UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021 March 31, 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 0-19961
ORTHOFIX MEDICAL INC.
(Exact name of registrant as specified in its charter)
Delaware | 98-1340767 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3451 Plano Parkway, Lewisville, Texas | 75056 | |
(Address of principal executive offices) | (Zip Code) |
(214) (214) 937-2000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer | ☒ | Accelerated filer | ☐ |
Non-Accelerated filer | ☐ | Smaller Reporting Company | ☐ |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of November 1, 2021, 19,745,269May 2, 2022, 19,911,974 shares of common stock were issued and outstanding.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, $0.10 par value per share | OFIX | Nasdaq Global Select Market |
Table of Contents
Page | |||||
PART I | |||||
Item 1. | 4 | ||||
4 | |||||
5 | |||||
6 | |||||
7 | |||||
Notes to the Unaudited Condensed Consolidated Financial Statements | 8 | ||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II | |||||
Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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2
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, relating to our business and financial outlook, which are based on our current beliefs, assumptions, expectations, estimates, forecasts, and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or other comparable terminology. Forward-looking statements include, but are not limited to, statements about:
• our intentions, beliefs, and expectations regarding our operations, sales, expenses, and future financial performance; • our operating results; • our plans for future products and enhancements of existing products; • anticipated growth and trends in our business; • the timing of and our ability to maintain and obtain regulatory clearances or approvals; • our belief that our cash and cash equivalents, investments, and access to our revolving line of credit will be sufficient to satisfy our anticipated cash requirements; • our expectations regarding our revenues, customers, and distributors; • our expectations regarding our costs, suppliers, and manufacturing abilities; • our beliefs and expectations regarding our market penetration and expansion efforts; • our expectations regarding the benefits and integration of acquired businesses and/or products and our ability to make future acquisitions and successfully integrate any such future-acquired businesses; • our anticipated trends and challenges in the markets in which we operate; and • our expectations and beliefs regarding and the impact of investigations, claims, and litigation.
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These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates, and assumptions that are difficult to predict. Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to, those set forth in Part I, Item 1A under the heading Risk Factors; Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations; and elsewhere throughout the Annual Report on Form 10-K for the year ended December 31, 2020,2021, and in any other documents incorporated by reference. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. We undertake no obligation to update, and expressly disclaim any duty to update, our forward-looking statements, whether as a result of circumstances or events that arise after the date hereof, new information, or otherwise.
Trademarks
Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance Sheets
(U.S. Dollars, in thousands, except share data) |
| September 30, 2021 |
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| December 31, 2020 |
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| March 31, |
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| December 31, |
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| (Unaudited) |
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| (Unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 82,710 |
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| $ | 96,291 |
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| $ | 71,917 |
| $ | 87,847 |
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Restricted cash |
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| 505 |
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| 530 |
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Accounts receivable, net of allowances of $4,928 and $4,848, respectively |
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| 68,971 |
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| 72,423 |
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Accounts receivable, net of allowances of $5,389 and $4,944, respectively |
| 72,466 |
| 78,560 |
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Inventories |
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| 84,678 |
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| 84,635 |
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| 88,832 |
| 82,974 |
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Prepaid expenses and other current assets |
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| 23,348 |
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| 16,500 |
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| 21,888 |
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| 20,141 |
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Total current assets |
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| 260,212 |
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| 270,379 |
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| 255,103 |
| 269,522 |
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Property, plant, and equipment, net |
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| 58,784 |
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| 63,613 |
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| 58,513 |
| 59,252 |
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Intangible assets, net |
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| 54,794 |
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| 60,517 |
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| 50,171 |
| 52,666 |
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Goodwill |
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| 83,357 |
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| 84,018 |
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| 71,317 |
| 71,317 |
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Deferred income taxes |
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| 22,745 |
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| 25,042 |
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| 1,930 |
| 1,771 |
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Other long-term assets |
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| 20,503 |
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| 22,292 |
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| 24,959 |
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| 22,095 |
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Total assets |
| $ | 500,395 |
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| $ | 525,861 |
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| $ | 461,993 |
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| $ | 476,623 |
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Liabilities and shareholders’ equity |
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Current liabilities |
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Accounts payable |
| $ | 19,437 |
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| $ | 23,118 |
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| $ | 27,448 |
| $ | 26,459 |
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Current portion of finance lease liability |
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| 2,570 |
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| 510 |
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| 610 |
| 2,590 |
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Other current liabilities |
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| 57,997 |
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| 80,271 |
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| 60,152 |
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| 76,781 |
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Total current liabilities |
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| 80,004 |
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| 103,899 |
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| 88,210 |
| 105,830 |
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Long-term portion of finance lease liability |
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| 20,044 |
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| 22,338 |
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| 19,730 |
| 19,890 |
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Other long-term liabilities |
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| 35,514 |
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| 42,760 |
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| 18,478 |
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| 13,969 |
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Total liabilities |
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| 135,562 |
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| 168,997 |
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| 126,418 |
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| 139,689 |
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Contingencies (Note 8) |
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Contingencies (Note 7) |
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Shareholders’ equity |
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Common shares $0.10 par value; 50,000,000 shares authorized; 19,741,410 and 19,423,874 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively |
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| 1,974 |
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| 1,942 |
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Common shares $0.10 par value; 50,000,000 shares authorized; |
| 1,984 |
| 1,983 |
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Additional paid-in capital |
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| 307,783 |
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| 292,291 |
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| 318,213 |
| 313,951 |
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Retained earnings |
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| 53,812 |
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| 59,379 |
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| 16,540 |
| 21,000 |
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Accumulated other comprehensive income |
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| 1,264 |
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| 3,252 |
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Accumulated other comprehensive loss |
| (1,162 | ) |
| — |
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Total shareholders’ equity |
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| 364,833 |
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| 356,864 |
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| 335,575 |
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| 336,934 |
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Total liabilities and shareholders’ equity |
| $ | 500,395 |
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| $ | 525,861 |
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| $ | 461,993 |
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| $ | 476,623 |
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The accompanying notes form an integral part of these condensed consolidated financial statements
4
ORTHOFIX MEDICAL INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)Loss
|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| Three Months Ended |
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(Unaudited, U.S. Dollars, in thousands, except share and per share data) |
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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Net sales |
| $ | 112,428 |
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| $ | 110,985 |
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| $ | 339,415 |
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| $ | 288,943 |
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| $ | 106,418 |
| $ | 105,593 |
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Cost of sales |
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| 28,307 |
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| 26,243 |
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| 81,660 |
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| 72,818 |
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| 28,318 |
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| 25,914 |
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Gross profit |
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| 84,121 |
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| 84,742 |
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| 257,755 |
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| 216,125 |
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| 78,100 |
| 79,679 |
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Sales and marketing |
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| 56,097 |
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| 52,926 |
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| 164,220 |
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| 150,718 |
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| 54,137 |
| 50,785 |
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General and administrative |
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| 16,312 |
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| 16,541 |
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| 51,091 |
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| 49,453 |
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| 19,328 |
| 16,444 |
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Research and development |
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| 12,360 |
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| 9,962 |
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| 36,378 |
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| 28,691 |
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| 11,212 |
| 10,897 |
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Acquisition-related amortization and remeasurement (Note 12) |
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| (335 | ) |
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| 1,138 |
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| 5,028 |
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| (2,766 | ) | ||||||||
Operating income (loss) |
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| (313 | ) |
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| 4,175 |
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| 1,038 |
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| (9,971 | ) | ||||||||
Acquisition-related amortization and remeasurement (Note 11) |
| (3,499 | ) |
| 4,469 |
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Operating loss |
| (3,078 | ) |
| (2,916 | ) | ||||||||||||||||||
Interest expense, net |
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| (433 | ) |
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| (731 | ) |
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| (1,400 | ) |
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| (2,055 | ) |
| (375 | ) |
| (417 | ) | ||
Other income (expense), net |
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| (1,789 | ) |
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| 1,817 |
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| (3,528 | ) |
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| 6,088 |
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Income (loss) before income taxes |
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| (2,535 | ) |
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| 5,261 |
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| (3,890 | ) |
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| (5,938 | ) | ||||||||
Other expense, net |
| (936 | ) |
| (2,690 | ) | ||||||||||||||||||
Loss before income taxes |
| (4,389 | ) |
| (6,023 | ) | ||||||||||||||||||
Income tax benefit (expense) |
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| 364 |
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| (607 | ) |
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| (1,677 | ) |
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| 17,833 |
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| (71 | ) |
| 207 |
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Net income (loss) |
| $ | (2,171 | ) |
| $ | 4,654 |
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| $ | (5,567 | ) |
| $ | 11,895 |
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Net loss |
| $ | (4,460 | ) |
| $ | (5,816 | ) | ||||||||||||||||
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Net income (loss) per common share: |
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Net loss per common share: |
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Basic |
| $ | (0.11 | ) |
| $ | 0.24 |
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| $ | (0.28 | ) |
| $ | 0.62 |
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| $ | (0.22 | ) |
| $ | (0.30 | ) |
Diluted |
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| (0.11 | ) |
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| 0.24 |
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| (0.28 | ) |
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| 0.61 |
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| (0.22 | ) |
| (0.30 | ) | ||
Weighted average number of common shares: |
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Basic |
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| 19,769,823 |
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| 19,335,718 |
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| 19,633,782 |
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| 19,217,057 |
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| 19,897,695 |
| 19,526,872 |
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Diluted |
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| 19,769,823 |
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| 19,398,567 |
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| 19,633,782 |
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| 19,319,302 |
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| 19,897,695 |
| 19,526,872 |
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Other comprehensive income (loss), before tax |
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Unrealized gain (loss) on debt securities |
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| 513 |
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| — |
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| (115 | ) |
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| — |
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Other comprehensive loss, before tax |
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Unrealized loss on debt securities |
| (674 | ) |
| (726 | ) | ||||||||||||||||||
Currency translation adjustment |
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| (719 | ) |
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| 2,275 |
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| (1,901 | ) |
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| 2,048 |
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| (488 | ) |
| (1,027 | ) | ||
Other comprehensive income (loss), before tax |
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| (206 | ) |
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| 2,275 |
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| (2,016 | ) |
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| 2,048 |
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Income tax benefit (expense) related to other comprehensive income (loss) |
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| (128 | ) |
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| — |
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| 28 |
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| — |
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Other comprehensive income (loss), net of tax |
|
| (334 | ) |
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| 2,275 |
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| (1,988 | ) |
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| 2,048 |
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Comprehensive income (loss) |
| $ | (2,505 | ) |
| $ | 6,929 |
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| $ | (7,555 | ) |
| $ | 13,943 |
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Other comprehensive loss, before tax |
| (1,162 | ) |
| (1,753 | ) | ||||||||||||||||||
Income tax benefit related to other comprehensive loss |
| — |
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| 180 |
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Other comprehensive loss, net of tax |
| (1,162 | ) |
| (1,573 | ) | ||||||||||||||||||
Comprehensive loss |
| $ | (5,622 | ) |
| $ | (7,389 | ) |
The accompanying notes form an integral part of these condensed consolidated financial statements
5
ORTHOFIX MEDICAL INC.
