(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.

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 ~~November 6, 2023,~~May 3, 2024, ~~36,756,607~~37,529,256 shares of common stock were issued and outstanding.

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. All statements, other than statements of historical fact, contained in this report, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or the negative version of those terms and other similar expressions. Forward-looking statements include, but are not limited to, statements about:

Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates, and assumptions. 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 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 of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 ("~~2022~~2023 10-K"); Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of the ~~2022~~2023 10-K; and elsewhere throughout the ~~2022~~2023 10-K, and in our reports filed with the U.S. Securities and Exchange Commission (the "SEC") subsequent to the date we filed the ~~2022~~2023 10-K with the SEC. You should not place undue reliance on any forward-looking statements. Further, any forward-looking statement in this report speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. Except as required by law, 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.

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.

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

2. Recently adopted accounting standards, recently issued accounting pronouncements

Adoption of Accounting Standards Update ~~(“ASU”~~("ASU") ~~2021-08— Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~2022-03 - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In ~~October 2021,~~June 2022, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued ASU ~~2021-08,~~2022-03, which ~~aims~~clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to ~~address diversity in practice~~contractual restrictions that prohibit the sale and ~~inconsistency related~~ to the accounting for acquired revenue contracts with customers in a business combination. The amendments require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, ~~Revenue from Contracts with Customers~~.introduce new disclosure requirements. The Company adopted this standard effective January 1, ~~2023,~~2024, on a prospective basis. Adoption of this standard ~~resulted~~did not have a material impact to the Company's consolidated balance sheet, statements of operations, or cash flows, but did modify the Company's disclosures related to certain investments. Refer to Note 7 for the Company's updated disclosures on investments in equity securities subject to capital sale restrictions.

Adoption of ASU 2023-07 - Improvements to Reportable Segment Disclosures

In November 2023, the ~~recognition~~FASB issued ASU 2023-07, which enhances and improves disclosures about operating segment's revenues, measures of $~~2.2~~ ~~million~~profit/loss, and expenses to enable investors to better understand an entity's overall performance and assess potential future cash flows. The amendment requires that an entity disclose (i) significant expenses that are regularly provided to the Chief Operating Decision Maker ("CODM"), (ii) other segment items by reportable segment including a description of its composition, (iii) all annual disclosures required by Topic 280 in ~~contract liabilities associated with acquired revenue contracts as~~interim periods, (iv) additional measures of a ~~result~~segment's profit or loss used by the CODM in assessing segment performance and allocation of resources, and (v) title and position of the ~~Company’s merger with SeaSpine, which closed~~CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. The Company adopted this standard effective January 1, 2024, on ~~January 5, 2023.~~
a prospective basis. Refer to Note 11 for the Company's updated business segment disclosures.

Recently Issued Accounting Pronouncements


Topic	Description of Guidance	Effective Date	Status of Company's Evaluation
~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (ASU 2022-03)~~	~~Clarifies the guidance in Topic 820,~~ ~~Fair Value Measurement~~, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions. Certain of the provisions are to be applied retrospectively with other provisions applied prospectively.	~~January 1, 2024~~	~~The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.~~
Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (ASU 2023-06)	Adds interim and annual disclosure requirements to a variety of subtopics in the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and repurchase agreements. The guidance will be applied prospectively. The effective date will be the date when the SEC's removal of the related disclosure requirement becomes effective, with early adoption prohibited.	Various	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
Improvements to Income Tax Disclosures (ASU 2023-09)	Enhance the transparency and decision usefulness of income tax disclosures to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The amendments are to be applied prospectively, but retrospective application is permitted.	January 1, 2025	The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

Other recently issued ASUs, excluding those ASUs ~~that~~which have already been disclosed as adopted or described above, were assessed and determined not applicable, or are expected to have minimal impact on the Company's condensed consolidated financial statements.

3. ~~Merger~~Mergers and acquisitions

Merger with SeaSpine

On January 5, 2023, the Company and SeaSpine completed an all-stock merger of equals (the "Merger") to create a leading global spine and orthopedics company with highly complementary portfolios of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. As a result of the Merger, each share of SeaSpine common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.4163 shares of Orthofix common stock.

~~The Merger is being accounted for as an acquisition~~

During the fourth quarter of ~~SeaSpine by Orthofix under~~2023, the ~~acquisition method~~Company finalized its valuation of accounting for business combinations in accordance with U.S. GAAP. Therefore, Orthofix is treated as the acquirer for accounting purposes. In identifying the acquirer, Orthofix and SeaSpine considered the structure of the transaction and other actions contemplated by the merger agreement (the “Merger Agreement”), relative outstanding share ownership, market values, the composition of the combined company's board of directors, and the relative size of Orthofix and SeaSpine. Under the acquisition method of accounting, the assets acquired and liabilities ~~of SeaSpine and its subsidiaries have been recorded at their respective fair values as of the acquisition date.~~assumed.

~~The total estimated fair value of consideration associated with the Merger as of the acquisition date was comprised of:~~

(Unaudited, U.S. Dollars, in thousands, except shares and price per share)

Share Consideration:

Orthofix common shares to be issued in exchange for SeaSpine common shares

16,047,315

Orthofix closing price per share as of January 4, 2023

$
22.76

Estimated fair value of shares issued in exchange for SeaSpine common shares

$
365,237

Estimated fair value of Orthofix stock options and RSUs issued in exchange for outstanding SeaSpine equity awards

$
11,508

Total estimated fair value of consideration

$
376,745

The following table summarizes the ~~preliminary estimated~~ fair ~~values~~value of ~~the~~ assets acquired and liabilities assumed at the acquisition date. Certain acquired assets and liabilities assumed were valued utilizing Level 3 inputs and assumptions. A final determination of the allocation of the purchase price to assets acquired and liabilities assumed has not been made and the following should bedate:

considered preliminary. The final determination is subject to completion of the Company's valuation of the assets acquired and liabilities assumed, including contingent liabilities and deferred income taxes, which it expects to complete within one year of the acquisition date. Subsequent adjustments to the preliminary purchase price allocation could be material.


(Unaudited, U.S. Dollars, in thousands)	Previously Reported		Adjustments			As Revised		Assigned Useful Life
(U.S. Dollars, in thousands)									Final Acquisition Date Fair Value		Assigned Useful Life
Assets acquired:
Current assets
Cash and cash equivalents	$	29,419	$	—		$	29,419		$	29,419
Accounts receivable, net		35,313		—			35,313			35,313
Inventories		132,636		—			132,636			132,636
Prepaid expenses and other current assets		4,590		—			4,590			4,590
Total current assets		201,958		—			201,958			201,958
Property, plant, and equipment, net		68,863		—			68,863			68,863
Customer relationships		33,100		—			33,100	13 years		33,100	13 years
Developed technology		47,200		—			47,200	6 - 8 years		47,200	6 - 8 years
In-process research and development ("IPR&D")		5,750		—			5,750	Indefinite		5,750	Indefinite
Other long-term assets		20,501		—			20,501			20,501
Total identifiable assets acquired	$	377,372	$	—		$	377,372		$	377,372

Liabilities assumed:
Current liabilities
Accounts payable	$	21,602	$	—		$	21,602		$	21,602
Other current liabilities		40,304		3,040			43,344			43,521
Total current liabilities		61,906		3,040			64,946			65,123
Long-term borrowings under SeaSpine credit facility		26,298		—			26,298			26,298
Other long-term liabilities		32,833		—			32,833			32,823
Total liabilities assumed		121,037		3,040			124,077			124,244
Net identifiable assets acquired	$	256,335	$	(3,040	)	$	253,295		$	253,128
Total fair value of consideration transferred		376,745		—			376,745			376,745
Residual goodwill	$	120,410	$	3,040		$	123,450		$	123,617

The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired in the Merger. During the three months ended September 30, 2023, the Company identified a contingent liability that existed as of the merger date. As a result, the Company recorded a $~~3.0~~ ~~million adjustment to other current liabilities with a corresponding increase in goodwill. As of September 30, 2023, the Company recorded goodwill totaling $123.5~~ million, which was assigned to the Global Spine reporting segment. Specifically, the goodwill includes the assembled workforce and synergies associated with the combined entity. The goodwill is not deductible for tax purposes.

The IPR&D intangible assets are considered an indefinite-lived asset until the completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the acquisition, these assets are not amortized but, instead, are subject to impairment assessment. Upon completion of each IPR&D project, the Company will determine the useful life of the asset and begin amortization.

The Company recognized $0.1 million and $~~9.9~~6.5 million in direct acquisition-related costs, which exclude integration-related activities, that were expensed during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, respectively. These costs are included in the condensed consolidated statements of operations and comprehensive ~~income (loss),~~loss, primarily within general and administrative expenses. The Company's results of operations included $~~62.9~~ ~~million and $188.2~~70.5 million of net sales and a net loss of $14.3 million from SeaSpine for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024 compared to $60.9 million of net sales and a net loss ~~attributable to SeaSpine~~ of $~~19.2~~ ~~million and $72.1~~27.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 ~~respectively.~~

~~Pro Forma Financial Information~~in the condensed consolidated statements of operations and comprehensive loss.

Due to the completion of the Merger ~~closing~~ on January 5, 2023, all SeaSpine financial results for fiscal year 2023, except for the first four days of January, ~~are~~were included in ~~Orthofix's~~the Company's condensed consolidated statement of operations and comprehensive loss. ~~The following~~Therefore, the Company did not prepare unaudited pro forma financial information for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022, are based~~ on the ~~Company's historical condensed consolidated financial statements adjusted to reflect as if~~basis that the Merger ~~closed as of~~was completed on January 1, ~~2022.~~2023.

The unaudited pro-forma information makes certain adjustments to depreciation and amortization expense to reflect the fair value recognized in the purchase price allocation and to remove one-time transaction-related costs. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Merger closed as of January 1, 2022.

Three Months Ended September 30,

Nine Months Ended September 30,

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

2023

2022

2023

2022

Net sales

$
184.0

$
181.1

$
546.2

$
512.6

Net loss

$
(21.2
)

$
(32.5
)

$
(96.5
)

$
(102.4
)

~~Integration and Restructuring Activities~~

~~The Company has incurred significant integration and restructuring costs in connection with the Merger.~~ ~~The following table summarizes integration costs incurred for the three and nine months ended September 30, 2023, and 2022.~~

Three Months Ended September 30,

Nine Months Ended September 30,

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

2023

2022

2023

2022

Compensation-related integration costs

$
2.6

$
—

$
16.5

$
—

International spine restructuring

1.1

—

1.1

—

Fee paid to financial advisor to the Merger

—

—

5.5

—

Professional fees / consulting fees

0.2

—

5.2

—

Product rationalization charges

1.3

—

6.1

—

Other costs to complete

0.1

—

1.3

—

Total

$
5.3

$
—

$
35.7

$
—

In the first quarter of 2023, the Company approved and initiated certain restructuring activities to streamline costs and to better align talent with operational needs following the consummation of the Merger. This program was expanded in the third quarter of 2023 to include further restructuring activities related to the Company's international spine business. The Company expects to incur total pre-tax expense of approximately $~~18.3~~ ~~million associated with the restructuring activities, which will be recognized within operating expenses.~~ ~~The table below provides a summary of restructuring costs incurred during the period and the resulting liability as of September 30, 2023, which is recognized within other current liabilities:~~

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

Balance as of
December 31, 2022

Charges Incurred

Payments Made

Balance as of
September 30, 2023

Severance costs

$
—

$
12.2

$
(5.2
)

$
7.0

Retention costs

—

4.0

(0.4
)

3.6

Payroll taxes

—

0.5

(0.1
)

0.4

Total

$
—

$
16.7

$
(5.7
)

$
11.0

4. Inventories

Inventories were as follows:


(Unaudited, U.S. Dollars, in thousands)	September 30, 2023		December 31, 2022
(U.S. Dollars, in thousands)					March 31, 2024		December 31, 2023
					(Unaudited)
Raw materials	$	26,422	$	17,035	$	30,903	$	28,390
Work-in-process		54,631		19,243		56,193		53,510
Finished products		140,692		63,872		131,980		140,266
Inventories	$	221,745	$	100,150	$	219,076	$	222,166

1110

5. Leases

A summary of the ~~Company’s~~Company's lease portfolio as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, is presented in the table below:


(Unaudited, U.S. Dollars, in thousands)		Classification	September 30, 2023		December 31, 2022
(U.S. Dollars, in thousands)								Classification	March 31, 2024		December 31, 2023
									(Unaudited)
Right-of-use assets ("ROU assets")	Right-of-use assets ("ROU assets")						Right-of-use assets ("ROU assets")
Operating leases		Other long-term assets	$	19,765	$	6,788		Other long-term assets	$	19,116	$	19,869
Finance leases		Property, plant and equipment, net		16,599		17,360		Property, plant and equipment, net		16,092		16,345
Total ROU assets			$	36,364	$	24,148			$	35,208	$	36,214

Lease Liabilities
Current
Operating leases		Other current liabilities	$	3,259	$	1,638		Other current liabilities	$	3,534	$	3,477
Finance leases		Current portion of finance lease liability		693		652		Current portion of finance lease liability		724		708
Long-term
Operating leases		Other long-term liabilities		17,171		5,376		Other long-term liabilities		16,372		17,125
Finance leases		Long-term portion of finance lease liability		18,715		19,239		Long-term portion of finance lease liability		18,345		18,532
Total lease liabilities			$	39,838	$	26,905			$	38,975	$	39,842

Supplemental cash flow information related to leases was as follows:


