10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021  

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-19961

ORTHOFIX MEDICAL INC.

(Exact name of registrant as specified in its charter)

Delaware	98-1340767
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3451 Plano Parkway, Lewisville, Texas	75056
(Address of principal executive offices)	(Zip Code)

(214) 937-2000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☒	Accelerated filer	☐
Non-Accelerated filer	☐	Smaller Reporting Company	☐
		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.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of August 2, 2021, 19,694,874 shares of common stock were issued and outstanding.

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

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
SIGNATURES		31

2

Forward-Looking Statements

This Quarterly Report 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. Forward-looking statements include, but are not limited to, statements about:

• our intentions, beliefs, and expectations regarding our operations, sales, expenses, and future financial performance;

• our operating results;

• our plans for future products and enhancements of existing products;

• anticipated growth and trends in our business;

• the timing of and our ability to maintain and obtain regulatory clearances or approvals;

• our belief that our cash and cash equivalents, investments, and access to our revolving line of credit will be sufficient to satisfy our anticipated cash requirements;

• our expectations regarding our revenues, customers, and distributors;

• our expectations regarding our costs, suppliers, and manufacturing abilities;

• our beliefs and expectations regarding our market penetration and expansion efforts;

• our expectations regarding the benefits and integration of acquired businesses and/or products and our ability to make future acquisitions and successfully integrate any such future-acquired businesses;

• our anticipated trends and challenges in the markets in which we operate; and

• our expectations and beliefs regarding and the impact of investigations, claims, and litigation.

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates, and assumptions that are difficult to predict. Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to, those set forth in Part I, Item 1A under the heading Risk Factors; Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations; and elsewhere throughout the Annual Report on Form 10-K for the year ended December 31, 2020, and in any other documents incorporated by reference. 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.

Trademarks

Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Balance Sheets

(U.S. Dollars, in thousands, except share data)	June 30, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	79,968	$	96,291
Restricted cash		554		530
Accounts receivable, net of allowances of $4,471 and $4,848, respectively		73,453		72,423
Inventories		81,551		84,635
Prepaid expenses and other current assets		22,926		16,500
Total current assets		258,452		270,379
Property, plant, and equipment, net		62,268		63,613
Intangible assets, net		55,890		60,517
Goodwill		83,646		84,018
Deferred income taxes		21,239		25,042
Other long-term assets		20,515		22,292
Total assets	$	502,010	$	525,861
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	20,095	$	23,118
Current portion of finance lease liability		2,551		510
Other current liabilities		59,000		80,271
Total current liabilities		81,646		103,899
Long-term portion of finance lease liability		20,193		22,338
Other long-term liabilities		37,887		42,760
Total liabilities		139,726		168,997
Contingencies (Note 8)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized;     19,669,129 and 19,423,874 issued and outstanding as of June 30,    2021 and December 31, 2020, respectively		1,967		1,942
Additional paid-in capital		302,736		292,291
Retained earnings		55,983		59,379
Accumulated other comprehensive income		1,598		3,252
Total shareholders’ equity		362,284		356,864
Total liabilities and shareholders’ equity	$	502,010	$	525,861

The accompanying notes form an integral part of these condensed consolidated financial statements

4

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

	Three Months Ended June 30,						Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands, except share and per share data)	2021			2020			2021			2020
Net sales	$	121,394		$	73,135		$	226,987		$	177,958
Cost of sales		27,439			23,166			53,353			46,575
Gross profit		93,955			49,969			173,634			131,383
Sales and marketing		57,338			43,479			108,123			97,792
General and administrative		18,335			15,047			34,779			32,912
Research and development		13,121			8,765			24,018			18,729
Acquisition-related amortization and remeasurement (Note 12)		894			3,678			5,363			(3,904	)
Operating income (loss)		4,267			(21,000	)		1,351			(14,146	)
Interest expense, net		(550	)		(901	)		(967	)		(1,324	)
Other income (expense), net		951			5,069			(1,739	)		4,271
Income (loss) before income taxes		4,668			(16,832	)		(1,355	)		(11,199	)
Income tax benefit (expense)		(2,248	)		(1,592	)		(2,041	)		18,440
Net income (loss)	$	2,420		$	(18,424	)	$	(3,396	)	$	7,241
Net income (loss) per common share:
Basic	$	0.12		$	(0.96	)	$	(0.17	)	$	0.38
Diluted		0.12			(0.96	)		(0.17	)		0.37
Weighted average number of common shares:
Basic		19,650,610			19,215,392			19,575,127			19,149,523
Diluted		19,938,392			19,215,392			19,575,127			19,271,467
Other comprehensive income (loss), before tax
Unrealized gain (loss) on debt securities		98			—			(628	)		—
Currency translation adjustment		(155	)		1,484			(1,182	)		(227	)
Other comprehensive income (loss), before tax		(57	)		1,484			(1,810	)		(227	)
Income tax related to other comprehensive income (loss)		(24	)		—			156			—
Other comprehensive income (loss), net of tax		(81	)		1,484			(1,654	)		(227	)
Comprehensive income (loss)	$	2,339		$	(16,940	)	$	(5,050	)	$	7,014

The accompanying notes form an integral part of these condensed consolidated financial statements

5

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited, U.S. Dollars, in thousands, except share data)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
At December 31, 2020		19,423,874	$	1,942	$	292,291	$	59,379		$	3,252		$	356,864
Net loss		—		—		—		(5,816	)		—			(5,816	)
Other comprehensive loss, net of tax		—		—		—		—			(1,573	)		(1,573	)
Share-based compensation expense		—		—		3,721		—			—			3,721
Common shares issued, net		50,510		5		1,617		—			—			1,622
At March 31, 2021		19,474,384	$	1,947	$	297,629	$	53,563		$	1,679		$	354,818
Net income		—		—		—		2,420			—			2,420
Other comprehensive loss, net of tax		—		—		—		—			(81	)		(81	)
Share-based compensation expense		—		—		3,907		—			—			3,907
Common shares issued, net		194,745		20		1,200		—			—			1,220
At June 30, 2021		19,669,129	$	1,967	$	302,736	$	55,983		$	1,598		$	362,284

(Unaudited, U.S. Dollars, in thousands, except share data)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
At December 31, 2019		19,022,619	$	1,902	$	271,019	$	57,749		$	(3,039	)	$	327,631
Cumulative effect adjustment from adoption of ASU 2016-13		—		—		—		(887	)		—			(887	)
Net income		—		—		—		25,665			—			25,665
Other comprehensive loss, net of tax		—		—		—		—			(1,711	)		(1,711	)
Share-based compensation expense		—		—		3,859		—			—			3,859
Common shares issued, net		33,559		4		808		—			—			812
At March 31, 2020		19,056,178	$	1,906	$	275,686	$	82,527		$	(4,750	)	$	355,369
Net loss		—		—		—		(18,424	)		—			(18,424	)
Other comprehensive income, net of tax		—		—		—		—			1,484			1,484
Share-based compensation expense		—		—		4,699		—			—			4,699
Common shares issued, net		152,885		15		1,902		—			—			1,917
At June 30, 2020		19,209,063	$	1,921	$	282,287	$	64,103		$	(3,266	)	$	345,045

The accompanying notes form an integral part of these condensed consolidated financial statements

6

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Cash Flows

	Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands)	2021			2020
Cash flows from operating activities
Net income (loss)	$	(3,396	)	$	7,241
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation and amortization		15,002			13,269
Amortization of operating lease assets, debt costs, and other assets		1,779			1,908
Provision for expected credit losses		(214	)		1,564
Deferred income taxes		3,936			(1,184	)
Share-based compensation expense		7,628			8,558
Interest and (gain) loss on valuation of investment securities		(198	)		219
Change in fair value of contingent consideration		(75	)		(6,900	)
Other		(105	)		(1,933	)
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable		(986	)		16,291
Inventories		2,655			468
Prepaid expenses and other current assets		(6,507	)		43
Accounts payable		(2,662	)		(4,782	)
Other current liabilities		(6,905	)		(1,022	)
Contract liability (Note 10)		(2,880	)		13,851
Payment of contingent consideration		(6,595	)		—
Other long-term assets and liabilities		(213	)		(17,497	)
Net cash from operating activities		264			30,094
Cash flows from investing activities
Acquisition of a business		—			(18,000	)
Capital expenditures for property, plant and equipment		(9,035	)		(8,560	)
Capital expenditures for intangible assets		(757	)		(772	)
Asset acquisitions and other investments		—			(1,240	)
Net cash from investing activities		(9,792	)		(28,572	)
Cash flows from financing activities
Proceeds from revolving credit facility		—			100,000
Proceeds from issuance of common shares		4,685			3,839
Payments related to withholdings for share-based compensation		(1,843	)		(1,110	)
Payments related to finance lease obligation		(260	)		(124	)
Payment of contingent consideration		(8,405	)		—
Other financing activities		(705	)		(687	)
Net cash from financing activities		(6,528	)		101,918
Effect of exchange rate changes on cash		(243	)		(452	)
Net change in cash, cash equivalents, and restricted cash		(16,299	)		102,988
Cash, cash equivalents, and restricted cash at the beginning of period		96,821			70,403
Cash, cash equivalents, and restricted cash at the end of period	$	80,522		$	173,391
Components of cash, cash equivalents, and restricted cash at the end of period
Cash and cash equivalents	$	79,968		$	172,888
Restricted cash		554			503
Cash, cash equivalents, and restricted cash at the end of period	$	80,522		$	173,391

The accompanying notes form an integral part of these condensed consolidated financial statements

7

ORTHOFIX MEDICAL INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Business, basis of presentation, and CARES Act

Description of the Business

Orthofix Medical Inc. and its subsidiaries (the “Company”) is a global medical device company with a spine and orthopedics focus. The Company’s mission is to deliver innovative, quality-driven solutions while partnering with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedic products are distributed in more than 60 countries via the Company's sales representatives and distributors.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2021.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition; contractual allowances; allowance for expected credit losses; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

The global Coronavirus Disease 2019 ("COVID-19") pandemic has significantly affected the Company’s hospital and physician customers, patients, communities, employees, and business operations. The pandemic has led to the cancellation or deferral of elective surgeries and procedures within certain hospitals, ambulatory surgery centers, and other medical facilities; restrictions on travel; the implementation of physical distancing measures; and the temporary or permanent closure of certain businesses.

On March 27, 2020, the CARES Act entered into federal law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and to provide general support to the U.S. economy. The CARES Act, among other things, included provisions relating to the deferment of employer social security payments and technical corrections to tax depreciation methods for qualified improvement property. The Company recorded a benefit for the three months ended March 31, 2020 that was reversed in the period ending June 30, 2020. The CARES Act had no impact to the Company’s income tax benefit (expense) reported within the condensed consolidated statements of operations for the three and six months ended June 30, 2021. The CARES Act provided financial relief to the Company through other various programs, which are each described in further detail below.

In April 2020, the Company received $13.9 million in funds from the Centers for Medicare & Medicaid Services (“CMS”) Accelerated and Advance Payment Program. For discussion of the Company’s accounting for these funds, see Note 10.

In addition, as part of the CARES Act, the Company was permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% of the payroll taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All of these deferred tax payments were then repaid in January 2021. As of June 30, 2021, the Company has no deferred balance associated with this program.

Consolidated Appropriations Act of 2021 (the “Consolidated Appropriations Act”)

On December 27, 2020, the Consolidated Appropriations Act entered into federal law. The Consolidated Appropriations Act, among other things, included provisions related to the deductibility of business meals in 2021 and 2022.  The impact of this act was not material to the Company’s income tax provision for the three and six months ended June 30, 2021.

8

American Rescue Plan Act of 2021 (the “American Rescue Plan”)

On March 11, 2021, the American Rescue Plan entered into federal law. The American Rescue Plan, among other things, included provisions related to the deduction of executive compensation beginning in 2027. The American Rescue Plan had no impact to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2021.

2. Recently adopted accounting standards and recently issued accounting pronouncements

 Adoption of Accounting Standards Update (“ASU”) 2019-12, Simplifying the accounting for income taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, Income Taxes. Additionally, the ASU simplifies U.S. GAAP by amending the requirements related to the accounting for "hybrid" tax regimes and also adding the requirement to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction. The Company adopted this ASU effective January 1, 2021, with certain provisions applied retrospectively and other provisions applied prospectively. Adoption of this ASU did not have a material impact to the Company’s condensed consolidated balance sheet, statements of operations, or cash flows.

3. Acquisitions

On February 2, 2021, the Company entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby the Company acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance and the attainment of certain net sales targets. The Company accounted for this transaction as an asset acquisition. As the transaction is classified as an asset acquisition, the value of the consideration associated with the contingent milestones will be recognized at the time that applicable contingencies are resolved and consideration is paid or becomes payable. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date:

(U.S. Dollars, in thousands)	Fair Value
Fair Value of Consideration Transferred
Cash paid	$	1,000
Total fair value of consideration transferred	$	1,000
Fair value of assets acquired
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement	$	1,000
Total fair value of assets acquired	$	1,000

In addition, the Company is obligated to pay a royalty of 2% to 4% on net sales, commencing upon commercialization of the acquired assets.

The transaction was approved by the Company’s Audit and Finance Committee, with the Audit and Finance Committee directly supervising and directing the negotiations of the transaction. Mr. Serbousek was excluded from such discussions and did not participate in the negotiation or evaluation of the transaction. Mr. Serbousek also continues to be excluded from the oversight of the Company’s development and commercialization activities in relation to the acquired technology and all other matters relating to the relationship between the Company and the counterparty.

