OFIX - Orthofix Medical Reports Orthofix and SeaSpine Fourth Quarter and Full-Year 2022 Results

(NASDAQ:OFIX) The merger of Orthofix Medical Inc. ("Orthofix") and SeaSpine Holdings Corporation ("SeaSpine") became effective as of January 5, 2023. This news release includes the financial results of stand-alone Orthofix and stand-alone SeaSpine for the fourth quarter and full year ended December 31, 2022. As such, these financial results do not include any potential accounting adjustments the merger may have on future net sales or operating results.

Orthofix Fourth Quarter Highlights

• Net sales of $122.2 million, a decrease of 2% on a reported basis and flat on a constant currency basis over prior year
• Bone Growth Therapies net sales growth of approximately 3%, driven by the commercial roll-out of AccelStim™ Bone Healing Therapy and channel investments
• Global Orthopedics net sales growth of over 6% on a constant currency basis driven by new product launches and channel investments

SeaSpine Fourth Quarter Highlights

• Net sales of $63.4 million, an increase of 14% on a reported basis over prior year and an increase of 18% when adjusted to exclude the impact of SeaSpine’s exit from the European Spinal Implants market in the third quarter of 2022
• U.S. Spinal Implants and Orthobiologics net sales growth of 23% and 20%, respectively, driven by recently launched products and expanded distribution
• A record twelve 7D FLASH Technology System units placed in the fourth quarter, and the achievement of 100th unit placement milestone
  
  

“We are proud of the strong revenue results for the fourth quarter of 2022 within the legacy SeaSpine U.S. Spinal Implants and Orthobiologics portfolios as well as within the Orthofix Bone Growth Therapies and Global Orthopedics portfolios,” said Keith Valentine, President and Chief Executive Officer of Orthofix. “Following the completion of the merger on January 5 ^th , we have begun our focused integration of these two highly complementary businesses to realize the meaningful synergy opportunities that we identified. We will continue to deliver innovative and differentiated solutions to both our surgeon and hospital partners, helping them provide the best treatment to their patients through a full continuum of care from pre-operative planning through post-surgical recovery. Our revenue guidance for the first quarter and the full year 2023 assumes minimal realization of potential revenue synergies, which we believe will accelerate as we move into 2024.”

Fourth Quarter Financial Results Overview

Orthofix Stand-Alone Fourth Quarter Net Sales and Financial Results

Gross margin decreased to 73.0% compared to 73.4% in the prior year period.

Net loss was $(7.1) million, or $(0.35) per share, compared to net loss of $(32.8) million, or $(1.65) per share in the prior year period. Adjusted net income was $3.8 million, or $0.19 per share, compared to adjusted net income of $5.4 million, or $0.27 per share in the prior year period.

EBITDA was $0.7 million, compared to $10.0 million in the prior year period. Adjusted EBITDA was $15.8 million, or 12.9% of net sales, compared to $17.0 million, or 13.6% of net sales, in the prior year period.

As of December 31, 2022, Orthofix's cash totaled $50.7 million, compared to $87.8 million as of December 31, 2021. As of December 31, 2022, Orthofix had no borrowings under its five year $300 million secured revolving credit facility; however, on January 3, 2023, and March 3, 2023, Orthofix borrowed $30.0 million and $15.0 million, respectively, under this credit facility to fund (i) the repayment of the outstanding balance on SeaSpine’s credit facility, (ii) certain merger-related expenses, and (iii) working capital purposes.

SeaSpine Stand-Alone Fourth Quarter Net Sales and Financial Results

Gross margin increased to 62.5% compared to 53.7% in the prior year period. Adjusted gross margin was 63.8% compared to 61.6% in the prior year period.

Net loss was $(19.0) million, or $(0.51) per share, compared to net loss of $(18.8) million, or $(0.52) per share in the prior year period. Adjusted EBITDA was $(5.7) million, or (9.1)% of net sales, compared to $(6.8) million, or (12.2)% of net sales in the prior year period.

As of December 31, 2022, SeaSpine's cash totaled $29.4 million, compared to $83.1 million as of December 31, 2021. As of December 31, 2022, SeaSpine had $26.2 million in borrowing outstanding under its credit facility, which was subsequently repaid in full on January 5, 2023, in connection with the merger.

Full Year Financial Results Overview

Orthofix Stand-Alone Full Year Net Sales and Financial Results

Gross profit decreased $12.4 million to $337.2 million. Gross margin decreased to 73.2% compared to 75.3% in the prior year period.

Net loss was $(19.7) million, or $(0.98) per share, compared to net loss of $(38.4) million, or $(1.95) per share in the prior year period. Adjusted net income was $6.0 million, or $0.30 per share, compared to adjusted net income of $17.2 million, or $0.86 per share in the prior year period.

EBITDA was $12.6 million, compared to $29.7 million in the prior year period. Adjusted EBITDA was $48.6 million, or 10.5% of net sales, compared to $61.3 million, or 13.2% of net sales, in the prior year period.