(Unaudited, U.S. Dollars, in thousands)	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022		Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,538	$	3,001	$	2,162	$	1,674
Operating cash flows from finance leases		643		665		210		214
Financing cash flows from finance leases		483		2,441		172		160
ROU assets obtained in exchange for lease obligations
Operating leases		15,771		5,429		462		15,316
Finance leases		—		—		—		—

6. Long-term debt

~~In connection with the closing~~The carrying values of the ~~Merger on January 5,~~Company's outstanding debt obligations as of March 31, 2024, and December 31, 2023, ~~the Company terminated SeaSpine's credit facility and all applicable commitments with Wells Fargo Bank, National Association and paid an aggregate amount of $26.9~~ ~~million reflecting all of the outstanding obligations in respect of principal, interest, and fees, including a $0.6~~ ~~million prepayment premium.~~were as follows:


(U.S. Dollars, in thousands)	March 31, 2024			December 31, 2023
	(Unaudited)
Initial Term Loan and Delayed Draw Term Loan
Principal amount	$	125,000		$	100,000
Unamortized original debt discount		(4,050	)		(4,331	)
Unamortized debt issuance costs and lenders fees		(2,754	)		(1,312	)
Total indebtedness from initial term loan and delayed draw term loan		118,196			94,357

Revolving Credit Facilities
Principal amount outstanding		—			—
Total indebtedness outstanding	$	118,196		$	94,357

Current portion of long-term debt	$	3,125		$	1,250
Long-term debt		115,071			93,107
Total indebtedness outstanding	$	118,196		$	94,357

On January ~~3, 2023,~~10, 2024, the Company borrowed $~~30.0~~ million for working capital purposes, including to fund certain Merger-related expenses, under its secured revolving credit facility under the Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., dated as of October 25, 2019 (as amended by the First Amendment thereto dated March 1, 2023, the "Prior Credit Agreement"), which credit facility had a maturity date of ~~October 25, 2024. Subsequently, the Company borrowed an additional $40.0~~ ~~million to fund working capital needs whereby, as of September 30, 2023, the Company had $70.0~~ ~~million in principal amount of borrowings outstanding under the secured revolving credit facility.~~ ~~The table below provides a summary of borrowing activities during the nine months ended September 30, 2023:~~

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

Balance as of
December 31, 2022

Long-term Borrowings Assumed Under the SeaSpine Credit Facility

Additional Borrowings

Pre-payment Penalty Incurred to Interest Expense, Net

Repayments Made

Balance as of
September 30, 2023

SeaSpine credit facility

$
—

$
26,298

$
—

$
601

$
(26,899
)

$
—

Orthofix secured revolving credit facility

—

—

70,000

—

—

70,000

Long-term borrowings under credit facility

$
—

$
26,298

$
70,000

$
601

$
(26,899
)

$
70,000

~~As of September 30, 2023, the Company was in compliance with all required financial covenants under the Prior Credit Agreement. The effective interest rate on amounts borrowed was~~ ~~7.3%, with interest accrued of $1.0~~ ~~million as of September 30, 2023, within~~

~~other current liabilities. Subsequent to September 30, 2023, the Company borrowed an additional $9.0~~15.0 million under ~~the Prior Credit Agreement to fund working capital needs.~~

On November 6, 2023, the Company, as borrower, and certain subsidiaries of the Company as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $~~100~~ ~~million senior secured term loan (the “Initial Term Loan”), a $~~25 ~~million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $~~25 ~~million~~its senior secured revolving credit facility (the ~~“Revolving~~"Revolving Credit ~~Facility,” and together~~Facility") as part of its Financing Agreement with Blue Torch Finance LLC. On March 22, 2024, the ~~Initial Term Loan and the Delayed~~secured delayed draw term loan

facility (the "Delayed Draw Term ~~Loan, the “Credit Facilities”~~Loan")~~, each~~ of ~~which mature on~~ $~~November 6, 2027~~25.0~~. In connection with entering into the Financing Agreement, the Company repaid in full amounts outstanding and terminated all commitments under the Prior Credit Agreement. The Initial Term Loan~~ million was fully funded ~~on November 6, 2023. As of~~and the ~~date of this filing (November 8, 2023),~~proceeds were used to repay the ~~Company had~~ $no15.0~~t made any borrowings~~ million outstanding under ~~the Delayed Draw Term Loan or~~ the Revolving Credit Facility.

Borrowings under the Financing Agreement were and may be used for, among other things, the repayment in full of the Prior Credit Agreement, working capital, and other general corporate purposes of the Company. ~~Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at the Company’s option, either the~~ ~~three-month~~ ~~SOFR rate (subject to a floor of~~ ~~3.00% and a credit spread adjustment of~~ ~~0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of~~ ~~7.25%, or a base rate plus an applicable margin of~~ ~~6.25~~%. ~~A revolving unused line fee of~~ ~~2.00~~% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of ~~1.00~~% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.

Certain of the Company’s existing and future material subsidiaries (collectively, the “Guarantors”) are required to guarantee the repayment of the Company’s obligations under the Financing Agreement. The obligations of the Company and each of the Guarantors with respect to the Financing Agreement are secured by a pledge of substantially all assets of the Company and each of the Guarantors, including, without limitation, accounts receivables, deposit accounts, intellectual property, investment property, inventory, equipment, and equity interests in their respective subsidiaries.

The Financing Agreement contains customary affirmative and negative covenants, including limitations on the Company’s and its subsidiaries ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay subordinated indebtedness, and enter into affiliate transactions. In addition, the Financing Agreement contains financial covenants requiring the Company to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). ~~The~~As of March 31, 2024, the Company was in compliance with all required financial covenants.

On March 15, 2024, the Company entered into Amendment No.1 to the Financing Agreement ~~also includes events~~with Blue Torch Finance LLC (the "First Amendment"). Under the terms of ~~default customary~~the First Amendment, the parties agreed to reduce the number of business days to submit a notice of borrowing for ~~facilities~~the Delayed Draw Term Loan, and redefine certain terms within the asset coverage financial covenant. The maturity date remains November 6, 2027, for each of ~~this type~~the Initial Term Loan, Delayed Draw Term Loan, and ~~upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the~~Revolving Credit ~~Facilities may be accelerated and/or the lenders’ commitments terminated.~~Facility.

~~The~~As of March 31, 2024, the Company had no borrowings on its available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($~~5.8~~5.9 million) ~~as of September 30, 2023.~~.

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:

September 30,
2023

December 31,
2022

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

Level 1

Level 2

Level 3

Total

Total

Assets

Neo Medical convertible loan agreements

$
—

$
—

$
7,670

$
7,670

$
7,140

Neo Medical preferred equity securities

—

6,084

—

6,084

6,084

Bone Biologics equity securities

—

—

—

—

—

Other investments

—

—

1,286

1,286

1,726

Total

$
—

$
6,084

$
8,956

$
15,040

$
14,950

Liabilities

Lattus contingent consideration

$
—

$
—

(9,100
)

$
(9,100
)

$
—

Spinal Kinetics contingent consideration

—

—

—

—

—

Deferred compensation plan

—

(1,413
)

—

(1,413
)

(1,515
)
Total

$
—

$
(1,413
)

$
(9,100
)

$
(10,513
)

$
(1,515
)


	March 31, 2024											December 31, 2023
(Unaudited, U.S. Dollars, in thousands)	Level 1		Level 2			Level 3			Total			Total
Assets
Neo Medical convertible loan agreements	$	—	$	8,355		$	—		$	8,355		$	6,760
Neo Medical preferred equity securities		—		4,951			—			4,951			4,951
Other investments		—		—			1,331			1,331			1,309
Total	$	—	$	13,306		$	1,331		$	14,637		$	13,020
Liabilities
Lattus contingent consideration	$	—	$	—			(9,670	)	$	(9,670	)	$	(8,500	)
Deferred compensation plan		—		(1,604	)		—			(1,604	)		(1,674	)
Total	$	—	$	(1,604	)	$	(9,670	)	$	(11,274	)	$	(10,174	)

Neo Medical Convertible Loan Agreements and Equity Investment

InSince October 2020, the Company ~~purchased~~has held preferred equity securities of Neo Medical SA, a privately held Swiss-based company developing a new generation of products for spinal surgery ("Neo Medical")~~, for consideration of $5.0~~ ~~million. The Company also entered into~~ and a Convertible Loan Agreement, pursuant to which the Company loaned Neo Medical CHF 4.6 million, or $5.0 million, at the date of issuance (the “Convertible Loan”). In October 2021, the Company entered into a second Convertible Loan Agreement (the “Second Convertible Loan” and together with the Convertible Loan, the “Neo Medical Convertible Loans”), pursuant to which the Company loaned Neo Medical an additional CHF ~~0.6~~ ~~million, or $0.7~~ ~~million as of the date of issuance.~~

The preferred 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.

The Company's equity investment with Neo Medical is subject to certain sales restrictions, such as right of first refusal, tag-along provisions, and drag-along provisions. Permitted transfers include (i) sales of shares to an affiliate of such shareholder, (ii) transfer of shares as part of a compensation package offered to employees, or (iii) Neo Medical may repurchase shares at a price no greater than that originally paid by the shareholder.

The table below presents a reconciliation of the beginning and ending balances of the Company’s investment in Neo Medical preferred equity securities:


(Unaudited, U.S. Dollars, in thousands)	2023		2022		2024			2023
Fair value of Neo Medical preferred equity securities at January 1	$	6,084	$	5,413	$	4,951		$	6,084
Conversion of loan into preferred equity securities		—		671		—			—
Fair value of Neo Medical preferred equity securities at September 30	$	6,084	$	6,084
Cumulative unrealized gain on Neo Medical preferred equity securities	$	413	$	413
Foreign currency remeasurement recognized in other income (expense), net						—			—
Unrealized loss recognized in other income (expense), net						—			—
Fair value of Neo Medical preferred equity securities at March 31					$	4,951		$	6,084
Cumulative unrealized gain (loss) on Neo Medical preferred equity securities					$	(720	)	$	413

~~The Company elected to convert the Second Convertible Loan into shares of Neo Medical’s preferred equity securities in January 2022.~~ The Convertible Loan is recorded in other long-term assets as an available for sale debt security as of ~~September 30, 2023. The~~March 31, 2024. In April 2024, the Company and Neo Medical agreed to convert the Convertible Loan into shares of Neo Medical preferred equity securities, with

such conversion occurring on April 19, 2024. As such, the Company estimated the fair value of the Convertible Loan based upon the estimated fair value of equivalent preferred shares as of March 31, 2024. Therefore, as this fair value estimate is based upon ~~significant unobservable~~a valuation method using observable market inputs, ~~including the use of option-pricing models, Monte Carlo simulations for certain periods, and a probability-weighted discounted cash flow model, requiring~~ the Company ~~to develop its own assumptions. Therefore, the Company categorized~~has now classified this investment as a Level 32 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 a credit loss. As of September 30, 2023, the Company has no~~t recognized any credit loss related to the Convertible Loan.~~

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

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

2023

2022

Fair value of Neo Medical Convertible Loans at January 1

$
7,140

$
7,148

Interest recognized in interest income, net

367

326

Foreign currency remeasurement recognized in other expense, net

54

(437
)
Unrealized gain (loss) recognized in other comprehensive loss

109

(766
)
Conversion of Second Convertible Loan into preferred equity securities

—

(671
)
Fair value of Neo Medical Convertible Loans at September 30

$
7,670

$
5,600

Amortized cost basis of Neo Medical Convertible Loans at September 30

$
6,328

$
5,425

~~The following table provides quantitative information related to certain key assumptions utilized within the valuation as of September 30,~~in 2023:


(Unaudited, U.S. Dollars, in thousands)	Fair Value as of September 30, 2023		Unobservable inputs	Estimate			2024			2023
Neo Medical Convertible Loan	$	7,670	Cost of equity discount rate		19.4	%
Fair value of Neo Medical Convertible Loans at January 1							$	6,760		$	7,140
Interest recognized in interest income, net								135			116
Foreign currency remeasurement recognized in other income (expense), net								(471	)		61
Unrealized gain (loss) recognized in other comprehensive loss								1,671			(137	)
Reversal of expected credit loss recognized in other income (expense), net								260			—
Fair value of Neo Medical Convertible Loans at March 31							$	8,355		$	7,180
			Estimated equity volatility		80.6	%
Contractual value of Neo Medical Convertible Loans at January 1							$	6,683		$	6,084
Allowance for credit loss recognized in other income (expense), net								—			—
Amortized cost basis of Neo Medical Convertible Loans at March 31							$	6,683		$	6,084

~~Bone Biologics Equity Securities~~

Until August 2022, the Company held an investment in common stock of Bone Biologics Inc. (“Bone Biologics”, NASDAQ: BBLG), a developer of orthobiologic products. The Company disposed of its remaining holdings in Bone Biologics equity securities during the third quarter of 2022.

Other Investments

Other investments represent assets and investments recorded at fair value that are not deemed to be material for disclosure on an individual basis. The fair value of these assets is based upon significant unobservable inputs, such as probability-weighted discounted cash flow models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets. As of ~~September 30, 2023,~~March 31, 2024, this balance was classified within other ~~long-term~~current assets.

~~Spinal Kinetics Contingent Consideration~~

The Company recognized a contingent consideration obligation in connection with the acquisition of Spinal Kinetics in 2018. The fair value of the remaining Spinal Kinetics contingent consideration, attributable to a revenue-based milestone, was concluded to be zero as of September 30, 2023, as the Company did not achieve the milestone prior to April 30, 2023, the end of the measurement period for achieving such milestone.

