in the Merger, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangement as of March 31, 2024, was $9.7 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of March 31, 2024, we classified the remaining contingent consideration liability within other long-term liabilities. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Current wording
Under the terms of a contingent consideration obligation in a purchase agreement assumed in the Merger, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangement as of June 30, 2024, was $12.7 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of June 30, 2024, we classified the remaining contingent consideration liability of $5.9 million and $6.8 million within other current liabilities and other long-term liabilities, respectively. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Previous wording
In May 2022, we achieved FDA approval pertaining to the acquired technology, triggering a contingent consideration milestone obligation of $3.5 million. Of this amount, $1.5 million was paid in 2022, $1.0 million was paid in May 2023, and $1.0 million was accrued within other current liabilities as of March 31, 2024.
Current wording
In May 2022, we achieved FDA approval pertaining to the acquired technology, triggering a contingent consideration milestone obligation of $3.5 million. Of this amount, $1.5 million was paid in 2022, $1.0 million was paid in May 2023, and $1.0 million was paid subsequent to the reporting period in July 2024.
Rearranged current paragraphs (18)
Current report — wording carried from elsewhere
Bone Growth Therapies net sales increased $11.2 million or 11.2%, driven by (i) an increase in gross order volumes resulting from our continued investment in our direct sales channel for both the spine and fracture markets, (ii) capitalization of cross-selling opportunities, and (iii) continued growth and adoption of AccelStim
Current report — wording carried from elsewhere
Spinal Implants, Biologics, and Enabling Technologies net sales increased $10.9 million, or 5.3%, primarily due to increased sales growth from new and existing high-volume distribution partners, particularly within Spinal Implants and Biologics, which saw growth in each of our cervical, interbody, thoracolumbar, and demineralized bone matrices franchises
Current report — wording carried from elsewhere
U.S. growth of $0.5 million, or 7.2%, largely due to investments made in recent product launches and commercial execution within our sales channel and from our comprehensive surgeon education program
Current report — wording carried from elsewhere
Partially offset by a decrease of $0.3 million due to movement in foreign currency exchange rates, which had an unfavorable impact on net sales in the second quarter of 2024
Current report — wording carried from elsewhere
Increase in gross profit driven primarily by net sales growth across all principal product categories
Current report — wording carried from elsewhere
Increase of $15.0 million driven by a reduction of amortization of the inventory fair value step-up recognized in the Merger, which is being amortized over the expected sales cycles of the acquired inventory
Current report — wording carried from elsewhere
Increase of $5.3 million in variable compensation expenses, including commissions, largely resulting from changes in sales volume and sales mix
Current report — wording carried from elsewhere
Increase of $4.3 million in depreciation expense related to an increase in deployed instrumentation to support increased sales demand
Current report — wording carried from elsewhere
Decrease in integration-related expenses of $17.2 million compared to prior year comprised professional and advisor fees and severance and retention costs.
Current report — wording carried from elsewhere
Decrease of $5.3 million in share-based compensation expense primarily due to accelerated vesting of certain equity-based awards as a result of the Merger recorded in 2023
Current report — wording carried from elsewhere
Partially offset by an increase of $7.3 million in succession charges as a result of recent changes in executive leadership positions
Current report — wording carried from elsewhere
Decrease of $4.0 million in costs to comply with the European Union Medical Device Regulations
Current report — wording carried from elsewhere
Decrease of $1.8 million related to merger and integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses were further reduced by the realization of Merger-related synergies.
Current report — wording carried from elsewhere
Increase of $5.5M recognized in 2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger
Current report — wording carried from elsewhere
Decrease of $1.1 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ($0.9 million) in the second quarter of 2024 compared to a gain of $0.3 million in the second quarter of 2023
Current report — wording carried from elsewhere
Interest expense, net increased $6.9 million
Current report — wording carried from elsewhere
Increase of $6.7 million attributable to an increase in outstanding indebtedness as part of our Financing Agreement in 2024 compared to prior year
Current report — wording carried from elsewhere
Other income (expense), net decreased $4.4 million