(Unaudited, U.S. Dollars, in thousands, except share data) |
| Number of Common Shares Outstanding |
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| Common Shares |
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| Additional Paid-in Capital |
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| Retained Earnings |
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| Accumulated Other Comprehensive Income (Loss) |
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| Total Shareholders’ Equity |
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| Number of |
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| Common |
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| Additional |
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| Retained |
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| Accumulated |
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| Total |
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At December 31, 2020 |
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| 19,423,874 |
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| $ | 1,942 |
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| $ | 292,291 |
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| $ | 59,379 |
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| $ | 3,252 |
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| $ | 356,864 |
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At December 31, 2021 |
| 19,836,937 |
| $ | 1,983 |
| $ | 313,951 |
| $ | 21,000 |
| $ | — |
| $ | 336,934 |
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Net loss |
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| — |
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| — |
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| — |
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| (5,816 | ) |
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| — |
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| (5,816 | ) |
| — |
| — |
| — |
| (4,460 | ) |
| — |
| (4,460 | ) | ||||||||||
Other comprehensive loss, net of tax |
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| — |
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| — |
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| — |
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| — |
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| (1,573 | ) |
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| (1,573 | ) |
| — |
| — |
| — |
| — |
| (1,162 | ) |
| (1,162 | ) | ||||||||||
Share-based compensation expense |
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| — |
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| — |
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| 3,721 |
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| — |
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| — |
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| 3,721 |
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| — |
| — |
| 4,332 |
| — |
| — |
| 4,332 |
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Common shares issued, net |
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| 50,510 |
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| 5 |
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| 1,617 |
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| — |
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| — |
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| 1,622 |
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| 4,885 |
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| 1 |
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| (70 | ) |
| — |
|
| — |
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| (69 | ) | ||||||
At March 31, 2021 |
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| 19,474,384 |
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| $ | 1,947 |
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| $ | 297,629 |
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| $ | 53,563 |
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| $ | 1,679 |
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| $ | 354,818 |
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Net income |
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| — |
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| — |
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| — |
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| 2,420 |
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| — |
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| 2,420 |
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Other comprehensive loss, net of tax |
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| — |
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| — |
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| — |
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| — |
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| (81 | ) |
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| (81 | ) | ||||||||||||||||||||||||
Share-based compensation expense |
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| — |
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| — |
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| 3,907 |
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| — |
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| — |
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| 3,907 |
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Common shares issued, net |
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| 194,745 |
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| 20 |
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| 1,200 |
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|
| — |
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| — |
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| 1,220 |
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At June 30, 2021 |
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| 19,669,129 |
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| $ | 1,967 |
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| $ | 302,736 |
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| $ | 55,983 |
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| $ | 1,598 |
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| $ | 362,284 |
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Net loss |
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| — |
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|
| — |
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|
| — |
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|
| (2,171 | ) |
|
| — |
|
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| (2,171 | ) | ||||||||||||||||||||||||
Other comprehensive loss, net of tax |
|
| — |
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|
| — |
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|
| — |
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| — |
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| (334 | ) |
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| (334 | ) | ||||||||||||||||||||||||
Share-based compensation expense |
|
| — |
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|
| — |
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| 3,842 |
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| — |
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| — |
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| 3,842 |
| ||||||||||||||||||||||||
Common shares issued, net |
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| 72,281 |
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|
| 7 |
|
|
| 1,205 |
|
|
| — |
|
|
| — |
|
|
| 1,212 |
| ||||||||||||||||||||||||
At September 30, 2021 |
|
| 19,741,410 |
|
| $ | 1,974 |
|
| $ | 307,783 |
|
| $ | 53,812 |
|
| $ | 1,264 |
|
| $ | 364,833 |
| ||||||||||||||||||||||||
At March 31, 2022 |
| 19,841,822 |
|
| $ | 1,984 |
|
| $ | 318,213 |
|
| $ | 16,540 |
|
| $ | (1,162 | ) |
| $ | 335,575 |
|
(Unaudited, U.S. Dollars, in thousands, except share data) |
| Number of Common Shares Outstanding |
|
| Common Shares |
|
| Additional Paid-in Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total Shareholders’ Equity |
|
| Number of |
|
| Common |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Total |
| ||||||||||||
At December 31, 2019 |
|
| 19,022,619 |
|
| $ | 1,902 |
|
| $ | 271,019 |
|
| $ | 57,749 |
|
| $ | (3,039 | ) |
| $ | 327,631 |
| ||||||||||||||||||||||||
Cumulative effect adjustment from adoption of ASU 2016-13 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (887 | ) |
|
| — |
|
|
| (887 | ) | ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,665 |
|
|
| — |
|
|
| 25,665 |
| ||||||||||||||||||||||||
At December 31, 2020 |
| 19,423,874 |
| $ | 1,942 |
| $ | 292,291 |
| $ | 59,379 |
| $ | 3,252 |
| $ | 356,864 |
| ||||||||||||||||||||||||||||||
Net loss |
| — |
| — |
| — |
| (5,816 | ) |
| — |
| (5,816 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,711 | ) |
|
| (1,711 | ) |
| — |
| — |
| — |
| — |
| (1,573 | ) |
| (1,573 | ) | ||||||||||
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 3,859 |
|
|
| — |
|
|
| — |
|
|
| 3,859 |
|
| — |
| — |
| 3,721 |
| — |
| — |
| 3,721 |
| |||||||||||
Common shares issued, net |
|
| 33,559 |
|
|
| 4 |
|
|
| 808 |
|
|
| — |
|
|
| — |
|
|
| 812 |
|
| 50,510 |
|
| 5 |
|
| 1,617 |
|
| — |
|
| — |
|
| 1,622 |
| ||||||
At March 31, 2020 |
|
| 19,056,178 |
|
| $ | 1,906 |
|
| $ | 275,686 |
|
| $ | 82,527 |
|
| $ | (4,750 | ) |
| $ | 355,369 |
| ||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18,424 | ) |
|
| — |
|
|
| (18,424 | ) | ||||||||||||||||||||||||
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,484 |
|
|
| 1,484 |
| ||||||||||||||||||||||||
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 4,699 |
|
|
| — |
|
|
| — |
|
|
| 4,699 |
| ||||||||||||||||||||||||
Common shares issued, net |
|
| 152,885 |
|
|
| 15 |
|
|
| 1,902 |
|
|
| — |
|
|
| — |
|
|
| 1,917 |
| ||||||||||||||||||||||||
At June 30, 2020 |
|
| 19,209,063 |
|
| $ | 1,921 |
|
| $ | 282,287 |
|
| $ | 64,103 |
|
| $ | (3,266 | ) |
| $ | 345,045 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,654 |
|
|
| — |
|
|
| 4,654 |
| ||||||||||||||||||||||||
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,275 |
|
|
| 2,275 |
| ||||||||||||||||||||||||
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 3,841 |
|
|
| — |
|
|
| — |
|
|
| 3,841 |
| ||||||||||||||||||||||||
Common shares issued, net |
|
| 58,357 |
|
|
| 6 |
|
|
| (925 | ) |
|
| — |
|
|
| — |
|
|
| (919 | ) | ||||||||||||||||||||||||
At September 30, 2020 |
|
| 19,267,420 |
|
| $ | 1,927 |
|
| $ | 285,203 |
|
| $ | 68,757 |
|
| $ | (991 | ) |
| $ | 354,896 |
| ||||||||||||||||||||||||
At March 31, 2021 |
| 19,474,384 |
|
| $ | 1,947 |
|
| $ | 297,629 |
|
| $ | 53,563 |
|
| $ | 1,679 |
|
| $ | 354,818 |
|
The accompanying notes form an integral part of these condensed consolidated financial statements
6
ORTHOFIX MEDICAL INC.
Condensed Consolidated Statements of Cash Flows
|
| Nine Months Ended September 30, |
|
| Three Months Ended |
| ||||||||||
(Unaudited, U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | (5,567 | ) |
| $ | 11,895 |
| ||||||||
Adjustments to reconcile net income (loss) to net cash from operating activities |
|
|
|
|
|
|
|
| ||||||||
Net loss |
| $ | (4,460 | ) |
| $ | (5,816 | ) | ||||||||
Adjustments to reconcile net loss to net cash from operating activities |
|
|
|
|
|
| ||||||||||
Depreciation and amortization |
|
| 22,153 |
|
|
| 22,299 |
|
| 7,516 |
| 7,443 |
| |||
Amortization of operating lease assets, debt costs, and other assets |
|
| 2,645 |
|
|
| 2,811 |
|
| 798 |
| 889 |
| |||
Provision for expected credit losses |
|
| 376 |
|
|
| 945 |
|
| 600 |
| (182 | ) | |||
Deferred income taxes |
|
| 2,228 |
|
|
| (2,471 | ) |
| (36 | ) |
| (971 | ) | ||
Share-based compensation expense |
|
| 11,470 |
|
|
| 12,399 |
|
| 4,332 |
| 3,721 |
| |||
Interest and (gain) loss on valuation of investment securities |
|
| (305 | ) |
|
| 219 |
|
| (9 | ) |
| (96 | ) | ||
Change in fair value of contingent consideration |
|
| (2,375 | ) |
|
| (7,600 | ) |
| (5,500 | ) |
| 1,500 |
| ||
Other |
|
| 743 |
|
|
| (1,798 | ) |
| 528 |
| 24 |
| |||
Changes in operating assets and liabilities, net of effects of acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| 2,729 |
|
|
| 11,551 |
|
| 5,392 |
| 2,748 |
| |||
Inventories |
|
| (866 | ) |
|
| 246 |
|
| (6,211 | ) |
| 16 |
| ||
Prepaid expenses and other current assets |
|
| (6,987 | ) |
|
| 2,453 |
|
| (1,891 | ) |
| 1,993 |
| ||
Accounts payable |
|
| (2,983 | ) |
|
| (3,106 | ) |
| 1,387 |
| (1,457 | ) | |||
Other current liabilities |
|
| (3,951 | ) |
|
| 5,742 |
|
| (6,993 | ) |
| (7,719 | ) | ||
Contract liability (Note 10) |
|
| (5,951 | ) |
|
| 13,851 |
| ||||||||
Payment of contingent consideration |
|
| (6,595 | ) |
|
| — |
| ||||||||
Contract liability (Note 9) |
| (3,395 | ) |
| — |
| ||||||||||
Other long-term assets and liabilities |
|
| (68 | ) |
|
| (17,455 | ) |
| 233 |
|
| 348 |
| ||
Net cash from operating activities |
|
| 6,696 |
|
|
| 51,981 |
|
| (7,709 | ) |
| 2,441 |
| ||
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Acquisition of a business |
|
| — |
|
|
| (18,000 | ) | ||||||||
Capital expenditures for property, plant and equipment |
|
| (11,560 | ) |
|
| (11,625 | ) | ||||||||
Capital expenditures for property, plant, and equipment |
| (5,329 | ) |
| (4,365 | ) | ||||||||||
Capital expenditures for intangible assets |
|
| (1,221 | ) |
|
| (1,079 | ) |
| (338 | ) |
| (416 | ) | ||
Purchase of investment securities |
|
| — |
|
|
| (5,000 | ) | ||||||||
Asset acquisitions and other investments |
|
| (1,250 | ) |
|
| (7,240 | ) | ||||||||
Net cash from investing activities |
|
| (14,031 | ) |
|
| (42,944 | ) |
| (5,667 | ) |
| (4,781 | ) | ||
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proceeds from revolving credit facility |
|
| — |
|
|
| 100,000 |
| ||||||||
Repayment of revolving credit facility |
|
| — |
|
|
| (100,000 | ) | ||||||||
Proceeds from issuance of common shares |
|
| 6,238 |
|
|
| 3,839 |
|
| — |
| 1,717 |
| |||
Payments related to withholdings for share-based compensation |
|
| (2,184 | ) |
|
| (2,029 | ) |
| (69 | ) |
| (95 | ) | ||
Payments related to finance lease obligation |
|
| (395 | ) |
|
| (204 | ) |
| (2,141 | ) |
| (127 | ) | ||
Payment of contingent consideration |
|
| (8,405 | ) |
|
| — |
| ||||||||
Other financing activities |
|
| (927 | ) |
|
| (1,023 | ) |
| (23 | ) |
| (385 | ) | ||
Net cash from financing activities |
|
| (5,673 | ) |
|
| 583 |
|
| (2,233 | ) |
| 1,110 |
| ||
Effect of exchange rate changes on cash |
|
| (598 | ) |
|
| 277 |
|
| (321 | ) |
| (534 | ) | ||
Net change in cash, cash equivalents, and restricted cash |
|
| (13,606 | ) |
|
| 9,897 |
|
| (15,930 | ) |
| (1,764 | ) | ||
Cash, cash equivalents, and restricted cash at the beginning of period |
|
| 96,821 |
|
|
| 70,403 |
|
| 87,847 |
|
| 96,821 |
| ||
Cash, cash equivalents, and restricted cash at the end of period |
| $ | 83,215 |
|
| $ | 80,300 |
|
| $ | 71,917 |
|
| $ | 95,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Components of cash, cash equivalents, and restricted cash at the end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 82,710 |
|
| $ | 79,810 |
|
| $ | 71,917 |
| $ | 94,569 |
| |
Restricted cash |
|
| 505 |
|
|
| 490 |
|
| — |
|
| 488 |
| ||
Cash, cash equivalents, and restricted cash at the end of period |
| $ | 83,215 |
|
| $ | 80,300 |
|
| $ | 71,917 |
|
| $ | 95,057 |
|
Noncash investing activities - Purchase of intangible assets |
| $ | — |
|
| $ | 1,575 |
|
The accompanying notes form an integral part of these condensed consolidated financial statements
7
ORTHOFIX MEDICAL INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Business and basis of presentation and CARES Act
Description of the Business
Orthofix Medical Inc. and its subsidiaries (the “Company”) is a global medical device company with a spine and orthopedics focus. The Company’s mission is to deliver innovative, quality-driven solutions while partnering with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedic products are distributed in more than 60 countries via the Company's sales representatives and distributors.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2020. 2021. Operating results for the three and nine months ended September 30, 2021March 31, 2022 are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2021.2022.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition; contractual allowances; allowances for expected credit losses; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.
