8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 06, 2023

ORTHOFIX MEDICAL INC.

(Exact name of Registrant as Specified in Its Charter)

Delaware	0-19961	98-1340767
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
3451 Plano Parkway
Lewisville, Texas		75056
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (214) 937-2000

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.10 par value per share	OFIX	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On March 6, 2023, Orthofix Medical Inc. (the “Company”) issued a news release announcing, among other things, its financial results for the fourth quarter and year ended December 31, 2022. As the merger with SeaSpione Holdings Corporation ("SeaSpine") was completed on January 5, 2023, the news release also includes the stand-alone financial results of SeaSpine for the fourth quarter and year ended December 31, 2022. A copy of the press release is furnished herewith as Exhibit 99.1 and attached hereto.

The information furnished in this Item 2.02, including the exhibit furnished herewith as Exhibit 99.1, will not be treated as “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or into another filing under the Exchange Act, unless that filing expressly incorporates by reference this Item 2.02 of this report.

Discussion of Non-GAAP Financial Measures

Constant Currency

Constant currency is a non-GAAP measure, which the Company calculates by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

Free Cash Flow

Free cash flow is a non-GAAP financial measure, which is calculated by subtracting capital expenditures from cash flow from operating activities. Free cash flow is an important indicator of how much cash is generated or used by the Company's normal business operations, including capital expenditures. Management uses free cash flow to measure progress on its capital efficiency and cash flow initiatives.

EBITDA

EBITDA is a non-GAAP financial measure, which the Company calculate by adding interest income (expense), net; income tax expense (benefit); and depreciation and amortization to net income. EBITDA provides management with additional insight to its results of operations. EBITDA is the primary metric used by the Company's Chief Operating Decision Maker in managing the business.

Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS for Stand-Alone Orthofix Financial Results

These non-GAAP financial measures utilized in the Orthofix stand-alone financial results provide management with additional insight to its results of operations and reflect the exclusion of the following items:

•Share-based compensation expense – Costs related to the Company's share-based compensation plans, which include stock options, restricted stock, performance-based or market-based restricted stock, and a stock purchase plan; see the share-based compensation footnote in the Company's Form 10-K for the year ended December 31, 2022 for an allocation of these costs by consolidated statement of operations line item. It should be noted that certain share-based compensation costs are instead included within medical device regulation for 2021 and 2022. Management excludes this item when evaluating the Company's operating performance as it represents a non-cash expense.

•Foreign exchange impact – Gains and losses related to foreign currency transactions, which are recorded as other income (expense), net. Management excludes this item when evaluating the Company's operating results as at is primarily a non-cash expense or benefit and is non-operating in nature.

•Strategic investments – Costs related to the Company's strategic investments, such as due diligence and integration costs, which are primarily recorded as general and administrative expenses. These acquisition and integration-related charges are not factored into the evaluation of the Company's performance by management because they are of a temporary nature, not related to the Company's core operating performance, and as the frequency and amount of such charges vary significantly based on the timing and magnitude of the Company's acquisition transactions.

•Acquisition-related fair value adjustments – Comprised of (i) gains and losses related to remeasurement of contingent consideration to fair value, which are recorded as operating expenses and (ii) recognized costs related to acquired in-process research and development ("IPR&D") assets, which were expensed immediately. Management excludes this item when evaluating the Company's operating results as the remasurement of contingent consideration is primarily non-cash in nature and as the frequency and amount of IPR&D charges can vary significantly based on the timing and magnitude of the Company's acquisition transactions.

•Amortization of acquired intangibles – Amortization of intangible assets acquired in business combinations or asset acquisitions, including items such as developed technologies, customer relationships, trade names, manufacturing agreements, and other intangible assets, and any impairment of acquired goodwill, which are recorded in cost of sales or

operating expenses. Management excludes this item when evaluating the Company's operating performance as it represents a non-cash expense.

•(Gain) Loss on investment securities – Net gains or losses recognized (realized or unrealized) within other income (expense), net relating to certain of our investments. Management excludes this item when evaluating the Company's operating performance as it typically represents a non-cash gain or loss and is not related to the Company's core operating performance.

