EX-99.1 3 ofix-ex991_6.htm EX-99.1 ofix-ex991_6.htm

Exhibit 99.1

Orthofix Reports Fourth Quarter and Fiscal 2018 Financial Results, CEO Announces Plans to Retire

 

Fourth Quarter Highlights

 

Net sales of $121.1 million, an increase of 3.6% compared to prior year and 4.4% on a constant currency basis

 

Net income of $8.9 million; compared to net income from continuing operations of $1.5 million in the prior year

 

Adjusted EBITDA of $24.4 million; an increase of $0.1 million, or 0.6%, over prior year

 

Fiscal Year 2018 Highlights

 

Net sales of $453.0 million, an increase of 4.4% compared to prior year and 3.9% on a constant currency basis

 

Net income of $13.8 million; compared to net income from continuing operations of $7.3 million in the prior year

 

Adjusted EBITDA of $87.6 million; an increase of $6.0 million, or 7.4%, over prior year

CEO Transition

 

Brad Mason to retire from Orthofix; will remain in current role until a successor is named

LEWISVILLE, Texas — February 25, 2019 — Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the fourth quarter and fiscal year ended December 31, 2018.  For the fourth quarter of 2018, net sales were $121.1 million, earnings per share from continuing operations was $0.46 and adjusted earnings per share from continuing operations was $0.55.  For fiscal year 2018, net sales were $453.0 million, earnings per share from continuing operations was $0.72 and adjusted earnings per share from continuing operations was $1.79.

“With the recent FDA approval of the M6-C artificial cervical disc, the primary focus in our spine business is on the launch in the U.S., which we expect will happen late in the second quarter,” commented Brad Mason, President and Chief Executive Officer. “This approval is an important milestone in our transition to a topline growth story beginning in the second half of this year and accelerating in 2020.”

 

Financial Results Overview

Fourth Quarter

The following table provides net sales by reporting segments:

 

  

 

Three Months Ended December 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2018

 

 

2017

 

 

Change

 

 

Constant

Currency

Change

 

Bone Growth Therapies

 

$

52,819

 

 

$

49,760

 

 

 

6.1

%

 

 

6.1

%

Spinal Implants1

 

 

24,969

 

 

 

21,175

 

 

 

17.9

%

 

 

18.5

%

Biologics2

 

 

16,045

 

 

 

16,858

 

 

 

(4.8

%)

 

 

(4.8

%)

Orthofix Extremities

 

 

27,245

 

 

 

29,103

 

 

 

(6.4

%)

 

 

(3.6

%)

Net sales3

 

$

121,078

 

 

$

116,896

 

 

 

3.6

%

 

 

4.4

%

 

1 Excluding Spinal Kinetics, net sales increased 1.4% on a reported basis and 1.7% on a constant currency basis

2 Excluding the contractual reduction in fee for marketing services, the growth year over year was 2.7% on a reported and constant currency basis

3 Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, the increase was 1.7% on a reported and 2.4% on a constant currency basis

 

Gross profit increased $2.1 million to $95.5 million. Gross margin decreased to 78.8% compared to 79.8% in the prior year period, primarily due to sales mix, including the impact of the Spinal Kinetics acquisition, which was impacted by non-cash inventory fair market value adjustments. Non-GAAP net margin (gross profit less sales and marketing expenses) was $41.6 million, an increase of 0.4% compared to $41.5 million in the prior year period.


 

Net income from continuing operations was $8.9 million, or $0.46 per share, compared to net income of $1.5 million, or $0.08 per share in the prior year period. Adjusted net income from continuing operations was $10.6 million, or $0.55 per share, compared to adjusted net income of $9.7 million, or $0.52 per share in the prior year period. Excluding the impact of the Spinal Kinetics operating loss in the period, adjusted net income was $12.0 million, or $0.62 per share, a 19.2% increase over prior year.

EBITDA was $16.8 million, compared to $21.8 million in the prior year period. Adjusted EBITDA was $24.4 million, or 20.2% of net sales for the fourth quarter, compared to $24.3 million, or 20.8% of net sales, in the prior year period. Excluding the impact of Spinal Kinetics, adjusted EBITDA was $25.9 million, or 22.0% of net sales for fourth quarter, a 6.7% increase over prior year.