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):

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

2023

2022

Spinal Kinetics contingent consideration estimated fair value at January 1

$
—

$
17,200

Decrease in fair value recognized in acquisition-related amortization and remeasurement

—

(17,200
)
Spinal Kinetics contingent consideration estimated fair value at September 30

$
—

$
—

Lattus Contingent Consideration

In connection with the Merger, the Company assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus Spine LLC ("Lattus") executed in December 2022. Under the terms of the agreement, the Company may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products").

The estimated fair value of the Lattus contingent consideration ~~as of the closing of the Merger, January 5, 2023, was $11.2~~ ~~million. The estimated fair value of the Lattus contingent consideration~~ is determined using a Monte Carlo simulation and a discounted cash flow model requiring significant inputs which are not observable in the market. The significant inputs include assumptions related to the timing and probability of certain product launch dates, estimated future sales of the products, revenue risk-adjusted discount rate, revenue volatility, and discount rates matched to the timing of payments. The following table provides a reconciliation of the beginning and ending balances for the Lattus contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

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

2023

2022

Lattus contingent consideration estimated fair value at January 5

$
11,200

$
—

Decrease in fair value recognized in acquisition-related amortization and remeasurement

(2,100
)

—

Lattus contingent consideration estimated fair value at September 30

$
9,100

$
—


(Unaudited, U.S. Dollars, in thousands)	2024		2023
Lattus contingent consideration estimated fair value at January 1	$	8,500	$	—
Contingent consideration assumed in Merger		—		11,500
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement		1,170		—
Lattus contingent consideration estimated fair value at March 31	$	9,670	$	11,500

The following table provides quantitative information related to certain key assumptions utilized within the valuation as of ~~September 30, 2023:~~March 31, 2024:


(Unaudited, U.S. Dollars, in thousands)	Fair Value as of September 30, 2023		Unobservable inputs	Estimate			Fair Value as of March 31, 2024		Unobservable inputs	Estimate
Lattus Contingent Consideration	$	9,100	Counterparty discount rate		9.5	%	$	9,670	Counterparty discount rate	15.0% - 15.6%
			Revenue risk-adjusted discount rate		7.0	%			Revenue risk-adjusted discount rate	7.10% - 7.86%

8. Commitments and Contingencies

Contingencies policies

The Company records accruals for certain outstanding legal proceedings, investigations, or claims when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company evaluates developments in legal proceedings, investigations, and claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable on a quarterly basis. When a loss contingency is not both probable and reasonably estimable, the Company does not accrue the loss. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then the Company discloses a reasonable estimate of the possible loss or range of loss, if such reasonable estimate can be made. If the Company cannot make a reasonable estimate of the possible loss, or range of loss, then that is disclosed. In addition, legal fees and other directly related costs are expensed as incurred.

In addition to the matters described in the paragraphs 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.

Arbitration claims with former executives

In September 2023, the Company’s Board of Directors terminated the employment of Keith Valentine, John Bostjancic, and Patrick Keran, who had served respectively as the Company’s President and Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer. The Board’s decision followed an investigation conducted by independent outside legal counsel and directed and overseen by the Company’s independent directors. As a result of the investigation, the Board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the Company’s values and culture. The Company notified each of Messrs. Valentine, Bostjancic, and Keran that their respective terminations were being made for “Cause,” as defined in applicable employment-related agreements (including each executive’s respective Change in Control and Severance Agreement, dated June 19, 2023). The Company also notified each of Messrs. Valentine, Bostjancic, and Keran that it did not believe it was required to make any further payments to them, other than payment of salary through September 12, 2023. The Board also requested that Mr. Valentine resign as a director, which he did in October 2023.

In January 2024, the Company received written notices of arbitration claims from counsel to Messrs. Valentine, Bostjancic, and Keran. Each of the arbitration claims asserts that the respective former executive was wrongfully terminated for “Cause” because the former executive’s conduct did not meet the contractually applicable definition of “Cause.” The claims seek relief for, among other things, alleged breach of contract, defamation, false light invasion of privacy, deceit, as well as indemnification and advancement for attorneys’ fees. The three former executives seek severance payments, as well as the value of forfeited equity grants, under applicable change in control and severance agreements and further damages as a result of purported defamatory statements. The Company disagrees with many of the assertions contained in the written notices of arbitration claims and intends to vigorously defend the asserted claims. Due in part to the preliminary nature of this matter, the Company currently cannot reasonably estimate a possible loss, or range of loss, that may arise from the arbitration claims.

Commitments

As a result of the Merger, the Company became party to agreements with certain distributor partners that provide the Company with an option to purchase, and an option for those partners to require the Company to purchase, the distribution business of those

partners at specified future dates. At such time, the Company or distributor may (in certain cases, subject to satisfying certain conditions) submit written notice to the other of its intention to exercise its rights and initiate or require the purchase. Upon receipt of the written notice, the Company and the distributor will work in good faith to consummate the purchase. Under these agreements, the purchase price would be paid in shares of the Company's common stock. Based on the closing price of the Company's common stock as of ~~September 30, 2023,~~March 31, 2024, assuming the options under all the relevant agreements were exercised, the estimated total number of shares the Company would issue under these agreements was approximately ~~1.7~~1.5 million ~~shares.~~shares for agreements that must be settled in shares of the Company's stock. The Company has received notification from one such distributor, who has notified the Company of its decision to exercise its buyout option. The Company is currently in negotiations with this distributor in regard to the consummation of the potential acquisition.

~~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.

In the third quarter of 2022, the Italian Ministry of Health provided guidelines to the Italian regions and provinces on seeking payback of expenditure overruns relating to the years ended December 31, 2015, through December 31, 2018. Since receiving the guidelines, several regions and provinces have requested payment from affected medical device companies, including the Company. The Company has taken legal action to dispute the legality of such measures.

The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically reassesses the liability based upon current facts and circumstances. As a result, the Company recorded an expense of $~~0.2~~0.3 million and $~~0.8~~0.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, ~~respectively, and an expense of $0.3~~ ~~million and $0.9~~ ~~million for the three and nine months ended September 30, 2022,~~ respectively. As of ~~September 30, 2023,~~March 31, 2024, the Company has accrued $~~7.0~~7.7 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 all legal proceedings are resolved and upon further clarification of the IMDP by the Italian authorities for more recent fiscal years.

9. Accumulated other comprehensive loss

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


(Unaudited, U.S. Dollars, in thousands)	Currency Translation Adjustments			Neo Medical Convertible Loans		Other Investments			Accumulated Other Comprehensive Loss			Currency Translation Adjustments			Neo Medical Convertible Loans			Other Investments		Accumulated Other Comprehensive Loss
Balance at December 31, 2022	$	(2,482	)	$	1,005	$	101		$	(1,376	)
Balance at December 31, 2023												$	(1,065	)	$	(228	)	$	—	$	(1,293	)
Other comprehensive income (loss)		(492	)		109		(101	)		(484	)		(1,038	)		1,671			—		633
Income taxes		—			—		—			—			—			—			—		—
Balance at September 30, 2023	$	(2,974	)	$	1,114	$	—		$	(1,860	)
Balance at March 31, 2024												$	(2,103	)	$	1,443		$	—	$	(660	)

10. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments: Global Spine and Global Orthopedics. Within the Global Spine reporting segment, there are two product categories: (i) Bone Growth Therapies, and (ii) Spinal Implants, Biologics, and Enabling Technologies.

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

Three Months Ended September 30,

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

2023

2022

Change

Bone Growth Therapies

$
53,359

$
46,531

14.7
%
Spinal Implants, Biologics, and Enabling Technologies

100,993

39,655

154.7
%
Global Spine

154,352

86,186

79.1
%
Global Orthopedics

29,654

27,810

6.6
%

Net sales

$
184,006

$
113,996

61.4
%


	Nine Months Ended September 30,							Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		Change			2024		2023		Change
Bone Growth Therapies	$	153,735	$	136,244		12.8	%	$	52,477	$	47,714		10.0	%
Spinal Implants, Biologics, and Enabling Technologies		307,799		123,379		149.5	%		108,816		101,492		7.2	%
Global Spine		461,534		259,623		77.8	%		161,293		149,206		8.1	%
Global Orthopedics		84,692		78,861		7.4	%		27,315		25,998		5.1	%
Net sales	$	546,226	$	338,484		61.4	%	$	188,608	$	175,204		7.7	%

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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022		2024		2023
Product sales	$	170,666	$	100,485	$	506,992	$	296,652	$	175,831	$	162,248
Marketing service fees		13,340		13,511		39,234		41,832		12,777		12,956
Net sales	$	184,006	$	113,996	$	546,226	$	338,484	$	188,608	$	175,204

Product sales primarily consist of the sale of bone growth therapies devices, spinal implants, certain biologics, enabling technologies, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues sourced from MTF Biologics and relate solely to the Global Spine reporting segment. The Company partners with MTF Biologics to provide certain allograft solutions (HCT/Ps) for various spine, orthopedic and other bone repair needs, with this partnership allowing us to exclusively market certain biologic offerings.

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 nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			2023			2022			2024			2023
Allowance for expected credit losses beginning balance	$	7,015		$	5,589		$	6,419		$	4,944		$	7,130		$	6,419
Addition resulting from the Merger with SeaSpine		—			—			137			—			—			137
Current period provision for expected credit losses		415			574			905			1,713			1,376			208
Write-offs charged against the allowance and other		(214	)		10			(334	)		(236	)		(19	)		(126	)
Effect of changes in foreign exchange rates		(126	)		(225	)		(37	)		(473	)		(89	)		53
Allowance for expected credit losses ending balance	$	7,090		$	5,948		$	7,090		$	5,948		$	8,398		$	6,691

11. Business segment information

The ~~Company has~~Company's operations are managed through two reporting segments: Global Spine and Global Orthopedics. These reporting segments represent the operating segments for which the Chief Executive Officer, who is also the CODM, reviews financial information and makes resource allocation decisions among businesses. The primary metric used by the CODM in managing the Company is adjusted earnings before interest, tax, depreciation, and amortization (“adjusted ~~EBITDA,”~~EBITDA”, a non-GAAP financial measure). Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization, and excludes the impact of share-based compensation, gains and losses related to changes in foreign exchange rates, charges related to the SeaSpine merger and other strategic investments, acquisition-related fair value adjustments, ~~legal judgments~~gains and/or losses on investments, litigation and ~~settlements,~~investigation charges, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and ~~certain other activities.~~ succession charges.

Corporate activities are comprised of operating expenses not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The Company neither discretely allocates assets, other than goodwill, to its operating segments nor evaluates the operating segments using discrete asset information.

Global Spine

The Global Spine reporting segment offers two primary product categories: (i) Bone Growth Therapies and (ii) Spinal Implants, Biologics, and Enabling Technologies.

The Bone Growth Therapies product category manufactures, distributes, sells, and provides support services for market leading devices used adjunctively in high-risk spinal fusion procedures and to treat both nonunion and acute fractures in the orthopedic space. These Class III medical devices are indicated as an adjunctive, noninvasive treatment to improve fusion success rates in the cervical and lumbar spine as well as a therapeutic treatment for non-spine acute and nonunion fractures. This product category uses distributors and a direct sales channel to sell its devices to hospitals, healthcare providers, and patients, in the U.S.

Spinal Implants, Biologics, and Enabling Technologies is comprised of (i) a broad portfolio of spine fixation and motion preservation implant products used in surgical procedures of the spine, (ii) one of the most comprehensive biologics portfolios in both the demineralized bone matrix and cellular allograft market segments, and (iii) image-guided surgical solutions to facilitate degenerative, minimally invasive, and complex surgical procedures. Spinal Implants, Biologics, and Enabling Technologies products are sold through a network of distributors and sales representatives to hospitals and healthcare providers on a global basis for Spinal Implants and Enabling Technologies, and primarily within the U.S. for Biologics.

Global Orthopedics

The Global Orthopedics reporting segment offers products and solutions for limb deformity correction and complex limb reconstruction with a focus on use in trauma, adult and pediatric limb reconstruction, and foot and ankle procedures. This reporting segment specializes in the design, development, and marketing of external and internal fixation orthopedic products that are coupled with enabling digital technologies to serve the complete patient treatment pathway. We sell these products through a global network of distributors and sales representatives to hospitals, healthcare organizations, and healthcare providers.

Corporate

Corporate activities are comprised of the operating expenses and activities of the Company not necessarily identifiable within the two reporting segments.