•Legal judgments/settlements – Adverse or favorable legal judgments or negotiated legal settlements, which are recorded as general and administrative expenses. Management excludes this item when evaluating the Company's operating results as these costs and/or benefits can vary significantly based on the timing and magnitude of litigation matters.

•Succession and transition charges – Costs related to the transition of certain named executive officers and certain targeted restructuring costs, including any cessation and onboarding amounts, accelerated share-based compensation expense, consulting services, and other related expenses, which are primarily recorded as general and administrative expenses. Management excludes this item when evaluating the Company's operating results as these costs associated with events that are not expected to recur at a similar frequency and magnitude in the future.

•Medical device regulation – Incremental costs incurred (i) to establish initial compliance with the regulations set forth by the European Union Medical Device Regulation (“MDR”) and the U.S. Food and Drug Administration related to our currently-approved medical devices, which are recorded primarily as research and development expenses, and (ii) related to rationalization of certain product lines that we do not expect to continue to market subsequent to the effective date of these regulations, which are recorded primarily as costs of sales. Management excludes this item when evaluating the Company's operating results as these costs associated with events that are not expected to recur at a similar frequency and magnitude in the future.

•Business interruption – COVID-19 – Gains and losses related to the realized effects the COVID-19 pandemic has had on our business operations, which consist primarily of (i) certain legislative relief received as a result of the COVID-19 pandemic, (ii) costs associated with the redesign of certain products in response to supply chain disruption, and (iii) incremental costs incurred to enhance the safety and sanitation of our facilities. Management excludes this item when evaluating the Company's operating results as these costs associated with events that are not expected to recur at a similar frequency and magnitude in the future.

•Long-term income tax rate adjustment – Reflects management’s expectation of a long-term normalized effective tax rate of 27% for 2021 and 28% for the fiscal year 2022 results and outlook, which is based on current tax law and current expected adjusted income; actual reported tax expense will ultimately be based on GAAP earnings and may differ from the expected long-term normalized effective tax rate due to a variety of factors, including the resolutions of issues arising from tax audits with various tax authorities, the ability to realize deferred tax assets, and the tax impact of certain reconciling items that are excluded in determining Adjusted Net Income and Adjusted EPS.

Adjusted EBITDA and Adjusted Gross Margin for SeaSpine Stand-Alone Financial Results

Adjusted EBITDA and Adjusted Gross Margin are measures used by management for purposes of:

•supplementing the financial results and forecasts reported to the Company's board of directors;

•evaluating, managing and benchmarking the operating performance of the Company;

•establishing internal operating budgets;

•enhancing comparability from period to period; and

•comparing performance with internal forecasts and targeted business models.

Adjusted EBITDA consists of GAAP net loss before interest, taxes, depreciation and amortization and excludes the impact of the following items:

•Fixed NanoMetalene supplier processing charge – This charge relates to the future fixed payments that SeaSpine is obligated to make to a supplier in connection with securing and maintaining long-term backup processing capacity for its NanoMetalene franchise. Because SeaSpine no longer anticipates utilizing the backup processor for a meaningful portion of its future NanoMetalene supply needs throughout the term of the payment stream, SeaSpine recorded a loss on this future contractual obligation in the fourth quarter of 2021. Management excludes this item when evaluating the Company's operating performance because the frequency of such charge is expected to be highly unusual and nonrecurring.

•Spinal set instrument replacement expenses – The cost of purchased instruments used to replace damaged instruments in existing sets is recorded directly to instrument replacement expense. Management excludes this item when evaluating the Company's operating performance because it is, in nature and substance, very similar to depreciation expense recorded over time for spinal set instruments deployed to new sets.

•Stock-based compensation – Management excludes this item when evaluating the Company's operating performance because it is a non-cash expense.

•European sales and marketing organization restructuring– Management excludes this item when evaluating the Company’s operating performance because these charges are associated with an event that is not expected to recur at a similar magnitude in the future.