2. Recently issued accounting pronouncements
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
The global Coronavirus Disease 2019 ("COVID-19") pandemic has significantly affected the Company’s hospital and physician customers, patients, communities, employees, and business operations. The pandemic has led to the cancellation or deferral of elective surgeries and procedures within certain hospitals, ambulatory surgery centers, and other medical facilities; restrictions on travel; the implementation of physical distancing measures; and the temporary or permanent closure of certain businesses.
In March 2020, the CARES Act entered into federal law, which was aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and to provide general support to the U.S. economy.The CARES Act, among other things, included provisions relating to the deferment of employer social security payments and technical corrections to tax depreciation methods for qualified improvement property. The Company recorded a benefit forconsiders the applicability and impact of all accounting standards updates ("ASUs"). Recently issued ASUs not listed were assessed and determined not applicable, or are expected to have minimal impact on the Company's condensed consolidated financial statements. Furthermore, there have been no material changes during the three months ended March 31, 2020 that was reversed2022, to the Company's application of significant accounting policies and estimates as described in the period ending June 30, 2020. The CARES Act had 0 impact to the Company’s income tax benefit (expense) reported within the condensed consolidated statements of operationsForm 10-K for the three and nine monthsyear ended September 30, 2021. The CARES Act provided financial relief to the Company through other various programs, which are each described in further detail below.
In April 2020, the Company received $13.9 million in funds from the Centers for Medicare & Medicaid Services (“CMS”) Accelerated and Advance Payment Program. For discussion of the Company’s accounting for these funds, see Note 10.
In addition, as part of the CARES Act, the Company was permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% of the payroll taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All of these deferred tax payments were then repaid in January 2021. As of September 30, 2021, the Company has 0 deferred balance associated with this program.
Consolidated Appropriations Act of 2021 (the “Consolidated Appropriations Act”)
On December 27, 2020, the Consolidated Appropriations Act entered into federal law. The Consolidated Appropriations Act did not have a material impact to the Company’s income tax provision for the three and nine months ended September 30, 2021.3. Inventories
American Rescue Plan Act of 2021 (the “American Rescue Plan”)
On March 11, 2021, the American Rescue Plan entered into federal law. The American Rescue Plan, among other things, included provisions related to the deduction of executive compensation beginning in 2027. The American Rescue Plan had no impact to the Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2021.
2. Recently adopted accounting standards and recently issued accounting pronouncements
Adoption of Accounting Standards Update (“ASU”) 2019-12, Simplifying the accounting for income taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which reduces the complexity of accounting for income taxes by eliminating certain exceptions to the general principles in ASC 740, Income Taxes. Additionally, the ASU simplifies U.S. GAAP by amending the requirements related to the accounting for "hybrid" tax regimes and also adding the requirement to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination and when it should be considered a separate transaction. The Company adopted this ASU effective January 1, 2021, with certain provisions applied retrospectively and other provisions applied prospectively. Adoption of this ASU did not have a material impact to the Company’s condensed consolidated balance sheet, statements of operations, or cash flows.
3. Acquisitions
On February 2, 2021, the Company entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby the Company acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance and the attainment of certain net sales targets. The Company accounted for this transaction as an asset acquisition. As the transaction is classified as an asset acquisition, the value of the consideration associated with the contingent milestones will be recognized at the time that applicable contingencies are resolved and consideration is paid or becomes payable. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date:
(U.S. Dollars, in thousands) |
| Fair Value |
| |
Fair Value of Consideration Transferred |
|
|
|
|
Cash paid |
| $ | 1,000 |
|
Total fair value of consideration transferred |
| $ | 1,000 |
|
|
|
|
|
|
Fair value of assets acquired |
|
|
|
|
In-process research and development costs, recognized within Acquisition-related amortization and remeasurement |
| $ | 1,000 |
|
Total fair value of assets acquired |
| $ | 1,000 |
|
In addition, the Company is obligated to pay a royalty of 2% to 4% on net sales, commencing upon commercialization of the acquired assets.
The transaction was approved by the Company’s Audit and Finance Committee, with the Audit and Finance Committee directly supervising the negotiations of the transaction. Mr. Serbousek was excluded from such discussions and did not participate in the negotiation or evaluation of the transaction. Mr. Serbousek also continues to be excluded from the oversight of the Company’s development and commercialization activities in relation to the acquired technology and all other matters relating to the relationship between the Company and the counterparty.
4. Inventories
Inventories were as follows:
(U.S. Dollars, in thousands) |
| March 31, |
|
| December 31, |
| ||
Raw materials |
| $ | 11,263 |
|
| $ | 9,589 |
|
Work-in-process |
|
| 14,477 |
|
|
| 15,096 |
|
Finished products |
|
| 24,553 |
|
|
| 15,149 |
|
Field/consignment |
|
| 38,539 |
|
|
| 43,140 |
|
Inventories |
| $ | 88,832 |
|
| $ | 82,974 |
|
8
(U.S. Dollars, in thousands) |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Raw materials |
| $ | 7,992 |
|
| $ | 8,442 |
|
Work-in-process |
|
| 14,977 |
|
|
| 12,149 |
|
Finished products |
|
| 17,164 |
|
|
| 29,142 |
|
Field/consignment |
|
| 44,545 |
|
|
| 34,902 |
|
Inventories |
| $ | 84,678 |
|
| $ | 84,635 |
|
4. Leases
5. Leases
A summary of the Company’s lease portfolio as of September 30, 2021March 31, 2022, and December 31, 20202021, is presented in the table below:
(U.S. Dollars, in thousands) |
| Classification |
| March 31, |
| December 31, 2021 |
| ||
Right-of-use assets ("ROU assets") |
|
|
|
|
|
|
| ||
Operating leases |
| Other long-term assets |
| $ | 7,093 |
| $ | 3,155 |
|
Finance leases |
| Property, plant and equipment, net |
|
| 18,120 |
|
| 18,600 |
|
Total ROU assets |
|
|
| $ | 25,213 |
| $ | 21,755 |
|
|
|
|
|
|
|
|
| ||
Lease Liabilities |
|
|
|
|
|
|
| ||
Current |
|
|
|
|
|
|
| ||
Operating leases |
| Other current liabilities |
| $ | 1,461 |
| $ | 1,834 |
|
Finance leases |
| Current portion of finance lease liability |
|
| 610 |
|
| 2,590 |
|
Long-term |
|
|
|
|
|
|
| ||
Operating leases |
| Other long-term liabilities |
|
| 5,742 |
|
| 1,443 |
|
Finance leases |
| Long-term portion of finance lease liability |
|
| 19,730 |
|
| 19,890 |
|
Total lease liabilities |
|
|
| $ | 27,543 |
| $ | 25,757 |
|
(U.S. Dollars, in thousands) |
| Classification |
| September 30, 2021 |
| December 31, 2020 |
| ||
Right-of-use assets ("ROU assets") |
|
|
|
|
|
|
|
|
|
Operating leases |
| Other long-term assets |
| $ | 3,571 |
| $ | 4,840 |
|
Finance leases |
| Property, plant and equipment, net |
|
| 19,114 |
|
| 20,552 |
|
Total ROU assets |
|
|
| $ | 22,685 |
| $ | 25,392 |
|
|
|
|
|
|
|
|
|
|
|
Lease Liabilities |
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
Operating leases |
| Other current liabilities |
| $ | 2,002 |
| $ | 2,092 |
|
Finance leases |
| Current portion of finance lease liability |
|
| 2,570 |
|
| 510 |
|
Long-term |
|
|
|
|
|
|
|
|
|
Operating leases |
| Other long-term liabilities |
|
| 1,713 |
|
| 2,946 |
|
Finance leases |
| Long-term portion of finance lease liability |
|
| 20,044 |
|
| 22,338 |
|
Total lease liabilities |
|
|
| $ | 26,329 |
| $ | 27,886 |
|
Supplemental cash flow information related to leases was as follows:
(U.S. Dollars, in thousands) |
| Three Months Ended |
|
| Three Months Ended |
| ||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
| ||
Operating cash flows from operating leases |
| $ | 1,068 |
|
| $ | 1,147 |
|
Operating cash flows from finance leases |
|
| 222 |
|
|
| 225 |
|
Financing cash flows from finance leases |
|
| 2,141 |
|
|
| 127 |
|
ROU assets obtained in exchange for lease obligations |
|
|
|
|
|
| ||
Operating leases |
|
| 4,470 |
|
|
| 248 |
|
Finance leases |
|
| — |
|
|
| 76 |
|
(U.S. Dollars, in thousands) |
| Nine Months Ended September 30, 2021 |
|
| Nine Months Ended September 30, 2020 |
| ||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 3,469 |
|
| $ | 3,170 |
|
Operating cash flows from finance leases |
|
| 680 |
|
|
| 458 |
|
Financing cash flows from finance leases |
|
| 395 |
|
|
| 204 |
|
ROU assets obtained in exchange for lease obligations |
|
|
|
|
|
|
|
|
Operating leases |
|
| 460 |
|
|
| 619 |
|
Finance leases |
|
| 149 |
|
|
| 1,949 |
|
6.5. Long-term debt
As of September 30, 2021,March 31, 2022, the Company had no borrowings outstanding under the secured revolving credit facility and was in compliance with all required financial covenants.
In addition, the Company had 0 borrowings on its €5.5€5.5 million ($6.46.1 million) available lines of credit in Italy as of September 30, 2021.March 31, 2022.
7.6. 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, 2021 |
|
| December 31, 2020 |
|
| March 31, |
|
| December 31, |
| ||||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Total |
| ||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Neo Medical convertible loan agreements |
| $ | — |
|
| $ | — |
|
| $ | 5,780 |
|
| $ | 5,780 |
|
| $ | 7,148 |
| ||||||||||||||||||||
Neo Medical preferred equity securities |
| $ | — |
|
| $ | 5,000 |
|
| $ | — |
|
| $ | 5,000 |
|
| $ | 5,000 |
|
|
| — |
|
|
| 6,084 |
|
|
| — |
|
|
| 6,084 |
|
|
| 5,413 |
|
Neo Medical convertible loan agreement |
|
| — |
|
|
| — |
|
|
| 7,080 |
|
|
| 7,080 |
|
|
| 7,160 |
| ||||||||||||||||||||
Bone Biologics equity securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 243 |
|
|
| — |
|
|
| — |
|
|
| 243 |
|
|
| 309 |
|
Other investments |
|
| — |
|
|
| — |
|
|
| 1,535 |
|
|
| 1,535 |
|
|
| 1,505 |
| ||||||||||||||||||||
Total |
| $ | — |
|
| $ | 5,000 |
|
| $ | 7,080 |
|
| $ | 12,080 |
|
| $ | 12,160 |
|
| $ | 243 |
|
| $ | 6,084 |
|
| $ | 7,315 |
|
| $ | 13,642 |
|
| $ | 14,375 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Spinal Kinetics contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | (18,400 | ) |
| $ | (18,400 | ) |
| $ | (35,400 | ) |
| $ | — |
|
| $ | — |
|
| $ | (11,700 | ) |
| $ | (11,700 | ) |
| $ | (17,200 | ) |
Other contingent consideration |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (375 | ) | ||||||||||||||||||||
Deferred compensation plan |
|
| — |
|
|
| (1,405 | ) |
|
| — |
|
|
| (1,405 | ) |
|
| (1,441 | ) |
|
| — |
|
|
| (1,285 | ) |
|
| — |
|
|
| (1,285 | ) |
|
| (1,314 | ) |
Total |
| $ | — |
|
| $ | (1,405 | ) |
| $ | (18,400 | ) |
| $ | (19,805 | ) |
| $ | (37,216 | ) |
| $ | — |
|
| $ | (1,285 | ) |
| $ | (11,700 | ) |
| $ | (12,985 | ) |
| $ | (18,514 | ) |
9
Neo Medical Equity Investment and Convertible Loan AgreementAgreements and Equity Investment
OnIn October 1, 2020, the Company purchased preferred sharesequity securities of Neo Medical SA, a privately held Swiss-based Medtech company (“developing a new generation of products for spinal surgery ("Neo Medical”Medical"), for consideration of $5.0$5.0 million and entered into a Convertible Loan Agreement pursuant to which Orthofix 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 an additional Convertible Loan Agreement (the “Additional Convertible Loan”), pursuant to which the Company loaned Neo Medical an additional CHF 0.6 million (funded by the payment of $0.7 million as of the issuance date).
The equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. As
The table below presents a reconciliation of September 30, 2021, the carrying valuebeginning and ending balances of thisthe Company’s investment remained at $5.0 million.in Neo Medical preferred equity securities:
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Fair value of Neo Medical preferred equity securities at January 1 |
| $ | 5,413 |
|
| $ | 5,000 |
|
Conversion of loan into preferred equity securities |
|
| 671 |
|
|
| 0 |
|
Fair value of Neo Medical preferred equity securities at March 31 |
|
| 6,084 |
|
|
| 5,000 |
|
Cumulative unrealized gain on Neo Medical preferred equity securities |
|
| 413 |
|
|
| 0 |
|
The Company made an election to convert the Additional Convertible Loan matures on October 1, 2024; however, if a change in controlinto shares of Neo Medical occurs prior to the maturity date, the Convertible Loan shall become immediately due upon such event. Medical’s preferred equity securities in January 2022. The remaining Convertible Loan is recorded in other long-term assets as an available for sale debt security as of March 31, 2022. The Convertible Loan is recorded at fair value, with applicable interest recorded in interest income. The fair value of the Convertible Loan including accrued interest, is based upon significant unobservable inputs, including the use of option-pricing models, Monte Carlo simulations option-pricing models,for certain periods, and a probability-weighted discounted cash flows model, requiring the Company to develop its own assumptions. Therefore, the Company has categorized this assetthese investments as a Level 3 financial asset.assets.
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, the probability and amount of subsequent capital raises by Neo Medical in order to fund the business, 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 losses.loss. As of September 30, 2021,March 31, 2022, the Company has 0tnot recognized any credit lossesloss related to the Convertible Loan.
The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan,Loans, measured at fair value using significant unobservable inputs (Level 3):
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Fair value of Neo Medical Convertible Loan at January 1 |
| $ | 7,160 |
|
| $ | — |
| ||||||||
Fair value of Neo Medical Convertible Loans at January 1 |
| $ | 7,148 |
|
| $ | 7,160 |
| ||||||||
Interest recognized in interest income, net |
|
| 305 |
|
|
| — |
|
|
| 112 |
|
|
| 96 |
|
Foreign currency remeasurement recognized in other expense, net |
|
| (270 | ) |
|
| — |
|
|
| (69 | ) |
|
| (330 | ) |
Unrealized loss recognized in other comprehensive income (loss) |
|
| (115 | ) |
|
| — |
|
|
| (740 | ) |
|
| (726 | ) |
Fair value of Neo Medical Convertible Loan at September 30 |
|
| 7,080 |
|
|
| — |
| ||||||||
Amortized cost basis of Neo Medical Convertible Loan at September 30 |
|
| 5,314 |
|
|
| — |
| ||||||||
Conversion of loan into preferred equity securities |
|
| (671 | ) |
|
| — |
| ||||||||
Fair value of Neo Medical Convertible Loans at March 31 |
|
| 5,780 |
|
|
| 6,200 |
| ||||||||
Amortized cost basis of Neo Medical Convertible Loans at March 31 |
|
| 5,581 |
|
|
| 5,045 |
|
The following table provides quantitative information related to certain key assumptions utilized within the valuation as of September 30, 2021:March 31, 2022:
(U.S. Dollars, in thousands) |
| Fair Value as of |
|
| Unobservable inputs |
| Estimate |
| ||
Neo Medical Convertible Loan |
| $ | 5,780 |
|
| Cost of equity discount rate |
|
| 16.9 | % |
|
|
|
|
| Implied volatility |
|
| 71.3 | % |
10
Bone Biologics Equity Securities
The Company holds an investment in common stock of Bone Biologics Inc. (“Bone Biologics”, NASDAQ: BBLG), a developer of orthobiologic products. Changes in the fair value of the investment recorded during the three months ended March 31, 2022 and 2021, are shown in the table below:
(U.S. Dollars, in thousands) |
| Fair Value as of September 30, 2021 |
|
| Unobservable inputs |
| Estimate |
|
| 2022 |
|
| 2021 |
| ||||
Neo Medical Convertible Loan |
| $ | 7,080 |
|
| Cost of equity discount rate |
|
| 21.6 | % | ||||||||
|
|
|
|
|
| Implied volatility |
|
| 90.4 | % | ||||||||
Bone Biologics equity securities at January 1 |
| $ | 309 |
|
| $ | — |
| ||||||||||
Fair value adjustments recognized in other expense, net |
|
| (66 | ) |
|
| — |
| ||||||||||
Bone Biologics equity securities at March 31 |
| $ | 243 |
|
| $ | — |
|
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 are based upon significant unobservable inputs, such as probability-weighted discounted cash flows models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets. As of March 31, 2022, this balance was classified within other long-term assets.
Contingent Consideration
The Company recognized a contingent consideration obligation in connection with the acquisition of Spinal Kinetics in 2018. The Spinal Kinetics contingent consideration consistedconsists of potential future milestone payments of up to $60.0$60.0 million in cash. The milestone payments included (i) $15.0$15.0 million upon U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc (the “FDA Milestone”) and (ii) revenue-based milestone payments of up to $45.0$45.0 million in connection with future sales of the acquired artificial discs. Milestones must be achieved within five years of April 30, 2018, to trigger applicable payments. The FDA Milestone was achieved and paid in 2019. A second2019 and a revenue-based milestone payment, totaling $15.0$15.0 million, was achieved in the first quarter of 2021 and paid in the second quarter of 2021 upon meeting certain net sales targets.
The estimated fair value of the remaining Spinal Kinetics contingent consideration, attributable to a revenue-based milestone, was $18.4$11.7 million as of September 30, 2021.March 31, 2022. The estimated fair value reflects assumptions made by management as of September 30, 2021,March 31, 2022, such as the expected timing and volume of elective procedures and the impact of these procedures on future revenues. However, the actual amount ultimately paid could be higher or lower than the fair value of the remaining contingent consideration (ultimate payment will either be $30.0$30.0 million or the liability will be reversed if the milestone is not met within the required timeline). As of September 30, 2021,March 31, 2022, the Company has classified the remaining contingent consideration$11.7 million liability within other long-term liabilities.current liabilities, as the Company currently expects to achieve the remaining milestone in the next twelve months, if achieved. Any changes in fair value are recorded as an operating expense within acquisition-related amortization and remeasurement.
The following table provides a reconciliation of the beginning and ending balances for the Spinal Kinetics contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
| ||
Spinal Kinetics contingent consideration estimated fair value at January 1 |
| $ | 35,400 |
|
| $ | 42,700 |
|
Decrease in fair value recognized in acquisition-related amortization and remeasurement |
|
| (2,000 | ) |
|
| (7,600 | ) |
Payment made |
|
| (15,000 | ) |
|
| — |
|
Spinal Kinetics contingent consideration estimated fair value at September 30 |
| $ | 18,400 |
|
| $ | 35,100 |
|
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Spinal Kinetics contingent consideration estimated fair value at January 1 |
| $ | 17,200 |
|
| $ | 35,400 |
|
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement |
|
| (5,500 | ) |
|
| 1,500 |
|
Spinal Kinetics contingent consideration estimated fair value at March 31 |
| $ | 11,700 |
|
| $ | 36,900 |
|
The Company estimated the fair value of the remaining potential future revenue-based milestone payment using a Monte Carlo simulation and a discounted cash flow model. This fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. The key assumptions in applying the valuation model include the Company’s forecasted future revenues for the Motion Preservation product line (which is derived from the acquired Spinal Kinetics products,business), the expected timing of payment, applicable discount rates applied, and assumptions for potential volatility of the Company’s forecasted revenue. Significant changes in these assumptions could result in a significantly higher or lower fair value.
11
The following table provides a range of key assumptions used within the valuation as of September 30, 2021.March 31, 2022:
(U.S. Dollars, in thousands) |
| Fair Value as of |
|
| Valuation Technique |
| Unobservable inputs |
| Range | |
Spinal Kinetics contingent consideration |
| $ | 11,700 |
|
| Discounted cash flow |
| Revenue discount rate |
| 5.9% - 7.4% |
|
|
|
|
|
|
| Payment discount rate |
| 3.2% - 4.7% | |
|
|
|
|
|
|
| Projected year of achievement |
| 2023 |
(U.S. Dollars, in thousands) |
| Fair Value as of September 30, 2021 |
|
| Valuation Technique |
| Unobservable inputs |
| Range | |
Spinal Kinetics contingent consideration |
| $ | 18,400 |
|
| Discounted cash flow |
| Revenue discount rate |
| 6.5% - 6.7% |
|
|
|
|
|
|
|
| Payment discount rate |
| 3.9% - 4.0% |
|
|
|
|
|
|
|
| Projected year of achievement |
| 2022 |
7. Contingencies
8. Contingencies
In addition to the matters described below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.
Italian Medical Device Payback (“IMDP”)
In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. A key provision of the law is a ‘payback’ measure, requiring medical device companies in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps. There is considerable uncertainty about how the law will operate and what the exact timeline is for finalization. The Company’s current assessment of the IMDP involves significant judgment regarding the expected scope and actual implementation terms of the measure as the latter have not been clarified to date by Italian authorities. The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically reassesses this liability based upon current facts and circumstances. As a result, the Company recorded expense of $0.6$0.3 million and $1.1$0.4 million for the three and nine months ended September 30,March 31, 2022 and 2021, and expense of $0.4 million and $1.1 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021,March 31, 2022, the Company has accrued $7.7$5.4 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once the law has been clarified by the Italian authorities.
Brazil
In 2019, in relation to an ongoing legal dispute with a former Brazilian distributor, approximately $0.5 million (based upon foreign exchange rates as of September 30, 2021) of the Company’s cash in Brazil was frozen upon request to satisfy a judgment. Although the Company is appealing the judgment, this cash has been reclassified to restricted cash. As of September 30, 2021, the Company has an accrual of $0.8 million related to this matter, which is classified within other current liabilities.
9.8. Accumulated other comprehensive income (loss)loss
The components of and changes in accumulated other comprehensive income (loss)loss were as follows:
(U.S. Dollars, in thousands) |
| Currency |
|
| Neo Medical Convertible Loans |
|
| Other Investments |
|
| Accumulated Other |
| ||||
Balance at December 31, 2021 |
| $ | (711 | ) |
| $ | 711 |
|
| $ | — |
|
| $ | — |
|
Other comprehensive income (loss) |
|
| (488 | ) |
|
| (740 | ) |
|
| 66 |
|
|
| (1,162 | ) |
Income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at March 31, 2022 |
| $ | (1,199 | ) |
| $ | (29 | ) |
| $ | 66 |
|
| $ | (1,162 | ) |
(U.S. Dollars, in thousands) |
| Currency Translation Adjustments |
|
| Neo Medical Convertible Loan |
|
| Accumulated Other Comprehensive Income (Loss) |
| |||
Balance at December 31, 2020 |
| $ | 1,833 |
|
| $ | 1,419 |
|
| $ | 3,252 |
|
Other comprehensive loss |
|
| (1,901 | ) |
|
| (115 | ) |
|
| (2,016 | ) |
Income taxes |
|
| — |
|
|
| 28 |
|
|
| 28 |
|
Balance at September 30, 2021 |
| $ | (68 | ) |
| $ | 1,332 |
|
| $ | 1,264 |
|
10.9. Revenue recognition and accounts receivable
Revenue Recognition
The Company has two reporting segments, which consist of Global Spine and Global Orthopedics. Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants, and Biologics.