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


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024		2023		Change
Bone Growth Therapies	$	52,477	$	47,714		10.0	%
Spinal Implants, Biologics, and Enabling Technologies		108,816		101,492		7.2	%
Global Spine		161,293		149,206		8.1	%
Global Orthopedics		27,315		25,998		5.1	%
Net sales	$	188,608	$	175,204		7.7	%

The following table presents adjusted EBITDA, the primary metric used in managing the Company, by reporting segment:


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024			2023
Adjusted EBITDA by reporting segment
Global Spine	$	19,890		$	14,981
Global Orthopedics		(1,492	)		44
Corporate		(10,733	)		(11,821	)
Consolidated adjusted EBITDA	$	7,665		$	3,204

Reconciling items:
Interest expense, net	$	4,558		$	1,289
Depreciation and amortization		14,862			12,670
Share-based compensation expense		8,800			13,020
Foreign exchange impact		1,588			(583	)
SeaSpine merger-related costs		4,520			20,740
Strategic investments		120			661
Acquisition-related fair value adjustments		4,217			11,636
Interest and loss on investments		(260	)		—
Litigation and investigation costs		2,260			469
Succession charges		2,210			—
Medical device regulation		—			3,629
All other		(41	)		—
Loss before income taxes	$	(35,169	)	$	(60,327	)

The following table presents depreciation and amortization by reporting segment:


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024		2023
Global Spine	$	11,929	$	9,599
Global Orthopedics		2,207		1,629
Corporate		726		1,442
Total	$	14,862	$	12,670

Three Months Ended September 30,

Nine Months Ended September 30,

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

2023

2022

2023

2022

Adjusted EBITDA by reporting segment

Global Spine

$
22,593

$
16,601

$
58,832

$
45,244

Global Orthopedics

477

2,648

386

2,624

Corporate

(9,549
)

(4,994
)

(32,574
)

(15,081
)
Consolidated adjusted EBITDA

$
13,521

$
14,255

$
26,644

$
32,787

Reconciling items:

Interest expense, net

$
1,576

$
277

$
4,131

$
1,059

Depreciation and amortization

13,097

7,570

39,094

21,598

Share-based compensation expense

6,274

4,729

32,540

13,521

Foreign exchange impact

1,909

3,253

1,057

7,486

SeaSpine merger-related costs

5,416

—

34,362

—

Strategic investments

913

3,390

1,883

6,184

Acquisition-related fair value adjustments

7,122

419

26,907

(15,795
)
Legal judgments/settlements

3,851

125

5,611

466

Medical device regulation

1,840

2,590

7,519

6,883

Business interruption - COVID-19

—

1,215

—

1,874

All other

(92
)

59

170

230

Loss before income taxes

$
(28,385
)

$
(9,372
)

$
(126,630
)

$
(10,719
)

Geographical information

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022		2024		2023
Global Spine
U.S.	$	145,764	$	81,414	$	432,581	$	244,379	$	151,865	$	139,457
International		8,588		4,772		28,953		15,244		9,428		9,749
Total Global Spine		154,352		86,186		461,534		259,623		161,293		149,206

Global Orthopedics
U.S.		7,482		6,588		21,341		18,818		8,154		6,636
International		22,172		21,222		63,351		60,043		19,161		19,362
Total Global Orthopedics		29,654		27,810		84,692		78,861		27,315		25,998

Consolidated
U.S.		153,246		88,002		453,922		263,197		160,019		146,093
International		30,760		25,994		92,304		75,287		28,589		29,111
Net sales	$	184,006	$	113,996	$	546,226	$	338,484	$	188,608	$	175,204

The following data includes property, plant, and equipment by geographic area:


(U.S. Dollars, in thousands)	March 31, 2024		December 31, 2023
	(Unaudited)
U.S.	$	142,355	$	142,727
Italy		10,033		10,187
Germany		2,620		3,030
Others		3,124		3,116
Total	$	158,132	$	159,060

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 and (ii) remeasurement of any related contingent consideration arrangements, ~~and (iii) recognized costs associated with acquired IPR&D assets,~~ which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

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

2023

2022

2023

2022

Amortization of acquired intangibles

$
4,370

$
2,070

$
13,137

$
6,122

Changes in fair value of contingent consideration

(800
)

(986
)

(2,100
)

(17,200
)
Acquired IPR&D

—

1,400

—

1,400

Total

$
3,570

$
2,484

$
11,037

$
(9,678
)


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024		2023
Amortization of acquired intangibles	$	4,226	$	4,134
Changes in fair value of contingent consideration		1,170		—
Total	$	5,396	$	4,134

13. Share-based compensation

Components of share-based compensation expense are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023		2022		2023		2022		2024		2023
Cost of sales	$	463	$	195	$	1,416	$	611	$	576	$	471
Sales and marketing		2,092		948		6,892		2,929		1,667		2,249
General and administrative		2,832		3,285		21,103		9,461		5,548		9,104
Research and development		887		301		3,129		520		1,009		1,196
Total	$	6,274	$	4,729	$	32,540	$	13,521	$	8,800	$	13,020

Three Months Ended
September 30,

Nine Months Ended
September 30,

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

2023

2022

2023

2022

Stock options

$
1,429

$
294

$
6,582

$
858

Time-based restricted stock awards and units

4,263

2,467

24,344

7,047

Market-based / performance-based restricted stock units

54

1,626

167

4,567

Stock purchase plan

528

342

1,447

1,049

Total

$
6,274

$
4,729

$
32,540

$
13,521


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024		2023
Stock options	$	1,118	$	2,756
Market-based stock options		327		—
Time-based restricted stock awards and units		5,873		9,846
Market-based / performance-based restricted stock units		838		—
Stock purchase plan		644		418
Total	$	8,800	$	13,020

Pursuant to the Merger Agreement, the equity awards of SeaSpine (including stock options and restricted stock units) outstanding as of immediately prior to the closing of the Merger were converted into equity awards denominated in shares of Orthofix common stock. The Company issued options to purchase 1.9 million shares of Orthofix common stock and 0.5 million shares of time-based vesting restricted stock in connection with the conversion of such awards. The estimated fair value of the portion of the SeaSpine equity awards for which the required service period had been completed at the time of the closing of the Merger was treated as purchase consideration. The remaining estimated fair value is recorded as compensation expense over the remainder of the service period associated with the awards.

During the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ the Company issued ~~16,411~~ ~~and~~ ~~7,057~~ 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 nine months ended September 30, 2023, and 2022, the Company issued ~~0.5~~0.2 million and ~~0.2~~0.3 million shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units.

~~On September 12, 2023,~~Inducement plans

During 2024, the Company ~~announced the termination of the Company's former~~appointed a new President and Chief Executive Officer, ~~former~~ Chief Financial Officer, Chief People & Business Operations Officer, and ~~former~~ Chief Legal Officer. ~~This change~~As an inducement to accept employment with the Company, the individuals were awarded grants of (i) stock options, (ii) time-based restricted stock units, (iii) time-based cliff vesting restricted stock units, and (iv) performance stock units, valued in ~~leadership resulted in a recognized benefit of~~the aggregate across all award types at approximately $~~1.1~~14.9 ~~million and $0.1~~ million for the three and nine months ended September 30, 2023, related to the forfeiture of outstanding equity grants, net of any incremental share-based compensation expense related to interim leaders appointed to these roles.million.

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. Due to the impact of losses not benefited by the Company’s U.S. and Italian operations, 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 nine~~ months ended ~~September 30, 2023.~~March 31, 2024. Due to the impact of temporary differences on the U.S. current tax liability without any deferred tax benefit, the actual effective rate may vary in future quarters.

For the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ the effective tax rate was (~~1.7~~2.4%) and (~~14.3%), respectively. For the nine months ended September 30, 2023, and 2022, the effective tax rate was (2.0%) and (18.4~~1.0%), respectively. The primary factors affecting the Company’s effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, were certain losses not ~~benefitted~~benefited and tax amortization on certain acquired intangibles.

15. Earnings per share (“EPS”)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, no 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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
(Unaudited, In thousands)	2023		2022		2023		2022		2024		2023
Weighted average common shares-basic		37,249		20,091		36,588		20,007		37,741		35,734
Effect of dilutive securities
Unexercised stock options and stock purchase plan		—		—		—		—		—		—
Unvested restricted stock units		—		—		—		—		—		—
Weighted average common shares-diluted		37,249		20,091		36,588		20,007		37,741		35,734

There were ~~6.3~~6.7 million and 7~~2.4~~.2 million weighted average outstanding stock options and restricted stock units not included in the diluted EPS computation for the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022, respectively, and~~ ~~6.8~~ ~~million and~~ ~~2.2~~ ~~million weighted average outstanding stock options and restricted stock units not included in the diluted EPS computation for the nine months ended September 30, 2023, and 2022,~~ respectively, because inclusion of these awards was anti-dilutive.

~~16. Goodwill~~

The Company tests goodwill at least annually for impairment. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment.

In the third quarter of 2023, the Company announced the termination of the former President and Chief Executive Officer, former Chief Financial Officer, and former Chief Legal Officer, from their respective roles. Immediately following the announcement, the Company's market capitalization decreased by approximately 30~~%, indicating that an impairment may exist. As a result, the Company performed an interim quantitative assessment of its goodwill as of September 30, 2023.~~

The Company estimated the fair value of each reporting unit using a weighted average of the fair value derived from both an income approach and a market approach (all Level 3 fair value measurements). Upon performing its assessment, the Company determined its Global Spine reporting unit's fair value exceed its carrying value of net assets as of September 30, 2023.

The following table presents the net carrying value of goodwill as of September 30, 2023, and any activity recognized during the year-to-date period, including accumulated goodwill impairment losses by reportable segment:

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

Balance as of
December 31, 2022

Goodwill Acquired in the Merger with SeaSpine

Impairment Recognized within Acquisition-related Amortization and Remeasurement

Balance as of
September 30, 2023

Global Spine - Gross

$
71,317

$
123,450

$
—

$
194,767

Global Spine - Accumulated Impairment Loss

—

—

—

$
—

Global Spine - Net

$
71,317

$
123,450

$
—

$
194,767

Global Orthopedics - Gross

$
11,822

$
—

$
—

$
11,822

Global Orthopedics - Accumulated Impairment Loss

(11,822
)

—

—

$
(11,822
)
Global Orthopedics - Net

$
—

$
—

$
—

$
—

Goodwill, net of accumulated impairment losses

$
71,317

$
123,450

$
—

$
194,767

~~17. Subsequent Events~~

As further described above in Note 6, on November 6, 2023, the Company, as borrower, and certain subsidiaries of the Company as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent

~~and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $100~~ ~~million senior secured term loan (the “Initial Term Loan”), a $~~25 ~~million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $~~25 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on ~~November 6, 2027~~. In connection with entering into the Financing Agreement, the Company repaid in full amounts outstanding and terminated all commitments under the Prior Credit Agreement. The Initial Term Loan was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), the Company had no~~t made any borrowings under the Delayed Draw Term Loan or the Revolving Credit Facility.~~

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 operations should be read in conjunction with the discussion under the heading “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.

Executive Summary

Following our merger (the ~~“Merger”~~"Merger") with SeaSpine Holdings Corporation ("SeaSpine"), which was completed in January 2023, ~~the newly merged Orthofix-SeaSpine organization is~~we are a leading global spine and orthopedics company with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. Headquartered in Lewisville, Texas, our spine and orthopedic products are distributed in ~~approximately 68~~more than 60 countries via our sales representatives and distributors. For more information, please visit www.Orthofix.com. Information included on our website is not incorporated into, or otherwise creates a part of, this report.

Notable financial metrics in the ~~third~~first quarter of ~~2023~~2024 and recent achievements include the following:

•

Net sales of ~~$184.0~~$188.6 million, an increase of ~~61%~~7.7% on a reported and ~~60%~~7.5% on a constant currency basis over prior year ~~largely as a result of the Merger~~

•

Bone Growth Therapies net sales growth of ~~15%~~10.0%, marking ~~three~~five consecutive quarters with double-digit net sales increases ~~with growth coming from both spine and fracture portfolios~~

•

~~Spinal Implants, Biologics, and Enabling Technologies~~U.S. Spine Fixation net sales growth of ~~155% on a reported basis over prior year~~16%, driven by distribution expansion and further penetration in existing accounts

•

Global Orthopedics net sales ~~increase~~growth of 7%5% on a reported basis, primarily driven by U.S. Orthopedic net sales growth of 23%

•

First quarter net loss of $36 million; Non-GAAP adjusted EBITDA of $8 million, an increase of $4.5 million, a 220 basis point expansion over prior year

Results of Operations

The following table provides certain items in our condensed consolidated statements of operations as a percent of net sales:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(Unaudited)	2023 (%)			2022 (%)			2023 (%)			2022 (%)			2024 (%)			2023 (%)
Net sales		100.0			100.0			100.0			100.0			100.0			100.0
Cost of sales		34.9			26.8			36.0			26.7			32.5			37.0
Gross profit		65.1			73.2			64.0			73.3			67.5			63.0
Sales and marketing		51.7			48.7			52.7			50.1			53.0			53.5
General and administrative		14.7			16.9			20.2			16.1			16.8			27.9
Research and development		10.1			10.5			11.2			10.6			10.3			13.3
Acquisition-related amortization and remeasurement		1.9			2.2			2.0			(2.8	)		2.9			2.4
Operating loss		(13.3	)		(5.1	)		(22.1	)		(0.7	)		(15.6	)		(34.1	)
Net loss		(15.7	)		(9.4	)		(23.7	)		(3.7	)		(19.1	)		(34.8	)

Net Sales by Product Category and Reporting Segment

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


	Three Months Ended September 30,				Percentage Change						Three Months Ended March 31,				Percentage Change
(Unaudited, U.S. Dollars, in thousands)	2023		2022		Reported			Constant Currency			2024		2023		Reported			Constant Currency
Bone Growth Therapies	$	53,359	$	46,531		14.7	%		14.7	%	$	52,477	$	47,714		10.0	%		10.0	%
Spinal Implants, Biologics, and Enabling Technologies		100,993		39,655		154.7	%		154.5	%		108,816		101,492		7.2	%		7.2	%
Global Spine		154,352		86,186		79.1	%		79.0	%		161,293		149,206		8.1	%		8.1	%
Global Orthopedics		29,654		27,810		6.6	%		0.7	%		27,315		25,998		5.1	%		3.8	%
Net sales	$	184,006	$	113,996		61.4	%		59.9	%	$	188,608	$	175,204		7.7	%		7.5	%

2221

Nine Months Ended
September 30,

Percentage Change

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

2023

2022

Reported

Constant Currency

Bone Growth Therapies

$
153,735

$
136,244

12.8
%

12.8
%
Spinal Implants, Biologics, and Enabling Technologies

307,799

123,379

149.5
%

149.5
%
Global Spine

461,534

259,623

77.8
%

77.8
%
Global Orthopedics

84,692

78,861

7.4
%

6.1
%
Net sales

$
546,226

$
338,484

61.4
%

61.1
%

Global Spine

Global Spine offers the following product categories:

Bone Growth Therapies, which manufactures, distributes, sells, and provides support services for ~~market leading~~market-leading devices used adjunctively in high-risk spinal fusion procedures and ~~to treat~~treats both ~~non-union~~nonunion and acute fractures in the orthopedic space. Bone Growth Therapies uses distributors and a direct sales channel to sell its devices and provide associated support services to hospitals, healthcare providers, and patients in the U.S.