•Litigation special charges – Management excludes legal fees and any litigation settlement costs associated with onboarding competitive distributor partners in a compliant manner when evaluating the Company’s operating performance because these charges are associated with events that are not expected to recur at a similar frequency and magnitude in the future.

•Purchase accounting inventory fair market value adjustments – Purchase accounting inventory fair market value adjustments consist of the increase to cost of goods sold that occur as a result of expensing the “step up” in the fair value of acquired inventory that SeaSpine purchased in connection with acquisitions as that inventory is sold during the financial period. Management excludes this item when evaluating the Company’s operating performance because it is not related to its core operating performance and because it is a non-cash expense for which the frequency and amount of such charges may vary significantly based on the level of inventory on hand at the time of acquisition.

•Acquisition and integration-related charges – Acquisition and integration-related charges include (i) legal, accounting, and other outside consultant expenses directly related to acquisitions and (ii) costs related to acquisition integration, including systems, operations, retention and severance. These acquisition and integration-related charges are not factored into the evaluation of the Company's performance by management after completion of acquisitions because they are of a temporary nature, they are not related to the Company's core operating performance and the frequency and amount of such charges vary significantly based on the timing and magnitude of the Company's acquisition transactions.

•Business combination charges related to Orthofix – Legal, accounting, and other outstide consultant expenses or costs directly related to the merger of SeaSpine and Orthofix. Management excludes this item when evaluating the Company’s operating performance because these charges are associated with an event that is not expected to recur at a similar magnitude in the future.

Adjusted Gross Margin represents GAAP gross margin excluding the impact of the following items recorded to cost of goods sold:

•Technology-related intangible asset amortization expense – Management excludes this item when evaluating the Company's operating performance because it is a non-cash expense.

•Fixed NanoMetalene supplier processing charge – See above under, the "Adjusted EBITDA" heading for a description of this charge and the reason management excludes it when evaluating the Company's operating performance.

•Purchase accounting inventory fair market value adjustments – See above under the "Adjusted EBITDA" heading for a description of these charges and the reason management excluded them when evaluating the Company’s operating performance.

Usefulness and Limitations of Non-GAAP Financial Measures

Management uses non-GAAP measures to evaluate performance period-over-period, analyze the underlying trends in our business, assess performance relative to competitors, and establish operational goals and forecasts that are used in allocating resources. Management uses these non-GAAP measures as the basis for evaluating the ability of the underlying operations to generate cash. In addition, management uses these non-GAAP measures to further its understanding of the performance of our business units.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost and can have a material effect on cash flows. Similarly, certain non-cash expenses, such as share-based compensation, do not directly impact cash flows, but are part of total compensation costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures

We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. The GAAP results provide management with the ability to further understand our performance based on a defined set of criteria. Management believes that the non-GAAP measures reflect the underlying operating results of our businesses and provide an important measure of our overall performance. We provide detailed reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures above and encourage investors to review these reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. Management believes it is important to provide investors with the same non-GAAP metrics it uses to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to our historical operating results and internally evaluate the effectiveness of our operating strategies. We believe that disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

Item 7.01 Regulation FD Disclosure.

The news release furnished in Exhibit 99.1 also provides an update on the Company’s business outlook, that is intended to be within the safe harbor provided by the Private Securities Litigation Reform Act of 1995 (the “Act”) as comprising forward looking statements within the meaning of the Act.

The information furnished in this Item 7.01, including the exhibit furnished herewith as Exhibit 99.1, will not be treated as “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into any filing under the Securities Act, or into another filing under the Exchange Act, unless that filing expressly incorporates by reference this Item 7.01 of this report.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1	News release, dated March 6, 2023
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Orthofix Medical Inc.
By:	/s/ Patrick Keran
	Patrick Keran Chief Legal Officer

Date: March 6, 2023

EX-99

Exhibit 99.1

 

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

LEWISVILLE, Texas — March 6, 2023 — (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 5th, 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