The table below presents net sales by major product category by reporting segment:
|
| Three Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
| ||||||
Bone Growth Therapies |
| $ | 45,168 |
|
| $ | 47,066 |
|
|
| -4.0 | % |
| $ | 41,948 |
|
| $ | 42,947 |
|
|
| -2.3 | % |
Spinal Implants |
|
| 28,151 |
|
|
| 25,505 |
|
|
| 10.4 | % |
|
| 26,615 |
|
|
| 25,701 |
|
|
| 3.6 | % |
Biologics |
|
| 12,806 |
|
|
| 15,245 |
|
|
| -16.0 | % |
|
| 14,092 |
|
|
| 13,692 |
|
|
| 2.9 | % |
Global Spine |
|
| 86,125 |
|
|
| 87,816 |
|
|
| -1.9 | % |
|
| 82,655 |
|
|
| 82,340 |
|
|
| 0.4 | % |
Global Orthopedics |
|
| 26,303 |
|
|
| 23,169 |
|
|
| 13.5 | % |
|
| 23,763 |
|
|
| 23,253 |
|
|
| 2.2 | % |
Net sales |
| $ | 112,428 |
|
| $ | 110,985 |
|
|
| 1.3 | % |
| $ | 106,418 |
|
| $ | 105,593 |
|
|
| 0.8 | % |
12
|
| Nine Months Ended September 30, |
| |||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Change |
| |||
Bone Growth Therapies |
| $ | 137,821 |
|
| $ | 120,888 |
|
|
| 14.0 | % |
Spinal Implants |
|
| 83,943 |
|
|
| 67,025 |
|
|
| 25.2 | % |
Biologics |
|
| 41,351 |
|
|
| 40,319 |
|
|
| 2.6 | % |
Global Spine |
|
| 263,115 |
|
|
| 228,232 |
|
|
| 15.3 | % |
Global Orthopedics |
|
| 76,300 |
|
|
| 60,711 |
|
|
| 25.7 | % |
Net sales |
| $ | 339,415 |
|
| $ | 288,943 |
|
|
| 17.5 | % |
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 |
| |||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Product sales |
| $ | 100,004 |
|
| $ | 96,305 |
|
| $ | 299,214 |
|
| $ | 250,161 |
|
| $ | 92,608 |
| $ | 92,263 |
| |
Marketing service fees |
|
| 12,424 |
|
|
| 14,680 |
|
|
| 40,201 |
|
|
| 38,782 |
|
| 13,810 |
|
| 13,330 |
| ||
Net sales |
| $ | 112,428 |
|
| $ | 110,985 |
|
| $ | 339,415 |
|
| $ | 288,943 |
|
| $ | 106,418 |
|
| $ | 105,593 |
|
Product sales primarily consist of the sale of bone growth therapies devices, motion preservation products, spine fixationspinal implants products, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment.
Accounts receivable and related allowances
The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020::
(U.S. Dollars, in thousands) |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Allowance for expected credit losses beginning balance |
| $ | 4,471 |
|
| $ | 6,364 |
|
| $ | 4,848 |
|
| $ | 3,987 |
|
| $ | 4,944 |
|
| $ | 4,848 |
|
Impact of adoption of ASU 2016-13 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,120 |
| ||||||||
Current period provision (recovery) for expected credit losses |
|
| 590 |
|
|
| (619 | ) |
|
| 376 |
|
|
| 945 |
|
|
| 600 |
|
|
| (182 | ) |
Write-offs charged against the allowance and other |
|
| (54 | ) |
|
| (309 | ) |
|
| (134 | ) |
|
| (647 | ) |
|
| (104 | ) |
|
| (46 | ) |
Effect of changes in foreign exchange rates |
|
| (79 | ) |
|
| 88 |
|
|
| (162 | ) |
|
| 119 |
|
|
| (51 | ) |
|
| (114 | ) |
Allowance for expected credit losses ending balance |
| $ | 4,928 |
|
| $ | 5,524 |
|
| $ | 4,928 |
|
| $ | 5,524 |
|
| $ | 5,389 |
|
| $ | 4,506 |
|
Contract Liabilities
The Company’s contract liabilities largely relate to a prepayment of $13.9$13.9 million received in April 2020 from the CMSCenters for Medicare and Medicaid Service ("CMS") as part of the Accelerated and Advance Payment Program of the CARESCoronavirus Aid, Relief, and Economic Security Act.
In October 2020, the President of the United States signed the “Continuing Appropriations Act, 2021 and Other Extensions Act,” which relaxed a number of the Medicare Accelerated and Advance Payment Programs recoupment terms for providers and suppliers that received funds from the program. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months, recoupment will increase to 50% for another 6 months. Thus, during these time periods, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will be reduced by the recoupment amount until the full balance has been repaid.
As of September 30, 2021, the balance of the contract liability associated with the Accelerated and Advance Payment Program of the CARES Act totaled $7.9 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.
The following table provides a detail of changes in the Company’s contract liability associated with the Accelerated and Advanced Payment Program for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:
(U.S. Dollars, in thousands) |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Contract liability beginning balance |
| $ | 10,971 |
|
| $ | 13,851 |
|
| $ | 13,851 |
|
| $ | — |
|
| $ | 4,791 |
|
| $ | 13,851 |
|
Additions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,851 |
| ||||||||
Recoupment recognized in net sales |
|
| (3,071 | ) |
|
| — |
|
|
| (5,951 | ) |
|
| — |
|
|
| (3,395 | ) |
|
| 0 |
|
Contract liability ending balance |
| $ | 7,900 |
|
| $ | 13,851 |
|
| $ | 7,900 |
|
| $ | 13,851 |
|
| $ | 1,396 |
|
| $ | 13,851 |
|
Other Contract Assets
The Company’s contract assets, excluding trade accounts receivable (“Other Contract Assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of the exclusive distribution of Orthofixthe Company's products. Other Contract Assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $1.7$1.2 million and $2.0$1.4 million as of September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
11.10. Business segment information
The Company has 2 reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the Company is earnings before interest, tax, depreciation, and amortization (“EBITDA”). Corporate activities are comprised of operating expenses and activities not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The table below presents EBITDA by reporting segment:
13
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Global Spine |
| $ | 13,908 |
|
| $ | 19,960 |
|
| $ | 44,835 |
|
| $ | 38,670 |
|
Global Orthopedics |
|
| (196 | ) |
|
| 1,258 |
|
|
| (650 | ) |
|
| (3,995 | ) |
Corporate |
|
| (8,663 | ) |
|
| (6,196 | ) |
|
| (24,522 | ) |
|
| (16,259 | ) |
Total EBITDA |
| $ | 5,049 |
|
| $ | 15,022 |
|
| $ | 19,663 |
|
| $ | 18,416 |
|
Depreciation and amortization |
|
| (7,151 | ) |
|
| (9,030 | ) |
|
| (22,153 | ) |
|
| (22,299 | ) |
Interest expense, net |
|
| (433 | ) |
|
| (731 | ) |
|
| (1,400 | ) |
|
| (2,055 | ) |
Income (loss) before income taxes |
| $ | (2,535 | ) |
| $ | 5,261 |
|
| $ | (3,890 | ) |
| $ | (5,938 | ) |
|
| Three Months Ended |
| |||||
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Global Spine |
| $ | 15,893 |
|
| $ | 11,895 |
|
Global Orthopedics |
|
| (3,096 | ) |
|
| (2,229 | ) |
Corporate |
|
| (9,295 | ) |
|
| (7,829 | ) |
Total EBITDA |
| $ | 3,502 |
|
| $ | 1,837 |
|
Depreciation and amortization |
|
| (7,516 | ) |
|
| (7,443 | ) |
Interest expense, net |
|
| (375 | ) |
|
| (417 | ) |
Loss before income taxes |
| $ | (4,389 | ) |
| $ | (6,023 | ) |
Geographical information
The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:
|
| Three Months Ended |
| |||||
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Global Spine |
|
|
|
|
|
| ||
U.S. |
| $ | 77,066 |
|
| $ | 77,755 |
|
International |
|
| 5,589 |
|
|
| 4,585 |
|
Total Global Spine |
|
| 82,655 |
|
|
| 82,340 |
|
|
|
|
|
|
|
| ||
Global Orthopedics |
|
|
|
|
|
| ||
U.S. |
|
| 5,327 |
|
|
| 5,591 |
|
International |
|
| 18,436 |
|
|
| 17,662 |
|
Total Global Orthopedics |
|
| 23,763 |
|
|
| 23,253 |
|
|
|
|
|
|
|
| ||
Consolidated |
|
|
|
|
|
| ||
U.S. |
|
| 82,393 |
|
|
| 83,346 |
|
International |
|
| 24,025 |
|
|
| 22,247 |
|
Net sales |
| $ | 106,418 |
|
| $ | 105,593 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Global Spine |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 79,983 |
|
| $ | 83,477 |
|
| $ | 246,815 |
|
| $ | 215,819 |
|
International |
|
| 6,142 |
|
|
| 4,339 |
|
|
| 16,300 |
|
|
| 12,413 |
|
Total Global Spine |
|
| 86,125 |
|
|
| 87,816 |
|
|
| 263,115 |
|
|
| 228,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Orthopedics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 6,010 |
|
|
| 6,356 |
|
|
| 17,757 |
|
|
| 16,439 |
|
International |
|
| 20,293 |
|
|
| 16,813 |
|
|
| 58,543 |
|
|
| 44,272 |
|
Total Global Orthopedics |
|
| 26,303 |
|
|
| 23,169 |
|
|
| 76,300 |
|
|
| 60,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 85,993 |
|
|
| 89,833 |
|
|
| 264,572 |
|
|
| 232,258 |
|
International |
|
| 26,435 |
|
|
| 21,152 |
|
|
| 74,843 |
|
|
| 56,685 |
|
Net sales |
| $ | 112,428 |
|
| $ | 110,985 |
|
| $ | 339,415 |
|
| $ | 288,943 |
|
12.11. Acquisition-related amortization and remeasurement
Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangements, and (iii) recognized costs associated with acquired in-process research and development (“IPR&D”) assets, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Changes in fair value of contingent consideration |
| $ | (2,300 | ) |
| $ | (700 | ) |
| $ | (2,375 | ) |
| $ | (7,600 | ) |
Amortization of acquired intangibles |
|
| 1,965 |
|
|
| 1,838 |
|
|
| 5,903 |
|
|
| 4,834 |
|
Acquired IPR&D |
|
| — |
|
|
| — |
|
|
| 1,500 |
|
|
| — |
|
Total |
| $ | (335 | ) |
| $ | 1,138 |
|
| $ | 5,028 |
|
| $ | (2,766 | ) |
|
| Three Months Ended |
| |||||
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Amortization of acquired intangibles |
| $ | 2,001 |
|
| $ | 1,969 |
|
Changes in fair value of contingent consideration |
|
| (5,500 | ) |
|
| 1,500 |
|
Acquired IPR&D |
|
| — |
|
|
| 1,000 |
|
Total |
| $ | (3,499 | ) |
| $ | 4,469 |
|
On April 7, 2021, the Company entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. As consideration for the License Agreement, the Company agreed to pay up to $4.0 million, with certain payments contingent upon reaching an FDA milestone. Of this amount, $0.5 million was paid in the second quarter of 2021, which was recognized as acquired IPR&D costs within acquisition-related amortization and remeasurement. The License Agreement also includes certain minimum purchase requirements.