 

Fiscal Year 2018

The following table provides net sales by reporting segments:

 

 

 

Year Ended December 31,

 

(U.S. Dollars, in thousands)

 

2018

 

 

2017

 

 

Change

 

 

Constant

Currency

Change

 

Bone Growth Therapies

 

$

195,252

 

 

$

185,900

 

 

 

5.0

%

 

 

5.0

%

Spinal Implants4

 

 

91,658

 

 

 

81,957

 

 

 

11.8

%

 

 

11.9

%

Biologics5

 

 

59,684

 

 

 

62,724

 

 

 

(4.8

%)

 

 

(4.8

%)

Orthofix Extremities

 

 

106,448

 

 

 

103,242

 

 

 

3.1

%

 

 

0.9

%

Net sales6

 

$

453,042

 

 

$

433,823

 

 

 

4.4

%

 

 

3.9

%

 

4 Excluding Spinal Kinetics, net sales increased 1.2% on a reported basis and 1.3% on a constant currency basis

5 Excluding the contractual reduction in fee for marketing services, the growth year over year was 1.3% on a reported and constant currency basis

6 Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, the increase was 3.3% on a reported and 2.8% on a constant currency basis

Driven by the increase in net sales, gross profit increased $15.6 million to $356.4 million and gross margin increased to 78.7% compared to 78.6% in the same prior year period. Non-GAAP net margin was $150.9 million, an increase of 5.9% compared to $142.4 million in the same prior year period.  The increase in Non-GAAP net margin was due to the increase in net sales in addition to savings in certain variable compensation expenses in our Bone Growth Therapies business.

Net income from continuing operations was $13.8 million, or $0.72 per share, compared to net income of $7.3 million, or $0.39 per share in the prior year.  Adjusted net income from continuing operations was $34.1 million, or $1.79 per share, compared to adjusted net income of $30.1 million, or $1.62 per share in the prior year. Excluding the impact of the Spinal Kinetics operating loss in the period, adjusted net income was $37.3 million, or $1.96 per share, a 21.0% increase over prior year.

EBITDA was $42.4 million in 2018, compared to $56.9 million in the prior year. Adjusted EBITDA was $87.6 million or 19.3% of net sales for the year, compared to $81.6 million or 18.8% of net sales in the prior year. Excluding the impact of Spinal Kinetics, adjusted EBITDA was $91.2 million, or 20.5% of net sales for fourth quarter, an 11.9% increase over prior year.

 

Liquidity

As of December 31, 2018, cash, cash equivalents, and restricted cash totaled $72.2 million compared to $81.2 million as of December 31, 2017. As of December 31, 2018, the Company had no outstanding indebtedness and borrowing capacity of $125 million under its existing credit facility. Cash flow from operations increased $10.9 million to $49.9 million, while free cash flow increased $12.6 million to $34.7 million.

 

CEO Transition

Brad Mason has informed the Board of Directors of his intention to retire from Orthofix.  He has agreed to remain with the Company until a successor is hired and serve as a consultant subsequently to ensure an orderly transition.  The Board has commenced a search for Mr. Mason’s successor.

 

“What I’ve always done best and enjoyed the most in my career is starting and fixing companies. I love the challenges associated with these phases in a business’s lifecycle,” said Mr. Mason.  “Now with the stage set for the Company’s next chapter, I’ve finished what I came to do. Because of the tireless efforts of the talented and dedicated Orthofix team, we’ve accomplished everything and

2


 

more than I ever expected. Therefore, I believe it is the right time for both the Company and for me to pass the reins to a new leader who will take Orthofix through the next chapter and capitalize on this enormous potential.

 

2019 Outlook

For the year ending December 31, 2019, the Company expects the following results, assuming exchange rates are the same as those currently prevailing.

 

  

 

2019 Outlook

 

 

(Unaudited, U.S. Dollars, in millions, except per share data)

 

Low

 

 

High

 

 

Net sales

 

$

472.0

 

1

$

477.0

 

1

Net income from continuing operations

 

$

18.9

 

2

$

21.7

 

2

Adjusted EBITDA

 

$

86.0

 

3

$

89.0

 

3

EPS from continuing operations

 

$

0.98

 

4

$

1.12

 

4

Adjusted EPS from continuing operations

 

$

1.75

 

5

$

1.82

 

5

 

1 Represents a year-over-year increase of 4.2% to 5.3% on a reported basis

2 Represents a year-over-year increase of 36.8% to 57.1%

3 Represents a year-over-year decrease of 1.8% to a year-over-year increase of 1.6%

4 Represents a year-over-year increase of 36.1% to 55.6%

5 Represents a year-over-year decrease of 2.2% to year-over-year increase of 1.7%

 

Conference Call

Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company's financial results for the fourth quarter and fiscal year 2018. Interested parties may access the conference call by dialing (844) 809-1992 in the U.S. and (612) 979-9886 outside the U.S., and referencing the conference ID 7446347. A replay of the call will be available for two weeks by dialing (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and entering the conference ID 7446347. A webcast of the conference call may be accessed by going to the Company's website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.