	Orthofix
	Three Months Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022		2021		Change			Constant Currency Change
Bone Growth Therapies	$	51,003	$	49,627		2.8	%		2.8	%
Spinal Implants		28,852		31,150		(7.4	%)		(6.6	%)
Biologics		13,696		15,071		(9.1	%)		(9.1	%)
Global Spine		93,551		95,848		(2.4	%)		(2.1	%)
Global Orthopedics		28,678		29,216		(1.8	%)		6.4	%
Net sales	$	122,229	$	125,064		(2.3	%)		(0.1	%)

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

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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

	SeaSpine
	Three Months Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022		2021		Percentage Change
U.S. Spinal Implants and Enabling Technologies	$	30,637	$	27,315		12.2	%
U.S. Orthobiologics		27,454		22,860		20.1	%
U.S. Net Sales		58,091		50,175		15.8	%
International Net Sales		5,282		5,413		(2.4	%)
Net sales	$	63,373		55,588		14.0	%

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

	Orthofix
	Year Ended December 31,
(U.S. Dollars, in thousands)	2022		2021		Change			Constant Currency Change
Bone Growth Therapies	$	187,247	$	187,448		(0.1	%)		(0.1	%)
Spinal Implants		109,546		115,094		(4.8	%)		(4.0	%)
Biologics		56,381		56,421		(0.1	%)		(0.1	%)
Global Spine		353,174		358,963		(1.6	%)		(1.4	%)
Global Orthopedics		107,539		105,516		1.9	%		11.0	%
Net sales	$	460,713	$	464,479		(0.8	%)		1.5	%

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.

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SeaSpine Stand-Alone Full Year Net Sales and Financial Results

	SeaSpine
	Year Ended December 31,
(U.S. Dollars, in thousands)	2022		2021		Percentage Change
U.S. Spinal Implants and Enabling Technologies	$	107,170	$	88,192		21.5	%
U.S. Orthobiologics		97,049		83,249		16.6	%
U.S. Net Sales		204,219		171,441		19.1	%
International Net Sales		33,312		20,010		66.5	%
Net sales	$	237,531		191,451		24.1	%

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 .

	Current 2023 Outlook
(Unaudited, U.S. Dollars, in millions)	Low		High
Expected net sales for the first quarter	$	166	$	170
Expected full year net sales		743		753

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.

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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.

Company Contact

Orthofix Medical Inc.

Alexa Huerta

P: 214-937-3190

E: alexahuerta@orthofix.com

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ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Operations

	Three Months Ended						Year Ended
	December 31,						December 31,
(U.S. Dollars, in thousands, except share and per share data)	2022			2021			2022			2021
	(Unaudited)
Net sales	$	122,229		$	125,064		$	460,713		$	464,479
Cost of sales		33,053			33,254			123,544			114,914
Gross profit		89,176			91,810			337,169			349,565
Sales and marketing		59,324			57,098			228,810			221,318
General and administrative		25,470			18,262			79,966			69,353
Research and development		13,152			13,243			49,065			49,621
Acquisition-related amortization and remeasurement		2,274			12,560			(7,404	)		17,588
Operating income (loss)		(11,044	)		(9,353	)		(13,268	)		(8,315	)
Interest expense, net		(229	)		(437	)		(1,288	)		(1,837	)
Other expense, net		4,286			185			(3,150	)		(3,343	)
Loss before income taxes		(6,987	)		(9,605	)		(17,706	)		(13,495	)
Income tax benefit (expense)		(75	)		(23,207	)		(2,043	)		(24,884	)
Net loss	$	(7,062	)	$	(32,812	)	$	(19,749	)	$	(38,379	)
Net loss per common share:
Basic	$	(0.35	)	$	(1.65	)	$	(0.98	)	$	(1.95	)
Diluted		(0.35	)		(1.65	)		(0.98	)		(1.95	)
Weighted average number of common shares (in millions):
Basic		20.2			19.9			20.1			19.7
Diluted		20.2			19.9			20.1			19.7

1

ORTHOFIX MEDICAL INC.