14
13.12. 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 |
| |||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Cost of sales |
| $ | 200 |
|
| $ | 149 |
|
| $ | 587 |
|
| $ | 535 |
|
| $ | 211 |
| $ | 178 |
| |
Sales and marketing |
|
| 831 |
|
|
| 668 |
|
|
| 2,505 |
|
|
| 2,897 |
|
| 981 |
| 717 |
| |||
General and administrative |
|
| 2,531 |
|
|
| 2,770 |
|
|
| 7,667 |
|
|
| 7,939 |
|
| 3,218 |
| 2,529 |
| |||
Research and development |
|
| 280 |
|
|
| 254 |
|
|
| 711 |
|
|
| 1,028 |
|
| (78 | ) |
| 297 |
| ||
Total |
| $ | 3,842 |
|
| $ | 3,841 |
|
| $ | 11,470 |
|
| $ | 12,399 |
|
| $ | 4,332 |
|
| $ | 3,721 |
|
|
| Three Months Ended |
| |||||
(U.S. Dollars, in thousands) |
| 2022 |
|
| 2021 |
| ||
Stock options |
| $ | 359 |
|
| $ | 661 |
|
Time-based restricted stock awards and units |
|
| 2,170 |
|
|
| 1,727 |
|
Market-based / performance-based restricted stock units |
|
| 1,444 |
|
|
| 897 |
|
Stock purchase plan |
|
| 359 |
|
|
| 436 |
|
Total |
| $ | 4,332 |
|
| $ | 3,721 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Stock options |
| $ | 382 |
|
| $ | 786 |
|
| $ | 1,441 |
|
| $ | 1,840 |
|
Time-based restricted stock awards and units |
|
| 1,819 |
|
|
| 1,632 |
|
|
| 5,565 |
|
|
| 6,804 |
|
Market-based restricted stock units |
|
| 1,212 |
|
|
| 1,049 |
|
|
| 3,162 |
|
|
| 2,529 |
|
Stock purchase plan |
|
| 429 |
|
|
| 374 |
|
|
| 1,302 |
|
|
| 1,226 |
|
Total |
| $ | 3,842 |
|
| $ | 3,841 |
|
| $ | 11,470 |
|
| $ | 12,399 |
|
During the three months ended September 30,March 31, 2022 and 2021, and 2020, the Company issued 72,2814,885 and 58,35750,510 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, 2021 and 2020, the Company issued 317,536 and 244,801 shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units.
14.13. Income taxes
Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs, including discrete items.occurs. Due to the impact of losses not benefitedbenefitted by the Company’s European manufacturing subsidiaryU.S. and certain non-deductible financial statement expenses,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, 2021.March 31, 2022. 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, 2022 and 2021, and 2020, the effective tax rate was 14.4% and 11.5%, respectively. For the nine months ended September 30, 2021 and 2020, the effective tax rate was (43.1%(1.6%) and 300.3%.3.4%, respectively. The primary factors affecting the Company’s effective tax rate for the three and nine months ended September 30, 2021,March 31, 2022, were certain losses not benefited, the remeasurement of contingent considerationbenefitted.
(which is predominantly not recognized for tax purposes), limits on the deductibility of executive compensation, the reversal of tax benefits related to certain performance stock units forfeited in the current year, and a favorable tax ruling related to certain previously unrecognized tax benefits.
During the first quarter, the Company received a favorable ruling related to certain previously unrecognized tax benefits, which resulted in the recognition of a net benefit of $0.3 million for the nine months ended September 30, 2021. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state, and foreign matters could be reduced by $1.0 million to $1.5 million as audits close and statutes expire.
15.14. Earnings per share (“EPS”)
The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with nonforfeitable rights to dividends or dividend equivalents (referred to as participating securities). For the three and nine months ended September 30, 2021,March 31, 2022, no significant adjustments were made to net income for purposes of calculating basic and diluted EPS.
The following is a reconciliation of the weighted average shares used in diluted EPS computations.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended |
| |||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Weighted average common shares-basic |
|
| 19,769,823 |
|
|
| 19,335,718 |
|
|
| 19,633,782 |
|
|
| 19,217,057 |
|
| 19,897,695 |
| 19,526,872 |
| |||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Unexercised stock options and stock purchase plan |
|
| — |
|
|
| 10,607 |
|
|
| — |
|
|
| 41,701 |
|
|
| — |
|
|
| — |
|
Unvested restricted stock awards and units |
|
| — |
|
|
| 52,242 |
|
|
| — |
|
|
| 60,544 |
|
|
| — |
|
|
| — |
|
Weighted average common shares-diluted |
|
| 19,769,823 |
|
|
| 19,398,567 |
|
|
| 19,633,782 |
|
|
| 19,319,302 |
|
| 19,897,695 |
|
| 19,526,872 |
|
There were 2,055,4052,461,446 and 1,771,1132,037,663 weighted average outstanding (i) stock options and (ii) restricted stock awards and units, respectively, not included in the diluted EPS computation for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and 1,626,804 and 1,527,735 weighted average outstanding stock options and restricted stock awards and units not included in the diluted EPS computation for the nine months ended September 30, 2021 and 2020, respectively, because inclusion of these awards was anti-dilutive or, for performance-based and market-based restricted stock awards and units, all necessary conditions had not been satisfied by the end of the respective period.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of Orthofix Medical Inc.’s (sometimes referred to as “we,” “us” or “our”) financial condition and results of our operations should be read in conjunction with the “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.
Executive Summary
We are a global medical device company with a spine and orthopedics focus. Our mission is to deliver innovative, quality-driven solutions as we partner with health care professionals to improve patient mobility. Headquartered in Lewisville, Texas, our spine and orthopedic products are distributed in more than 60 countries via our sales representatives and distributors. For more information, please visit www.orthofix.com.www.Orthofix.com.
Notable financial metrics and achievements in the thirdfirst quarter of 20212022 include the following:
|
|
|
|
|
|
|
|
|
|
COVID-19 Update and Outlook
The global COVID-19 pandemic has significantly affected our hospital and physician customers, patients, communities, employees, and business operations. At various points in time, the pandemic has led to the cancellation or deferralprior year on a reported basis and an increase of elective surgeries2.0% on a constant currency basis
Given these various uncertainties, it is unclear the extent toTrueLok Evo Ring Fixation system, which lingering slowdowns in elective procedures will affect our business during 2021 and beyond. We expect that the effects of COVID-19 on our business will depend on various factors including (i) the magnitude and length of increased case waves in certain geographies, (ii) the existence of multiple strains or variants of the virus that cause COVID-19, and the effectiveness of treatments and vaccines against such variants, (iii) the comfort level of patients in returning to clinics and hospitals, (iv) the extent to which localized elective surgery shutdowns occur, (v) the unemployment rate’s effect on potential patients lacking medical insurance coverage, (vi) the effects of any supply chain disruption or raw material shortages for key product components, (vii) potential labor shortages for our customers or suppliers, and (viii) general hospital capacity constraints occurring because of the need to treat COVID-19 patients.
Results of Operations
The following table provides certain items in our condensed consolidated statements of operations and comprehensive income (loss) as a percent of net sales:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended |
| |||||||||||||||
|
| 2021 (%) |
|
| 2020 (%) |
|
| 2021 (%) |
|
| 2020 (%) |
|
| 2022 |
|
| 2021 |
| ||||||
Net sales |
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
| 100.0 |
| 100.0 |
| |||
Cost of sales |
|
| 25.2 |
|
|
| 23.6 |
|
|
| 24.1 |
|
|
| 25.2 |
|
| 26.6 |
|
| 24.5 |
| ||
Gross profit |
|
| 74.8 |
|
|
| 76.4 |
|
|
| 75.9 |
|
|
| 74.8 |
|
| 73.4 |
| 75.5 |
| |||
Sales and marketing |
|
| 49.9 |
|
|
| 47.7 |
|
|
| 48.4 |
|
|
| 52.2 |
|
| 50.9 |
| 48.1 |
| |||
General and administrative |
|
| 14.5 |
|
|
| 14.9 |
|
|
| 15.1 |
|
|
| 17.1 |
|
| 18.2 |
| 15.6 |
| |||
Research and development |
|
| 11.0 |
|
|
| 9.0 |
|
|
| 10.7 |
|
|
| 9.9 |
|
| 10.5 |
| 10.3 |
| |||
Acquisition-related amortization and remeasurement |
|
| (0.3 | ) |
|
| 1.0 |
|
|
| 1.4 |
|
|
| (0.9 | ) |
| (3.3 | ) |
| 4.3 |
| ||
Operating income (loss) |
|
| (0.3 | ) |
|
| 3.8 |
|
|
| 0.3 |
|
|
| (3.5 | ) | ||||||||
Net income (loss) |
|
| (1.9 | ) |
|
| 4.2 |
|
|
| (1.6 | ) |
|
| 4.1 |
| ||||||||
Operating loss |
| (2.9 | ) |
| (2.8 | ) | ||||||||||||||||||
Net loss |
| (4.2 | ) |
| (5.5 | ) |
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 |
|
| Percentage Change |
| ||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Reported |
|
| Constant Currency |
|
| 2022 |
|
| 2021 |
|
| Reported |
|
| Constant Currency |
| ||||||||
Bone Growth Therapies |
| $ | 45,168 |
|
| $ | 47,066 |
|
|
| -4.0 | % |
|
| -4.0 | % |
| $ | 41,948 |
| $ | 42,947 |
| -2.3 | % |
| -2.3 | % | ||||
Spinal Implants |
|
| 28,151 |
|
|
| 25,505 |
|
|
| 10.4 | % |
|
| 10.2 | % |
| 26,615 |
| 25,701 |
| 3.6 | % |
| 4.2 | % | ||||||
Biologics |
|
| 12,806 |
|
|
| 15,245 |
|
|
| -16.0 | % |
|
| -16.0 | % |
| 14,092 |
|
| 13,692 |
|
| 2.9 | % |
| 2.9 | % | ||||
Global Spine |
|
| 86,125 |
|
|
| 87,816 |
|
|
| -1.9 | % |
|
| -2.0 | % |
| 82,655 |
| 82,340 |
| 0.4 | % |
| 0.6 | % | ||||||
Global Orthopedics |
|
| 26,303 |
|
|
| 23,169 |
|
|
| 13.5 | % |
|
| 12.2 | % |
| 23,763 |
|
| 23,253 |
|
| 2.2 | % |
| 7.2 | % | ||||
Net sales |
| $ | 112,428 |
|
| $ | 110,985 |
|
|
| 1.3 | % |
|
| 1.0 | % |
| $ | 106,418 |
|
| $ | 105,593 |
|
| 0.8 | % |
| 2.0 | % |
|
| Nine Months Ended September 30, |
|
| Percentage Change |
| ||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Reported |
|
| Constant Currency |
| ||||
Bone Growth Therapies |
| $ | 137,821 |
|
| $ | 120,888 |
|
|
| 14.0 | % |
|
| 14.0 | % |
Spinal Implants |
|
| 83,943 |
|
|
| 67,025 |
|
|
| 25.2 | % |
|
| 24.4 | % |
Biologics |
|
| 41,351 |
|
|
| 40,319 |
|
|
| 2.6 | % |
|
| 2.6 | % |
Global Spine |
|
| 263,115 |
|
|
| 228,232 |
|
|
| 15.3 | % |
|
| 15.0 | % |
Global Orthopedics |
|
| 76,300 |
|
|
| 60,711 |
|
|
| 25.7 | % |
|
| 20.1 | % |
Net sales |
| $ | 339,415 |
|
| $ | 288,943 |
|
|
| 17.5 | % |
|
| 16.1 | % |
16
Global Spine
Global Spine offers the following products categories:
- Bone Growth Therapies, which manufactures, distributes, sells, and provides support services for market leading devices that enhance bone fusion. Bone Growth Therapies uses distributors and sales representatives to sell its devices and provide associated services to hospitals, healthcare providers, and patients. - Spinal Implants, which designs, develops and markets a broad portfolio of motion preservation and fixation implant products used in surgical procedures of the spine. Spinal Implants distributes its products globally through a network of distributors and sales representatives to sell spine products to hospitals and healthcare providers. - Biologics, which provides a portfolio of regenerative products and tissue forms that allow physicians to successfully treat a variety of spinal and orthopedic conditions. Biologics markets its tissues to hospitals and healthcare providers, primarily in the U.S., through a network of employed and independent sales representatives.
|
|
|
|
|
|
Three months ended September 30, 2021March 31, 2022 compared to 20202021
Net sales decreased $1.7 million or 1.9%
|
|
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
Net sales increased $34.9$0.3 million or 15.3%0.4%
• Bone Growth Therapies net sales decreased $1.0 million or 2.3%, primarily driven by a slowdown in complex procedure volumes due to hospital restrictions and staff shortages, which impacted our ability to access both existing and prospective accounts • Spinal Implants net sales increased $0.9 million or 3.6%, driven by international spine fixation sales and continued growth in the U.S. for our M6-C artificial cervical disc • Biologics net sales increased $0.4 million or 2.9%, primarily attributable to sales from our new biologics offerings as we continue to broaden our Biologics portfolio
|
|
|
|
|
|
Global Orthopedics
Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions in adultsspecifically related to limb reconstruction and childrendeformity correction unrelated to the spine. Global Orthopedics distributes its products globally through a network of distributors and sales representatives to sell orthopedic products to hospitals and healthhealthcare providers.