 

About Orthofix

Orthofix Medical Inc. is a global medical device company focused on musculoskeletal products and therapies. The Company’s mission is to improve patients' lives by providing superior reconstruction and regenerative musculoskeletal solutions to physicians worldwide. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedic extremities products are distributed in over seventy countries via the Company's sales representatives and distributors. For more information, please visit www.orthofix.com.

 

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, 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 further update any such statement, or the risk factors described in Part I, Item 1A under the heading Risk Factors in our Form 10-K for the year ended December 31, 2018, to reflect new information, the occurrence of future events or circumstances or otherwise.

 

Company Contact

 

 

Orthofix Medical Inc.

 

 

Mark Quick

 

 

P: 214-937-2924

 

 

E: markquick@orthofix.com

 

 

 

3


 

ORTHOFIX MEDICAL INC.

Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

(U.S. Dollars, in thousands, except share and per  share data)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Net sales

 

$

121,078

 

 

$

116,896

 

 

$

453,042

 

 

$

433,823

 

Cost of sales

 

 

25,626

 

 

 

23,562

 

 

 

96,628

 

 

 

93,037

 

Gross profit

 

 

95,452

 

 

 

93,334

 

 

 

356,414

 

 

 

340,786

 

Sales and marketing

 

 

53,832

 

 

 

51,874

 

 

 

205,527

 

 

 

198,370

 

General and administrative

 

 

20,046

 

 

 

15,146

 

 

 

84,506

 

 

 

71,905

 

Research and development

 

 

8,792

 

 

 

8,454

 

 

 

33,218

 

 

 

29,700

 

Changes in fair value of contingent consideration

 

 

380

 

 

 

 

 

 

3,069

 

 

 

 

Operating  income

 

 

12,402

 

 

 

17,860

 

 

 

30,094

 

 

 

40,811

 

Interest income (expense), net

 

 

(213

)

 

 

(522

)

 

 

(828

)

 

 

(416

)

Other expense, net

 

 

(596

)

 

 

(720

)

 

 

(6,381

)

 

 

(4,004

)

Income before income taxes

 

 

11,593

 

 

 

16,618

 

 

 

22,885

 

 

 

36,391

 

Income tax expense

 

 

(2,722

)

 

 

(15,102

)

 

 

(9,074

)

 

 

(29,100

)

Net income from continuing operations

 

 

8,871

 

 

 

1,516

 

 

 

13,811

 

 

 

7,291

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

 

 

 

 

3

 

 

 

 

 

 

(1,759

)

Income tax benefit

 

 

 

 

 

49

 

 

 

 

 

 

691

 

Net income (loss) from discontinued operations

 

 

 

 

 

52

 

 

 

 

 

 

(1,068

)

Net income

 

$

8,871

 

 

$

1,568

 

 

$

13,811

 

 

$

6,223

 

Net income (loss) per common share—basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

0.47

 

 

$

0.08

 

 

$

0.73

 

 

$

0.40

 

Net income (loss) from discontinued operations

 

 

 

 

 

0.01

 

 

 

 

 

 

(0.06

)

Net income per common share—basic

 

$

0.47

 

 

$

0.09

 

 

$

0.73

 

 

$

0.34

 

Net income (loss) per common share—diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

0.46

 

 

$

0.08

 

 

$

0.72

 

 

$

0.39

 

Net income (loss) from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.05

)

Net income per common share—diluted

 

$

0.46

 

 

$

0.08

 

 

$

0.72

 

 

$

0.34

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,592,385

 

 

 

18,254,831

 

 

 

18,494,002

 

 

 

18,117,405

 

Diluted

 

 

19,052,853

 

 

 

18,773,786

 

 

 

18,911,610

 

 

 

18,498,745

 

4


 

ORTHOFIX MEDICAL INC.