9

4. Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2021		December 31, 2020
Raw materials	$	9,625	$	8,442
Work-in-process		15,742		12,149
Finished products		14,654		29,142
Field/consignment		41,530		34,902
Inventories	$	81,551	$	84,635

5. Leases

A summary of the Company’s lease portfolio as of June 30, 2021 and December 31, 2020 is presented in the table below:

(U.S. Dollars, in thousands)	Classification	June 30, 2021		December 31, 2020
Right-of-use assets ("ROU assets")
Operating leases	Other long-term assets	$	4,155	$	4,840
Finance leases	Property, plant and equipment, net		19,641		20,552
Total ROU assets			23,796		25,392
Lease Liabilities
Current
Operating leases	Other current liabilities		2,107		2,092
Finance leases	Current portion of finance lease liability		2,551		510
Long-term
Operating leases	Other long-term liabilities		2,212		2,946
Finance leases	Long-term portion of finance lease liability		20,193		22,338
Total lease liabilities		$	27,063	$	27,886

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,327	$	2,082
Operating cash flows from finance leases		452		304
Financing cash flows from finance leases		260		124
ROU assets obtained in exchange for lease obligations
Operating leases		415		400
Finance leases		149		1,949

6. Long-term debt

As of June 30, 2021, the Company had no borrowings outstanding under the secured revolving credit facility and was in compliance with all required financial covenants.

In addition, the Company had no borrowings on its €5.5 million ($6.5 million) available lines of credit in Italy as of June 30, 2021.

10

7. Fair value measurements and investments

The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2021											December 31, 2020
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Neo Medical preferred equity securities	$	—	$	5,000		$	—		$	5,000		$	5,000
Neo Medical convertible loan agreement		—		—			6,500			6,500			7,160
Bone Biologics equity securities		—		—			—			—			—
Total	$	—	$	5,000		$	6,500		$	11,500		$	12,160
Liabilities
Spinal Kinetics contingent consideration	$	—	$	—		$	(20,700	)	$	(20,700	)	$	(35,400	)
Other contingent consideration		—		—			—			—			(375	)
Deferred compensation plan		—		(1,445	)		—			(1,445	)		(1,441	)
Total	$	—	$	(1,445	)	$	(20,700	)	$	(22,145	)	$	(37,216	)

Neo Medical Equity Investment and Convertible Loan Agreement

On October 1, 2020, the Company purchased preferred shares of Neo Medical SA, a privately held Swiss-based Medtech company (“Neo Medical”), for consideration of $5.0 million and entered into a Convertible Loan Agreement pursuant to which Orthofix loaned Neo Medical CHF 4.6 million (the “Convertible Loan”).

The equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. As of June 30, 2021, the carrying value of this investment remained at $5.0 million.

The Convertible Loan matures on October 1, 2024, provided that if a change in control of Neo Medical occurs prior to the maturity date, the Convertible Loan shall become immediately due upon such event. The Convertible Loan is recorded in other long-term assets as an available for sale debt security at fair value, with applicable interest recorded in interest income. The fair value of the Convertible Loan, including accrued interest, is based upon significant unobservable inputs, including the use of Monte Carlo simulations, option-pricing models, and a probability-weighted discounted cash flows model, requiring the Company to develop its own assumptions. Therefore, the Company has categorized this asset as a Level 3 financial asset.

Some of the more significant unobservable inputs used in the fair value measurement of the Convertible Loan include applicable discount rates, implied volatility, the likelihood and projected timing of repayment or conversion, and projected cash flows in support of the estimated enterprise value of Neo Medical.  Holding other inputs constant, changes in these assumptions could result in a significant change in the fair value of the Convertible Loan. If the amortized cost of the Convertible Loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of credit losses. As of June 30, 2021, the Company has not recognized any credit losses related to the Convertible Loan.

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Fair value of Neo Medical Convertible Loan at January 1	$	7,160		$	—
Interest recognized in interest income, net		198			—
Foreign currency remeasurement recognized in other expense, net		(230	)		—
Unrealized loss recognized in other comprehensive income (loss)		(628	)		—
Fair value of Neo Medical Convertible Loan at June 30		6,500			—
Amortized cost basis of Neo Medical Convertible Loan at June 30		5,247			—

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The following table provides quantitative information related to certain key assumptions utilized within the valuation as of June 30, 2021:

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Unobservable inputs	Estimate
Neo Medical Convertible Loan	$	6,500	Cost of equity discount rate		21.9	%
			Implied volatility		86.0	%

Contingent Consideration

The Company recognized a contingent consideration obligation in connection with the acquisition of Spinal Kinetics in 2018. The Spinal Kinetics contingent consideration consisted of potential future milestone payments of up to $60.0 million in cash. The milestone payments included (i) $15.0 million upon U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to $45.0 million in connection with future sales of the acquired artificial discs. Milestones must be achieved within five years of April 30, 2018 to trigger applicable payments. The FDA Milestone was achieved and paid in 2019. In the first quarter of 2021, the Company achieved trailing-twelve month artificial disc sales of over $30.0 million, triggering the obligation of a $15.0 million milestone payment. The Company made this payment in the second quarter of 2021.

The estimated fair value of the remaining Spinal Kinetics contingent consideration was $20.7 million as of June 30, 2021. The estimated fair value reflects assumptions made by management as of June 30, 2021, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues. However, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration. As of June 30, 2021, the Company has classified the remaining contingent consideration liability within other long-term liabilities. Any changes in fair value are recorded as an operating expense within acquisition-related amortization and remeasurement.

The following table provides a reconciliation of the beginning and ending balances for the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Spinal Kinetics contingent consideration estimated fair value at January 1	$	35,400		$	42,700
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement		300			(6,900	)
Payment made		(15,000	)		—
Spinal Kinetics contingent consideration estimated fair value at June 30	$	20,700		$	35,800

The Company estimated the fair value of the remaining potential future revenue-based milestone payment using a Monte Carlo simulation and a discounted cash flow model. This fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The key assumptions in applying the valuation model include the Company’s forecasted future revenues for Spinal Kinetics products, the expected timing of payment, applicable discount rates applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.

The following table provides a range of key assumptions used within the valuation as of June 30, 2021.

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Valuation Technique	Unobservable inputs	Range
Spinal Kinetics contingent consideration	$	20,700	Discounted cash flow	Revenue discount rate	7.0% - 7.2%
				Payment discount rate	3.1% - 3.2%
				Projected year of payment	2022

8. Contingencies

In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.

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Italian Medical Device Payback (“IMDP”)

In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. A key provision of the law is a ‘payback’ measure, requiring medical device companies in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. The Company’s current assessment of the IMDP involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically assesses this liability based upon current facts and circumstances. As a result, the Company recorded expense of $0.1 million and $0.5 million for the three and six months ended June 30, 2021 and expense of $0.4 million and $0.7 million for the three and six months ended June 30, 2020, respectively. As of June 30, 2021, the Company has accrued $7.3 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once the law has been clarified by the Italian authorities.

Brazil

In 2019, in relation to an ongoing legal dispute with a former Brazilian distributor, approximately $0.6 million (based upon foreign exchange rates as of June 30, 2021) of the Company’s cash in Brazil was frozen upon request to satisfy a judgment. Although the Company is appealing the judgment, this cash has been reclassified to restricted cash. As of June 30, 2021, the Company has an accrual of $1.7 million related to this matter, which is classified within other current liabilities.

9. Accumulated other comprehensive income (loss)

The components of and changes in accumulated other comprehensive income (loss) were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loan			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020	$	1,833		$	1,419		$	3,252
Other comprehensive loss		(1,182	)		(628	)		(1,810	)
Income taxes		—			156			156
Balance at June 30, 2021	$	651		$	947		$	1,598

10. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Orthopedics. Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants, and Biologics.

The table below presents net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	49,706	$	28,379		75.2	%
Spinal Implants		30,092		18,594		61.8	%
Biologics		14,852		11,125		33.5	%
Global Spine		94,650		58,098		62.9	%
Global Orthopedics		26,744		15,037		77.9	%
Net sales	$	121,394	$	73,135		66.0	%

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	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	92,653	$	73,822		25.5	%
Spinal Implants		55,793		41,520		34.4	%
Biologics		28,544		25,074		13.8	%
Global Spine		176,990		140,416		26.0	%
Global Orthopedics		49,997		37,542		33.2	%
Net sales	$	226,987	$	177,958		27.6	%

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Product sales	$	106,947	$	62,435	$	199,210	$	153,856
Marketing service fees		14,447		10,700		27,777		24,102
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

Product sales primarily consist of the sale of bone growth therapies devices, motion preservation products, spine fixation products, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and six months ended June 30, 2021 and 2020:

(U.S. Dollars, in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Allowance for expected credit losses beginning balance	$	4,506		$	5,591		$	4,848		$	3,987
Impact of adoption of ASU 2016-13		—			—			—			1,120
Current period provision (recovery) for expected credit losses		(32	)		885			(214	)		1,564
Writeoffs charged against the allowance and other		(34	)		(224	)		(80	)		(338	)
Effect of changes in foreign exchange rates		31			112			(83	)		31
Allowance for expected credit losses ending balance	$	4,471		$	6,364		$	4,471		$	6,364

Contract Liabilities

The Company’s contract liabilities largely relate to a prepayment of $13.9 million received in April 2020 from the CMS as part of the Accelerated and Advance Payment Program of the CARES Act.

On October 1, 2020, the President of the United States signed the “Continuing Appropriations Act, 2021 and Other Extensions Act,” which relaxed a number of the Medicare Accelerated and Advance Payment Programs recoupment terms for providers and suppliers that received funds from the program. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid.

As of June 30, 2021, the balance of the contract liability associated with the Accelerated and Advance Payment Program of the CARES Act totaled $11.0 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.

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The following table provides a detail of changes in the Company’s contract liability associated with the Accelerated and Advanced Payment Program for the three and six months ended June 30, 2021 and 2020:

(U.S. Dollars, in thousands)	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Contract liability beginning balance	$	13,851		$	—	$	13,851		$	—
Additions		—			13,851		—			13,851
Recoupment recognized in net sales		(2,880	)		—		(2,880	)		—
Contract liability ending balance	$	10,971		$	13,851	$	10,971		$	13,851

Other Contract Assets

The Company’s contract assets, excluding trade accounts receivable (“Other Contract Assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of Orthofix products. Other Contract Assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $1.5 million and $2.0 million as of June 30, 2021 and December 31, 2020, respectively.

11. Business segment information

The Company has two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the Company is earnings before interest, tax, depreciation, and amortization (“EBITDA”). Corporate activities are comprised of the operating expenses and activities not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			2021			2020
Global Spine	$	19,032		$	(3,707	)	$	30,927		$	18,710
Global Orthopedics		1,775			(3,359	)		(454	)		(5,253	)
Corporate		(8,030	)		(1,923	)		(15,859	)		(10,063	)
Total EBITDA	$	12,777		$	(8,989	)	$	14,614		$	3,394
Depreciation and amortization		(7,559	)		(6,942	)		(15,002	)		(13,269	)
Interest expense, net		(550	)		(901	)		(967	)		(1,324	)
Income (loss) before income taxes	$	4,668		$	(16,832	)	$	(1,355	)	$	(11,199	)

Geographical information

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Global Spine
U.S.	$	89,077	$	55,236	$	166,832	$	132,342
International		5,573		2,862		10,158		8,074
Total Global Spine		94,650		58,098		176,990		140,416
Global Orthopedics
U.S.		6,156		4,040		11,747		10,083
International		20,588		10,997		38,250		27,459
Total Global Orthopedics		26,744		15,037		49,997		37,542
Consolidated
U.S.		95,233		59,276		178,579		142,425
International		26,161		13,859		48,408		35,533
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

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12. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development (“IPR&D”) assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020		2021			2020
Changes in fair value of contingent consideration	$	(1,575	)	$	2,100	$	(75	)	$	(6,900	)
Amortization of acquired intangibles		1,969			1,578		3,938			2,996
Acquired IPR&D		500			—		1,500			—
Total	$	894		$	3,678	$	5,363		$	(3,904	)

On April 7, 2021, the Company entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. As consideration for the License Agreement, the Company has agreed to pay up to $4.0 million, with certain payments contingent upon reaching an FDA milestone. Of this amount, $0.5 million was paid in the second quarter of 2021, which was recognized as acquired IPR&D costs. The License Agreement also includes certain minimum purchase requirements.

13. Share-based compensation

Components of share-based compensation expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Cost of sales	$	209	$	205	$	387	$	386
Sales and marketing		957		1,533		1,674		2,229
General and administrative		2,607		2,639		5,136		5,169
Research and development		134		322		431		774
Total	$	3,907	$	4,699	$	7,628	$	8,558

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Stock options	$	398	$	750	$	1,059	$	1,054
Time-based restricted stock awards and units		2,019		2,751		3,746		5,172
Market-based restricted stock units		1,053		810		1,950		1,480
Stock purchase plan		437		388		873		852
Total	$	3,907	$	4,699	$	7,628	$	8,558

During the three months ended June 30, 2021 and 2020, the Company issued 194,745 and 152,885 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units. During the six months ended June 30, 2021 and 2020, the Company issued 245,255 and 186,444 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units

14. Income taxes

Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs, including discrete items. Due to the impact of losses not benefited by the Company’s European manufacturing subsidiary and certain non-deductible financial statement expenses, the Company determined the estimated annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate. As such, the Company has calculated the tax provision using the actual effective rate for the three and six months ended June 30, 2021.

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For the three months ended June 30, 2021 and 2020, the effective tax rate was 48.2% and (9.5%), respectively. For the six months ended June 30, 2021 and 2020, the effective tax rate was (150.6%) and 164.7%. The primary factors affecting the Company’s effective tax rate for the three months and six months ended June 30, 2021, were certain losses not benefited, the remeasurement of contingent consideration (which is predominantly not recognized for tax purposes), a favorable tax ruling related to certain previously unrecognized tax benefits, limits on the deductibility of executive compensation, and the reversal of tax benefits related to certain performance stock units forfeited in the current year.

During the first quarter, the Company received a favorable ruling related to certain previously unrecognized tax benefits, which resulted in the recognition of a net benefit of $0.3 million for the six months ended June 30, 2021. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state, and foreign matters could be reduced by $1.0 million to $1.5 million as audits close and statutes expire.

15. Earnings per share (“EPS”)

The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with nonforfeitable rights to dividends or dividend equivalents (referred to as participating securities). For the three and six months ended June 30, 2021, no significant adjustments were made to net income for purposes of calculating basic and diluted EPS.

The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Weighted average common shares-basic		19,650,610		19,215,392		19,575,127		19,149,523
Effect of dilutive securities
Unexercised stock options and stock purchase plan		171,459		—		—		57,249
Unvested restricted stock awards and units		116,323		—		—		64,695
Weighted average common shares-diluted		19,938,392		19,215,392		19,575,127		19,271,467

There were 787,343 and 2,141,086 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the three months ended June 30, 2021 and 2020, respectively, and 1,412,503 and 1,406,046 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the six months ended June 30, 2021 and 2020, respectively, because inclusion of these awards was anti-dilutive or, for performance-based and market-based restricted stock awards and units, all necessary conditions had not been satisfied by the end of the respective period.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Orthofix Medical Inc.’s (sometimes referred to as “we,” “us” or “our”) financial condition and results of our operations should be read in conjunction with the “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.

Executive Summary

We are a global medical device company with a spine and orthopedics focus. Our mission is to deliver innovative, quality-driven solutions as we partner with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, our spine and orthopedic products are distributed in more than 60 countries via our sales representatives and distributors. For more information, please visit www.orthofix.com.

Notable financial metrics and achievements in the second quarter of 2021 include the following:

• Net sales of $121.4 million, an increase of 66% compared to prior year on a reported basis and up 5% compared to 2019

• U.S. Spinal Implants net sales grew 56% compared to prior year and 37% over the second quarter of 2019

• Strong performance from our U.S. M6-C artificial cervical disc and FITBONE limb lengthening system with approximately $9 million in combined sales

COVID-19 Update and Outlook

The global COVID-19 pandemic has significantly affected our hospital and physician customers, patients, communities, employees, and business operations. At various points in time, the pandemic has led to the cancellation or deferral of elective surgeries and procedures with certain hospitals, ambulatory surgery centers, and other medical facilities; restrictions on travel; the implementation of physical distancing measures; and the temporary or permanent closure of businesses. At this time, the future trajectory of the COVID-19 pandemic remains uncertain, both in the U.S. and in other markets. Significant progress has been made on therapeutic treatments and the development and distribution of vaccines, though the efficacy, timing, and adoption of various treatments and vaccines is uncertain.

Given these various uncertainties, it is unclear the extent to which lingering slowdowns in elective procedures will affect our business during 2021 and beyond. We expect that the effects of COVID-19 on our business will depend on various factors including (i) the magnitude and length of increased case waves in certain geographies, (ii) the existence of multiple strains or variants of the virus that cause COVID-19, and the effectiveness of treatments and vaccines against such variants, (iii) the comfort level of patients in returning to clinics and hospitals, (iv) the extent to which localized elective surgery shutdowns occur, (v) the unemployment rate’s effect on potential patients lacking medical insurance coverage, and (vi) general hospital capacity constraints occurring because of the need to treat COVID-19 patients.

Results of Operations

The following table provides certain items in our condensed consolidated statements of operations and comprehensive income (loss) as a percent of net sales:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021 (%)		2020 (%)			2021 (%)			2020 (%)
Net sales		100.0		100.0			100.0			100.0
Cost of sales		22.6		31.7			23.5			26.2
Gross profit		77.4		68.3			76.5			73.8
Sales and marketing		47.2		59.5			47.6			55.0
General and administrative		15.1		20.6			15.3			18.5
Research and development		10.8		12.0			10.6			10.5
Acquisition-related amortization and remeasurement		0.8		4.9			2.4			(2.3	)
Operating income (loss)		3.5		(28.7	)		0.6			(7.9	)
Net income (loss)		2.0		(25.2	)		(1.5	)		4.1

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Net Sales by Product Category and Reporting Segment

The following tables provide net sales by major product category by reporting segment:

	Three Months Ended June 30,				Percentage Change
(U.S. Dollars, in thousands)	2021		2020		Reported			Constant Currency
Bone Growth Therapies	$	49,706	$	28,379		75.2	%		75.2	%
Spinal Implants		30,092		18,594		61.8	%		60.6	%
Biologics		14,852		11,125		33.5	%		33.5	%
Global Spine		94,650		58,098		62.9	%		62.5	%
Global Orthopedics		26,744		15,037		77.9	%		66.0	%
Net sales	$	121,394	$	73,135		66.0	%		63.2	%

	Six Months Ended June 30,				Percentage Change
(U.S. Dollars, in thousands)	2021		2020		Reported			Constant Currency
Bone Growth Therapies	$	92,653	$	73,822		25.5	%		25.5	%
Spinal Implants		55,793		41,520		34.4	%		33.2	%
Biologics		28,544		25,074		13.8	%		13.8	%
Global Spine		176,990		140,416		26.0	%		25.7	%
Global Orthopedics		49,997		37,542		33.2	%		24.9	%
Net sales	$	226,987	$	177,958		27.6	%		25.5	%

Global Spine

Global Spine offers the following products categories:

- Bone Growth Therapies, which includes our market leading external bone growth stimulators that enhance bone fusion. Global Spine uses distributors and sales representatives to sell and support our Bone Growth Therapy devices and provide associated services to hospitals, healthcare providers, and patients.

- Spinal Implants, which includes a broad portfolio of motion preservation and fixation implant products used in surgical procedures of the spine. Global Spine distributes its Spinal Implant products globally through a network of distributors and sales representatives to sell spine products to hospitals and healthcare providers.

- Biologics, which includes a portfolio of regenerative products and tissue forms that allow physicians to successfully treat a variety of spinal and orthopedic conditions. We market our Biologics tissues to hospitals and healthcare providers, primarily in the U.S., through a network of employed and independent sales representatives that support our Spine and Orthopedic surgeons.

Three months ended June 30, 2021 compared to 2020

Net sales increased $36.6 million or 62.9%

• Bone Growth Therapies net sales increased $21.3 million or 75.2%, as procedure volumes have trended closer to levels consistent with periods prior to the COVID-19 pandemic despite multi-level complex procedure volumes still being depressed

• Spinal Implants net sales increased $11.5 million or 61.8%, as procedure volumes for our legacy Spine Fixation products, both in the U.S. and internationally, have trended closer to levels consistent with periods prior to the COVID-19 pandemic, coupled with the continued growth and adoption of our Motion Preservation product line in the U.S.

• Biologics net sales increased $3.7 million or 33.5%, as multi-level complex procedure volumes have recovered from the second quarter of the prior year, but have still not returned to historical levels prior to the pandemic

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Six months ended June 30, 2021 compared to 2020

Net sales increased $36.6 million or 26.0%

• Bone Growth Therapies net sales increased $18.8 million or 25.5%, primarily driven by an increase in gross orders across all sales channels as restrictions associated with the COVID-19 pandemic have lessened

• Spinal Implants net sales increased $14.3 million or 34.4%, primarily driven by the continued recovery from the effects of the COVID-19 pandemic within our Spine Fixation product line, both in the U.S. and internationally, and from the continued growth and adoption of our Motion Preservation product line in the U.S.

• Biologics net sales increased $3.5 million or 13.8%, primarily driven by the continued recovery from the effects of the COVID-19 pandemic and an increase in revenues from new distributors added over the last 12 months

Global Orthopedics

Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions in adults and children unrelated to the spine. Global Orthopedics distributes its products globally through a network of distributors and sales representatives to sell orthopedic products to hospitals and health providers.

Three months ended June 30, 2021 compared to 2020

Net sales increased $11.7 million or 77.9%

• Increased as procedure volumes, both in the U.S. and internationally, are approaching historical levels prior to the COVID-19 pandemic while complex procedure volumes remain down

• Continued growth in our acquired FITBONE product line

Six months ended June 30, 2021 compared to 2020

Net sales increased $12.5 million or 33.2%

• Increase of $9.4 million primarily driven by the continued recovery from the effects of the COVID-19 pandemic, both in the U.S. and internationally

• Continued growth in our acquired FITBONE product line

• Increase of $3.1 million due to the changes in foreign currency exchange rates, which had a positive impact on net sales

Gross Profit

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Net sales	$	121,394		$	73,135			66.0	%	$	226,987		$	177,958			27.6	%
Cost of sales		27,439			23,166			18.4	%		53,353			46,575			14.6	%
Gross profit	$	93,955		$	49,969			88.0	%	$	173,634		$	131,383			32.2	%
Gross margin		77.4	%		68.3	%		9.1	%		76.5	%		73.8	%		2.7	%

Three months ended June 30, 2021 compared to 2020

Gross profit increased $44.0 million

• Increase primarily due to the continued recovery from the effects of the COVID-19 pandemic as net sales have recovered to levels consistent with periods prior to the COVID-19 pandemic and increased fixed cost absorption when compared to the prior year period

• Gross margins have also improved as a result of significant inventory-related charges incurred in the prior year that did not recur in 2021

Six months ended June 30, 2021 compared to 2020

Gross profit increased $42.3 million

• Increase primarily due to the continued recovery from the effects of the COVID-19 pandemic as net sales have recovered to levels consistent with periods prior to the COVID-19 pandemic and increased fixed cost absorption when compared to the prior year period

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• Gross margins have also improved as a result of significant inventory-related charges incurred in the prior year that did not recur in 2021

Sales and Marketing Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Sales and marketing	$	57,338		$	43,479			31.9	%	$	108,123		$	97,792			10.6	%
As a percentage of net sales		47.2	%		59.5	%		(12.3	%)		47.6	%		55.0	%		(7.4	%)

Three months ended June 30, 2021 compared to 2020

Sales and marketing expense increased $13.9 million

• Increase in variable compensation expenses of $10.2 million as a result of the recovery in net sales

• Increase of $3.5 million largely a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

Six months ended June 30, 2021 compared to 2020

Sales and marketing expense increased $10.3 million

• Increase in variable compensation expenses of $9.6 million as a result of the recovery in net sales

• Increase of $1.8 million largely a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S. and suspension of the 401(k) match, which are no longer in place for 2021

• Partially offset by a decrease of $1.1 million in expenses for marketing events, travel, and other related costs as the first quarter of 2020 was not impacted by the COVID-19 pandemic

General and Administrative Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
General and administrative	$	18,335		$	15,047			21.9	%	$	34,779		$	32,912			5.7	%
As a percentage of net sales		15.1	%		20.6	%		(5.5	%)		15.3	%		18.5	%		(3.2	%)

Three months ended June 30, 2021 compared to 2020

General and administrative expense increased $3.3 million

• Increase largely a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

• Partially offset by a decrease of $0.3 million in succession and transition charges relating to the retirement, transition, or termination of certain executive officers and from targeted restructuring activities

Six months ended June 30, 2021 compared to 2020

General and administrative expense increased $1.9 million

• Increase largely a result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

• Partially offset by a decrease of $1.2 million in succession and transition charges relating to the retirement, transition, or termination of certain executive officers and from targeted restructuring activities

Research and Development Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Research and development	$	13,121		$	8,765			49.7	%	$	24,018		$	18,729			28.2	%
As a percentage of net sales		10.8	%		12.0	%		(1.2	%)		10.6	%		10.5	%		0.1	%

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Three months ended June 30, 2021 compared to 2020   

Research and development expense increased $4.4 million

• Increase of $1.5 million related to costs to comply with recent European Union medical device reporting regulations

• Increase in spending to support our development of new innovative and differentiated products or indications

• Partially offset by the result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

Six months ended June 30, 2021 compared to 2020

Research and development expense increased $5.3 million

• Increase of $2.7 million related to costs to comply with recent European Union medical device reporting regulations

• Increase in spending to support our development of new innovative and differentiated products or indications

• Partially offset by the result of savings initiatives executed in 2020 in response to the COVID-19 pandemic, such as temporary salary reductions in the U.S., suspension of the 401(k) match, and restrictions on travel and related expenses, which are no longer in place for 2021

Acquisition-related Amortization and Remeasurement

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Acquisition-related amortization and remeasurement	$	894		$	3,678			(75.7	%)	$	5,363		$	(3,904	)		(237.4	%)
As a percentage of net sales		0.8	%		4.9	%		(4.1	%)		2.4	%		(2.3	%)		4.7	%

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development assets, which are recognized immediately upon acquisition.

Three months ended June 30, 2021 compared to 2020   

Acquisition-related amortization and remeasurement decreased $2.8 million

• Decrease of $3.3 million primarily related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition that become due upon achievement of certain revenue targets

• Decrease of $0.4 million associated with the reassessment of contingent consideration associated with the acquisition of a former distributor

• Partially offset by the recognition of $0.5 million in expense associated with acquired in-process research and development assets, which were recognized immediately upon acquisition

• Further offset by an increase of $0.4 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions

Six months ended June 30, 2021 compared to 2020

Acquisition-related amortization and remeasurement increased $9.3 million

• Increase of $7.2 million primarily related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition that become due upon achievement of certain revenue targets

• Increase of $1.5 million associated with acquired in-process research and development assets, which were recognized immediately upon acquisition

• Increase of $0.9 million related to the amortization of intangible assets acquired through business combinations or asset acquisitions

• Partially offset by a decrease of $0.4 million associated with the reassessment of contingent consideration associated with the acquisition of a former distributor

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Non-operating Income and Expense

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Interest expense, net	$	(550	)	$	(901	)		(39.0	%)	$	(967	)	$	(1,324	)		(27.0	%)
Other income (expense), net		951			5,069			(81.2	%)		(1,739	)		4,271			(140.7	%)

Three months ended June 30, 2021 compared to 2020

Interest expense, net decreased $0.4 million

• Decrease of $0.4 million associated with interest expense incurred in the prior year on our outstanding indebtedness under the secured revolving credit facility

Other income (expense), net decreased $4.1 million

• Decrease of $4.7 million attributable to funds received in the prior year period from the U.S. Department of Health and Human Services as part of the Provider Relief Fund included within the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

• Increase of $0.6 million associated with changes in foreign currency exchange rates

Six months ended June 30, 2021 compared to 2020

Interest expense, net decreased $0.4 million

• Decrease of $0.4 million associated with interest expense incurred in the prior year on our outstanding indebtedness under the secured revolving credit facility

Other income (expense), net decreased $6.0 million

• Decrease of $4.7 million attributable to funds received in the prior year period from the U.S. Department of Health and Human Services as part of the Provider Relief Fund included within the CARES Act

• Decrease of $1.5 million associated with changes in foreign currency exchange rates

Income Taxes

	Three Months Ended June 30,									Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			% Change			2021			2020			% Change
Income tax (benefit) expense	$	2,248		$	1,592			41.2	%	$	2,041		$	(18,440	)		(111.1	%)
Effective tax rate		48.2	%		(9.5	%)		57.7	%		(150.6	%)		164.7	%		(315.3	%)

Three months ended June 30, 2021 compared to 2020

The increase in the effective tax rate compared to the prior year period was primarily a result of the following factors:

• Certain losses not benefitted

• Changes in financial expenses not recognized for tax purposes, primarily related to acquisition-related remeasurement

• Reversal of tax benefits related to certain performance stock units that were forfeited in the current period

• Decreases in non-deductible executive compensation

The primary factors affecting our effective tax rate for the second quarter of 2021 are as follows:

• Certain losses not benefitted

• Financial expenses not recognized for tax purposes, primarily related to acquisition-related remeasurement

• Reversal of tax benefits related to certain performance stock units that were forfeited in the current period

• Non-deductible executive compensation

Six months ended June 30, 2021 compared to 2020

The decrease in the effective tax rate compared to the prior year period was primarily a result of the following factors:

• Certain losses not benefitted

• Changes in financial expenses not recognized for tax purposes, primarily related to acquisition-related remeasurement

• Reversal of tax benefits related certain performance stock units that were forfeited in the current period

• Benefits related to statute expirations for previously unrecognized tax benefits

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• Decreases in non-deductible executive compensation

The primary factors affecting our effective tax rate for the six months ended June 30, 2021 are as follows:

• Certain losses not benefitted

• Reversal of tax benefits related to certain performance stock units that were forfeited in the current period

• Non-deductible executive compensation

• Favorable tax ruling related to certain previously unrecognized tax benefits

Segment Review

Our business is managed through two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the business by segment is EBITDA (which is described further in Note 11 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein). The following table presents EBITDA by segment and reconciles consolidated EBITDA to income (loss) before income taxes:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			2021			2020
Global Spine	$	19,032		$	(3,707	)	$	30,927		$	18,710
Global Orthopedics		1,775			(3,359	)		(454	)		(5,253	)
Corporate		(8,030	)		(1,923	)		(15,859	)		(10,063	)
Total EBITDA	$	12,777		$	(8,989	)	$	14,614		$	3,394
Depreciation and amortization		(7,559	)		(6,942	)		(15,002	)		(13,269	)
Interest expense, net		(550	)		(901	)		(967	)		(1,324	)
Income (loss) before income taxes	$	4,668		$	(16,832	)	$	(1,355	)	$	(11,199	)

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash at June 30, 2021, totaled $80.5 million compared to $96.8 million at December 31, 2020.

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			Change
Net cash from operating activities	$	264		$	30,094		$	(29,830	)
Net cash from investing activities		(9,792	)		(28,572	)		18,780
Net cash from financing activities		(6,528	)		101,918			(108,446	)
Effect of exchange rate changes on cash		(243	)		(452	)		209
Net change in cash, cash equivalents and restricted cash	$	(16,299	)	$	102,988		$	(119,287	)

The following table presents free cash flow, a non-GAAP financial measure, which is calculated by subtracting capital expenditures from net cash from operating activities:

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			Change
Net cash from operating activities	$	264		$	30,094		$	(29,830	)
Capital expenditures		(9,792	)		(9,332	)		(460	)
Free cash flow	$	(9,528	)	$	20,762		$	(30,290	)

Operating Activities

Cash flows from operating activities decreased $29.8 million

• Decrease in net income of $10.6 million

• Net increase of $12.3 million for non-cash gains and losses, largely related to changes in fair value of contingent consideration and deferred income taxes

• Net decrease of $31.5 million in relating to changes in working capital accounts, primarily attributable to accounts receivable and changes in our contract liability associated with the CMS Accelerated and Advance Payment Program

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Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 55 days at June 30, 2021 compared to 84 days at June 30, 2020. Inventory turns increased to 1.3 times as of June 30, 2021 compared to 1.2 times as of June 30, 2020.

Investing Activities

Cash flows from investing activities increased $18.8 million

• Increase of $18.0 million associated with cash paid in March 2020 to acquire assets associated with the FITBONE intramedullary lengthening system for limb lengthening of the femur and tibia bones

• Increase of $1.2 million associated with cash paid to acquire certain assets of a former distributor in the prior year period

• Partially offset by a decrease in capital expenditures of $0.5 million

Financing Activities

Cash flows from financing activities decreased $108.4 million

• Decrease of $100.0 million from proceeds borrowed under our secured revolving credit facility in 2020

• Decrease of $8.4 million associated with cash paid for the achievement of a revenue-based milestone associated with the Spinal Kinetics acquisition; the milestone payment totaled $15.0 million with a portion of the payment reflected in both operating and financing activities

Credit Facilities

As of June 30, 2021, we had no borrowings outstanding under the secured revolving credit facility. In addition, we had no borrowings outstanding under on our €5.5 million ($6.5 million) available lines of credit in Italy. We were in compliance with all required financial covenants as of June 30, 2021.

Other

For information regarding contingencies, see Note 8 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.

Impact of COVID-19 and the CARES Act on Liquidity and Capital Resources

In March 2020, the CARES Act was signed into U.S. federal law, which provided emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic.

In April 2020, we received $13.9 million in funds from the CMS Accelerated and Advance Payment Program to increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid. As of June 30, 2021, the balance of the contract liability associated with the Accelerated and Advance Payment Program of the CARES Act totaled $11.0 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.

Further, as part of the CARES Act, we were permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% of the taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All of these deferred tax payments were then repaid in January 2021. Therefore, as of June 30, 2021, we have no deferred balance associated with this program.

Spinal Kinetics Contingent Consideration

Under the terms of the acquisition agreement under which we acquired Spinal Kinetics, we agreed to make contingent milestone payments of up to $60.0 million in cash to former Spinal Kinetics’ shareholders. One milestone payment, which was for $15.0 million, became due upon FDA approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”). The FDA Milestone was achieved and paid in 2019. Another milestone payment, which was for $15.0 million, became due upon the achievement of the trailing-twelve month artificial disc sales of over $30.0 million in the first quarter of 2021. We made this payment in the second quarter of 2021.

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The remaining milestone payment is a revenue-based milestone payment of $30.0 million in connection with future sales of the acquired artificial discs. The fair value of the contingent consideration arrangement as of June 30, 2021, was $20.7 million; however, the actual amount ultimately paid could be higher or lower than the fair value of the contingent consideration (ultimate payment will either be $30.0 million or the liability will be reversed if the milestone is not met within the required timeline). As of June 30, 2021, we classified the remaining contingent consideration liability within other long-term liabilities. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

FITBONE Asset Acquisition

On February 3, 2020, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Wittenstein SE (“Wittenstein”), a privately-held German-based company, to acquire assets associated with the FITBONE intramedullary lengthening system for limb lengthening of the femur and tibia bones. At the time of the acquisition, we also entered into a Contract Manufacturing and Supply Agreement (“CMSA”) with Wittenstein. The CMSA with Wittenstein has an initial term of up to two years to manufacture the FITBONE product line. As consideration for the CMSA, we will pay $2.0 million to Wittenstein at the conclusion of the agreement if certain conditions are met in relation to the prompt delivery of manufactured products. This payment is expected to be made in the first quarter of 2022.

Neo Medical Convertible Loan

In October 2020, we entered into a Convertible Loan Agreement (the “Convertible Loan”) with Neo Medical SA, a privately held Swiss-based Medtech company (“Neo Medical”), whereby we loaned CHF 4.6 million to Neo Medical. The loan bears interest at 8.0%, with interest due semi-annually. The Convertible Loan matures in October 2024, provided that if a change in control of Neo Medical occurs prior to maturity, the Convertible Loan shall become immediately due upon such event.

Related Party Transaction

On February 2, 2021, we entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby we acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance or the attainment of certain net sales targets. In addition, the Company is obligated to pay a royalty of 2% to 4% on net sales, commencing upon commercialization of the acquired assets. For additional discussion regarding this transaction, see Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

IGEA S.p.A Exclusive License and Distribution Agreement

On April 7, 2021, we entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. Per the terms of the License Agreement, we will have the exclusive right to sell IGEA products in the U.S. and Canada. As consideration for the License Agreement, we agreed to pay up to $4.0 million, of which $0.5 million was paid in the second quarter of 2021, with certain payments contingent upon achieving an FDA milestone. The License Agreement also includes certain minimum purchase requirements.

Brazil

In September 2019, in relation to an ongoing legal dispute with a former Brazilian distributor, approximately $0.6 million (based upon foreign exchange rates as of June 30, 2021) of our cash in Brazil was frozen upon request to satisfy a judgment. Although we are appealing the judgment, this cash has been reclassified to restricted cash. As of June 30, 2021, we have an accrual of $1.7 million related to this matter, which is classified within other current liabilities

Off-balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations

There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, 2020.

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Critical Accounting Estimates

Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates are detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes to our critical accounting estimates.

Recently Issued Accounting Pronouncements

See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued or adopted accounting pronouncements. As of June 30, 2021, we do not expect any of the issued Accounting Standards Updates to materially affect our condensed consolidated financial statements upon adoption.

Non-GAAP Financial Measures

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. We believe it is important to provide investors with the same non-GAAP metrics used to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to historical operating results and internally evaluate the effectiveness of our operating strategies. 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.

The non-GAAP financial measures used in this filing 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 that can have a material effect on cash flows.

Constant Currency

Constant currency is calculated 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.

EBITDA

EBITDA is a non-GAAP metric defined as earnings before interest income (expense), income taxes, depreciation, and amortization. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business.

Free Cash Flow

Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. Management uses free cash flow as an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, evaluated the

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effectiveness of our disclosure controls and procedures as of . Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2021.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, known to the President and Chief Executive Officer or the Chief Financial Officer that occurred for the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 8 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

The following risk factors supplement and should be read in conjunction with those contained in the risk factors disclosed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2020.

The COVID-19 pandemic and related supply chain and raw material disruptions could have a continuing material impact on our global operations and the operations of our supply chain, which could adversely impact our business results and financial condition.

We rely on a limited number of suppliers to manufacture or supply certain products or components. In the event of interruption within our supply chain, or global shortages of key supplies or components, we may not be able to increase capacity from other sources or develop alternative or secondary sources without incurring material additional costs and/or substantial delays. For example, the COVID-19 pandemic has led to a global shortage of semiconductor chips, which are used in certain of our products. This shortage appears primarily to have been caused by manufacturers experiencing shutdowns or slowdowns during the pandemic, and it may take several fiscal quarters or longer for normalized capacity to return. In addition, limitations in key raw material supplies could also cause semiconductor chip and other component shortages to continue. To the extent it continues, or more shortages are experienced, particularly on a longer term basis, this could adversely affect our ability to procure such components and manufacture certain of our products or it could require us to redesign any affected products in order to incorporate more readily available components, which may require additional regulatory testing and approvals. Thus, our business could be adversely affected in a significant manner if one or more of our suppliers are impacted by any interruption at a particular location or in relation to a particular material or component.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We have not made any repurchases of our common stock during the second quarter of 2021.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There are no matters to be reported under this heading.

Item 6. Exhibits

10.1	Amendment No. 2 to the Orthofix Medical Inc. Amended and Restated 2012 Long-Term Incentive Plan
10.2	Amendment No. 2 to the Orthofix Medical Inc. Second Amended and Restated Stock Purchase Plan
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1*	Section 1350 Certifications of each of the Chief Executive Officer and Chief Financial Officer.
101.INS*	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.

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101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ORTHOFIX MEDICAL INC.
Date: August 6, 2021	By:	/s/ JON SERBOUSEK
	Name:	Jon Serbousek
	Title:	President and Chief Executive Officer, Director
Date: August 6, 2021	By:	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

31

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jon Serbousek, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2021, of Orthofix Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2021	By:	/s/ JON SERBOUSEK
	Name:	Jon Serbousek
	Title:	President and Chief Executive Officer, Director

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Doug Rice, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2021, of Orthofix Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2021	By:	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Orthofix Medical Inc. (“Orthofix”) on Form 10-Q for the quarterly period ended June 30, 2021, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, Jon Serbousek, Chief Executive Officer and President of Orthofix, and Doug Rice, Chief Financial Officer, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Orthofix.

Dated: August 6, 2021	/s/ JON SERBOUSEK
	Name:	Jon Serbousek
	Title:	President and Chief Executive Officer
Dated: August 6, 2021	/s/ DOUG RICE
	Name:	Doug Rice
	Title:	Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 02, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Trading Symbol	OFIX
Entity Registrant Name	ORTHOFIX MEDICAL INC.
Entity Central Index Key	0000884624
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		19,694,874
Entity File Number	0-19961
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
Entity Incorporation, State or Country Code	DE
Title of 12(b) Security	Common stock, $0.10 par value per share
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Document Quarterly Report	true
Document Transition Report	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents	$ 79,968	$ 96,291
Restricted cash	554	530
Accounts receivable, net of allowances of $4,471 and $4,848, respectively	73,453	72,423
Inventories	81,551	84,635
Prepaid expenses and other current assets	22,926	16,500
Total current assets	258,452	270,379
Property, plant, and equipment, net	62,268	63,613
Intangible assets, net	55,890	60,517
Goodwill	83,646	84,018
Deferred income taxes	21,239	25,042
Other long-term assets	20,515	22,292
Total assets	502,010	525,861
Current liabilities
Accounts payable	20,095	23,118
Current portion of finance lease liability	2,551	510
Other current liabilities	59,000	80,271
Total current liabilities	81,646	103,899
Long-term portion of finance lease liability	20,193	22,338
Other long-term liabilities	37,887	42,760
Total liabilities	139,726	168,997
Contingencies (Note 8)
Shareholders’ equity
Common shares $0.10 par value; 50,000,000 shares authorized; 19,669,129 and 19,423,874 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	1,967	1,942
Additional paid-in capital	302,736	292,291
Retained earnings	55,983	59,379
Accumulated other comprehensive income	1,598	3,252
Total shareholders’ equity	362,284	356,864
Total liabilities and shareholders’ equity	$ 502,010	$ 525,861

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Statement Of Financial Position [Abstract]
Trade accounts receivable, allowance for doubtful accounts	$ 4,471	$ 4,848
Common shares, par value	$ 0.10	$ 0.10
Common shares, authorized	50,000,000	50,000,000
Common shares, issued	19,669,129	19,423,874
Common shares, outstanding	19,669,129	19,423,874

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Net sales	$ 121,394	$ 73,135	$ 226,987	$ 177,958
Cost of sales	27,439	23,166	53,353	46,575
Gross profit	93,955	49,969	173,634	131,383
Sales and marketing	57,338	43,479	108,123	97,792
General and administrative	18,335	15,047	34,779	32,912
Research and development	13,121	8,765	24,018	18,729
Acquisition-related amortization and remeasurement (Note 12)	894	3,678	5,363	(3,904)
Operating income (loss)	4,267	(21,000)	1,351	(14,146)
Interest expense, net	(550)	(901)	(967)	(1,324)
Other income (expense), net	951	5,069	(1,739)	4,271
Income (loss) before income taxes	4,668	(16,832)	(1,355)	(11,199)
Income tax benefit (expense)	(2,248)	(1,592)	(2,041)	18,440
Net income (loss)	$ 2,420	$ (18,424)	$ (3,396)	$ 7,241
Net income (loss) per common share:
Basic	$ 0.12	$ (0.96)	$ (0.17)	$ 0.38
Diluted	$ 0.12	$ (0.96)	$ (0.17)	$ 0.37
Weighted average number of common shares:
Basic	19,650,610	19,215,392	19,575,127	19,149,523
Diluted	19,938,392	19,215,392	19,575,127	19,271,467
Other comprehensive income (loss), before tax
Unrealized gain (loss) on debt securities	$ 98		$ (628)
Currency translation adjustment	(155)	$ 1,484	(1,182)	$ (227)
Other comprehensive income (loss), before tax	(57)	1,484	(1,810)	(227)
Income tax related to other comprehensive income (loss)	(24)		156
Other comprehensive income (loss), net of tax	(81)	1,484	(1,654)	(227)
Comprehensive income (loss)	$ 2,339	$ (16,940)	$ (5,050)	$ 7,014

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Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Shares [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Dec. 31, 2019	$ 327,631	$ 1,902	$ 271,019	$ 57,749	$ (3,039)
Balance, Shares at Dec. 31, 2019		19,022,619
Cumulative effect adjustment from adoption | ASU 2016-13 [Member]	(887)			(887)
Net income (loss)	25,665			25,665
Other comprehensive income (loss), net of tax	(1,711)				(1,711)
Share-based compensation expense	3,859		3,859
Common shares issued, net	812	$ 4	808
Common shares issued, net, Shares		33,559
Ending Balance at Mar. 31, 2020	355,369	$ 1,906	275,686	82,527	(4,750)
Balance, Shares at Mar. 31, 2020		19,056,178
Beginning Balance at Dec. 31, 2019	327,631	$ 1,902	271,019	57,749	(3,039)
Balance, Shares at Dec. 31, 2019		19,022,619
Net income (loss)	7,241
Other comprehensive income (loss), net of tax	(227)
Ending Balance at Jun. 30, 2020	345,045	$ 1,921	282,287	64,103	(3,266)
Balance, Shares at Jun. 30, 2020		19,209,063
Beginning Balance at Mar. 31, 2020	355,369	$ 1,906	275,686	82,527	(4,750)
Balance, Shares at Mar. 31, 2020		19,056,178
Net income (loss)	(18,424)			(18,424)
Other comprehensive income (loss), net of tax	1,484				1,484
Share-based compensation expense	4,699		4,699
Common shares issued, net	1,917	$ 15	1,902
Common shares issued, net, Shares		152,885
Ending Balance at Jun. 30, 2020	345,045	$ 1,921	282,287	64,103	(3,266)
Balance, Shares at Jun. 30, 2020		19,209,063
Beginning Balance at Dec. 31, 2020	$ 356,864	$ 1,942	292,291	59,379	3,252
Balance, Shares at Dec. 31, 2020	19,423,874	19,423,874
Net income (loss)	$ (5,816)			(5,816)
Other comprehensive income (loss), net of tax	(1,573)				(1,573)
Share-based compensation expense	3,721		3,721
Common shares issued, net	1,622	$ 5	1,617
Common shares issued, net, Shares		50,510
Ending Balance at Mar. 31, 2021	354,818	$ 1,947	297,629	53,563	1,679
Balance, Shares at Mar. 31, 2021		19,474,384
Beginning Balance at Dec. 31, 2020	$ 356,864	$ 1,942	292,291	59,379	3,252
Balance, Shares at Dec. 31, 2020	19,423,874	19,423,874
Net income (loss)	$ (3,396)
Other comprehensive income (loss), net of tax	(1,654)
Ending Balance at Jun. 30, 2021	$ 362,284	$ 1,967	302,736	55,983	1,598
Balance, Shares at Jun. 30, 2021	19,669,129	19,669,129
Beginning Balance at Mar. 31, 2021	$ 354,818	$ 1,947	297,629	53,563	1,679
Balance, Shares at Mar. 31, 2021		19,474,384
Net income (loss)	2,420			2,420
Other comprehensive income (loss), net of tax	(81)				(81)
Share-based compensation expense	3,907		3,907
Common shares issued, net	1,220	$ 20	1,200
Common shares issued, net, Shares		194,745
Ending Balance at Jun. 30, 2021	$ 362,284	$ 1,967	$ 302,736	$ 55,983	$ 1,598
Balance, Shares at Jun. 30, 2021	19,669,129	19,669,129

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities
Net income (loss)	$ (3,396)	$ 7,241
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation and amortization	15,002	13,269
Amortization of operating lease assets, debt costs, and other assets	1,779	1,908
Provision for expected credit losses	(214)	1,564
Deferred income taxes	3,936	(1,184)
Share-based compensation expense	7,628	8,558
Interest and (gain) loss on valuation of investment securities	(198)	219
Change in fair value of contingent consideration	(75)	(6,900)
Other	(105)	(1,933)
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable	(986)	16,291
Inventories	2,655	468
Prepaid expenses and other current assets	(6,507)	43
Accounts payable	(2,662)	(4,782)
Other current liabilities	(6,905)	(1,022)
Contract liability (Note 10)	(2,880)	13,851
Payment of contingent consideration	(6,595)
Other long-term assets and liabilities	(213)	(17,497)
Net cash from operating activities	264	30,094
Cash flows from investing activities
Acquisition of a business		(18,000)
Capital expenditures for property, plant and equipment	(9,035)	(8,560)
Capital expenditures for intangible assets	(757)	(772)
Asset acquisitions and other investments		(1,240)
Net cash from investing activities	(9,792)	(28,572)
Cash flows from financing activities
Proceeds from revolving credit facility		100,000
Proceeds from issuance of common shares	4,685	3,839
Payments related to withholdings for share-based compensation	(1,843)	(1,110)
Payments related to finance lease obligation	(260)	(124)
Payment of contingent consideration	(8,405)
Other financing activities	(705)	(687)
Net cash from financing activities	(6,528)	101,918
Effect of exchange rate changes on cash	(243)	(452)
Net change in cash, cash equivalents, and restricted cash	(16,299)	102,988
Cash, cash equivalents, and restricted cash at the beginning of period	96,821	70,403
Cash, cash equivalents, and restricted cash at the end of period	80,522	173,391
Components of cash, cash equivalents, and restricted cash at the end of period
Cash and cash equivalents	79,968	172,888
Restricted cash	554	503
Cash, cash equivalents, and restricted cash at the end of period	$ 80,522	$ 173,391

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Business, basis of presentation, and CARES Act

6 Months Ended

Jun. 30, 2021

Organization Consolidation And Presentation Of Financial Statements And Unusual Or Infrequent Items Disclosure [Abstract]

Business, basis of presentation, and CARES Act

1. Business, basis of presentation, and CARES Act

Description of the Business

Orthofix Medical Inc. and its subsidiaries (the “Company”) is a global medical device company with a spine and orthopedics focus. The Company’s mission is to deliver innovative, quality-driven solutions while partnering with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedic products are distributed in more than 60 countries via the Company's sales representatives and distributors.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2021.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition; contractual allowances; allowance for expected credit losses; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

The global Coronavirus Disease 2019 ("COVID-19") pandemic has significantly affected the Company’s hospital and physician customers, patients, communities, employees, and business operations. The pandemic has led to the cancellation or deferral of elective surgeries and procedures within certain hospitals, ambulatory surgery centers, and other medical facilities; restrictions on travel; the implementation of physical distancing measures; and the temporary or permanent closure of certain businesses.

On March 27, 2020, the CARES Act entered into federal law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and to provide general support to the U.S. economy. The CARES Act, among other things, included provisions relating to the deferment of employer social security payments and technical corrections to tax depreciation methods for qualified improvement property. The Company recorded a benefit for the three months ended March 31, 2020 that was reversed in the period ending June 30, 2020. The CARES Act had no impact to the Company’s income tax benefit (expense) reported within the condensed consolidated statements of operations for the three and six months ended June 30, 2021. The CARES Act provided financial relief to the Company through other various programs, which are each described in further detail below.

In April 2020, the Company received $13.9 million in funds from the Centers for Medicare & Medicaid Services (“CMS”) Accelerated and Advance Payment Program. For discussion of the Company’s accounting for these funds, see Note 10.

In addition, as part of the CARES Act, the Company was permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% of the payroll taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All of these deferred tax payments were then repaid in January 2021. As of June 30, 2021, the Company has no deferred balance associated with this program.

Consolidated Appropriations Act of 2021 (the “Consolidated Appropriations Act”)

On December 27, 2020, the Consolidated Appropriations Act entered into federal law. The Consolidated Appropriations Act, among other things, included provisions related to the deductibility of business meals in 2021 and 2022.  The impact of this act was not material to the Company’s income tax provision for the three and six months ended June 30, 2021.

American Rescue Plan Act of 2021 (the “American Rescue Plan”)

On March 11, 2021, the American Rescue Plan entered into federal law. The American Rescue Plan, among other things, included provisions related to the deduction of executive compensation beginning in 2027. The American Rescue Plan had no impact to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2021.

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Recently adopted accounting standards and recently issued accounting pronouncements

6 Months Ended

Jun. 30, 2021

Accounting Changes And Error Corrections [Abstract]

Recently adopted accounting standards and recently issued accounting pronouncements

2. Recently adopted accounting standards and recently issued accounting pronouncements

 Adoption of Accounting Standards Update (“ASU”) 2019-12, Simplifying the accounting for income taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, Income Taxes. Additionally, the ASU simplifies U.S. GAAP by amending the requirements related to the accounting for "hybrid" tax regimes and also adding the requirement to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction. The Company adopted this ASU effective January 1, 2021, with certain provisions applied retrospectively and other provisions applied prospectively. Adoption of this ASU did not have a material impact to the Company’s condensed consolidated balance sheet, statements of operations, or cash flows.

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Acquisitions

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Acquisitions

3. Acquisitions

On February 2, 2021, the Company entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby the Company acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance and the attainment of certain net sales targets. The Company accounted for this transaction as an asset acquisition. As the transaction is classified as an asset acquisition, the value of the consideration associated with the contingent milestones will be recognized at the time that applicable contingencies are resolved and consideration is paid or becomes payable. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date:

(U.S. Dollars, in thousands)	Fair Value
Fair Value of Consideration Transferred
Cash paid	$	1,000
Total fair value of consideration transferred	$	1,000
Fair value of assets acquired
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement	$	1,000
Total fair value of assets acquired	$	1,000

In addition, the Company is obligated to pay a royalty of 2% to 4% on net sales, commencing upon commercialization of the acquired assets.

The transaction was approved by the Company’s Audit and Finance Committee, with the Audit and Finance Committee directly supervising and directing the negotiations of the transaction. Mr. Serbousek was excluded from such discussions and did not participate in the negotiation or evaluation of the transaction. Mr. Serbousek also continues to be excluded from the oversight of the Company’s development and commercialization activities in relation to the acquired technology and all other matters relating to the relationship between the Company and the counterparty.

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Inventories

6 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Inventories

4. Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2021		December 31, 2020
Raw materials	$	9,625	$	8,442
Work-in-process		15,742		12,149
Finished products		14,654		29,142
Field/consignment		41,530		34,902
Inventories	$	81,551	$	84,635

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Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

5. Leases

A summary of the Company’s lease portfolio as of June 30, 2021 and December 31, 2020 is presented in the table below:

(U.S. Dollars, in thousands)	Classification	June 30, 2021		December 31, 2020
Right-of-use assets ("ROU assets")
Operating leases	Other long-term assets	$	4,155	$	4,840
Finance leases	Property, plant and equipment, net		19,641		20,552
Total ROU assets			23,796		25,392
Lease Liabilities
Current
Operating leases	Other current liabilities		2,107		2,092
Finance leases	Current portion of finance lease liability		2,551		510
Long-term
Operating leases	Other long-term liabilities		2,212		2,946
Finance leases	Long-term portion of finance lease liability		20,193		22,338
Total lease liabilities		$	27,063	$	27,886

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,327	$	2,082
Operating cash flows from finance leases		452		304
Financing cash flows from finance leases		260		124
ROU assets obtained in exchange for lease obligations
Operating leases		415		400
Finance leases		149		1,949

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Long-term debt

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Long-term debt

6. Long-term debt

As of June 30, 2021, the Company had no borrowings outstanding under the secured revolving credit facility and was in compliance with all required financial covenants.

In addition, the Company had no borrowings on its €5.5 million ($6.5 million) available lines of credit in Italy as of June 30, 2021.

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Fair value measurements and investments

6 Months Ended

Jun. 30, 2021

Fair Value Measurements And Investment Disclosure [Abstract]

Fair value measurements and investments

7. Fair value measurements and investments

The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2021											December 31, 2020
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Neo Medical preferred equity securities	$	—	$	5,000		$	—		$	5,000		$	5,000
Neo Medical convertible loan agreement		—		—			6,500			6,500			7,160
Bone Biologics equity securities		—		—			—			—			—
Total	$	—	$	5,000		$	6,500		$	11,500		$	12,160
Liabilities
Spinal Kinetics contingent consideration	$	—	$	—		$	(20,700	)	$	(20,700	)	$	(35,400	)
Other contingent consideration		—		—			—			—			(375	)
Deferred compensation plan		—		(1,445	)		—			(1,445	)		(1,441	)
Total	$	—	$	(1,445	)	$	(20,700	)	$	(22,145	)	$	(37,216	)

Neo Medical Equity Investment and Convertible Loan Agreement

On October 1, 2020, the Company purchased preferred shares of Neo Medical SA, a privately held Swiss-based Medtech company (“Neo Medical”), for consideration of $5.0 million and entered into a Convertible Loan Agreement pursuant to which Orthofix loaned Neo Medical CHF 4.6 million (the “Convertible Loan”).

The equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. As of June 30, 2021, the carrying value of this investment remained at $5.0 million.

The Convertible Loan matures on October 1, 2024, provided that if a change in control of Neo Medical occurs prior to the maturity date, the Convertible Loan shall become immediately due upon such event. The Convertible Loan is recorded in other long-term assets as an available for sale debt security at fair value, with applicable interest recorded in interest income. The fair value of the Convertible Loan, including accrued interest, is based upon significant unobservable inputs, including the use of Monte Carlo simulations, option-pricing models, and a probability-weighted discounted cash flows model, requiring the Company to develop its own assumptions. Therefore, the Company has categorized this asset as a Level 3 financial asset.

Some of the more significant unobservable inputs used in the fair value measurement of the Convertible Loan include applicable discount rates, implied volatility, the likelihood and projected timing of repayment or conversion, and projected cash flows in support of the estimated enterprise value of Neo Medical.  Holding other inputs constant, changes in these assumptions could result in a significant change in the fair value of the Convertible Loan. If the amortized cost of the Convertible Loan exceeds its estimated fair value, the security is deemed to be impaired, and must be evaluated for the recognition of credit losses. As of June 30, 2021, the Company has not recognized any credit losses related to the Convertible Loan.

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Fair value of Neo Medical Convertible Loan at January 1	$	7,160		$	—
Interest recognized in interest income, net		198			—
Foreign currency remeasurement recognized in other expense, net		(230	)		—
Unrealized loss recognized in other comprehensive income (loss)		(628	)		—
Fair value of Neo Medical Convertible Loan at June 30		6,500			—
Amortized cost basis of Neo Medical Convertible Loan at June 30		5,247			—

The following table provides quantitative information related to certain key assumptions utilized within the valuation as of June 30, 2021:

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Unobservable inputs	Estimate
Neo Medical Convertible Loan	$	6,500	Cost of equity discount rate		21.9	%
			Implied volatility		86.0	%

Contingent Consideration

The Company recognized a contingent consideration obligation in connection with the acquisition of Spinal Kinetics in 2018. The Spinal Kinetics contingent consideration consisted of potential future milestone payments of up to $60.0 million in cash. The milestone payments included (i) $15.0 million upon U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to $45.0 million in connection with future sales of the acquired artificial discs. Milestones must be achieved within five years of April 30, 2018 to trigger applicable payments. The FDA Milestone was achieved and paid in 2019. In the first quarter of 2021, the Company achieved trailing-twelve month artificial disc sales of over $30.0 million, triggering the obligation of a $15.0 million milestone payment. The Company made this payment in the second quarter of 2021.

The estimated fair value of the remaining Spinal Kinetics contingent consideration was $20.7 million as of June 30, 2021. The estimated fair value reflects assumptions made by management as of June 30, 2021, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues. However, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration. As of June 30, 2021, the Company has classified the remaining contingent consideration liability within other long-term liabilities. Any changes in fair value are recorded as an operating expense within acquisition-related amortization and remeasurement.

The following table provides a reconciliation of the beginning and ending balances for the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Spinal Kinetics contingent consideration estimated fair value at January 1	$	35,400		$	42,700
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement		300			(6,900	)
Payment made		(15,000	)		—
Spinal Kinetics contingent consideration estimated fair value at June 30	$	20,700		$	35,800

The Company estimated the fair value of the remaining potential future revenue-based milestone payment using a Monte Carlo simulation and a discounted cash flow model. This fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The key assumptions in applying the valuation model include the Company’s forecasted future revenues for Spinal Kinetics products, the expected timing of payment, applicable discount rates applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.

The following table provides a range of key assumptions used within the valuation as of June 30, 2021.

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Valuation Technique	Unobservable inputs	Range
Spinal Kinetics contingent consideration	$	20,700	Discounted cash flow	Revenue discount rate	7.0% - 7.2%
				Payment discount rate	3.1% - 3.2%
				Projected year of payment	2022

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Contingencies

6 Months Ended

Jun. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Contingencies

8. Contingencies

In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.

Italian Medical Device Payback (“IMDP”)

In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. A key provision of the law is a ‘payback’ measure, requiring medical device companies in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. The Company’s current assessment of the IMDP involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically assesses this liability based upon current facts and circumstances. As a result, the Company recorded expense of $0.1 million and $0.5 million for the three and six months ended June 30, 2021 and expense of $0.4 million and $0.7 million for the three and six months ended June 30, 2020, respectively. As of June 30, 2021, the Company has accrued $7.3 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once the law has been clarified by the Italian authorities.

Brazil

In 2019, in relation to an ongoing legal dispute with a former Brazilian distributor, approximately $0.6 million (based upon foreign exchange rates as of June 30, 2021) of the Company’s cash in Brazil was frozen upon request to satisfy a judgment. Although the Company is appealing the judgment, this cash has been reclassified to restricted cash. As of June 30, 2021, the Company has an accrual of $1.7 million related to this matter, which is classified within other current liabilities.

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Accumulated other comprehensive loss

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Accumulated other comprehensive loss

9. Accumulated other comprehensive income (loss)

The components of and changes in accumulated other comprehensive income (loss) were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loan			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020	$	1,833		$	1,419		$	3,252
Other comprehensive loss		(1,182	)		(628	)		(1,810	)
Income taxes		—			156			156
Balance at June 30, 2021	$	651		$	947		$	1,598

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Revenue recognition and accounts receivable

6 Months Ended

Jun. 30, 2021

Revenue Recognition And Accounts Receivable [Abstract]

Revenue recognition and accounts receivable

10. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Orthopedics. Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants, and Biologics.

The table below presents net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	49,706	$	28,379		75.2	%
Spinal Implants		30,092		18,594		61.8	%
Biologics		14,852		11,125		33.5	%
Global Spine		94,650		58,098		62.9	%
Global Orthopedics		26,744		15,037		77.9	%
Net sales	$	121,394	$	73,135		66.0	%

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	92,653	$	73,822		25.5	%
Spinal Implants		55,793		41,520		34.4	%
Biologics		28,544		25,074		13.8	%
Global Spine		176,990		140,416		26.0	%
Global Orthopedics		49,997		37,542		33.2	%
Net sales	$	226,987	$	177,958		27.6	%

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Product sales	$	106,947	$	62,435	$	199,210	$	153,856
Marketing service fees		14,447		10,700		27,777		24,102
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

Product sales primarily consist of the sale of bone growth therapies devices, motion preservation products, spine fixation products, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and six months ended June 30, 2021 and 2020:

(U.S. Dollars, in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Allowance for expected credit losses beginning balance	$	4,506		$	5,591		$	4,848		$	3,987
Impact of adoption of ASU 2016-13		—			—			—			1,120
Current period provision (recovery) for expected credit losses		(32	)		885			(214	)		1,564
Writeoffs charged against the allowance and other		(34	)		(224	)		(80	)		(338	)
Effect of changes in foreign exchange rates		31			112			(83	)		31
Allowance for expected credit losses ending balance	$	4,471		$	6,364		$	4,471		$	6,364

Contract Liabilities

The Company’s contract liabilities largely relate to a prepayment of $13.9 million received in April 2020 from the CMS as part of the Accelerated and Advance Payment Program of the CARES Act.

On October 1, 2020, the President of the United States signed the “Continuing Appropriations Act, 2021 and Other Extensions Act,” which relaxed a number of the Medicare Accelerated and Advance Payment Programs recoupment terms for providers and suppliers that received funds from the program. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid.

As of June 30, 2021, the balance of the contract liability associated with the Accelerated and Advance Payment Program of the CARES Act totaled $11.0 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.

The following table provides a detail of changes in the Company’s contract liability associated with the Accelerated and Advanced Payment Program for the three and six months ended June 30, 2021 and 2020:

(U.S. Dollars, in thousands)	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Contract liability beginning balance	$	13,851		$	—	$	13,851		$	—
Additions		—			13,851		—			13,851
Recoupment recognized in net sales		(2,880	)		—		(2,880	)		—
Contract liability ending balance	$	10,971		$	13,851	$	10,971		$	13,851

Other Contract Assets

The Company’s contract assets, excluding trade accounts receivable (“Other Contract Assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of Orthofix products. Other Contract Assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $1.5 million and $2.0 million as of June 30, 2021 and December 31, 2020, respectively.

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Business segment information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Business segment information

11. Business segment information

The Company has two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the Company is earnings before interest, tax, depreciation, and amortization (“EBITDA”). Corporate activities are comprised of the operating expenses and activities not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			2021			2020
Global Spine	$	19,032		$	(3,707	)	$	30,927		$	18,710
Global Orthopedics		1,775			(3,359	)		(454	)		(5,253	)
Corporate		(8,030	)		(1,923	)		(15,859	)		(10,063	)
Total EBITDA	$	12,777		$	(8,989	)	$	14,614		$	3,394
Depreciation and amortization		(7,559	)		(6,942	)		(15,002	)		(13,269	)
Interest expense, net		(550	)		(901	)		(967	)		(1,324	)
Income (loss) before income taxes	$	4,668		$	(16,832	)	$	(1,355	)	$	(11,199	)

Geographical information

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Global Spine
U.S.	$	89,077	$	55,236	$	166,832	$	132,342
International		5,573		2,862		10,158		8,074
Total Global Spine		94,650		58,098		176,990		140,416
Global Orthopedics
U.S.		6,156		4,040		11,747		10,083
International		20,588		10,997		38,250		27,459
Total Global Orthopedics		26,744		15,037		49,997		37,542
Consolidated
U.S.		95,233		59,276		178,579		142,425
International		26,161		13,859		48,408		35,533
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

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Acquisition-Related Amortization and Remeasurement

6 Months Ended

Jun. 30, 2021

Acquisition Related Amortization And Remeasurement [Abstract]

Acquisition-Related Amortization and Remeasurement

12. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development (“IPR&D”) assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020		2021			2020
Changes in fair value of contingent consideration	$	(1,575	)	$	2,100	$	(75	)	$	(6,900	)
Amortization of acquired intangibles		1,969			1,578		3,938			2,996
Acquired IPR&D		500			—		1,500			—
Total	$	894		$	3,678	$	5,363		$	(3,904	)

On April 7, 2021, the Company entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. As consideration for the License Agreement, the Company has agreed to pay up to $4.0 million, with certain payments contingent upon reaching an FDA milestone. Of this amount, $0.5 million was paid in the second quarter of 2021, which was recognized as acquired IPR&D costs. The License Agreement also includes certain minimum purchase requirements.

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Share-based compensation

6 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-based compensation

13. Share-based compensation

Components of share-based compensation expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Cost of sales	$	209	$	205	$	387	$	386
Sales and marketing		957		1,533		1,674		2,229
General and administrative		2,607		2,639		5,136		5,169
Research and development		134		322		431		774
Total	$	3,907	$	4,699	$	7,628	$	8,558

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Stock options	$	398	$	750	$	1,059	$	1,054
Time-based restricted stock awards and units		2,019		2,751		3,746		5,172
Market-based restricted stock units		1,053		810		1,950		1,480
Stock purchase plan		437		388		873		852
Total	$	3,907	$	4,699	$	7,628	$	8,558

During the three months ended June 30, 2021 and 2020, the Company issued 194,745 and 152,885 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units. During the six months ended June 30, 2021 and 2020, the Company issued 245,255 and 186,444 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units

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Income taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income taxes

14. Income taxes

Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs, including discrete items. Due to the impact of losses not benefited by the Company’s European manufacturing subsidiary and certain non-deductible financial statement expenses, the Company determined the estimated annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate. As such, the Company has calculated the tax provision using the actual effective rate for the three and six months ended June 30, 2021.

For the three months ended June 30, 2021 and 2020, the effective tax rate was 48.2% and (9.5%), respectively. For the six months ended June 30, 2021 and 2020, the effective tax rate was (150.6%) and 164.7%. The primary factors affecting the Company’s effective tax rate for the three months and six months ended June 30, 2021, were certain losses not benefited, the remeasurement of contingent consideration (which is predominantly not recognized for tax purposes), a favorable tax ruling related to certain previously unrecognized tax benefits, limits on the deductibility of executive compensation, and the reversal of tax benefits related to certain performance stock units forfeited in the current year.

During the first quarter, the Company received a favorable ruling related to certain previously unrecognized tax benefits, which resulted in the recognition of a net benefit of $0.3 million for the six months ended June 30, 2021. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state, and foreign matters could be reduced by $1.0 million to $1.5 million as audits close and statutes expire.

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Earnings per share ("EPS")

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Earnings per share ("EPS")

15. Earnings per share (“EPS”)

The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with nonforfeitable rights to dividends or dividend equivalents (referred to as participating securities). For the three and six months ended June 30, 2021, no significant adjustments were made to net income for purposes of calculating basic and diluted EPS.

The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Weighted average common shares-basic		19,650,610		19,215,392		19,575,127		19,149,523
Effect of dilutive securities
Unexercised stock options and stock purchase plan		171,459		—		—		57,249
Unvested restricted stock awards and units		116,323		—		—		64,695
Weighted average common shares-diluted		19,938,392		19,215,392		19,575,127		19,271,467

There were 787,343 and 2,141,086 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the three months ended June 30, 2021 and 2020, respectively, and 1,412,503 and 1,406,046 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the six months ended June 30, 2021 and 2020, respectively, because inclusion of these awards was anti-dilutive or, for performance-based and market-based restricted stock awards and units, all necessary conditions had not been satisfied by the end of the respective period.

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Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

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Recently adopted accounting standards and recently issued accounting pronouncements (Policies)	6 Months Ended
	Jun. 30, 2021
Accounting Changes And Error Corrections [Abstract]
Recently adopted accounting standards and recently issued accounting pronouncements	Adoption of Accounting Standards Update (“ASU”) 2019-12, Simplifying the accounting for income taxesIn December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, Income Taxes. Additionally, the ASU simplifies U.S. GAAP by amending the requirements related to the accounting for "hybrid" tax regimes and also adding the requirement to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction. The Company adopted this ASU effective January 1, 2021, with certain provisions applied retrospectively and other provisions applied prospectively. Adoption of this ASU did not have a material impact to the Company’s condensed consolidated balance sheet, statements of operations, or cash flows.

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2021

Business Combinations [Abstract]

Summary of Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date:

(U.S. Dollars, in thousands)	Fair Value
Fair Value of Consideration Transferred
Cash paid	$	1,000
Total fair value of consideration transferred	$	1,000
Fair value of assets acquired
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement	$	1,000
Total fair value of assets acquired	$	1,000

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Inventories (Tables)

6 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories were as follows:

(U.S. Dollars, in thousands)	June 30, 2021		December 31, 2020
Raw materials	$	9,625	$	8,442
Work-in-process		15,742		12,149
Finished products		14,654		29,142
Field/consignment		41,530		34,902
Inventories	$	81,551	$	84,635

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Leases (Tables)

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Summary of Lease Portfolio

A summary of the Company’s lease portfolio as of June 30, 2021 and December 31, 2020 is presented in the table below:

(U.S. Dollars, in thousands)	Classification	June 30, 2021		December 31, 2020
Right-of-use assets ("ROU assets")
Operating leases	Other long-term assets	$	4,155	$	4,840
Finance leases	Property, plant and equipment, net		19,641		20,552
Total ROU assets			23,796		25,392
Lease Liabilities
Current
Operating leases	Other current liabilities		2,107		2,092
Finance leases	Current portion of finance lease liability		2,551		510
Long-term
Operating leases	Other long-term liabilities		2,212		2,946
Finance leases	Long-term portion of finance lease liability		20,193		22,338
Total lease liabilities		$	27,063	$	27,886

Summary of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,327	$	2,082
Operating cash flows from finance leases		452		304
Financing cash flows from finance leases		260		124
ROU assets obtained in exchange for lease obligations
Operating leases		415		400
Finance leases		149		1,949

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Fair value measurements and investments (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Measurements And Investment Disclosure [Abstract]

Schedule of Financial Assets and Liabilities Recorded at Fair Value on Recurring Basis

The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

	June 30, 2021											December 31, 2020
(U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Neo Medical preferred equity securities	$	—	$	5,000		$	—		$	5,000		$	5,000
Neo Medical convertible loan agreement		—		—			6,500			6,500			7,160
Bone Biologics equity securities		—		—			—			—			—
Total	$	—	$	5,000		$	6,500		$	11,500		$	12,160
Liabilities
Spinal Kinetics contingent consideration	$	—	$	—		$	(20,700	)	$	(20,700	)	$	(35,400	)
Other contingent consideration		—		—			—			—			(375	)
Deferred compensation plan		—		(1,445	)		—			(1,445	)		(1,441	)
Total	$	—	$	(1,445	)	$	(20,700	)	$	(22,145	)	$	(37,216	)

Schedule of Reconciliation For Convertible Loan Measured At Fair Value Using Significant Unobservable Inputs

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, measured at fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Fair value of Neo Medical Convertible Loan at January 1	$	7,160		$	—
Interest recognized in interest income, net		198			—
Foreign currency remeasurement recognized in other expense, net		(230	)		—
Unrealized loss recognized in other comprehensive income (loss)		(628	)		—
Fair value of Neo Medical Convertible Loan at June 30		6,500			—
Amortized cost basis of Neo Medical Convertible Loan at June 30		5,247			—

Schedule of Changes in Valuation of Securities

The following table provides quantitative information related to certain key assumptions utilized within the valuation as of June 30, 2021:

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Unobservable inputs	Estimate
Neo Medical Convertible Loan	$	6,500	Cost of equity discount rate		21.9	%
			Implied volatility		86.0	%

The following table provides a range of key assumptions used within the valuation as of June 30, 2021.

(U.S. Dollars, in thousands)	Fair Value as of June 30, 2021		Valuation Technique	Unobservable inputs	Range
Spinal Kinetics contingent consideration	$	20,700	Discounted cash flow	Revenue discount rate	7.0% - 7.2%
				Payment discount rate	3.1% - 3.2%
				Projected year of payment	2022

Schedule of Reconciliation For Contingent Consideration Measured At Fair Value Using Significant Unobservable Inputs

The following table provides a reconciliation of the beginning and ending balances for the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

(U.S. Dollars, in thousands)	2021			2020
Spinal Kinetics contingent consideration estimated fair value at January 1	$	35,400		$	42,700
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement		300			(6,900	)
Payment made		(15,000	)		—
Spinal Kinetics contingent consideration estimated fair value at June 30	$	20,700		$	35,800

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Accumulated other comprehensive loss (Tables)

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Components of Changes in Accumulated Other Comprehensive Loss

The components of and changes in accumulated other comprehensive income (loss) were as follows:

(U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loan			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020	$	1,833		$	1,419		$	3,252
Other comprehensive loss		(1,182	)		(628	)		(1,810	)
Income taxes		—			156			156
Balance at June 30, 2021	$	651		$	947		$	1,598

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Revenue recognition and accounts receivable (Tables)

6 Months Ended

Jun. 30, 2021

Revenue Recognition And Accounts Receivable [Abstract]

Schedule of Net Sales by Major Product Category by Reporting Segment

The table below presents net sales by major product category by reporting segment:

	Three Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	49,706	$	28,379		75.2	%
Spinal Implants		30,092		18,594		61.8	%
Biologics		14,852		11,125		33.5	%
Global Spine		94,650		58,098		62.9	%
Global Orthopedics		26,744		15,037		77.9	%
Net sales	$	121,394	$	73,135		66.0	%

	Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		Change
Bone Growth Therapies	$	92,653	$	73,822		25.5	%
Spinal Implants		55,793		41,520		34.4	%
Biologics		28,544		25,074		13.8	%
Global Spine		176,990		140,416		26.0	%
Global Orthopedics		49,997		37,542		33.2	%
Net sales	$	226,987	$	177,958		27.6	%

Schedule of Components Net Sales

The table below presents product sales and marketing service fees, which are both components of net sales:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Product sales	$	106,947	$	62,435	$	199,210	$	153,856
Marketing service fees		14,447		10,700		27,777		24,102
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

Allowances for Expected Credit Losses

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and six months ended June 30, 2021 and 2020:

(U.S. Dollars, in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Allowance for expected credit losses beginning balance	$	4,506		$	5,591		$	4,848		$	3,987
Impact of adoption of ASU 2016-13		—			—			—			1,120
Current period provision (recovery) for expected credit losses		(32	)		885			(214	)		1,564
Writeoffs charged against the allowance and other		(34	)		(224	)		(80	)		(338	)
Effect of changes in foreign exchange rates		31			112			(83	)		31
Allowance for expected credit losses ending balance	$	4,471		$	6,364		$	4,471		$	6,364

Schedule of Changes in Contract Liability

(U.S. Dollars, in thousands)	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Contract liability beginning balance	$	13,851		$	—	$	13,851		$	—
Additions		—			13,851		—			13,851
Recoupment recognized in net sales		(2,880	)		—		(2,880	)		—
Contract liability ending balance	$	10,971		$	13,851	$	10,971		$	13,851

Other Contract Assets

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Business segment information (Tables)

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Summary of EBITDA by Reporting Segment

The table below presents EBITDA by reporting segment:

	Three Months Ended June 30,						Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020			2021			2020
Global Spine	$	19,032		$	(3,707	)	$	30,927		$	18,710
Global Orthopedics		1,775			(3,359	)		(454	)		(5,253	)
Corporate		(8,030	)		(1,923	)		(15,859	)		(10,063	)
Total EBITDA	$	12,777		$	(8,989	)	$	14,614		$	3,394
Depreciation and amortization		(7,559	)		(6,942	)		(15,002	)		(13,269	)
Interest expense, net		(550	)		(901	)		(967	)		(1,324	)
Income (loss) before income taxes	$	4,668		$	(16,832	)	$	(1,355	)	$	(11,199	)

Summary of Net Sales by Geographic Destination for each Reporting Segment

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Global Spine
U.S.	$	89,077	$	55,236	$	166,832	$	132,342
International		5,573		2,862		10,158		8,074
Total Global Spine		94,650		58,098		176,990		140,416
Global Orthopedics
U.S.		6,156		4,040		11,747		10,083
International		20,588		10,997		38,250		27,459
Total Global Orthopedics		26,744		15,037		49,997		37,542
Consolidated
U.S.		95,233		59,276		178,579		142,425
International		26,161		13,859		48,408		35,533
Net sales	$	121,394	$	73,135	$	226,987	$	177,958

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Acquisition-Related Amortization and Remeasurement (Tables)

6 Months Ended

Jun. 30, 2021

Acquisition Related Amortization And Remeasurement [Abstract]

Schedule of Acquisition-Related Amortization and Remeasurement

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development (“IPR&D”) assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021			2020		2021			2020
Changes in fair value of contingent consideration	$	(1,575	)	$	2,100	$	(75	)	$	(6,900	)
Amortization of acquired intangibles		1,969			1,578		3,938			2,996
Acquired IPR&D		500			—		1,500			—
Total	$	894		$	3,678	$	5,363		$	(3,904	)

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Share-based compensation (Tables)

6 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Components of Share-Based Compensation Expense

Components of share-based compensation expense are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Cost of sales	$	209	$	205	$	387	$	386
Sales and marketing		957		1,533		1,674		2,229
General and administrative		2,607		2,639		5,136		5,169
Research and development		134		322		431		774
Total	$	3,907	$	4,699	$	7,628	$	8,558

	Three Months Ended June 30,				Six Months Ended June 30,
(U.S. Dollars, in thousands)	2021		2020		2021		2020
Stock options	$	398	$	750	$	1,059	$	1,054
Time-based restricted stock awards and units		2,019		2,751		3,746		5,172
Market-based restricted stock units		1,053		810		1,950		1,480
Stock purchase plan		437		388		873		852
Total	$	3,907	$	4,699	$	7,628	$	8,558

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Earnings per share ("EPS") (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule of Reconciliation of Weighted Average Shares Used in Diluted EPS

The following is a reconciliation of the weighted average shares used in diluted EPS computations.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Weighted average common shares-basic		19,650,610		19,215,392		19,575,127		19,149,523
Effect of dilutive securities
Unexercised stock options and stock purchase plan		171,459		—		—		57,249
Unvested restricted stock awards and units		116,323		—		—		64,695
Weighted average common shares-diluted		19,938,392		19,215,392		19,575,127		19,271,467

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Business, basis of presentation, and CARES Act - Additional information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2020	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Business And Basis Of Presentation [Line Items]
CARES Act 2020 Impact on income tax benefit (expense)		$ 0	$ 0
CARES Act of 2020 funds received	$ 13,900		(2,880)	$ 13,851
Deferred tax payments							$ 600
Deferred and other long-term liabilities		$ 0	$ 0
Scenario Forecast [Member]
Business And Basis Of Presentation [Line Items]
CARES Act of 2020 deferred taxes percentage					50.00%	50.00%

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Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements - Additional Information (Detail) - ASU 2019-12 [Member]	Jun. 30, 2021
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted [true false]	true
Change in Accounting Principle, Accounting Standards Update, Adoption Date	Jan. 01, 2021

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Acquisitions - Additional Information (Detail) $ in Millions	Feb. 02, 2021 USD ($)
Intellectual Property Rights [Member]
Business Acquisition [Line Items]
Consideration transferred	$ 1.0
Consideration transferred	$ 9.0
Maximum [Member]
Business Acquisition [Line Items]
Royalty percentage on net sales	4.00%
Maximum [Member] | Intellectual Property Rights [Member]
Business Acquisition [Line Items]
Consideration transferred	$ 10.0
Minimum [Member]
Business Acquisition [Line Items]
Royalty percentage on net sales	2.00%

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Acquisitions - Summary of Fair Values of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Fair Value of Consideration Transferred
Cash paid		$ 18,000
Wittenstein [Member] | FITBONE Asset Purchase Agreement [Member]
Fair Value of Consideration Transferred
Cash paid	$ 1,000
Total fair value of consideration transferred	1,000
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement	1,000
Total fair value of assets acquired	$ 1,000

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Inventories - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 9,625	$ 8,442
Work-in-process	15,742	12,149
Finished products	14,654	29,142
Field/consignment	41,530	34,902
Inventories	$ 81,551	$ 84,635

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Leases - Summary of Lease Portfolio (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Right-of-use assets ("ROU assets")
Operating leases	$ 4,155	$ 4,840
Operating lease, right-of-use asset, statement of financial position [Extensible List]	Other long-term assets	Other long-term assets
Finance leases	$ 19,641	$ 20,552
Finance lease, right-of-use asset, statement of financial position [Extensible List]	Property, plant, and equipment, net	Property, plant, and equipment, net
Total ROU assets	$ 23,796	$ 25,392
Current
Operating leases	$ 2,107	$ 2,092
Operating lease, liability, current, statement of financial position [Extensible List]	Other current liabilities	Other current liabilities
Finance leases	$ 2,551	$ 510
Long-term
Operating leases	$ 2,212	$ 2,946
Operating lease, liability, noncurrent, statement of financial position [Extensible List]	Other current liabilities	Other long-term liabilities
Finance leases	$ 20,193	$ 22,338
Total lease liabilities	$ 27,063	$ 27,886

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Leases - Summary of Supplemental Cash Flow Information Related to Leases (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 2,327	$ 2,082
Operating cash flows from finance leases	452	304
Financing cash flows from finance leases	260	124
ROU assets obtained in exchange for lease obligations
Operating leases	415	400
Finance leases	$ 149	$ 1,949

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Long-Term Debt - Additional Information (Detail) - Jun. 30, 2021 - Italy [Member]	USD ($)	EUR (€)
Debt Instrument [Line Items]
Amount outstanding under lines of credit	$ 0
Maximum borrowing capacity	$ 6,500,000	€ 5,500,000

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Fair Value Measurements and Investments - Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	$ 11,500	$ 12,160
Deferred compensation plan, Liabilities	(1,445)	(1,441)
Liabilities fair value, Total	(22,145)	(37,216)
Neo Medical [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	6,500	7,160
Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Contingent consideration	(20,700)	(35,400)
Other [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Contingent consideration		(375)
Fair Value, Inputs, Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	5,000
Deferred compensation plan, Liabilities	(1,445)
Liabilities fair value, Total	(1,445)
Fair Value, Inputs, Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	6,500
Liabilities fair value, Total	(20,700)
Fair Value, Inputs, Level 3 [Member] | Neo Medical [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	6,500
Fair Value, Inputs, Level 3 [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Contingent consideration	(20,700)
Convertible Loan Agreement | Neo Medical [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	5,000	$ 5,000
Convertible Loan Agreement | Fair Value, Inputs, Level 2 [Member] | Neo Medical [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets fair value	$ 5,000

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Fair Value Measurements and Investments - Additional Information (Detail) - USD ($)	Oct. 01, 2020	Apr. 30, 2018	Jun. 30, 2021	Mar. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments			$ 30,000.0
Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Milestone achievement period		5 years
Consideration transferred			20,700,000
Maximum [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments		$ 60,000,000.0
US Food And Drug Administration [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments		15,000,000.0
Revenue Milestone [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments			$ 15,000.0
Revenue Milestone [Member] | Spinal Kinetics [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Future milestone payments		$ 45,000,000.0
Neo Medical [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Convertible loans	$ 4,600,000
Maturity date	Oct. 01, 2024
Carrying value of investment				$ 5,000,000.0
Convertible loan credit losses				$ 0
Neo Medical [Member] | Preferred Stock
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Amount of Preferred stock consideration	$ 5,000,000.0

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Fair Value Measurements and Investments - Schedule of Reconciliation For Contingent Consideration Measured At Fair Value Using Significant Unobservable Inputs (Level 3) (Detail) - Fair Value, Inputs, Level 3 [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Unrealized loss recognized in other comprehensive income (loss)	$ (628)
Neo Medical [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair value of Convertible Loan at January 1	7,160
Interest recognized in interest income, net	198
Foreign currency remeasurement recognized in other expense, net	(230)
Fair value of Convertible Loan at March 31	6,500
Amortized cost basis of Neo Medical Convertible Loan at June 30	$ 5,247

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Fair Value Measurements and Investments - Schedule of Valuation Methodology and Unobservable Inputs for Level 3 Assets and Liabilities Measured at Fair Value (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)
Spinal Kinetics [Member] | Revenue Discount Rate
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Consideration transferred	$ 20,700
Spinal Kinetics [Member] | Revenue Discount Rate | Minimum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement input	7.41
Spinal Kinetics [Member] | Revenue Discount Rate | Maximum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement input	7.49
Spinal Kinetics [Member] | Payment Discount Rate | Minimum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement input	4.33
Spinal Kinetics [Member] | Payment Discount Rate | Maximum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement input	4.40
Spinal Kinetics [Member] | Projected Year of Payment | Minimum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement period	2021
Spinal Kinetics [Member] | Projected Year of Payment | Maximum [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Business combination contingent consideration liability measurement period	2022
Spinal Kinetics [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Spinal Kinetics contingent consideration estimated fair value at January 1	$ 35,400	$ 42,700
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement	300	(6,900)
Payment made	(15,000)
Spinal Kinetics contingent consideration estimated fair value at June 30	20,700	$ 35,800
Neo Medical [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Neo Medical Convertible Loan	$ 6,500
Fair value implied volatility	21.90%
Fair value discount rate	86.00%

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Contingencies - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Commitments And Contingencies Disclosure [Abstract]
Accrued other long-term liabilities	$ 7.3		$ 7.3
Estimated sales and marketing expense (benefit)	(0.1)	$ (0.5)	0.4	$ 0.7
Freezing amount in cash resulted from court pending legal action issued	0.6		0.6
Accruals related court pending legal dispute	$ 1.7		$ 1.7

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Accumulated Other Comprehensive Loss - Components of Changes in Accumulated Other Comprehensive Loss (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	$ 356,864
Ending Balance	362,284
Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	1,833
Other comprehensive loss	(1,182)
Ending Balance	651
Neo Medical [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	1,419
Other comprehensive loss	(628)
Income taxes	156
Ending Balance	947
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	3,252
Other comprehensive loss	(1,810)
Income taxes	156
Ending Balance	$ 1,598

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Revenue Recognition and Accounts Receivable - Schedule of Net Sales by Major Product Category by Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 121,394	$ 73,135	$ 226,987	$ 177,958
Change	66.00%		27.60%
Bone Growth Therapies [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 49,706	28,379	$ 92,653	73,822
Change	75.20%		25.50%
Spinal Implants [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 30,092	18,594	$ 55,793	41,520
Change	61.80%		34.40%
Biologics [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 14,852	11,125	$ 28,544	25,074
Change	33.50%		13.80%
Global Spine [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 94,650	58,098	$ 176,990	140,416
Change	62.90%		26.00%
Global Orthopedics [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Net sales	$ 26,744	$ 15,037	$ 49,997	$ 37,542
Change	77.90%		33.20%

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Revenue Recognition and Accounts Receivable - Schedule of Components of Net Sales (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue Recognition [Abstract]
Product sales	$ 106,947	$ 62,435	$ 199,210	$ 153,856
Marketing service fees	14,447	10,700	27,777	24,102
Net sales	$ 121,394	$ 73,135	$ 226,987	$ 177,958

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Revenue Recognition and Accounts Receivable - Schedule of Allowance for Expected Credit Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue Recognition [Abstract]
Allowance for expected credit losses beginning balance	$ 4,506	$ 5,591	$ 4,848	$ 3,987
Impact of adoption of ASU 2016-13				1,120
Current period provision (recovery) for expected credit losses	(32)	885	(214)	1,564
Writeoffs charged against the allowance and other	(34)	(224)	(80)	(338)
Effect of changes in foreign exchange rates	31	112	(83)	31
Allowance for expected credit losses ending balance	$ 4,471	$ 6,364	$ 4,471	$ 6,364

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Revenue Recognition and Accounts Receivable - Additional Information (Detail) $ in Thousands			1 Months Ended	6 Months Ended
	Sep. 30, 2022	Oct. 01, 2021	Apr. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Revenue Recognition And Accounts Receivable [Line Items]
CARES Act of 2020 funds received			$ 13,900	$ (2,880)	$ 13,851
Frequency of recoupment	6 months	11 months
Contract liability, total				10,971	$ 13,851	$ 13,851	$ 13,851
Other Long-Term Assets or Other Current Assets [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Other contract assets				$ 1,500			$ 2,000
Scenario Forecast [Member]
Revenue Recognition And Accounts Receivable [Line Items]
Medicare recoupment	0.50	0.25

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Revenue Recognition and Accounts Receivable - Schedule of Changes In Contract Liability(Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue Recognition [Abstract]
Contract liability beginning balance	$ 13,851		$ 13,851
Additions		$ 13,851		$ 13,851
Recoupment recognized in net sales	(2,880)		(2,880)
Contract liability ending balance	$ 10,971	$ 13,851	$ 10,971	$ 13,851

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Business Segment Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2021 Segment
Segment Reporting [Abstract]
Number of reporting segments	2

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Business Segment Information - Summary of EBIDTA by Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Segment Reporting Information [Line Items]
Total EBITDA	$ 12,777	$ (8,989)	$ 14,614	$ 3,394
Depreciation and amortization	(7,559)	(6,942)	(15,002)	(13,269)
Interest expense, net	(550)	(901)	(967)	(1,324)
Income (loss) before income taxes	4,668	(16,832)	(1,355)	(11,199)
Operating Segments [Member] | Global Spine [Member]
Segment Reporting Information [Line Items]
Total EBITDA	19,032	(3,707)	30,927	18,710
Operating Segments [Member] | Global Orthopedics [Member]
Segment Reporting Information [Line Items]
Total EBITDA	1,775	(3,359)	(454)	(5,253)
Corporate, Non-Segment [Member]
Segment Reporting Information [Line Items]
Total EBITDA	$ (8,030)	$ (1,923)	$ (15,859)	$ (10,063)

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Business Segment Information - Summary of Net Sales by Geographic Destination for Each Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 121,394	$ 73,135	$ 226,987	$ 177,958
Global Spine [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	94,650	58,098	176,990	140,416
Global Orthopedics [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	26,744	15,037	49,997	37,542
U.S. [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	95,233	59,276	178,579	142,425
U.S. [Member] | Global Spine [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	89,077	55,236	166,832	132,342
U.S. [Member] | Global Orthopedics [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	6,156	4,040	11,747	10,083
International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	26,161	13,859	48,408	35,533
International [Member] | Global Spine [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	5,573	2,862	10,158	8,074
International [Member] | Global Orthopedics [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net sales	$ 20,588	$ 10,997	$ 38,250	$ 27,459

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Acquisition-Related Amortization and Remeasurement - Components of Acquisition-Related Amortization and Remeasurement (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Acquisition Related Amortization And Remeasurement [Abstract]
Changes in fair value of contingent consideration	$ (1,575)	$ 2,100	$ (75)	$ (6,900)
Amortization of acquired intangibles	1,969	1,578	3,938	2,996
Acquired IPR&D	500		1,500
Total	$ 894	$ 3,678	$ 5,363	$ (3,904)

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Acquisition-Related Amortization and Remeasurement - Additional Information (Details) - License Agreement [Member] $ in Millions	Apr. 07, 2021 USD ($)
Research And Development Arrangement Contract To Perform For Others [Line Items]
Contingent Payment Upon Reaching FDA Milestone	$ 4.0
Amount Recieved In Second Quater	$ 0.5

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Share-based Compensation - Schedule of Components of Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 3,907	$ 4,699	$ 7,628	$ 8,558
Stock options [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	398	750	1,059	1,054
Time-based Restricted Stock Awards and Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	2,019	2,751	3,746	5,172
Market-based Restricted Stock Units [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	1,053	810	1,950	1,480
Stock purchase plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	437	388	873	852
Cost of sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	209	205	387	386
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	957	1,533	1,674	2,229
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	2,607	2,639	5,136	5,169
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 134	$ 322	$ 431	$ 774

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Share-based Compensation - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Jun. 30, 2021	Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Shares issued under stock purchase plan, stock option exercises and restricted stock awards and units	194,745	152,885	245,255	186,444

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Components Of Income Tax Expense Benefit [Line Items]
Income tax effective rate	48.20%	(9.50%)	(150.60%)	164.70%
Internal Revenue Service [Member]
Components Of Income Tax Expense Benefit [Line Items]
Income tax benefit			$ 0.3
Minimum [Member]
Components Of Income Tax Expense Benefit [Line Items]
Decrease in unrecognized tax benefits	$ 1.0		1.0
Maximum [Member]
Components Of Income Tax Expense Benefit [Line Items]
Decrease in unrecognized tax benefits	$ 1.5		$ 1.5

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Earnings Per Share ("EPS") - Schedule of Reconciliation of Weighted Average Shares Used in Diluted EPS (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Line Items]
Weighted average common shares-basic	19,650,610	19,215,392	19,575,127	19,149,523
Effect of dilutive securities
Weighted average common shares-diluted	19,938,392	19,215,392	19,575,127	19,271,467
Stock Options And Stock Purchase Plan [Member]
Effect of dilutive securities
Effect of dilutive securities	171,459			57,249
Restricted Stock Units [Member]
Effect of dilutive securities
Effect of dilutive securities	116,323			64,695

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Earnings Per Share ("EPS") - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Restricted Stock Units [Member] | Outstanding Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Weighted average outstanding options, awards and units not included in diluted earnings per share	787,343	2,141,086	1,412,503	1,406,046