Condensed Consolidated Balance Sheets

(U.S. Dollars, in thousands, except par value data)	December 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	50,700		$	87,847
Accounts receivable, net of allowances of $6,419 and $4,944, respectively		82,857			78,560
Inventories		100,150			82,974
Prepaid expenses and other current assets		22,283			20,141
Total current assets		255,990			269,522
Property, plant, and equipment, net		58,229			59,252
Intangible assets, net		47,388			52,666
Goodwill		71,317			71,317
Other long-term assets		25,705			23,866
Total assets	$	458,629		$	476,623
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	27,598		$	26,459
Current portion of finance lease liability		652			2,590
Other current liabilities		55,374			76,781
Total current liabilities		83,624			105,830
Long-term portion of finance lease liability		19,239			19,890
Other long-term liabilities		18,906			13,969
Total liabilities		121,769			139,689
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 50,000 shares authorized;    20,162 and 19,837 issued and outstanding as of December 31,    2022 and 2021, respectively		2,016			1,983
Additional paid-in capital		334,969			313,951
Retained earnings		1,251			21,000
Accumulated other comprehensive loss		(1,376	)		—
Total shareholders’ equity		336,860			336,934
Total liabilities and shareholders’ equity	$	458,629		$	476,623

2

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

	Three Months Ended December 31, 2022
(Unaudited, U.S. Dollars, in thousands)	Total Orthofix			Global Spine			Global Orthopedics			Corporate
Operating income (loss)	$	(11,044	)	$	8,184		$	(1,901	)	$	(17,327	)
Other income (expense), net		4,286			990			2,258			1,038
Depreciation and amortization		5,348			2,784			1,440			1,124
Amortization of acquired intangibles		2,073			1,916			157			—
EBITDA	$	663		$	13,874		$	1,954		$	(15,165	)
Share-based compensation		4,917			1,980			507			2,430
Foreign exchange impact		(4,195	)		(1,052	)		(2,192	)		(951	)
Strategic investments		9,844			41			498			9,305
Acquisition-related fair value adjustments		200			200			—			—
Loss on investment securities		—			—			—			—
Legal judgments/settlements		337			156			131			50
Succession and transition charges		—			—			—			—
Medical device regulation		3,487			1,740			1,743			4
Business interruption - COVID-19		513			509			2			2
Adjusted EBITDA	$	15,766		$	17,448		$	2,643		$	(4,325	)
As a % of net sales		12.9	%		14.3	%		2.2	%		-3.5	%

	Year Ended December 31, 2022
(Unaudited, U.S. Dollars, in thousands)	Total Orthofix			Global Spine			Global Orthopedics			Corporate
Operating income (loss)	$	(13,268	)	$	43,062		$	(8,646	)	$	(47,684	)
Other income (expense), net		(3,150	)		(626	)		(2,087	)		(437	)
Depreciation and amortization		20,599			10,663			5,826			4,110
Amortization of acquired intangibles		8,420			7,550			870			—
EBITDA	$	12,601		$	60,649		$	(4,037	)	$	(44,011	)
Share-based compensation		18,334			7,318			1,836			9,180
Foreign exchange impact		3,291			860			2,136			295
Strategic investments		16,028			194			1,071			14,763
Acquisition-related fair value adjustments		(15,595	)		(15,595	)		—			—
Loss on investment securities		188			—			—			188
Legal judgments/settlements		803			397			354			52
Succession and transition charges		146			10			—			136
Medical device regulation		10,370			6,494			3,887			(11	)
Business interruption - COVID-19		2,387			2,365			20			2
Adjusted EBITDA	$	48,553		$	62,692		$	5,267		$	(19,406	)
As a % of net sales		10.5	%		13.6	%		1.1	%		-4.2	%