Spinal Implants, Biologics, and Enabling Technologies is comprised of a broad portfolio of spine fixation and motion preservation implant products used in surgical procedures of the spine, which includes one of the most comprehensive biologics portfolios in both the demineralized bone matrix and cellular allograft market segments and image-guided surgical solutions to facilitate degenerative, minimally invasive, and complex surgical procedures. Spinal Implants, Biologics, and Enabling Technologies products are sold through a network of distributors and sales representatives to hospitals and healthcare providers on a global basis for Spinal Implants and Enabling Technologies, ~~and~~ primarily within the U.S. for Biologics.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Net sales of ~~$154.4~~$161.3 million, an increase of ~~$68.2~~$12.1 million or ~~79.1%~~8.1%

•

Bone Growth Therapies net sales increased ~~$6.8~~$4.8 million, or ~~14.7%~~10.0%, largely driven by (i) an increase in ~~complex spine procedures, which are typically paired within~~gross order volumes resulting from our ~~CervicalStim and SpinalStim devices, (ii) increased reimbursement rates that were approved by Medicare~~continued investment in our direct sales channel for ~~2023, (iii) growth in our~~both the spine and fracture ~~sales channels as a result~~markets and (ii) continued growth and adoption of ~~investments made~~our AccelStim, which is used in ~~the commercial channel in the prior year, and (iv) the launch of AccelStim for~~ the healing of fresh and ~~non-union~~nonunion fractures

•

Spinal Implants, Biologics, and Enabling Technologies net sales increased ~~$61.3~~$7.3 million, or ~~154.7%~~7.2%, primarily due to ~~the contribution of SeaSpine net~~increased sales ~~in the third quarter of 2023 in addition to~~ growth ~~driven by the onboarding of~~from new and existing high-volume distribution partners, ~~along with multiple recent product launches~~

~~Nine months ended September 30, 2023 compared to 2022~~

~~Net sales of $461.5 million, an increase of $201.9 million or 77.8%~~

•

Bone Growth Therapies net sales increased $17.5 million or 12.8%, largely driven by (i) a continued increase in complex spine procedures, (ii) increased reimbursement rates that were approved by Medicare for 2023, (iii)particularly within Spinal Implants, which saw growth in each of our ~~spine~~cervical, interbody, and ~~fracture sales channels as a result of investments made in the prior year, and (iv) the launch of AccelStim~~

•

Spinal Implants, Biologics, and Enabling Technologies net sales increased $184.4 million or 149.5%, primarily due to the contribution of SeaSpine net sales and growth driven by the onboarding of new, high-volume distribution partners along with multiple recent product launchesthoracolumbar franchises

Global Orthopedics

Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions specifically related to limb reconstruction and deformity correction unrelated to the spine. Global Orthopedics distributes its products ~~globally~~world-wide through a network of distributors and sales representatives to sell orthopedic products to hospitals and healthcare providers.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Net sales of ~~$29.7~~$27.3 million, an increase of ~~$1.8~~$1.3 million or ~~6.6%~~5.1%

•

~~Growth of 13.6% in the~~ U.S.~~, primarily due to recent product launches and commercial execution within our U.S. sales channel~~

•

~~International~~ growth of ~~4.5% on a reported basis,~~$1.5 million or 22.9%, largely due to favorable movements in foreign exchange rates, which had a favorable impact on net sales of $1.6 million in the quarter, partially offset by a small decrease in stocking distributor orders and in certain direct international markets as a result of macroeconomic headwinds

~~Nine months ended September 30, 2023 compared to 2022~~

~~Net sales of $84.7 million, an increase of $5.8 million or 7.4%~~

•

~~Growth of 13.4% in the U.S. largely as a result of~~ investments made in recent product launches, ~~and~~ commercial execution within our sales channel, and from our comprehensive surgeon education program

•

International ~~growth of 3.8% on a constant currency basis, largely~~sales were flat compared to prior year due to ~~an increase~~healthcare provider strikes in the UK and timing of certain stocking ~~distributor~~distributors' orders ~~and as a result of recent product launches~~

•

Increase of ~~$1.0~~$0.3 million due to movement in foreign ~~current~~currency exchange rates, which had a favorable impact on net sales in ~~2023~~2024

Gross Profit


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023		��	2022			% Change			2023			2022			% Change			2024			2023			% Change
Net sales	$	184,006		$	113,996			61.4	%	$	546,226		$	338,484			61.4	%	$	188,608		$	175,204			7.7	%
Cost of sales		64,243			30,573			110.1	%		196,583			90,491			117.2	%		61,366			64,875			(5.4	%)
Gross profit	$	119,763		$	83,423			43.6	%	$	349,643		$	247,993			41.0	%	$	127,242		$	110,329			15.3	%
Gross margin		65.1	%		73.2	%		(8.1	%)		64.0	%		73.3	%		-9.3	%		67.5	%		63.0	%		4.5	%

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Gross profit increased ~~$36.3~~$16.9 million

•

~~Gross~~Increase in gross profit ~~largely increased due to the contribution of SeaSpine results in the third quarter of 2023, as SeaSpine contributed approximately $62.9 million in~~driven primarily by net sales growth across all principal product categories

•

~~Partially offset~~Increase of $8.6 million driven by ~~$7.9 million in~~a reduction of amortization of the inventory fair value ~~step up at acquisition,~~step-up recognized in the Merger, which is being ~~recognized over the expected sales cycles of the acquired inventory~~

•

~~Further offset by approximately $1.4 million in inventory-related charges as a result of product rationalization decisions that have been made related to the Merger~~

~~Nine months ended September 30, 2023 compared to 2022~~

~~Gross profit increased $101.7 million~~

•

~~Gross profit largely increased due to the contribution of SeaSpine results in the third quarter of 2023, as SeaSpine contributed approximately $188.2 million in net sales~~

•

~~Partially offset by $29.0 million in amortization of the inventory fair value step up at acquisition, which is being recognized~~amortized over the expected sales cycles of the acquired inventory

•

~~Further offset by approximately $5.7 million in inventory-related charges as a result of product rationalization decisions that have been made related to the Merger~~

Sales and Marketing Expense


	Three Months Ended September 30,									Nine Months Ended September 30,										Three Months Ended March 31,
(U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022				% Change
(Unaudited, U.S. Dollars, in thousands)																				2024			2023			% Change
Sales and marketing	$	94,947		$	55,461			71.2	%	$	287,987		$	169,486				69.9	%	$	100,043		$	93,791			6.7	%
As a percentage of net sales		51.5	%		48.7	%		2.8	%		52.7	%		50.1	%	��		2.6	%		52.9	%		53.5	%		(0.6	%)

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Sales and marketing expense increased ~~$39.5~~$6.3 million

•

Increase of $3.4 million in variable compensation expenses, including commissions, largely ~~due to~~resulting from changes in sales volume and sales mix; this increase was partially offset by realization of synergies achieved following the contribution of SeaSpine results in the third quarter of 2023 and the overall increase in net sales as compared to the prior year period, which resulted in increased variable expenses, such as commissions and bonus expenses associated with the achievement of sales objectivesMerger

•

~~Included within~~Increase of $2.9 million in depreciation expense related to an increase in deployed instrumentation to support increased sales ~~and marketing expenses for the third quarter of 2023 are integration-related expenses of $1.3 million, which are mainly severance and retention costs~~demand

~~Nine months ended September 30, 2023 compared to 2022~~

~~Sales and marketing expense increased $118.5 million~~

•23

Increase largely due to the contribution of SeaSpine results in the third quarter of 2023 and the overall increase in net sales as compared to the prior year period, which resulted in increased variable expenses, such as commissions and bonus expenses associated with the achievement of sales objectives

•

~~Included within sales and marketing expenses for 2023 are integration-related expenses of $4.3 million, which are mainly related to severance and retention costs~~

General and Administrative Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022			% Change
(Unaudited, U.S. Dollars, in thousands)																			2024			2023			% Change
General and administrative	$	27,136		$	19,322			40.4	%	$	110,124		$	54,496			102.1	%	$	31,648		$	48,811			(35.2	%)
As a percentage of net sales		14.7	%		16.9	%		(2.2	%)		20.2	%		16.1	%		4.1	%		16.8	%		27.9	%		(11.1	%)

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

General and administrative expense ~~increased $7.8~~decreased $17.2 million

•

~~Increase largely due to the contribution~~Decrease in integration-related expenses of ~~SeaSpine results in the third quarter of 2023 and resulting integration costs incurred as a result of the Merger~~

•

~~Increase also driven by approximately $3.4~~$16.2 million ~~in costs associated with the Board of Directors' independent investigation conducted by independent outside legal counsel, which resulted in the termination of three former executives~~

•

~~Partially offset by a decrease of $2.9 million associated with due diligence efforts and transaction costs incurred in 2022 prior to the closing of the Merger~~

•

Further offset by a $0.5 million decrease in share-based compensation expense resulting from (i) a $1.1 million recognized benefit related to the forfeiture of outstanding equity grants due to executive leadership changes, partially offset by increases from (ii) a larger employee base post-Merger, and (iii) accelerated vesting of certain equity-based awards as a result of the Merger

~~Nine months ended September 30, 2023~~ compared to ~~2022~~

~~General~~prior year comprised professional and ~~administrative expense increased $55.6 million~~

•

~~Increase largely due to the contribution of SeaSpine results in 2023~~advisor fees and ~~resulting integration costs incurred as a result of the Merger, partially offset by a reduction in due diligence~~severance and ~~transaction costs incurred prior to the closing of the Merger~~

•

~~Included within~~retention costs. In addition, general and administrative expenses ~~for 2023 are merger and integration related expense~~were further reduced by the realization of $21.4 million, which are mainly comprised of (i) professional fees totaling $10.8 million, inclusive of a $5.5 million payment to Orthofix's financial advisor for the Merger upon closing of the transaction, and (ii) severance and retention costs totaling $9.9 millionMerger-related synergies

•

~~Increase~~Decrease of ~~$11.6~~$3.6 million in share-based compensation expense ~~as a result of (i) a larger employee base post-Merger and (ii) from~~primarily due to accelerated vesting of certain equity-based awards as a result of the Merger ~~partially offset by a recognized benefit related to the forfeiture of outstanding equity grants due to executive leadership changes~~recorded in 2023

•

~~Increases~~Partially offset by an increase of ~~approximately $3.4~~$2.2 million in ~~costs associated with the Board~~succession charges as a result of ~~Directors' independent investigation conducted by independent outside legal counsel, which resulted~~recent changes in ~~the termination of three former executives~~executive leadership positions

Research and Development Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022			% Change			2024			2023			% Change
Research and development	$	18,559		$	11,943			55.4	%	$	61,290		$	35,913			70.7	%	$	19,492		$	23,307			(16.4	%)
As a percentage of net sales		10.1	%		10.5	%		(0.4	%)		11.2	%		10.6	%		0.6	%		10.3	%		13.3	%		(3.0	%)

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Research and development expense ~~increased $6.6~~decreased $3.8 million

•

~~Increase largely due to the contribution~~Decrease of ~~SeaSpine results in the third quarter of 2023 and resulting integration costs incurred as a result of the Merger~~

•

~~Included within research and development expenses for the third quarter of 2023 are merger and integration-related expenses of $0.4 million, which are mainly comprised of severance and retention costs~~

•

~~Partially offset by a decrease of $0.9~~$2.3 million in costs to comply with the European Union Medical Device Regulations

~~Nine months ended September 30, 2023 compared to 2022~~

~~Research and development expense increased $25.4 million~~

•

~~Increase largely due~~Decrease of $1.4 million related to ~~the contribution of SeaSpine results in 2023~~merger and ~~resulting integration costs incurred as a result of the Merger~~

•

~~Included within~~integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses ~~for 2023 are merger and integration-related expenses~~were further reduced by the realization of ~~$2.4 million, which are mainly comprised of severance and retention costs~~

•

~~Increase of $0.8 million~~Merger-related synergies. This was partially offset by an increase in our clinical spend related to the ~~attainment of a development milestone with MTF Biologics achieved in~~ongoing clinical study for the ~~first quarter of 2023~~M6-C artificial disc

•

~~Partially offset by a decrease of $0.7 million in costs to comply with the European Union Medical Device Regulations~~

Acquisition-related Amortization and Remeasurement


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022			% Change			2024			2023			% Change
Acquisition-related amortization and remeasurement	$	3,570		$	2,484			43.7	%	$	11,037		$	(9,678	)		(214.0	%)	$	5,396		$	4,134			30.5	%
As a percentage of net sales		1.9	%		2.2	%		(0.3	%)		2.0	%		(3.0	%)		5.0	%		2.9	%		2.4	%		0.5	%

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions and (ii) remeasurement of ~~any~~ related contingent consideration arrangements, ~~and (iii) recognized costs associated with IPR&D assets,~~ which are recognized immediately upon acquisition.

