- Net sales of $118.1 million, a decrease of 3% on a reported
basis and flat on a constant currency basis over prior
year
- Global Orthopedics net sales growth of 11% on a constant
currency basis driven by new products and channel
investments
- GAAP EPS of $0.12 and adjusted EPS of $0.08
- Executed partnership with CGBio to commercialize Novosis™
rhBMP-2 growth factor in the U.S. and Canada
- Limited launch of Virtuos™ Lyograft, a first-of-its-kind,
shelf-stable and complete autograft substitute
- Full year revenue guidance of $455 to $465, which represents
flat to 2% growth on a constant currency basis over prior
year
Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial
results for the quarter ended June 30, 2022. Net sales were $118.1
million, earnings per share (“EPS”) was $0.12, and adjusted EPS was
$0.08.
“We're pleased with our execution in the second quarter, which
was led by double digit growth in our global orthopedic business as
well as early commercial traction of new spine products. In
addition, we made significant progress on our innovation
initiatives, highlighted by the successful launches of the
AccelStim™ Bone Healing Therapy and Virtuos Lyograft, as well as
our recent partnerships with LimaCorporate and CGBio,” said
Orthofix President and Chief Executive Officer Jon Serbousek. “We
had solid operational execution, despite the challenges that macro
headwinds continue to present, including continued hospital
staffing shortages, complex spine procedure softness, and patients
deferring care due to economic pressures. In addition, currency
fluctuations during the quarter dampened reported revenue
results.”
Continued Serbousek, “We remain incredibly bullish on the
long-term opportunity here at Orthofix. While the macro environment
is causing near-term volatility, we are fully committed to driving
accelerated topline growth in the high single digits and continuing
to execute towards increasing profitability. With the strength of
our balance sheet as well as organic and inorganic investments made
throughout the organization, we will work to continue to drive
growth over the near term from key new product launches and channel
expansion.”
Financial Results Overview
The following table provides net sales by major product category
by reporting segment:
Three Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2022
2021
Change
Constant
Currency
Change
Bone Growth Therapies
$
47,765
$
49,706
(3.9
%)
(3.9
%)
Spinal Implants
28,222
30,092
(6.2
%)
(5.4
%)
Biologics
14,795
14,852
(0.4
%)
(0.4
%)
Global Spine
90,782
94,650
(4.1
%)
(3.8
%)
Global Orthopedics
27,288
26,744
2.0
%
11.4
%
Net sales
$
118,070
$
121,394
(2.7
%)
(0.5
%)
Gross profit decreased $7.5 million to $86.5 million. Gross
margin decreased to 73.2% compared to 77.4% in the prior year
period.
Net income was $2.5 million, or $0.12 per share, compared to net
income of $2.4 million, or $0.12 per share in the prior year
period. Adjusted net income was $1.5 million, or $0.08 per share,
compared to adjusted net income of $6.3 million, or $0.32 per share
in the prior year period.
EBITDA was $10.0 million, compared to $12.8 million in the prior
year period. Adjusted EBITDA was $11.4 million, or 9.7% of net
sales, compared to $18.4 million, or 15.1% of net sales, in the
prior year period.
Liquidity
As of June 30, 2022, cash and cash equivalents totaled $59.5
million, compared to $87.8 million as of December 31, 2021. As of
June 30, 2022, the Company had no borrowings under its five year
$300 million secured revolving credit facility. Cash flow from
operations decreased $12.9 million to $(12.6) million, while free
cash flow decreased $14.8 million to $(24.3) million.
CGBio Exclusive Recombinant Bone Growth Protein
Partnership
On August 2, 2022, we announced our new long-term strategic
license and distribution agreement with CGBio, a developer of
innovative, synthetic bone grafts currently approved and
commercially available in South Korea, Southeast Asia, Mexico, and
India. The agreement grants us the exclusive right to conduct
pre-clinical and clinical studies, commercialize, promote, market,
and sell the Novosis (rhBMP-2) recombinant bone growth protein in
the U.S. and Canada. Novosis is a novel composite bone graft
material that is flowable and provides moldable handling
characteristics that are unique compared to what is currently on
the market in the U.S. and Canada and represents the next evolution
of bone growth factor technology.
Business Outlook
As of the date hereof, the Company expects the following net
sales results for the year ended December 31, 2022. These
expectations are based on the current foreign currency exchange
rates and do not include any additional exchange rate changes that
may occur this year.
Current 2022 Outlook
Previous 2022 Outlook
(Unaudited, U.S. Dollars, in millions,
except per share data)
Range
Range
Full year net sales
$455 - $465
$475 - $490
Full year net sales growth rates –
reported
(2%) - 0%
2% - 5%
Full year net sales growth rates –
constant currency
0% - 2%
4% - 7%
Full year adjusted EBITDA
$53 - $57
$56 - $61
Full year adjusted EBITDA as percentage of
net sales 1
12%
12% - 13%
Full year adjusted EPS
$0.45-$0.55
$0.58-$0.73
1 Calculated using the midpoint of
estimated full year net sales
The Company is not able to provide expectations of operating
income or GAAP EPS, the closest comparable U.S. GAAP measures to
Adjusted EBITDA and Adjusted EPS, respectively (each of which are
non-GAAP measures), on a forward-looking basis because the Company
is unable to predict without unreasonable efforts the ultimate
outcome of matters (including legal proceedings,
acquisition-related expenses, accounting fair value adjustments,
and other such items) that will determine the quantitative amount
of the items excluded from the applicable non-GAAP measure, which
items are further described in the reconciliation tables and
related descriptions below. These items are uncertain, depend on
various factors, and could be material to the Company’s results
computed in accordance with U.S. GAAP.