Consolidated Balance Sheets

 

(U.S. Dollars, in thousands, except share data)

 

December 31,

2018

 

 

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,623

 

 

$

81,157

 

Restricted cash

 

 

2,566

 

 

 

 

Trade accounts receivable, less allowance for doubtful accounts of $7,463 and

   $8,405 at December 31, 2018 and 2017, respectively

 

 

77,747

 

 

 

63,437

 

Inventories

 

 

76,847

 

 

 

81,330

 

Prepaid expenses and other current assets

 

 

17,856

 

 

 

25,877

 

Total current assets

 

 

244,639

 

 

 

251,801

 

Property, plant and equipment, net

 

 

42,835

 

 

 

45,139

 

Patents and other intangible assets, net

 

 

51,897

 

 

 

10,461

 

Goodwill

 

 

72,401

 

 

 

53,565

 

Deferred income taxes

 

 

33,228

 

 

 

23,315

 

Other long-term assets

 

 

21,641

 

 

 

21,073

 

Total assets

 

$

466,641

 

 

$

405,354

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Trade accounts payable

 

$

17,989

 

 

$

18,111

 

Other current liabilities

 

 

67,919

 

 

 

61,295

 

Total current liabilities

 

 

85,908

 

 

 

79,406

 

Other long-term liabilities

 

 

45,336

 

 

 

29,340

 

Total liabilities

 

 

131,244

 

 

 

108,746

 

Contingencies

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

Common shares $0.10 par value; 50,000,000 shares authorized; 18,579,688 and

   18,278,833 issued and outstanding as of December 31, 2018 and 2017, respectively

 

 

1,858

 

 

 

1,828

 

Additional paid-in capital

 

 

243,165

 

 

 

220,591

 

Retained earnings

 

 

87,078

 

 

 

70,402

 

Accumulated other comprehensive income

 

 

3,296

 

 

 

3,787

 

Total shareholders’ equity

 

 

335,397

 

 

 

296,608

 

Total liabilities and shareholders’ equity

 

$

466,641

 

 

$

405,354

 

 

 

5


 

ORTHOFIX MEDICAL INC.
Non-GAAP Financial Measures

The following tables present reconciliations of net income  from continuing operations, earnings per share (“EPS”) from continuing operations, gross profit, 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 EBITDA, excluding Spinal Kinetics,” "Adjusted net income from continuing operations," “Adjusted net income, excluding Spinal Kinetics,” "Adjusted EPS from continuing operations," “Adjusted EPS from continuing operations, excluding Spinal Kinetics,” "Non-GAAP net margin" and "Free cash flow" that exclude items specified in the tables. A more detailed explanation of the items excluded from these non-GAAP financial measures, as well as why management believes the non-GAAP financial measures are useful to them, is included following the reconciliations.  

 

EBITDA, Adjusted EBITDA, and Adjusted EBITDA, excluding Spinal Kinetics

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income from continuing operations

 

$

8,871

 

 

$

1,516

 

 

$

13,811

 

 

$

7,291

 

Interest expense, net

 

 

213

 

 

 

522

 

 

 

828

 

 

 

416

 

Income tax expense

 

 

2,722

 

 

 

15,102

 

 

 

9,074

 

 

 

29,100

 

Depreciation and amortization

 

 

4,676

 

 

 

4,703

 

 

 

17,799

 

 

 

20,124

 

Amortization of Spinal Kinetics intangible assets

 

 

322

 

 

 

 

 

 

860

 

 

 

 

EBITDA

 

$

16,804

 

 

$

21,843

 

 

$

42,372

 

 

$

56,931

 

Share-based compensation

 

 

4,538

 

 

 

3,433

 

 

 

18,930

 

 

 

12,557

 

Foreign exchange impact

 

 

532

 

 

 

491

 

 

 

3,329

 

 

 

(1,934

)

Strategic investments

 

 

630

 

 

 

1,993

 

 

 

8,596

 

 

 

6,027

 

Domestication to Delaware

 

 

511

 

 

 

 

 

 

4,215

 

 

 

 

Spinal Kinetics acquisition-related adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash inventory fair market value adjustments

 

 

534

 

 

 

 

 

 

1,439

 

 

 

 

Contingent consideration fair value adjustments

 

 

380

 

 

 

 

 

 

3,069

 

 

 

 

Unrealized loss on investment securities

 

 

 

 