3

	Three Months Ended December 31, 2021
(Unaudited, U.S. Dollars, in thousands)	Total Orthofix			Global Spine			Global Orthopedics			Corporate
Operating income (loss)	$	(9,353	)	$	9,016		$	(9,484	)	$	(8,885	)
Other income (expense), net		185			(279	)		(233	)		697
Depreciation and amortization		5,189			2,613			1,557			1,019
Amortization of acquired intangibles		14,013			1,829			12,184			—
EBITDA	$	10,034		$	13,179		$	4,024		$	(7,169	)
Share-based compensation expense		3,956			1,645			523			1,788
Foreign exchange impact		807			294			564			(51	)
Strategic investments		1,817			429			276			1,112
Acquisition-related fair value adjustments		(1,190	)		(1,195	)		—			5
(Gain) loss on investment securities		(643	)		—			—			(643	)
Legal judgments/settlements		352			69			279			4
Succession and transition charges		75			30			8			37
Medical device regulation		2,111			1,008			545			558
Business interruption - COVID-19		(312	)		2,297			(2,618	)		9
Adjusted EBITDA	$	17,007		$	17,756		$	3,601		$	(4,350	)
As a % of net sales		13.6	%		14.2	%		2.9	%		-3.5	%

	Year Ended December 31, 2021
(Unaudited, U.S. Dollars, in thousands)	Total Orthofix			Global Spine			Global Orthopedics			Corporate
Operating income (loss)	$	(8,315	)	$	41,382		$	(14,359	)	$	(35,338	)
Other income (expense), net		(3,343	)		(917	)		(2,257	)		(169	)
Depreciation and amortization		20,647			10,367			6,464			3,816
Amortization of acquired intangibles		20,708			7,182			13,526			—
EBITDA	$	29,697		$	58,014		$	3,374		$	(31,691	)
Share-based compensation expense		15,416			6,361			2,145			6,910
Foreign exchange impact		3,981			966			2,203			812
Strategic investments		5,700			823			2,329			2,548
Acquisition-related fair value adjustments		(2,015	)		(1,645	)		—			(370	)
(Gain) loss on investment securities		(643	)		—			—			(643	)
Legal judgments/settlements		33			462			(381	)		(48	)
Succession and transition charges		739			482			70			187
Medical device regulation		8,034			2,753			2,112			3,169
Business interruption - COVID-19		320			2,870			(2,592	)		42
Adjusted EBITDA	$	61,262		$	71,086		$	9,260		$	(19,084	)
As a % of net sales		13.2	%		15.3	%		2.0	%		-4.1	%

4

Adjusted Net Income

	Three Months Ended December 31,						Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022			2021			2022			2021
Net loss	$	(7,062	)	$	(32,812	)	$	(19,749	)	$	(38,379	)
Foreign exchange impact		(4,195	)		807			3,291			3,981
Strategic investments		9,841			1,837			16,006			5,813
Acquisition-related fair value adjustments		200			(1,190	)		(15,595	)		(2,015	)
Amortization of acquired intangibles		2,073			14,019			8,425			20,732
(Gain) loss on investment securities		—			(643	)		188			(643	)
Legal judgments/settlements		337			352			803			33
Succession and transition charges		—			75			146			739
Medical device regulation		3,491			2,111			10,381			8,034
Business interruption - COVID-19		514			(310	)		2,395			328
Long-term income tax rate adjustment		(1,402	)		21,195			(291	)		18,537
Adjusted net income	$	3,797		$	5,441		$	6,000		$	17,160

Adjusted EPS

	Three Months Ended December 31,						Year Ended December 31,
(Unaudited, per diluted share)	2022			2021			2022			2021
EPS	$	(0.35	)	$	(1.65	)	$	(0.98	)	$	(1.95	)
Foreign exchange impact		(0.21	)		0.04			0.16			0.20
Strategic investments		0.49			0.09			0.79			0.29
Acquisition-related fair value adjustments		0.01			(0.06	)		(0.77	)		(0.10	)
Amortization of acquired intangibles		0.10			0.70			0.42			1.04
Loss on investment securities		—			(0.03	)		0.01			(0.03	)
Legal judgments/settlements		0.02			0.02			0.04			—
Succession and transition charges		—			—			0.01			0.04
Medical device regulation		0.17			0.11			0.52			0.40
Business interruption - COVID-19		0.03			(0.02	)		0.12			0.02
Long-term income tax rate adjustment		(0.07	)		1.07			(0.02	)		0.95
Adjusted EPS	$	0.19		$	0.27		$	0.30		$	0.86
Weighted average number of diluted common shares (treasury stock method, in millions)		20.3			20.0			20.1			20.0

