Financial

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

February 25, 2019 

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

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

Financial Results Overview

Fourth Quarter

The following table provides net sales by reporting segments:

Three Months Ended December 31,
(Unaudited, U.S. Dollars, in thousands)20182017ChangeConstantCurrencyChange
Bone Growth Therapies$52,819$49,7606.1%6.1%
Spinal Implants124,96921,17517.9%18.5%
Biologics216,04516,858(4.8%)(4.8%)
Orthofix Extremities27,24529,103(6.4%)(3.6%)
Net sales3$121,078$116,8963.6%4.4%
1Excluding Spinal Kinetics, net sales increased 1.4% on a reported basis and 1.7% on a constant currency basis
2Excluding the contractual reduction in fee for marketing services, the growth year over year was 2.7% on a reported and constant currency basis
3Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, the increase was 1.7% on a reported and 2.4% on a constant currency basis

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

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

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

Fiscal Year 2018

The following table provides net sales by reporting segments:

Year Ended December 31,
(U.S. Dollars, in thousands)20182017ChangeConstantCurrencyChange
Bone Growth Therapies$195,252$185,9005.0%5.0%
Spinal Implants491,65881,95711.8%11.9%
Biologics559,68462,724(4.8%)(4.8%)
Orthofix Extremities106,448103,2423.1%0.9%
Net sales6$453,042$433,8234.4%3.9%
4Excluding Spinal Kinetics, net sales increased 1.2% on a reported basis and 1.3% on a constant currency basis
5Excluding the contractual reduction in fee for marketing services, the growth year over year was 1.3% on a reported and constant currency basis
6Excluding Spinal Kinetics and the contractual reduction in fee for marketing services, the increase was 3.3% on a reported and 2.8% on a constant currency basis

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

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

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

Liquidity

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

CEO Transition

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

“What I’ve always done best and enjoyed the most in my career is starting and fixing companies. I love the challenges associated with these phases in a business’s lifecycle,” said Mr. Mason. “Now with the stage set for the Company’s next chapter, I’ve finished what I came to do. Because of the tireless efforts of the talented and dedicated Orthofix team, we’ve accomplished everything and more than I ever expected. Therefore, I believe it is the right time for both the Company and for me to pass the reins to a new leader who will take Orthofix through the next chapter and capitalize on this enormous potential.”

READ THE REST HERE

Print Friendly, PDF & Email
Tags

Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close