 

 

 

 

3,050

 

 

 

5,585

 

Legal judgments/settlements

 

 

267

 

 

 

(4,255

)

 

 

1,160

 

 

 

(606

)

Restructuring

 

 

214

 

 

 

764

 

 

 

1,447

 

 

 

3,006

 

Adjusted EBITDA

 

$

24,410

 

 

$

24,269

 

 

$

87,607

 

 

$

81,566

 

Loss related to Spinal Kinetics

 

 

(1,481

)

 

 

 

 

 

(3,625

)

 

 

 

Adjusted EBITDA, excluding Spinal Kinetics

 

$

25,891

 

 

$

24,269

 

 

$

91,232

 

 

$

81,566

 

Adjusted EBITDA as a % of net sales

 

 

20.2

%

 

 

20.8

%

 

 

19.3

%

 

 

18.8

%

Adjusted EBITDA as a % of net sales, excluding Spinal Kinetics

 

 

22.0

%

 

 

20.8

%

 

 

20.5

%

 

 

18.8

%

6


 

 

Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations excluding Spinal Kinetics

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income from continuing operations

 

$

8,871

 

 

$

1,516

 

 

$

13,811

 

 

$

7,291

 

Foreign exchange impact

 

 

532

 

 

 

491

 

 

 

3,329

 

 

 

(1,934

)

Strategic investments

 

 

630

 

 

 

1,993

 

 

 

8,596

 

 

 

6,027

 

Domestication to Delaware

 

 

511

 

 

 

 

 

 

4,215

 

 

 

 

Spinal Kinetics acquisition-related adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash inventory fair market value adjustments

 

 

534

 

 

 

 

 

 

1,439

 

 

 

 

Amortization of intangible assets

 

 

322

 

 

 

 

 

 

860

 

 

 

 

Contingent consideration fair value adjustments

 

 

380

 

 

 

 

 

 

3,069

 

 

 

 

Unrealized loss on investment securities

 

 

 

 

 

 

 

 

3,050

 

 

 

5,585

 

Legal judgments/settlements

 

 

267

 

 

 

(4,255

)

 

 

1,160

 

 

 

(606

)

Restructuring

 

 

214

 

 

 

764

 

 

 

1,447

 

 

 

3,006

 

Long-term income tax rate adjustment

 

 

(1,623

)

 

 

9,170

 

 

 

(6,849

)

 

 

10,682

 

Adjusted net income from continuing operations

 

$

10,638

 

 

$

9,679

 

 

$

34,127

 

 

$

30,051

 

Loss related to Spinal Kinetics

 

 

(1,333

)

 

 

 

 

 

(3,181

)

 

 

 

Adjusted net income from continuing operations, excluding Spinal Kinetics

 

$

11,971

 

 

$

9,679

 

 

$

37,308

 

 

$

30,051

 

 

 

Adjusted EPS from Continuing Operations and Adjusted EPS from Continuing Operations, excluding Spinal Kinetics

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

(Unaudited, per diluted share)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

EPS from continuing operations

 

$

0.46

 

 

$

0.08

 

 

$

0.72

 

 

$

0.39

 

Foreign exchange impact

 

 

0.03

 

 

 

0.03

 

 

 

0.17

 

 

 

(0.10

)

Strategic investments

 

 

0.03

 

 

 

0.11

 

 

 

0.45

 

 

 

0.32

 

Domestication to Delaware

 

 

0.03

 

 

 

 

 

 

0.22

 

 

 

 

Spinal Kinetics acquisition-related adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash inventory fair market value adjustments

 

 

0.03

 

 

 

 

 

 

0.08

 

 

 

 

Amortization of intangible assets

 

 

0.02

 

 

 

 

 

 

0.05

 

 

 

 

Contingent consideration fair value adjustments

 

 

0.02

 

 

 

 

 

 

0.16

 

 

 

 

Unrealized loss on investment securities

 

 

 

 

 

 

 

 

0.16

 

 

 

0.30

 

Legal judgments/settlements

 

 

0.01

 

 

 

(0.23

)

 

 

0.06

 

 

 

(0.03

)

Restructuring

 

 

0.01

 

 

 

0.04

 

 

 

0.08

 

 

 

0.16

 

Long-term income tax rate adjustment

 

 

(0.09

)

 

 

0.49

 

 

 

(0.36

)

 

 

0.58

 