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Acquisition-related amortization and remeasurement increased ~~$1.1 million~~

•

~~Increase in amortization expense of $2.4 million during the third quarter of 2023 associated with intangible assets recognized as a result of the Merger~~

•

Partially offset by $1.4 million in costs recognized in the third quarter of 2022 associated with the acquisition of in-process research and development assets, recognized immediately upon acquisition, related to our License and Distribution Agreement with CGBio Co., Ltd.

~~Nine months ended September 30, 2023 compared to 2022~~

~~Acquisition-related amortization and remeasurement increased $20.7~~$1.3 million

•

Increase of $17.2 million related to a benefit recognized in 2022 from the remeasurement of potential revenue-based milestone payments associated with the Spinal Kinetics acquisitions; we did not achieve the remaining milestone prior to April 30, 2023, the end of the measurement period for achieving such milestone

•

~~Increase in amortization expense of $7.1 million during 2023 associated with intangible assets recognized as a result of the Merger~~

•

~~Partially offset by a benefit of $2.1~~$1.2 million recognized in ~~2023~~2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger

Non-operating Income and Expense


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022			% Change			2024			2023			% Change
Interest expense, net	$	(1,576	)	$	(277	)		469.0	%	$	(4,131	)	$	(1,059	)		290.1	%	$	(4,558	)	$	(1,289	)		253.6	%
Other income (expense), net		(2,360	)		(3,308	)		(28.7	%)		(1,704	)		(7,436	)		(77.1	%)		(1,274	)		676			(288.5	%)

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

Interest expense, net increased ~~$1.3~~$3.3 million

•

Increase of ~~$1.3~~$3.6 million attributable to an increase in ~~secured revolving credit facility borrowings~~ outstanding indebtedness as part of our Financing Agreement in ~~the third quarter of 2023 as no such balance was outstanding in the prior year~~

~~Nine months ended September 30, 2023~~2024 compared to ~~2022~~

~~Interest expense, net increased $3.1 million~~

•

~~Increase of $2.6 million attributable to an increase in secured revolving credit facility borrowings outstanding in 2023 as no such balance was outstanding in the~~ prior year

•

~~Increase~~Offset by a decrease of $0.6 million attributable to an early termination prepayment penalty associated with the payoff of the assumed indebtedness of SeaSpine as of the close of the Merger recorded in 2023

~~Three months ended September 30, 2023 compared to 2022~~

Other income (expense), net ~~increased~~decreased $~~0.9~~2.0 million

•

~~Increase~~Decrease of ~~$1.3~~$2.2 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ~~$1.9 million~~($1.6 million) in ~~the third quarter of 2023~~2024 compared to a ~~loss~~gain of ~~$3.3~~$0.6 million in ~~the third quarter of 2022~~2023

•

Partially offset by ~~the recognition of~~ a ~~$0.4~~$0.3 million ~~impairment loss on a held-for-sale investment security in the third quarter of 2023~~

~~Nine months ended September 30, 2023 compared to 2022~~

~~Other income (expense), net increased $5.7 million~~

•

~~Increase of $6.4 million~~increase associated with ~~changes in foreign currency exchange rates, as we recorded a non-cash remeasurement~~the reversal of expected credit loss ~~of $1.1 million in 2023 compared to a loss of $7.5 million in 2022~~recognized on the Neo Medical convertible loan

•

~~Partially offset by the recognition of a $0.4 million impairment loss on a held-for-sale investment security in the third quarter of 2023~~

Income Taxes


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			% Change			2023			2022			% Change			2024			2023			% Change
Income tax expense	$	472		$	1,344			(64.9	%)	$	2,591		$	1,968			31.7	%	$	851		$	611			39.3	%
Effective tax rate		(1.7	%)		(14.3	%)		12.6	%		(2.0	%)		(18.4	%)		16.4	%		(2.4	%)		(1.0	%)		(1.4	%)

Three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~2022~~2023

•

~~Decrease~~The increase in tax expense compared to the prior year period ~~is attributable to lower cash taxes~~was primarily a result of changes in valuation allowances and tax amortization on certain acquired intangibles

•

The primary factor affecting our tax expense for the USfirst quarter of ~~$1.3 million partially offset by increased~~2024 was tax amortization ~~expense~~ on ~~long lived intangible assets of $0.4 million.~~certain acquired intangibles

~~Nine months ended September 30, 2023 compared to 2022~~25

•

Increase in tax expense compared to the prior year period is attributable to increased amortization expense on long lived intangible assets of $1.2 million and higher taxes on foreign earnings of $0.4 million, offset by lower cash taxes in the US of $0.9 million.

Segment Review

~~Our business is managed through~~The Company has two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the ~~business by segment~~Company is adjusted earnings before interest, tax, depreciation, and amortization ~~(“adjusted EBITDA,”~~("Adjusted EBITDA", a non-GAAP financial measure) (which is described further in Note 11 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein).

The following table presents adjusted EBITDA by segment and reconciles consolidated adjusted EBITDA to loss before income taxes:


	Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2024			2023
Adjusted EBITDA by reporting segment
Global Spine	$	19,890		$	14,981
Global Orthopedics		(1,492	)		44
Corporate		(10,733	)		(11,821	)
Consolidated adjusted EBITDA	$	7,665		$	3,204

Reconciling items:
Interest expense, net	$	4,558		$	1,289
Depreciation and amortization		14,862			12,670
Share-based compensation expense		8,800			13,020
Foreign exchange impact		1,588			(583	)
SeaSpine merger-related costs		4,520			20,740
Strategic investments		120			661
Acquisition-related fair value adjustments		4,217			11,636
Interest and loss on investments		(260	)		—
Litigation and investigation costs		2,260			469
Succession charges		2,210			—
Medical device regulation		—			3,629
All other		(41	)		—
Loss before income taxes	$	(35,169	)	$	(60,327	)

Liquidity and Capital Resources

Cash, ~~and~~ cash equivalents, and restricted cash at ~~September 30, 2023,~~March 31, 2024, totaled ~~$33.7~~$29.5 million compared to ~~$50.7~~$37.8 million at December 31, ~~2022.~~2023. The following table presents the net change in cash, ~~and~~ cash equivalents, and restricted cash for the ~~nine~~three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ respectively:


	Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			Change			2024			2023			Change
Net cash provided by (used in) operating activities	$	(39,059	)	$	(13,886	)	$	(25,173	)
Net cash used in operating activities										$	(18,595	)	$	(34,020	)	$	15,425
Net cash provided by (used in) investing activities		(18,078	)		(18,634	)		556			(10,867	)		17,084			(27,951	)
Net cash provided by (used in) financing activities		40,042			(1,576	)		41,618
Net cash provided by financing activities											21,453			15,983			5,470
Effect of exchange rate changes on cash		58			(2,091	)		2,149			(284	)		221			(505	)
Net change in cash and cash equivalents	$	(17,037	)	$	(36,187	)	$	19,150		$	(8,293	)	$	(732	)	$	(7,561	)

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:


	Nine Months Ended September 30,									Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			Change			2024			2023			Change
Net cash provided by (used in) operating activities	$	(39,059	)	$	(13,886	)	$	(25,173	)
Net cash used in operating activities										$	(18,595	)	$	(34,020	)	$	15,425
Capital expenditures		(46,997	)		(17,260	)		(29,737	)		(10,817	)		(11,835	)		1,018
Free cash flow	$	(86,056	)	$	(31,146	)	$	(54,910	)	$	(29,412	)	$	(45,855	)	$	16,443

Operating Activities

Cash flows from operating activities ~~decreased $25.2~~increased $15.4 million

•

~~Unfavorable~~Favorable change in net loss of ~~$116.9~~$24.9 million

•

~~Favorable~~Unfavorable change of ~~$96.5~~$7.7 million associated with non-cash gains and losses, largely related to ~~the~~ amortization of the inventory fair value step up ~~at acquisition,~~recognized in the Merger, share-based compensation expense, depreciation and amortization expenses, changes in the fair value of contingent consideration, ~~depreciation and amortization,~~provisions for expected credit losses, and inventory reserve expenses

•

Unfavorable change of ~~$4.8~~$1.8 million relating to changes in working capital accounts, primarily attributable to changes in ~~inventory levels, partially offset by recoupment activities associated with the CMS Accelerated~~inventories, accounts receivable, and ~~Advance Payment Program in prior year and favorable changes in~~ other current liabilities ~~prepaid expenses and other current assets, and accounts receivable~~

Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were ~~57 days at September 30, 2023, compared to~~ 61 days at ~~September 30, 2022.~~March 31, 2024, compared to 58 days at March 31, 2023 (calculated using first quarter net sales and ending accounts receivable). Inventory turns ~~decreased to 1.0 times as of September 30, 2023 compared~~improved to 1.2 times as of ~~September 30, 2022.~~March 31, 2024 compared to 0.7 times as of March 31, 2023.

Investing Activities

Cash flows from investing activities ~~increased $0.6~~decreased $28.0 million

•

~~Increase~~Decrease of $29.4 million attributable to cash acquired as a result of the Merger

•

~~Increase of $0.9 million associated with the payment of a contingent consideration milestone achieved~~ in ~~2022 related to a previous asset acquisition~~2023

•

Partially offset by ~~an increase~~a decrease in spend of ~~$29.5~~$1.0 million in capital expenditures ~~largely due~~and $0.5 million in other investing activities in 2024 compared to ~~the inclusion of SeaSpine's financial results within the~~ 2023 ~~financial results~~

Financing Activities

Cash flows from financing activities increased ~~$41.6~~$5.5 million

•

Increase of ~~$70.0~~$6.9 million associated with ~~our secured revolving credit facility borrowings for working capital purposes, including to fund certain Merger-related expenses, during 2023~~

•

~~Increase of $2.0 million~~net borrowing activities related to our credit facilities and from our assumption of SeaSpine's outstanding indebtedness at the ~~conclusion~~time of the ~~FITBONE Contract Manufacturing and Supply Agreement with Wittenstein, resulting in a $2.0 million payment in the first quarter of 2022~~Merger

•

Partially offset by ~~a decrease of $26.9~~$1.5 million ~~associated with the termination~~in debt issuance costs and ~~repayment of SeaSpine's credit facility~~

•

~~Further offset by a decrease in net proceeds of $1.9 million from the issuance of common shares and a decrease in~~ other financing activities ~~of $1.6 million~~

Credit Facilities

On January 3, 2023, we borrowed $30.0 million for working capital purposes, including to fund certain Merger-related expenses under our secured revolving credit facility under the Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., dated as of October 25, 2019 (as amended by the First Amendment thereto dated March 1, 2023, the "Prior Credit Agreement"), which credit facility had a maturity date of October 25, 2024. Following the completion of the Merger, we terminated SeaSpine's credit facility and all applicable commitments with Wells Fargo Bank, National Association and repaid all outstanding obligations in respect to principal, interest, and fees on January 5, 2023.

Additional borrowings were made under the Prior Credit Agreement subsequent to the closing of the Merger and as of September 30, 2023, we had $70.0 million borrowings outstanding under the Prior Credit Agreement. We borrowed an additional $9.0 million on October 10, 2023.

On November 6, 2023, we ~~as borrower, and certain of our subsidiaries, as guarantors,~~ entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC ~~as administrative agent and collateral agent (the “Agent”),~~ and certain lenders party thereto. The Financing Agreement provides for a ~~$100~~$100.0 million senior secured term loan (the “Initial Term Loan”), a ~~$25~~$25.0 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a ~~$25~~$25.0 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. ~~In connection with entering into the Financing Agreement,~~As of March 31, 2024, we ~~repaid in full amounts~~had $100.0 million outstanding ~~and terminated all commitments~~ under the ~~Prior Credit Agreement. The~~ Initial Term Loan ~~was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), we had not made any borrowings~~and $25.0 million outstanding under the Delayed Draw Term ~~Loan or the Revolving Credit Facility.~~

Borrowings under the Financing Agreement were and may be used for, among other things, the repayment in full of the Prior Credit Agreement, working capital, and other general corporate purposes. Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at our option, either the three-month SOFR rate (subject to a floor of 3.00% and a credit spread adjustment of 0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of 7.25%, or a base rate plus an applicable margin of 6.25%. A revolving unused line fee of 2.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of 1.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.Loan.

Certain of our existing and future material subsidiaries (collectively, the “Guarantors”) are required to guarantee the repayment of our obligations under the Financing Agreement. Our obligations and each of the Guarantors with respect to the Financing Agreement are secured by a pledge of substantially all of our assets and the assets of each of the Guarantors, including, without limitation, accounts receivables, deposit accounts, intellectual property, investment property, inventory, equipment, and equity interests in their respective subsidiaries.

The Financing Agreement contains customary affirmative and negative covenants, including limitations on our and our subsidiaries' ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay subordinated indebtedness, and enter into affiliate transactions. In addition, the Financing Agreement contains financial covenants requiring us to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). ~~The~~As of March 31, 2024, we were in compliance with all required financial covenants.

On March 15, 2024, we entered into Amendment No.1 to the Financing Agreement ~~also includes events~~with Blue Torch Finance LLC (the "First Amendment"). Under the terms of ~~default customary~~the First Amendment, the parties agreed to reduce the number of business days to submit a notice of borrowing for ~~facilities~~the Delayed Draw Term Loan, and redefine certain terms within the asset coverage financial covenant. The maturity date remains November 6, 2027, for each of ~~this type~~the Initial Term Loan, Delayed Draw Term Loan, and ~~upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the~~Revolving Credit ~~Facilities may be accelerated and/or the lenders’ commitments terminated.~~Facility.