Three months ended September 30, 2021March 31, 2022 compared to 20202021
Net sales increased $3.1$0.5 million or 13.5%2.2%
• Increase partially attributable to recovery in our international markets aided by lessening COVID-19 restrictions as well as an increase in orders from international stocking distributors • Continued strong contribution from our FITBONE limb-lengthening system • Partially offset by a decrease of $1.2 million due to changes in foreign currency exchange rates, which had a negative impact on net sales in 2022
|
|
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
Net sales increased $15.6 million or 25.7%
|
|
|
|
|
|
Gross Profit
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
Net sales |
| $ | 112,428 |
|
| $ | 110,985 |
|
|
| 1.3 | % |
| $ | 339,415 |
|
| $ | 288,943 |
|
|
| 17.5 | % |
| $ | 106,418 |
| $ | 105,593 |
| 0.8 | % | |||
Cost of sales |
|
| 28,307 |
|
|
| 26,243 |
|
|
| 7.9 | % |
|
| 81,660 |
|
|
| 72,818 |
|
|
| 12.1 | % |
| 28,318 |
|
| 25,914 |
|
| 9.3 | % | |||
Gross profit |
| $ | 84,121 |
|
| $ | 84,742 |
|
|
| (0.7 | %) |
| $ | 257,755 |
|
| $ | 216,125 |
|
|
| 19.3 | % |
| $ | 78,100 |
|
| $ | 79,679 |
|
| (2.0 | %) | |
Gross margin |
|
| 74.8 | % |
|
| 76.4 | % |
|
| (1.5 | %) |
|
| 75.9 | % |
|
| 74.8 | % |
|
| 1.1 | % |
| 73.4 | % |
|
| 75.5 | % |
|
| (2.1 | %) |
Three months ended September 30, 2021March 31, 2022 compared to 20202021
Gross profit decreased $0.6$1.6 million
|
|
|
|
|
|
Nine months ended September 30, 2021 compared to 202017
Gross profit increased $41.6 million
|
|
|
|
Sales and Marketing Expense
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
Sales and marketing |
| $ | 56,097 |
|
| $ | 52,926 |
|
|
| 6.0 | % |
| $ | 164,220 |
|
| $ | 150,718 |
|
|
| 9.0 | % |
| $ | 54,137 |
| $ | 50,785 |
| 6.6 | % | |||
As a percentage of net sales |
|
| 49.9 | % |
|
| 47.7 | % |
|
| 2.2 | % |
|
| 48.4 | % |
|
| 52.2 | % |
|
| (3.8 | %) |
| 50.9 | % |
|
| 48.1 | % |
| 2.8 | % |
Three months ended September 30, 2021March 31, 2022 compared to 20202021
Sales and marketing expense increased $3.2$3.4 million
|
|
Nine months ended September 30, 2021•
Salesthe prior year period
headcount to support growth and initiatives across all product lines
|
|
|
|
General and Administrative Expense
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
General and administrative |
| $ | 16,312 |
|
| $ | 16,541 |
|
|
| (1.4 | %) |
| $ | 51,091 |
|
| $ | 49,453 |
|
|
| 3.3 | % |
| $ | 19,328 |
| $ | 16,444 |
| 17.5 | % | |||
As a percentage of net sales |
|
| 14.5 | % |
|
| 14.9 | % |
|
| (0.4 | %) |
|
| 15.1 | % |
|
| 17.1 | % |
|
| (2.0 | %) |
| 18.2 | % |
|
| 15.6 | % |
| 2.6 | % |
Three months ended September 30, 2021March 31, 2022 compared to 20202021
General and administrative expense decreased $0.2 million
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
General and administrative expense increased $1.6$2.9 million
• Increase in share-based compensation expense as the tenure of our new management team increases • Increase in spending on legal settlements, strategic investments, and medical benefits compared to the prior year period • Increase in travel and professional fees as a result of loosened COVID-19 restrictions as compared to the prior year period
|
|
Research and Development Expense
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
Research and development |
| $ | 12,360 |
|
| $ | 9,962 |
|
|
| 24.1 | % |
| $ | 36,378 |
|
| $ | 28,691 |
|
|
| 26.8 | % |
| $ | 11,212 |
| $ | 10,897 |
| 2.9 | % | |||
As a percentage of net sales |
|
| 11.0 | % |
|
| 9.0 | % |
|
| 2.0 | % |
|
| 10.7 | % |
|
| 9.9 | % |
|
| 0.8 | % |
| 10.5 | % |
|
| 10.3 | % |
| 0.2 | % |
Three months ended September 30, 2021March 31, 2022 compared to 2020 2021
Research and development expense increased $2.4$0.3 million
• Increase primarily driven by increases to support new product development, clinical studies, and costs associated with our European Union Medical Device Regulation compliance efforts
|
|
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
Research and development expense increased $7.7 million
|
|
|
|
|
|
Acquisition-related Amortization and Remeasurement
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
Acquisition-related amortization and remeasurement |
| $ | (335 | ) |
| $ | 1,138 |
|
|
| (129.4 | %) |
| $ | 5,028 |
|
| $ | (2,766 | ) |
|
| (281.8 | %) |
| $ | (3,499 | ) |
| $ | 4,469 |
| (178.3 | %) | ||
As a percentage of net sales |
|
| (0.3 | %) |
|
| 1.0 | % |
|
| (1.3 | %) |
|
| 1.4 | % |
|
| (0.9 | %) |
|
| 2.3 | % |
| (3.3 | %) |
|
| 4.3 | % |
| (7.6 | %) |
Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions, (ii) the remeasurement of any related contingent consideration arrangement, and (iii) recognized costs associated with acquired in-process research and development assets, which are recognized immediately upon acquisition.
Three months ended September 30, 2021March 31, 2022 compared to 2020 2021
Acquisition-related amortization and remeasurement decreased $1.5$8.0 million
• Decrease of $7.0 million primarily related to the remeasurement of potential future revenue-based milestone payments associated with the Spinal Kinetics acquisition that become due upon achievement of certain revenue targets • Decrease of $1.0 million in costs associated with acquired in-process research and development assets, which were recognized immediately upon acquisition in the prior year period 18 |
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
Acquisition-related amortization and remeasurement increased $7.8 million
|
|
|
|
|
|
|
|
Non-operating Income and Expense
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| |||||||||
Interest expense, net |
| $ | (433 | ) |
| $ | (731 | ) |
|
| (40.8 | %) |
| $ | (1,400 | ) |
| $ | (2,055 | ) |
|
| (31.9 | %) |
| $ | (375 | ) |
| $ | (417 | ) |
| (10.1 | %) | |
Other income (expense), net |
|
| (1,789 | ) |
|
| 1,817 |
|
|
| (198.5 | %) |
|
| (3,528 | ) |
|
| 6,088 |
|
|
| (158.0 | %) | ||||||||||||
Other expense, net |
| (936 | ) |
| (2,690 | ) |
| (65.2 | %) |
Three months ended September 30, 2021March 31, 2022 compared to 20202021
Interest expense, net decreased $0.3 million
|
|
Other income (expense), netdecreased $3.6 million
|
|
Nine months ended September 30, 2021 compared to 2020
Interest expense, net decreased $0.7 million
|
|
Other income (expense), net decreased $9.6 million
|
|
|
|
Income Taxes
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| % Change |
| ||||||
Income tax (benefit) expense |
| $ | (364 | ) |
| $ | 607 |
|
|
| (160.0 | %) |
| $ | 1,677 |
|
| $ | (17,833 | ) |
|
| (109.4 | %) |
Effective tax rate |
|
| 14.4 | % |
|
| 11.5 | % |
|
| 2.9 | % |
|
| (43.1 | %) |
|
| 300.3 | % |
|
| (343.4 | %) |
Three months ended September 30, 2021 compared to 2020
The increasewas flat in the effective tax rate comparedcomparison to the prior year period was
Other expense, netdecreased $1.8 million
Income Taxes
Three Months Ended March 31, (U.S. Dollars, in thousands) 2022 2021 % Change Income tax (benefit) expense $ 71 $ (207 ) (134.3 %) Effective tax rate (1.6 %) 3.4 % (5.0 %) Three months ended March 31, 2022 compared to 2021 Income tax expense increased an immaterial amount for the period ended March 31, 2022, compared to March 31, 2021. |
|
|
|
|
The primary factors affecting our effective tax rateexpense for the thirdfirst quarter of 2021 are as follows:2022 were certain losses not benefitted.
|
|
|
|
|
|
|
|
Nine months ended September 30, 2021 compared to 2020
The decrease in the effective tax rate compared to the prior year period was primarily a result of the following factors:
|
|
|
|
|
|
|
|
The primary factors affecting our effective tax rate for the nine months ended September 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
Segment Review
Our business is managed through two reporting segments: Global Spine and Global Orthopedics. The primary metric used in managing the business by segment is EBITDA (which is described further in Note 11 10 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein). The following table presents EBITDA by segment and reconciles consolidated EBITDA to income (loss)loss before income taxes:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended |
| |||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Global Spine |
| $ | 13,908 |
|
| $ | 19,960 |
|
| $ | 44,835 |
|
| $ | 38,670 |
|
| $ | 15,893 |
| $ | 11,895 |
| |
Global Orthopedics |
|
| (196 | ) |
|
| 1,258 |
|
|
| (650 | ) |
|
| (3,995 | ) |
| (3,096 | ) |
| (2,229 | ) | ||
Corporate |
|
| (8,663 | ) |
|
| (6,196 | ) |
|
| (24,522 | ) |
|
| (16,259 | ) |
| (9,295 | ) |
| (7,829 | ) | ||
Total EBITDA |
| $ | 5,049 |
|
| $ | 15,022 |
|
| $ | 19,663 |
|
| $ | 18,416 |
|
| $ | 3,502 |
| $ | 1,837 |
| |
Depreciation and amortization |
|
| (7,151 | ) |
|
| (9,030 | ) |
|
| (22,153 | ) |
|
| (22,299 | ) |
| (7,516 | ) |
| (7,443 | ) | ||
Interest expense, net |
|
| (433 | ) |
|
| (731 | ) |
|
| (1,400 | ) |
|
| (2,055 | ) |
| (375 | ) |
| (417 | ) | ||
Income (loss) before income taxes |
| $ | (2,535 | ) |
| $ | 5,261 |
|
| $ | (3,890 | ) |
| $ | (5,938 | ) | ||||||||
Loss before income taxes |
| $ | (4,389 | ) |
| $ | (6,023 | ) |
Liquidity and Capital Resources
Cash and cash equivalents and restricted cash at September 30, 2021,March 31, 2022, totaled $83.2$71.9 million compared to $96.8$87.8 million at December 31, 2020.2021.