Cash Flow and Free Cash Flow

	Year Ended December 31,
(U.S. Dollars, in thousands)	2022			2021
Net cash from operating activities	$	(11,538	)	$	18,475
Net cash from investing activities		(24,534	)		(23,013	)
Net cash from financing activities		(78	)		(3,621	)
Effect of exchange rate changes on cash		(997	)		(815	)
Net change in cash and cash equivalents	$	(37,147	)	$	(8,974	)

	Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022			2021
Net cash from operating activities	$	(11,538	)	$	18,475
Capital expenditures		(23,160	)		(19,592	)
Free cash flow	$	(34,698	)	$	(1,117	)

5

SEASPINE HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

	Three Months Ended						Year Ended
	December 31,						December 31,
(U.S. Dollars, in thousands, except share and per share data)	2022			2021			2022			2021
	(Unaudited)
Net sales	$	63,373		$	55,589		$	237,531		$	191,451
Cost of sales		23,780			25,727			89,920			76,864
Gross profit		39,593			29,862			147,611			114,587
Sales and marketing		36,208			30,886			131,726			107,299
General and administrative		16,137			10,889			54,035			42,944
Research and development		6,625			6,388			24,720			22,006
Intangible amortization		855			739			3,423			3,316
Operating loss		(20,232	)		(19,040	)		(66,293	)		(60,978	)
Other (expense) income, net		(55	)		(157	)		(1,031	)		5,532
Loss before income taxes		(20,287	)		(19,197	)		(67,324	)		(55,446	)
Income tax benefit		1,329			411			2,315			1,100
Net loss	$	(18,958	)	$	(18,786	)	$	(65,009	)	$	(54,346	)
Net loss per common share:
Basic	$	(0.51	)	$	(0.52	)	$	(1.76	)	$	(1.62	)
Diluted		(0.51	)		(0.52	)		(1.76	)		(1.62	)
Weighted average number of common shares (in millions):
Basic		37.0			36.5			37.0			33.6
Diluted		37.0			36.5			37.0			33.6

6

SEASPINE HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

(U.S. Dollars, in thousands, except par value data)	December 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	29,418		$	83,106
Accounts receivable, net of allowances of $137 and $74, respectively		42,311			36,231
Inventories		84,580			72,299
Prepaid expenses and other current assets		4,404			4,328
Total current assets		160,713			195,964
Property, plant, and equipment, net		62,379			46,892
Right of use assets		16,019			6,948
Intangible assets, net		46,985			42,056
Goodwill		84,595			84,595
Long-term trade receivable		4,203			—
Other assets		1,465			812
Total assets	$	376,359		$	377,267
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	20,724		$	20,301
Accrued compensation		12,695			8,769
Accrued commissions		13,537			9,877
Short-term lease liability		2,463			2,234
Deferred revenue		2,180			1,545
Other accrued expenses and current liabilities		10,114			10,255
Total current liabilities		61,713			52,981
Long-term borrowings under credit facility		26,240			—
Long-term lease liability		14,787			5,866
Deferred tax liability, net		1,746			4,308
Contingent consideration liabilities		11,579			83
Other long-term liabilities		—			1,665
Total liabilities		116,065			64,903
Contingencies
Shareholders’ equity
Common stock, $0.01 par value; 120,000 authorized; 38,205 and 36,584 shares issued and outstanding at December 31, 2022 and 2021, respectively		382			366
Additional paid-in capital		597,308			584,031
Accumulated other comprehensive income		1,216			1,570
Accumulated deficit		(338,612	)		(273,603	)
Total shareholders’ equity		260,294			312,364
Total liabilities and shareholders’ equity	$	376,359		$	377,267