As of ~~September 30, 2023,~~March 31, 2024, we had no borrowings ~~outstanding under~~on our available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($~~5.8~~5.9 million). ~~We were in compliance with all required financial covenants of our credit facilities as of September 30, 2023.~~

Other

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

Lattus Spine LLC ("Lattus") Contingent Consideration

Under the terms of a contingent consideration obligation in a purchase agreement assumed in the Merger, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangement as of March 31, 2024, was $9.7 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of March 31, 2024, 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.

Legion Innovations, LLC Asset Acquisition

On December 29, 2022, we entered into a technology assignment and royalty agreement with Legion Innovations, LLC, a U.S.-based medical device technology company, whereby we acquired intellectual property rights to certain assets. As consideration, we paid $0.2 million in January 2023, with additional payments contingent upon reaching future commercialization and revenue-based milestones.

IGEA S.p.A Exclusive License and Distribution Agreement

In April 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 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 2021, with certain payments contingent upon achieving an FDA milestone. As

In May 2022, we achieved FDA approval pertaining to the acquired technology, triggering a contingent consideration milestone obligation of ~~September 30, 2023, we have a remaining liability under~~$3.5 million. Of this ~~agreement of~~amount, $1.5 million was paid in 2022, $1.0 million ~~which is~~was paid in May 2023, and $1.0 million was accrued within other current ~~liabilities.~~

~~CGBio Co., Ltd. Exclusive License and Distribution Agreement~~

On July 30, 2022, we entered into a long-term strategic License and Distribution Agreement (the “Agreement”) with CGBio Co., Ltd. (“CGBio”), a developer of innovative, synthetic bone grafts. The agreement grants us the exclusive right to conduct pre-clinical and clinical studies, commercialize, promote, market, and sell the Novosis recombinant human bone morphogenetic protein-2 (rhBMP-2) bone growth materials and other future tissue regenerative solutions in the U.S. and Canada. As consideration, we paid CGBio an upfront payment of $1.4 million with additional payments contingent upon the achievement of specified development milestones. This agreement was terminated in the third quarter of 2023. No additional milestones were achieved and/or paid per this agreement.

~~Lattus Spine LLC ("Lattus") Contingent Consideration~~

In connection with the Merger, we assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus executed in December 2022. Under the terms of the agreement, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangementliabilities as of September 30, 2023, was $9.1 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of September 30, 2023, 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.March 31, 2024.

Off-balance Sheet Arrangements

As of ~~September 30, 2023,~~March 31, 2024, 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, ~~2022.~~2023.

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 described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. There have been no significant changes to our critical accounting estimates during the quarter covered by this report.

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.

3128

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 financial measures used to supplement information regarding the performance and underlying trends of our business operations 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 U.S. 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 U.S. 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 U.S. GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

Adjusted EBITDA

EBITDA is a non-GAAP financial measure defined as earnings before interest income (expense), income taxes, depreciation, and amortization. Adjusted EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business. Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization and excludes the impact ~~of:~~of share-based compensation, gains and losses related to changes in foreign exchange rates, charges related to the SeaSpine ~~Merger-related costs,~~merger and other strategic investments, acquisition-related fair value adjustments, ~~legal judgments~~interest and ~~settlements,~~gains and losses on investments, litigation and investigation costs, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and ~~certain other items.~~succession charges. Adjusted 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, ~~2022.~~2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~We maintain disclosure controls and procedures (as defined in Rule 13a-15(e)~~At the end of the ~~Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted~~period covered by this report, under the ~~Exchange Act are recorded, processed, summarized,~~supervision and ~~reported within~~with 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~~participation of our management, including our ~~Interim~~President and Chief Executive Officer and our ~~Interim~~ Chief Financial Officer, ~~as appropriate to allow timely decisions regarding required disclosure. Management, with the participation~~we performed an evaluation of the ~~Interim Chief Executive Officer~~effectiveness of the design and ~~the Interim Chief Financial Officer, evaluated the effectiveness~~operation of our disclosure controls and ~~procedures~~procedures. As described below, as of ~~September 30, 2023. Based on~~December 31, 2023, management identified a material weakness in our internal control over financial reporting, which is an integral component of our disclosure controls and procedures. Our remediation efforts with respect to this ~~evaluation,~~material weakness are continuing, and we have determined that this material weakness is continuing as of March 31, 2024, as there have been no further control instances as of this date to conclude that the applicable controls have been remediated. As a result, our ~~Interim~~President and Chief Executive Officer and ~~our Interim~~ Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of ~~September 30, 2023.~~March 31, 2024.

~~On January 5, 2023, the Company completed a merger of equals with SeaSpine, whose financial statements reflect total assets~~Material Weakness in Internal Control over Financial Reporting

The Company’s management is responsible for establishing and revenues constituting 52% and 35%, respectively, of the condensed consolidated financial statement amounts as of and for the nine months ended September 30, 2023. As permitted by the rules of the SEC, the Company will exclude SeaSpine from its annual assessment of the effectiveness onmaintaining adequate internal control over financial reporting (as such term is defined in the Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide

reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation of reliable financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

In connection with the preparation and filing of the Annual Report for the year ~~ending~~ended December 31, 2023 (the “2023 Annual Report”), the ~~year~~Company’s management, including our President and Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of ~~acquisition. Management~~the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the framework set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Based on its evaluation, the Company’s management concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to a material weakness in the design and operation of certain management review controls pertaining to business combinations and assessing recoverability of goodwill, resulting from insufficient evidence supporting the precision over the determination of certain estimates and insufficient evidence supporting the operating effectiveness of the associated review controls. This material weakness did not result in any misstatements to the consolidated financial statements or disclosures.

Notwithstanding the material weakness, management has concluded that the financial statements included elsewhere in the 2023 Annual Report presented fairly, in all material respects, our financial position, results of operations, and cash flows in conformity with U.S. GAAP.

Remediation of the Material Weakness

Our management has worked, and continues to ~~monitor SeaSpine's~~work, to strengthen our disclosure controls and procedures and internal control over financial reporting in connection with the material weakness described above. Subsequent to the identification of the material weakness, the Company has better aligned its current finance department staff to enhance the review and oversight of the accounting and finance functions. The Company has also added several key positions in its finance department, including a new Chief Financial Officer, a Senior Vice President of Finance and Strategy, and other supporting roles with backgrounds in financial reporting, technical accounting, and financial planning and analysis. The Company continues to implement the remediation efforts described herein. These remediation efforts are being undertaken under the supervision of the Audit and Finance Committee of our Board of Directors.

We are in the process of implementing and continuing to refine the plan for remediation of the ineffective internal control over financial reporting described above. In addition, we have designed and are implementing the specific remediation initiatives described below:

•

Evaluating skill set gaps and hiring additional accounting, finance, and/or financial reporting personnel, as needed, with relevant public company accounting and financial reporting experience to develop and implement additional policies, procedures, and controls as it pertains to business combinations, asset acquisitions, and/or other processes heavily dependent on the usage of prospective financial information;

•

Providing ongoing training for key personnel responsible for internal control over financial reporting; and

•

Enhancing or designing and implementing controls over the completeness and accuracy of information used in financial reporting and forecasted financial results, particularly as it relates to the accounting for business combinations and goodwill impairment assessment.

We believe the remediation steps outlined above have improved and will continue to improve the effectiveness of our internal control over financial reporting. We are committed to remediating the material weakness and we are making progress in that effort. The actions we are taking are subject to ongoing senior management review, as well as oversight from the Audit and Finance Committee. When fully implemented and operational, we believe the measures described above will remediate the underlying causes of the control deficiencies that gave rise to the material weakness and will strengthen our internal control over financial reporting. However, remediation efforts are expected to continue beyond the quarter ended March 31, 2024. Further, we will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a

3230

sufficient period of time. We may also identify additional measures that may be required to remediate the material weakness in our internal control over financial reporting, necessitating further action.

Changes in Internal Control over Financial Reporting

~~There was no change~~Other than the remediation activities described above, there have not been any changes in our internal control over financial reporting ~~that occurred~~ during the quarterly period covered by this report that ~~has~~have materially affected or isare reasonably likely to materially affect, our internal control over financial reporting.

3331

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

There have been no material changes from the risk factors disclosed in "Part I, Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, ~~2022, or in "Part II, Item 1A. "Risk Factors" in our Form 10-Qs filed for the three months ended March 31, 2023, and six months ended June 30, 2023, except as follows.~~2023.

~~We maintain a $150 million secured revolving credit facility secured by a pledge of substantially all of our property.~~

On November 6, 2023, we, as borrower, and certain of our subsidiaries, as guarantors, entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and collateral agent (the “Agent”), and certain lenders party thereto. The Financing Agreement provides for a $100 million senior secured term loan (the “Initial Term Loan”), a $25 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $25 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. In connection with entering into the Financing Agreement, we repaid in full amounts outstanding and terminated all commitments under our prior credit agreement (which had a maturity date of October 25, 2024). The Initial Term Loan was fully funded on November 6, 2023. As of the date of this filing (November 8, 2023), we had not made any borrowings under the Delayed Draw Term Loan or the Revolving Credit Facility.

Borrowings under the Financing Agreement were and may be used for, among other things, (i) the repayment in full of amount that we had outstanding under our prior credit agreement, (ii) working capital and (iii) other general corporate purposes. Borrowings under the Credit Facilities bear interest at a floating rate, which will be, at our option, either the three-month SOFR rate (subject to a floor of 3.00% and a credit spread adjustment of 0.26161%) (the “Adjusted Term SOFR Rate”) plus an applicable margin of 7.25%, or a base rate plus an applicable margin of 6.25%. A revolving unused line fee of 2.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s revolving credit commitments under the Revolving Credit Facility for the preceding month. A delayed draw unused fee equal to the Adjusted Term SOFR Rate plus a margin of 1.00% is payable monthly in arrears based on the average amount of the undrawn portion of each lender’s delayed draw term loan commitments in respect of the Delayed Draw Term Loan for the preceding month.

The Financing Agreement contains customary affirmative and negative covenants, including limitations on our and our subsidiaries' ability to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions, pay subordinated indebtedness, and enter into affiliate transactions. In addition, the Financing Agreement contains financial covenants requiring us to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). The Financing Agreement also includes events of default customary for facilities of this type and upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the Credit Facilities may be accelerated and/or the lenders’ commitments terminated.

We believe that we will be in compliance with the covenants in future fiscal quarters. However, there can be no assurance that we will be in such compliance, and if we are not, the failure to do so could result in an event of default, which could have a material adverse effect on our financial position in the event that we continue to have significant amounts drawn under the facility at such time.

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

We have not made any repurchases of our common stock during the ~~third~~first quarter of ~~2023.~~2024.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the last fiscal quarter, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any "non-Rule 10b5-1 trading arrangement."

Item 6. Exhibits



10.1*10.1		~~Form of Time-Based Vesting Employee Restricted Stock Unit Grant Agreement (October~~Letter agreement, entered into on November 27, 2023, ~~grant) under the~~between Orthofix Medical Inc. ~~Amended~~ and ~~Restated 2012 Long-Term Incentive Plan.~~Massimo Calafiore (filed as an exhibit to the Company's Current Report on Form 8-K dated December 1, 2023 and incorporated herein by reference)

10.2*10.2		~~Form of Time-Based Vesting Employee Restricted Stock Unit Grant Agreement (October 2023 Cathy Burzik grant) under the~~ Orthofix Medical Inc. ~~Amended~~2024 CEO Inducement Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and ~~Restated 2012 Long-Term Incentive Plan.~~incorporated herein by reference)

10.3*10.3		~~Change in Control and Severance Agreement, dated October 2, 2023, between~~ Orthofix Medical Inc. 2024 CEO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and ~~Geoffrey Gillespie.~~incorporated herein by reference)

10.4*10.4		Orthofix Medical Inc. 2024 CEO Inducement Plan – Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)

10.5		Orthofix Medical Inc. 2024 CEO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)

10.6		Change in Control and Severance Agreement, dated ~~June 21, 2023,~~as of January 8, 2024, between Orthofix Medical Inc. and ~~Puja Leekha.~~Massimo Calafiore (filed as an exhibit to the Company's Current Report on Form 8-K dated January 9, 2024 and incorporated herein by reference)

10.7		Letter agreement, dated as of January 4, 2024, between Orthofix Medical Inc. and Julie Andrews (filed as an exhibit to the Company's Current Report on Form 8-K dated January 9, 2024 and incorporated herein by reference)

10.8		Orthofix Medical Inc. 2024 CFO Inducement Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference).


10.9		Orthofix Medical Inc. 2024 CFO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)

10.10		Orthofix Medical Inc. 2024 CFO Inducement Plan – Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)

10.11		Orthofix Medical Inc. 2024 CFO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)

10.12		Change in Control and Severance Agreement, dated as of January 15, 2024, between Orthofix Medical Inc. and Julie Andrews (filed as an exhibit to the Company's Current Report on Form 8-K dated January 17, 2024 and incorporated herein by reference)

10.13*		Letter agreement, dated as of March 18, 2024, between Orthofix Medical Inc. and Andres Cedron

10.14		Orthofix Medical Inc. 2024 CLO Inducement Plan (filed as an Exhibit to the Company's S-8 filed on April 16, 2024, and incorporated herein by reference)

10.15		Orthofix Medical Inc. 2024 CLO Inducement Plan – Performance Stock Unit Grant Agreement (filed as an Exhibit to the Company's S-8 filed on April 16, 2024, and incorporated herein by reference)

10.16		Orthofix Medical Inc. 2024 CLO Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as an Exhibit to the Company's S-8 filed on April 16, 2024, and incorporated herein by reference)