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
| ||||||
Net cash from operating activities |
| $ | 6,696 |
|
| $ | 51,981 |
|
| $ | (45,285 | ) |
| $ | (7,709 | ) |
| $ | 2,441 |
|
| $ | (10,150 | ) |
Net cash from investing activities |
|
| (14,031 | ) |
|
| (42,944 | ) |
|
| 28,913 |
|
| (5,667 | ) |
|
| (4,781 | ) |
|
| (886 | ) | |
Net cash from financing activities |
|
| (5,673 | ) |
|
| 583 |
|
|
| (6,256 | ) |
| (2,233 | ) |
|
| 1,110 |
|
|
| (3,343 | ) | |
Effect of exchange rate changes on cash |
|
| (598 | ) |
|
| 277 |
|
|
| (875 | ) |
| (321 | ) |
|
| (534 | ) |
|
| 213 |
| |
Net change in cash, cash equivalents and restricted cash |
| $ | (13,606 | ) |
| $ | 9,897 |
|
| $ | (23,503 | ) | ||||||||||||
Net change in cash and cash equivalents |
| $ | (15,930 | ) |
| $ | (1,764 | ) |
| $ | (14,166 | ) |
19
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, |
| ||||||||||||||||||
(U.S. Dollars, in thousands) |
| 2021 |
|
| 2020 |
|
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
| ||||||
Net cash from operating activities |
| $ | 6,696 |
|
| $ | 51,981 |
|
| $ | (45,285 | ) |
| $ | (7,709 | ) |
| $ | 2,441 |
|
| $ | (10,150 | ) |
Capital expenditures |
|
| (12,781 | ) |
|
| (12,704 | ) |
|
| (77 | ) |
| (5,667 | ) |
|
| (4,781 | ) |
|
| (886 | ) | |
Free cash flow |
| $ | (6,085 | ) |
| $ | 39,277 |
|
| $ | (45,362 | ) |
| $ | (13,376 | ) |
| $ | (2,340 | ) |
| $ | (11,036 | ) |
Operating Activities
Cash flows from operating activities decreased $45.3$10.2 million
• Increase in net income of $1.4 million • Net decrease of $4.1 million for non-cash gains and losses, largely related to changes in fair value of contingent consideration, share-based compensation expense, deferred income taxes, and our provision for expected credit losses • Net decrease of $7.4 million relating to changes in working capital accounts, primarily attributable to changes in inventories
|
|
|
|
|
|
Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 56 days at September 30, 2021 compared to 61 days at September 30, 2020.March 31, 2022, compared to 59 days at March 31, 2021. Inventory turns increased toremained consistent at 1.3 times as of September 30, 2021 compared to 1.2 times as of September 30, 2020.March 31, 2022 and March 31, 2021.
Investing Activities
Cash flows from investing activities increased $28.9decreased $0.9 million
• Decrease of $0.9 million associated with capital expenditures compared to the prior year period
|
|
|
|
|
|
Financing Activities
Cash flows from financing activities decreased $6.3$3.3 million
• Decrease of $2.0 million related to the conclusion of the FITBONE Contract Manufacturing and Supply Agreement with Wittenstein • Decrease in net proceeds of $1.7 million from the issuance of common shares, primarily related to the exercise of stock options in the prior year period • Partially offset by an increase of $0.4 million attributable to other financing activities
|
|
|
|
Credit Facilities
As of September 30, 2021,March 31, 2022, we had no borrowings outstanding under theour secured revolving credit facility. In addition, we had no borrowings outstanding under on our €5.5 million ($6.46.1 million) available lines of credit in Italy. We were in compliance with all required financial covenants as of September 30, 2021.March 31, 2022.
Other
For information regarding contingencies, see Note 87 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.
Impact of COVID-19The Coronavirus Aid, Relief, and the Economic Security Act (“CARES Act on Liquidity and Capital ResourcesAct”)
In March 2020, the CARES Act entered into U.S. federal law, which provided emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic.
In April 2020, we received $13.9 million in funds from the CMSCenters for Medicare and Medicaid Service Accelerated and Advance Payment Program to increase cash flow to providers of services and suppliers impacted byunder the COVID-19 pandemic.CARES Act. Starting in April 2021, Medicare began to recoup 25% of Medicare payments otherwise owed to the provider or supplier for submitted claims. After 11 months,Beginning in March 2022, recoupment will increaseincreased to 50%, which will remain in effect for another 6six months. Thus, during these time periods,this period, rather than receiving the full amount of payment for newly submitted claims, the Company’s outstanding accelerated / advance payment balance will beis reduced by the recoupment amount until the full balance has been repaid. As of September 30, 2021, the balance ofMarch 31, 2022, the contract liability balance associated with the Accelerated and Advance Payment Program of the CARES Act totaled $7.9$1.4 million. The Company has classified the entire balance of this contract liability within other current liabilities based upon the Company’s estimates of when such funds will be recouped.
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Spinal Kinetics Contingent Consideration
As part of the CARES Act, we were permitted to defer all employer social security payroll tax payments through December 31, 2020, such that 50% ofconsideration for the taxes would be deferred until December 31, 2021, with the remaining 50% deferred until December 31, 2022. As of December 31, 2020, the Company had deferred $0.6 million in social security payroll tax payments under this program. All deferred tax payments were repaid in January 2021. As of September 30, 2021, we have no deferred balance associated with this program.
Spinal Kinetics Contingent Consideration
Per the terms of the acquisition, agreement under which we acquired Spinal Kinetics, we agreed to make contingent milestone payments of up to $60.0 million in cash to former Spinal Kinetics’ shareholders. million. One milestone payment, which was for $15.0 million, became due upon FDA approval of Spinal Kinetics’ M6-C artificial cervical disc (the “FDA Milestone”). The FDA Milestone was achieved and paid in 2019. A secondrevenue-based milestone payment, totaling $15.0 million, was achieved in the first quarter of 2021 and paid in the second quarter of 2021 upon meeting certain net sales targets.
The remaining milestone payment is a revenue-based milestone payment of $30.0 million in connection with future sales of the acquired artificial discs. The fair value of the contingent consideration arrangement as of September 30, 2021,March 31, 2022, was $18.4$11.7 million; however, the actual amount ultimately paid could be higher or lower than the fair value of the contingent consideration (ultimate payment will either be $30.0 million or the liability will be reversed if the milestone is not met within the required timeline). As of
September 30, 2021, we classified March 31, 2022, the remaining contingent consideration liability was classified within other long-termcurrent liabilities. For additional discussion of this matter, see Note 76 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
FITBONE Asset Acquisition
In February 2020, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Wittenstein SE (“Wittenstein”), a privately-held German-based company, to acquire assets associated with the FITBONE intramedullary lengthening system for limb lengthening of the femur and tibia bones. At the time of the acquisition, we also entered into a Contract Manufacturing and Supply Agreement (“CMSA”) with Wittenstein. The CMSA with Wittenstein has an initial term of up to two years to manufacture the FITBONE product line. As consideration for the CMSA, we will pay $2.0 million to Wittenstein at the conclusion of the agreement if certain conditions are met in relation to the prompt delivery of manufactured products. This payment is expected to be made in the first quarter of 2022.
Neo Medical Convertible Loan
In October 2020, we entered into a Convertible Loan Agreement (the “Convertible Loan”) with Neo Medical SA, a privately held Swiss-based Medtech company (“Neo Medical”), whereby we loaned CHF 4.6 million ($5.0 million as of the issuance date) to Neo Medical. The loan bears interest at 8.0%, with interest due semi-annually. The Convertible Loan matures in October 2024; however, if a change in control of Neo Medical occurs prior to maturity, the Convertible Loan shall become immediately due upon such event.
Related Party Transaction
OnIn February 2, 2021, we entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby we acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration was comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance or the attainment of certain net sales targets. For additional discussion regarding this transaction, see Note 3None of the Notes to the Unaudited Condensed Consolidated Financial Statements.contingent consideration has been paid as of March 31, 2022.
IGEA S.p.A Exclusive License and Distribution Agreement
OnIn April 7, 2021, we entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. Per the terms of the License Agreement, we will have the exclusive right to sell IGEA products in the U.S. and Canada. As consideration for the License Agreement, we agreed to pay up to $4.0 million, of which $0.5 million was paid in the second quarter of 2021, with certain payments contingent upon achieving an FDA milestone. The License Agreement also includes certain minimum purchase requirements.
Brazil
In September 2019, in relation to an ongoing legal dispute with a former Brazilian distributor, approximately $0.5 million (based upon foreign exchange rates as of September 30, 2021) of our cash in Brazil was frozen upon request to satisfy a judgment. Although we are appealing the judgment, this cash has been reclassified to restricted cash. As of September 30, 2021, we have an accrual of $0.8 million related to this matter, which is classified within other current liabilities
Off-balance Sheet Arrangements
As of September 30, 2021,March 31, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.
Contractual Obligations
There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, 2020.2021.
Critical Accounting Estimates
Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Our critical accounting estimates are detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. There have been no significant changes to our critical accounting estimates.
Recently Issued Accounting Pronouncements
See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued or adopted accounting pronouncements. As of September 30, 2021,March 31, 2022, we do not expect any of the issued Accounting Standards Updates to materially affect our condensed consolidated financial statements upon adoption.
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Non-GAAP Financial Measures
We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP metrics used to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to historical operating results and internally evaluate the effectiveness of our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.
The non-GAAP financial measures used in this filing may have limitations as analytical tools, and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows.
Constant Currency
Constant currency is calculated by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.
EBITDA
EBITDA is a non-GAAP metric defined as earnings before interest income (expense), income taxes, depreciation, and amortization. EBITDA is the primary metric used by our Chief Operating Decision Maker in managing the business.
Free Cash Flow
Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. Management uses free cash flow as an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, 2020.2021.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of the President and Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021.March 31, 2022. Based on this evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.March 31, 2022.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, known to the President and Chief Executive Officer or the Chief Financial Officer that occurred for the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 87 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.
Item 1A. Risk Factors
The following risk factors supplement and should be read in conjunction with those contained in the risk factors disclosed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2020.2021, except as follows.
The COVID-19 pandemicconflict between Russia and relatedUkraine may continue to cause global economic instability and potentially disrupt supply chainchains.
In February 2022, Russia unlawfully invaded Ukraine, creating an ongoing humanitarian and rawglobal security crisis. In response, the U.S. and many other countries have imposed robust sanctions on Russia and may impose additional sanctions in the future. The ongoing invasion has caused significant damage and disruption to various aspects of the global economy. We have never conducted any meaningful business within Russia, and do not believe that the invasion will have material direct effects on our business or operations. However, we cannot predict the broader and longer-term consequences of this conflict or the sanctions imposed in response, and such consequences could include, among other things, general disruptions to global finance markets, exchange rates, and worldwide supply chains. Geopolitical instability and uncertainty resulting from the invasion could potentially have a continuing materialnegative impact on our global operationsability to sell to, ship products to, collect payments from, and the operations of our supply chain, which could adversely impact our business results and financial condition.
We rely on a limited number of suppliers to manufacture or supply certain products or components. In the event of interruption within our supply chain, or global shortages of key supplies or components, we may not be able to increase capacity from other sources or develop alternative or secondary sources without incurring material additional costs and/or substantial delays. For example, the COVID-19 pandemic has led to a global shortage of semiconductor chips, which are usedsupport customers in certain of our products. This shortage appears primarily to have been caused by manufacturers experiencing shutdowns or slowdowns during the pandemic,regions based on trade restrictions, embargoes and it may take several fiscal quarters or longer for normalized capacity to return. In addition, limitations in key raw material supplies could also cause semiconductor chipexport control law restrictions, and other component shortages to continue. To the extent it continues, or more shortages are experienced, particularly on a longer term basis, thislogistics restrictions. These considerations could adversely affect our abilitycosts, risks, and efficiencies related to procure such componentsour supply chain and manufacture certainlogistics. The potential effects of the conflict between Russia and Ukraine also could affect many of the other risk factors described in Item 1A, Risk Factors, in our products or it could require us to redesign any affected products in order to incorporate more readily available components, which may require additional regulatory testing and approvals. Thus, our business could be adversely affected in a significant manner if one or more of our suppliers are impacted by any interruption at a particular location or in relation to a particular material or component.Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We have not made any repurchases of our common stock during the thirdfirst quarter of 2021.2022.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
There are no matters to be reported under this heading.
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Item 6. Exhibits
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. 24 SIGNATURES
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ORTHOFIX MEDICAL INC. | |||
Date: | By: | /s/ JON SERBOUSEK | |
| Name: | Jon Serbousek | |
| Title: | President and Chief Executive Officer, Director | |
Date: | By: | /s/ DOUG RICE | |
| Name: | Doug Rice | |
| Title: | Chief Financial Officer |
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