7

SEASPINE HOLDINGS CORPORATIONNon-GAAP Financial Measures

SeaSpine presents two financial measures in this press release not reported in accordance with GAAP: adjusted gross margin and adjusted EBITDA loss. Adjusted gross margin represents GAAP gross margin excluding the impact of the following items recorded to cost of goods sold: technology-related intangible asset amortization expense, nonrecurring, fixed NanoMetalene supplier processing charge, and purchase accounting inventory fair market value adjustment charges. Adjusted EBITDA loss represents earnings (loss) before interest, taxes, depreciation and amortization and excludes the impact of: other income / expense, fixed NanoMetalene supplier processing charge, spinal set instrument replacement and impairment expenses, stock-based compensation, non-recurring employee severance and other charges related to the restructuring of SeaSpine’s European sales and marketing organization, litigation special charges, purchase accounting inventory fair market value adjustment charges, acquisition and integration-related charges, and charges associated with SeaSpine's business combination with Orthofix. A reconciliation of GAAP gross margin to adjusted gross margin and of GAAP net loss to adjusted EBITDA loss for all periods presented in this press release appears in the financial tables below.

The Company believes that the presentation of SeaSpine's adjusted gross margin and adjusted EBITDA loss provides important supplemental information to management and investors regarding financial and business trends relating to legacy SeaSpine's historical results of operations. 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 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.

Adjusted EBITDA

	Three Months Ended December 31,						Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022			2021			2022			2021
GAAP net loss	$	(18,958	)	$	(18,786	)	$	(65,009	)	$	(54,346	)
Non-GAAP adjustments:
Depreciation and intangible asset amortization expense		4,349			3,653			17,187			13,933
Other expense (income)		55			157			1,031			(5,532	)
Income tax (benefit) provision		(1,329	)		(411	)		(2,315	)		(1,100	)
Fixed NanoMetalene supplier processing charge		—			3,704			—			3,704
Spinal set instrument replacement expense		2,630			1,239			7,179			3,904
Stock-based compensation		3,412			3,065			13,584			11,856
European sales and marketing organization restructuring		426			161			984			1,826
Litigation special charges		1,066			—			1,610			—
Purchase accounting inventory fair market value adjustments		—			125			208			542
Acquisition and integration-related charges (7D Surgical)		(16	)		305			362			2,302
Business combination charges related to Orthofix		2,616			—			4,028			—
Adjusted EBITDA loss		(5,749	)		(6,788	)		(21,151	)		(22,911	)

8

Adjusted Gross Profit and Adjusted Gross Margin

	Three Months Ended December 31,						Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022			2021			2022			2021
Net sales	$	63,373		$	55,589		$	237,531		$	191,451
Less: Cost of sales		23,780			25,727			89,920			76,864
Gross profit		39,593			29,862			147,611			114,587
Add back:
Technology-related intangible asset amortization		864			551			3,821			2,718
Fixed NanoMetalene supplier processing charge		—			3,704			—			3,704
Purchase accounting inventory fair market value adjustments		—			125			208			542
Adjusted gross profit		40,457			34,242			151,640			121,551
Adjusted gross margin (Adjusted gross profit / Net sales)		63.8	%		61.6	%		63.8	%		63.5	%

Cash Flow and Free Cash Flow

	Year Ended December 31,
(U.S. Dollars, in thousands)	2022			2021
Net cash from operating activities	$	(38,157	)	$	(33,512	)
Net cash from investing activities		(40,325	)		(55,358	)
Net cash from financing activities		24,654			95,545
Effect of exchange rate changes on cash		140			(382	)
Net change in cash and cash equivalents	$	(53,688	)	$	6,293

	Year Ended December 31,
(Unaudited, U.S. Dollars, in thousands)	2022			2021
Net cash from operating activities	$	(38,157	)	$	(33,512	)
Capital expenditures		(37,752	)		(26,041	)
Free cash flow	$	(75,909	)	$	(59,553	)

Source

Orthofix Medical Inc.

9

XML

Document And Entity Information	Mar. 06, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Mar. 06, 2023
Entity Registrant Name	ORTHOFIX MEDICAL INC.
Entity Central Index Key	0000884624
Entity Emerging Growth Company	false
Securities Act File Number	0-19961
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	98-1340767
Entity Address, Address Line One	3451 Plano Parkway
Entity Address, City or Town	Lewisville
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75056
City Area Code	(214)
Local Phone Number	937-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, $0.10 par value per share
Trading Symbol	OFIX
Security Exchange Name	NASDAQ