10.17		Orthofix Medical Inc. 2024 CLO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as an Exhibit to the Company's S-8 filed on April 16, 2024, and incorporated herein by reference)

10.18*		Change in Control and Severance Agreement, dated as of April 15, 2024, between Orthofix Medical Inc. and Andres Cedron

10.19*		Letter agreement, dated as of February 2, 2024, between Orthofix Medical Inc. and Lucas Vitale

10.20		Orthofix Medical Inc. 2024 CP&BOO Inducement Plan (filed as an Exhibit to the Company's S-8 filed on March 15, 2024, and incorporated herein by reference)

10.21		Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Performance Stock Unit Grant Agreement (filed as an Exhibit to the Company's S-8 filed on March 15, 2024, and incorporated herein by reference)

10.22		Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Time-Based Annual Vesting Stock Unit Grant Agreement (filed as an Exhibit to the Company's S-8 filed on March 15, 2024, and incorporated herein by reference)

10.23		Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Time-Based Cliff Vesting Stock Unit Grant Agreement (filed as an Exhibit to the Company's S-8 filed on March 15, 2024, and incorporated herein by reference)

10.24		Orthofix Medical Inc. 2024 CFO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as an Exhibit to the Company's S-8 filed on March 15, 2024, and incorporated herein by reference)

10.25*		Change in Control and Severance Agreement, dated as of March 15, 2024, between Orthofix Medical Inc. and Lucas Vitale

10.26*		First Amendment to Financing Agreement, dated as of March 15, 2024, among Orthofix Medical Inc., certain subsidiaries of Orthofix Medical Inc. from time to time party thereto as guarantors, the lenders from time to time party thereto, and Blue Torch Finance LLC, as administrative agent and collateral agent

10.27		First Amendment to Cooperation Agreement, entered into on April 19, 2024, by and among Orthofix Medical Inc. Engine Capital, L.P., Engine Jet Capital, L.P., Engine Lift Capital LP, Engine Capital Management, LP, Engine Capital Management GP, LLC, Engine Investments, LLC, Engine Investments II, LLC and Arnaud Ajdler (filed as an Exhibit to the Company's Current Report on Form 8-K dated April 22, 2024, and incorporated herein by reference)

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.

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.

# Furnished herewith.

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: ~~November 8, 2023~~May 7, 2024	By:	/s/ ~~CATHERINE BURZIK~~MASSIMO CALAFIORE
	Name:	~~Catherine Burzik~~Massimo Calafiore
	Title:	~~Interim~~President and Chief Executive Officer ~~Director~~

Date: ~~November 8, 2023~~May 7, 2024	By:	/s/ ~~GEOFFREY GILLESPIE~~JULIE ANDREWS
	Name:	~~Geoffrey Gillespie~~Julie Andrews
	Title:	~~Interim~~ Chief Financial Officer ~~and VP, Corporate Controller~~

3635


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)


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


(U.S. Dollars, in thousands, except par value data)	September 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
	(Unaudited)						(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	33,663		$	50,700		$	26,964		$	33,107
Accounts receivable, net of allowances of $7,090 and $6,419, respectively		114,118			82,857
Restricted cash								2,500			4,650
Accounts receivable, net of allowances of $8,398 and $7,130, respectively								125,617			128,098
Inventories		221,745			100,150			219,076			222,166
Prepaid expenses and other current assets		24,170			22,283			24,821			32,422
Total current assets		393,696			255,990			398,978			420,443
Property, plant, and equipment, net		152,689			58,229			158,132			159,060
Intangible assets, net		121,021			47,388			112,761			117,490
Goodwill		194,767			71,317			194,934			194,934
Other long-term assets		43,479			25,705			41,245			33,388
Total assets	$	905,652		$	458,629		$	906,050		$	925,315

Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	53,261		$	27,598		$	57,147		$	58,357
Current portion of long-term debt								3,125			1,250
Current portion of finance lease liability		693			652			724			708
Other current liabilities		98,576			55,374			89,625			104,908
Total current liabilities		152,530			83,624			150,621			165,223
Long-term borrowings under credit facility		70,000			—
Long-term debt								115,071			93,107
Long-term portion of finance lease liability		18,715			19,239			18,345			18,532
Other long-term liabilities		48,924			18,906			51,698			49,723
Total liabilities		290,169			121,769			335,735			326,585
Contingencies (Note 8)
Shareholders’ equity
Common shares $0.10 par value; 100,000 shares authorized; 36,750 and 20,162 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		3,675			2,016
Common shares $0.10 par value; 100,000 shares authorized; 37,410 and 37,165 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively								3,741			3,717
Additional paid-in capital		741,638			334,969			753,398			746,450
Retained earnings (accumulated deficit)		(127,970	)		1,251
Accumulated deficit								(186,164	)		(150,144	)
Accumulated other comprehensive loss		(1,860	)		(1,376	)		(660	)		(1,293	)
Total shareholders’ equity		615,483			336,860			570,315			598,730
Total liabilities and shareholders’ equity	$	905,652		$	458,629		$	906,050		$	925,315


(Unaudited, U.S. Dollars, in thousands)	Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity			Number of Common Shares Outstanding		Common Shares		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
At December 31, 2021		19,837	$	1,983	$	313,951		$	21,000			—		$	336,934
At December 31, 2022																		20,162	$	2,016	$	334,969		$	1,251			(1,376	)	$	336,860
Net loss		—		—		—			(4,460	)		—			(4,460	)		—		—		—			(60,938	)		—			(60,938	)
Other comprehensive loss, net of tax		—		—		—			—			(1,162	)		(1,162	)
Other comprehensive income, net of tax																		—		—		—			—			430			430
Share-based compensation expense		—		—		4,332			—			—			4,332			—		—		13,020			—			—			13,020
Common shares issued in connection with SeaSpine merger																		16,047		1,605		375,140			—			—			376,745
Common shares issued, net		5		1		(70	)		—			—			(69	)		254		26		(1,984	)		—			—			(1,958	)
At March 31, 2022		19,842	$	1,984	$	318,213		$	16,540		$	(1,162	)	$	335,575
Net income		—		—		—			2,489			—			2,489
Other comprehensive loss, net of tax		—		—		—			—			(1,659	)		(1,659	)
Share-based compensation expense		—		—		4,460			—			—			4,460
Common shares issued, net		158		16		1,065			—			—			1,081
At June 30, 2022		20,000	$	2,000	$	323,738		$	19,029		$	(2,821	)	$	341,946
Net loss		—		—		—			(10,716	)		—			(10,716	)
Other comprehensive loss, net of tax		—		—		—			—			(2,341	)		(2,341	)
Share-based compensation expense		—		—		4,729			—			—			4,729
Common shares issued, net		7		1		(80	)		—			—			(79	)
At September 30, 2022		20,007	$	2,001	$	328,387		$	8,313		$	(5,162	)	$	333,539
At March 31, 2023																		36,463	$	3,647	$	721,145		$	(59,687	)	$	(946	)	$	664,159


	Nine Months Ended September 30,						Three Months Ended March 31,
(Unaudited, U.S. Dollars, in thousands)	2023			2022			2024			2023
Cash flows from operating activities
Net loss	$	(129,221	)	$	(12,687	)	$	(36,020	)	$	(60,938	)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		39,094			21,598			14,862			12,670
Inventory reserve expenses		24,013			9,856			6,350			7,412
Amortization of inventory fair value step up		29,006			—			3,047			11,636
Amortization of operating lease assets, debt costs, and other assets		4,506			2,321			1,478			1,696
Provision for expected credit losses		905			1,713			1,376			208
Deferred income taxes		1,148			21			408			379
Share-based compensation expense		32,540			13,521			8,800			13,020
Change in valuation of investment securities		(82	)		254			314			(207	)
Change in fair value of contingent consideration		(2,100	)		(17,200	)		1,170			—
Other		673			1,124			944			(383	)
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable		2,912			51			813			4,792
Inventories		(48,164	)		(29,875	)		(6,936	)		(16,781	)
Prepaid expenses and other current assets		925			16			2,749			2,225
Accounts payable		4,244			3,955			(820	)		(3,560	)
Other current liabilities		(20	)		(4,571	)		(14,856	)		(5,842	)
Contract liability		—			(4,791	)
Other long-term assets and liabilities		562			808			(2,274	)		(347	)
Net cash provided by (used in) operating activities		(39,059	)		(13,886	)
Net cash used in operating activities								(18,595	)		(34,020	)
Cash flows from investing activities
Capital expenditures for property, plant, and equipment		(45,695	)		(16,159	)		(10,543	)		(11,472	)
Capital expenditures for intangible assets		(1,302	)		(1,101	)		(274	)		(363	)
Contingent consideration payments related to asset acquisitions		—			(1,500	)		—			—
Cash acquired in the SeaSpine merger		29,419			—			—			29,419
Other investing activities		(500	)		126			(50	)		(500	)
Net cash provided by (used in) investing activities		(18,078	)		(18,634	)		(10,867	)		17,084
Cash flows from financing activities
Proceeds from issuance of common shares		2,377			2,400			—			—
Payments related to tax withholdings for share-based compensation		(3,334	)		(1,467	)		(1,828	)		(1,958	)
Payments related to finance lease obligation		(483	)		(2,441	)		(172	)		(160	)
Borrowings under credit facility		70,000			—			40,000			45,000
Repayment of borrowings from credit facility								(15,000	)		—
Payment of debt acquired from SeaSpine merger		(26,899	)		—			—			(26,899	)
Contingent consideration milestone payment		(920	)		—
Other financing activities		(699	)		(68	)
Net cash provided by (used in) financing activities		40,042			(1,576	)
Payment of debt issuance costs and other financing activities								(1,547	)		—
Net cash provided by financing activities								21,453			15,983
Effect of exchange rate changes on cash		58			(2,091	)		(284	)		221
Net change in cash and cash equivalents		(17,037	)		(36,187	)		(8,293	)		(732	)
Cash and cash equivalents at the beginning of period		50,700			87,847
Cash, cash equivalents, and restricted cash at the beginning of period								37,757			50,700
Cash, cash equivalents, and restricted cash at the end of period							$	29,464		$	49,968

Components of cash and cash equivalents at the end of period
Cash and cash equivalents							$	26,964		$	49,968
Restricted cash							$	2,500			—
Cash and cash equivalents at the end of period	$	33,663		$	51,660		$	29,464		$	49,968

Noncash investing activities - Purchase of intangible assets	$	—		$	2,000		$	50		$	—


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


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


Large Accelerated filer	☐	Accelerated filer	☒

Non-Accelerated filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022~~2023	4

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023 ~~and 2022~~	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023 ~~and 2022~~	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2024, and 2023 ~~and 2022~~	7

	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3229

Item 4.	Controls and Procedures	3229

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3432

Item 1A.	Risk Factors	3432

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3432

Item 3.	Defaults Upon Senior Securities	3532

Item 4.	Mine Safety Disclosures	3532

Item 5.	Other Information	3532

Item 6.	Exhibits	3532

SIGNATURES		3635


(Unaudited, U.S. Dollars, in thousands, except shares and price per share)
Share Consideration:
Orthofix common shares to be issued in exchange for SeaSpine common shares		16,047,315
Orthofix closing price per share as of January 4, 2023	$	22.76
Estimated fair value of shares issued in exchange for SeaSpine common shares	$	365,237
Estimated fair value of Orthofix stock options and RSUs issued in exchange for outstanding SeaSpine equity awards	$	11,508
Total estimated fair value of consideration	$	376,745


	Three Months Ended September 30,						Nine Months Ended September 30,
(Unaudited, U.S. Dollars, in millions)	2023			2022			2023			2022
Net sales	$	184.0		$	181.1		$	546.2		$	512.6
Net loss	$	(21.2	)	$	(32.5	)	$	(96.5	)	$	(102.4	)


(Unaudited, U.S. Dollars, in millions)	Balance as of December 31, 2022		Charges Incurred		Payments Made			Balance as of September 30, 2023
Severance costs	$	—	$	12.2	$	(5.2	)	$	7.0
Retention costs		—		4.0		(0.4	)		3.6
Payroll taxes		—		0.5		(0.1	)		0.4
Total	$	—	$	16.7	$	(5.7	)	$	11.0


(Unaudited, U.S. Dollars, in thousands)	Balance as of December 31, 2022		Long-term Borrowings Assumed Under the SeaSpine Credit Facility		Additional Borrowings		Pre-payment Penalty Incurred to Interest Expense, Net		Repayments Made			Balance as of September 30, 2023
SeaSpine credit facility	$	—	$	26,298	$	—	$	601	$	(26,899	)	$	—
Orthofix secured revolving credit facility		—		—		70,000		—		—			70,000
Long-term borrowings under credit facility	$	—	$	26,298	$	70,000	$	601	$	(26,899	)	$	70,000


(Unaudited, U.S. Dollars, in thousands)	Balance as of December 31, 2022			Goodwill Acquired in the Merger with SeaSpine		Impairment Recognized within Acquisition-related Amortization and Remeasurement		Balance as of September 30, 2023
Global Spine - Gross	$	71,317		$	123,450	$	—	$	194,767
Global Spine - Accumulated Impairment Loss		—			—		—	$	—
Global Spine - Net	$	71,317		$	123,450	$	—	$	194,767

Global Orthopedics - Gross	$	11,822		$	—	$	—	$	11,822
Global Orthopedics - Accumulated Impairment Loss		(11,822	)		—		—	$	(11,822	)
Global Orthopedics - Net	$	—		$	—	$	—	$	—

Goodwill, net of accumulated impairment losses	$	71,317		$	123,450	$	—	$	194,767