Adjusted EPS from continuing operations

 

$

0.55

 

 

$

0.52

 

 

$

1.79

 

 

$

1.62

 

Loss related to Spinal Kinetics

 

 

(0.07

)

 

 

 

 

 

(0.17

)

 

 

 

Adjusted EPS from continuing operations, excluding Spinal Kinetics

 

$

0.62

 

 

$

0.52

 

 

$

1.96

 

 

$

1.62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of diluted common shares (treasury stock method)

 

 

19,195,653

 

 

 

18,773,786

 

 

 

19,037,978

 

 

 

18,498,745

 

7


 

 

Non-GAAP Net Margin

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Gross profit

 

$

95,452

 

 

$

93,334

 

 

$

356,414

 

 

$

340,786

 

Sales and marketing

 

 

(53,832

)

 

 

(51,874

)

 

 

(205,527

)

 

 

(198,370

)

Non-GAAP net margin

 

$

41,620

 

 

$

41,460

 

 

$

150,887

 

 

$

142,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bone Growth Therapies

 

$

24,857

 

 

$

22,482

 

 

$

86,252

 

 

$

77,369

 

Spinal Implants

 

 

1,668

 

 

 

1,905

 

 

 

7,628

 

 

 

8,730

 

Biologics

 

 

7,317

 

 

 

7,041

 

 

 

26,298

 

 

 

25,692

 

Orthofix Extremities

 

 

7,936

 

 

 

10,170

 

 

 

31,391

 

 

 

31,071

 

Corporate

 

 

(158

)

 

 

(138

)

 

 

(682

)

 

 

(446

)

Non-GAAP net margin

 

$

41,620

 

 

$

41,460

 

 

$

150,887

 

 

$

142,416

 

 

Free Cash Flow

 

 

Year Ended

December 31,

 

(Unaudited, U.S. Dollars, in thousands)

 

2018

 

 

2017

 

Net cash from operating activities

 

$

49,918

 

 

$

38,972

 

Capital expenditures

 

 

(15,256

)

 

 

(16,948

)

Free cash flow

 

$

34,662

 

 

$

22,024

 

 

Pro-forma Net Sales Under the New Revenue Recognition Standard

 

(Unaudited, U.S. Dollars, in millions)

 

2018 (Actual)

 

 

2017 (Pro-forma)

 

 

Change

 

 

Constant Currency Change

 

1st quarter net sales

 

$

109

 

 

$

104

 

 

 

4.9

%

 

 

2.4

%

2nd quarter net sales

 

 

112

 

 

$

108

 

 

 

2.8

%

 

 

1.8

%

3rd quarter net sales

 

 

112

 

 

$

106

 

 

 

5.5

%

 

 

6.0

%

4th quarter net sales

 

 

121

 

 

$

111

 

 

 

8.7

%

 

 

9.5

%

Full year net sales

 

$

453

 

 

$

429

 

 

 

5.5

%

 

 

5.0

%

8


 

2019 Outlook

 

 

2019 Outlook

 

(Unaudited, U.S. Dollars, in millions)

 

Low

 

 

High

 

Net income from continuing operations

 

$

18.9

 

 

$

21.7

 

Interest expense, net

 

 

0.6

 

 

 

0.6

 

Income tax expense

 

 

7.7

 

 

 

8.8

 

Depreciation and amortization

 

 

24.6

 

 

 

24.6

 

EBITDA

 

$

51.8

 

 

$

55.7

 

Share-based compensation

 

 

17.5

 

 

 

17.5

 

Strategic investments

 

 

4.6

 

 

 

4.5

 

Spinal Kinetics acquisition-related adjustments:

 

 

 

 

 

 

 

 

Non-cash inventory fair market value adjustments

 

 

0.7

 

 

 

0.7

 

Contingent consideration fair value adjustments

 

 

4.0

 

 

 

3.3

 

Legal judgments/settlements

 

 

1.7

 

 

 

1.6

 

Succession charges

 

 

5.7

 

 

 

5.7

 

Adjusted EBITDA

 

$

86.0

 

 

$

89.0

 

 

 

 

2019 Outlook

 

(Unaudited, per diluted share)

 

Low

 

 

High

 

EPS from continuing operations

 

$

0.98

 

 

$

1.12

 

Strategic investments

 

 

0.24

 

 

 

0.23

 

Spinal Kinetics acquisition-related adjustments: