May 06, 2019
LEWISVILLE, Texas–(BUSINESS WIRE)–Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the first quarter ended March 31, 2019. Net sales were $109.1 million, earnings per share (“EPS”) was $0.05 and adjusted EPS was $0.27.
“For the first quarter, our top and bottom line results were slightly better than anticipated and we remain confident about our expected sales acceleration throughout the remainder of the year and into 2020, as we previously guided,” said Brad Mason, Orthofix President and Chief Executive Officer. “Regarding the M6-C artificial cervical disc, the U.S. Food and Drug Administration approval of the M6-C disc was certainly the most important highlight of the first quarter for the company. We recently released the compelling results of the full two-year data from the M6-C IDE clinical study and announced the first commercial U.S. patient implants, which marks the beginning of a measured launch of the M6-C disc in the U.S., including the ramp-up of training and certification of surgeons. Encouragingly, we continue to receive a very high level of interest and enthusiasm from physicians and distributors alike.” Mason continued, “Lastly, in addition to our strong first quarter sales of our Biologics products, we initiated a limited market release of fiberFUSE DBM, a differentiated demineralized bone matrix with handling characteristics similar to our market-leading Trinity ELITE™ stem cell allograft.” 
Financial Results Overview
The following table provides net sales by major product category by reporting segment:
| Three Months Ended March 31, | ||||||||
| (Unaudited, U.S. Dollars, in thousands) | 2019 | 2018 | Change | ConstantCurrencyChange | ||||
| Bone Growth Therapies | $ | 47,283 | $ | 46,163 | 2.4 | % | 2.4 | % |
| Spinal Implants1 | 22,903 | 20,707 | 10.6 | % | 11.6 | % | ||
| Biologics2 | 15,732 | 14,335 | 9.7 | % | 9.7 | % | ||
| Global Spine3 | 85,918 | 81,205 | 5.8 | % | 6.1 | % | ||
| Global Extremities | 23,194 | 27,504 | (15.7 | %) | (10.4 | %) | ||
| Net sales4 | $ | 109,112 | $ | 108,709 | 0.4 | % | 1.9 | % |
| 1 | Excluding Spinal Kinetics, net sales decreased 4.6% on a reported basis and 4.2% on a constant currency basis |
| 2 | Excluding the contractual reduction in fee for marketing services, the growth year over year was 16.6% on a reported and constant currency basis |
| 3 | Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, the increase was 3.1% on a reported and 3.2% on a constant currency basis |
| 4 | Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, net sales decreased 1.6% on a reported and 0.2% on a constant currency basis |
Gross profit increased $0.8 million to $85.4 million. Gross margin increased to 78.3% compared to 77.8% in the prior year period, primarily due to favorable product mix, offset slightly by the dilutive impact from Spinal Kinetics.
Net income was $0.9 million, or $0.05 per share, compared to net income of $5.2 million, or $0.27 per share in the prior year period. Adjusted net income from continuing operations was $5.2 million, or $0.27 per share, compared to adjusted net income of $7.4 million, or $0.39 per share in the prior year period.
EBITDA was $0.9 million, compared to $15.2 million in the prior year period. Adjusted EBITDA was $15.7 million, or 14.4% of net sales, compared to $19.7 million, or 18.1% of net sales, in the prior year period.
Liquidity
As of March 31, 2019, cash, cash equivalents, and restricted cash totaled $49.2 million compared to $72.2 million as of December 31, 2018. As of March 31, 2019, the Company had no outstanding indebtedness and borrowing capacity of $125 million under its existing credit facility. Cash flow from operations increased $2.5 million to ($1.0) million, while free cash flow increased $1.0 million to ($6.0) million.
Changes to Reportable Business Segments
The Company has changed its reportable business segments beginning with the first quarter of 2019, to align with changes in how the Company manages its business, reviews operating performance and allocates resources. The Company now reports results under two reportable segments: Global Spine and Global Extremities. Historical financial results for previously reported quarterly and annual periods have been recast to reflect the two new business segments and will be available in the Company’s Form 8-K after market close today.
In addition to changing its reportable business segments, the Company changed its profitability measure for its reporting segments to EBITDA, which is a non-GAAP measure.
2019 Outlook
For the year ending December 31, 2019, the Company expects the following results, assuming exchange rates are the same as those currently prevailing.
| 2019 Outlook | ||||||
| (Unaudited, U.S. Dollars, in millions, except per share data) | Low | High | ||||
| Net sales | $ | 472.0 | 1 | $ | 477.0 | 1 |
| Net income | $ | 14.6 | 2 | $ | 15.5 | 2 |
| Adjusted EBITDA | $ | 86.0 | 3 | $ | 89.0 | 3 |
| EPS | $ | 0.75 | 4 | $ | 0.80 | 4 |
| Adjusted EPS | $ | 1.75 | 5 | $ | 1.82 | 5 |
| 1 | Represents a year-over-year increase of 4.2% to 5.3% on a reported basis |
| 2 | Represents a year-over-year increase of 5.7% to 12.2% |
| 3 | Represents a year-over-year decrease of 1.8% to a year-over-year increase of 1.6% |
| 4 | Represents a year-over-year increase of 4.2% to 11.1% |
| 5 | Represents a year-over-year decrease of 2.2% to year-over-year increase of 1.7% |
Conference Call
Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company’s financial results for the first quarter 2019. Interested parties may access the conference call by dialing (844) 809-1992 in the U.S. and (612) 979-9886 outside the U.S., and referencing the conference ID 3049899. A replay of the call will be available for two weeks by dialing (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and entering the conference ID 3049899. A webcast of the conference call may be accessed by going to the Company’s website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.