SeaSpine Stand-Alone Full Year Net Sales and Financial Results

Gross profit increased $33.0 million to $147.6 million. Gross margin increased to 62.1% compared to 59.9% in the prior year period. Adjusted gross margin was 63.8% compared to 63.5% in the prior year period.

Net loss was $(65.0) million, or $(1.76) per share, compared to net loss of $(54.3) million, or $(1.62) per share in the prior year period. Adjusted EBITDA was $(21.2) million, or (8.9)% of net sales, compared to $(22.9) million, or (12.0)% of net sales in the prior year period.

Business Outlook

As of the date hereof, the combined company expects the following net sales results for the quarter ended March 31, 2023, and the year ended December 31, 2023. These expectations are based on the current foreign currency exchange rates and do not assume any additional exchange rate changes that may occur this year and exclude the 2023 revenue results for SeaSpine for the four-day period prior to the closing of the merger .

The Company expects to provide additional elements of financial guidance in the future.

Conference Call

Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the financial results for the fourth quarter and year ended December 31, 2022. Reported results include those for stand-alone Orthofix as well as stand-alone SeaSpine, which was merged into Orthofix effective January 5, 2023. Interested parties may access the conference call by dialing (888) 330-2508 in the U.S. and Canada, and (240) 789-2735 in all other locations, and referencing the access code 9556380. A replay of the call will be available for three weeks by dialing (800) 770-2030 in the U.S. and Canada, and (647) 362-9199 in all other locations, and entering the access code 9556380. A webcast of the conference call may be accessed at ir.Orthofix.com.

About Orthofix

The newly merged Orthofix-SeaSpine organization is a leading global spine and orthopedics company with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions and a leading surgical navigation system. Its products are distributed in 68 countries worldwide. The Company intends to announce a new name for the Orthofix-SeaSpine organization in the future, but in the interim will continue to operate under the Orthofix name.

The Company is headquartered in Lewisville, Texas, and has primary offices in Carlsbad, CA, with a focus on spinal product innovation and surgeon education, and Verona, Italy, with an emphasis on product innovation, production, and medical education for Orthopedics. The Orthofix-SeaSpine organization’s global R&D, commercial and manufacturing footprint also includes facilities and offices in Irvine, CA, Toronto, Canada, Sunnyvale, CA, Wayne, PA, Olive Branch, MS, Maidenhead, UK, Munich, Germany, Paris, France, and Sao Paolo, Brazil. 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. In this news release, such forward-looking statements include, but are not limited, to, statements relating to: our ability to continue to deliver innovative and differentiated solutions to both our surgeon and hospital partners and to help them provide the best treatment to their patients; and our revenue guidance for the first quarter and the full year 2023, including our belief that realization of potential revenue synergies will accelerate as we move into 2024. 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 under the heading “Risk Factors” in Orthofix’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, as well as subsequent Quarterly Reports on Form 10-Q and other information filed with the SEC. Factors that could cause or contribute to such differences may include, but are not limited to, (i) risks related to the integration of the legacy Orthofix and SeaSpine businesses and the ability of the combined company to realize the expected long-term financial and other benefits of the merger; (i) risks relating to the effects of the COVID-19 pandemic on our business, (iii) our ability to maintain operations to support our customers and patients in the near-term and to capitalize on future growth opportunities, (iv) risks associated with acceptance of surgical products and procedures by surgeons and hospitals, (v) development and acceptance of new products or product enhancements, (vi) clinical and statistical verification of the benefits achieved via the use of our products, (vii) our ability to adequately manage inventory, (viii) our ability to recruit and retain management and key personnel (including in connection with disruptions and uncertainties that may occur as the legacy Orthofix and SeaSpine businesses are integrated and the respective management and leadership teams are combined), (ix) global economic instability and potential supply chain disruption, including as a result of Russia’s invasion of Ukraine and resulting sanctions, and (x) the other risks and uncertainties more fully described in our periodic filings with the Securities and Exchange Commission (the “SEC”).

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 inaccurate (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.

ORTHOFIX MEDICAL INC.
Non-GAAP Financial Measures

The following tables present reconciliations of operating income (loss), net income (loss), EPS, and net cash from operating activities, in each case calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), to, as applicable, non-GAAP financial measures, referred to as "EBITDA," "Adjusted EBITDA," "Adjusted net income (loss)," "Adjusted EPS," and "Free cash flow" that include or exclude items specified in the tables. The GAAP measures shown in the tables below represent the most comparable GAAP measure to the applicable non-GAAP measure(s) shown in the table. For further information regarding why the Company believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company's Current Report on Form 8-K regarding this press release filed today with the Securities and Exchange Commission ("SEC") available on the SEC's website at www.sec.gov and on the “Investors” page of the Company’s website at www.orthofix.com .

EBITDA and Adjusted EBITDA

Adjusted Net Income

Adjusted EPS