Conference Call
Orthofix will host a conference call today at 8:30 AM Eastern
time to discuss the Company's financial results for the second
quarter of 2022. Interested parties may access the conference call
by dialing (844) 200-6205 in the U.S. and Canada, and (929)
526-1599 all other locations, and referencing the access code
135199. A replay of the call will be available for three weeks by
dialing (866) 813-9403 in the U.S. and Canada, and (929) 458-6194
in all other locations, and entering the access code 312854. A
webcast of the conference call may be accessed at
ir.Orthofix.com.
About Orthofix
Orthofix Medical Inc. 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 orthopedics products are
distributed in more than 60 countries via the Company's sales
representatives and distributors. For more information, please
visit www.orthofix.com.
Forward-Looking Statements
This communication contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, 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. These forward-looking
statements are not guarantees of our future performance and involve
risks, uncertainties, estimates and assumptions that are difficult
to predict, including the risks described in Part I, Item 1A under
the heading Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2021 (the “2021 Form 10-K”), and in Part
II, Item 1A under the heading Risk Factors in our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2022. Factors that
could cause or contribute to such differences may include, but are
not limited to, (i) risks relating to the effects of the COVID-19
pandemic on our business, (ii) our ability to maintain operations
to support our customers and patients in the near-term and to
capitalize on future growth opportunities, (iii) risks associated
with acceptance of surgical products and procedures by surgeons and
hospitals, (iv) development and acceptance of new products or
product enhancements, (v) clinical and statistical verification of
the benefits achieved via the use of our products, (vi) our ability
to adequately manage inventory, (vii) our ability to recruit and
retain management and key personnel, (viii) global economic
instability and potential supply chain disruption caused by
Russia’s unlawful invasion of Ukraine and resulting sanctions, and
(ix) the other risks and uncertainties more fully described in our
periodic filings with the Securities and Exchange Commission (the
“SEC”). To the extent that the COVID-19 pandemic continues to
adversely affect our business and financial results, it may also
have the effect of heightening many of the other risks described in
Part I, Item 1A under the heading Risk Factors in our 2021 Form
10-K, such as our ability to generate sufficient cash flows to run
our business and our ability to protect our information technology
networks and infrastructure from unauthorized access, misuse,
malware, phishing and other events that could have a security
impact as a result of our remote working environment or otherwise.
As a result of these various risks, our actual outcomes and results
may differ materially from those expressed in these forward-looking
statements.
This list of risks, uncertainties, and other factors is not
complete. We discuss some of these matters more fully, as well as
certain risk factors that could affect our business, financial
condition, results of operations, and prospects, in reports we file
from time-to-time with the SEC, which are available to read at
www.sec.gov. 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. 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.
ORTHOFIX MEDICAL INC.
Condensed Consolidated
Statements of Operations
Three Months Ended
Six Months Ended
June 30,
June 30,
(U.S. Dollars, in thousands, except
share and per share data)
2022
2021
2022
2021
(Unaudited)
(Unaudited)
Net sales
$
118,070
$
121,394
$
224,488
$
226,987
Cost of sales
31,600
27,439
59,918
53,353
Gross profit
86,470
93,955
164,570
173,634
Sales and marketing
59,888
57,338
114,025
108,123
General and administrative
15,846
18,335
35,174
34,779
Research and development
12,758
13,121
23,970
24,018
Acquisition-related amortization and
remeasurement
(8,663
)
894
(12,162
)
5,363
Operating income
6,641
4,267
3,563
1,351
Interest expense, net
(407
)
(550
)
(782
)
(967
)
Other income (expense), net
(3,192
)
951
(4,128
)
(1,739
)
Income (loss) before income taxes
3,042
4,668
(1,347
)
(1,355
)
Income tax expense
(553
)
(2,248
)
(624
)
(2,041
)
Net income (loss)
$
2,489
$
2,420
$
(1,971
)
$
(3,396
)
Net income (loss) per common share:
Basic
$
0.12
$
0.12
$
(0.10
)
$
(0.17
)
Diluted
0.12
0.12
(0.10
)
(0.17
)
Weighted average number of common shares
(in millions):
Basic
20.0
19.7
20.0
19.6
Diluted
20.1
19.9
20.0
19.6
ORTHOFIX MEDICAL INC.
Condensed Consolidated Balance
Sheets
(U.S. Dollars, in thousands, except par
value data)
June 30,
2022
December 31,
2021
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
59,536
$
87,847
Accounts receivable, net of allowances of
$5,589 and $4,944, respectively
77,069
78,560
Inventories
97,171
82,974
Prepaid expenses and other current
assets
21,416
20,141
Total current assets
255,192
269,522
Property, plant, and equipment, net
58,676
59,252
Intangible assets, net
50,634
52,666
Goodwill
71,317
71,317
Deferred income taxes
1,454
1,771
Other long-term assets
24,383
22,095
Total assets
$
461,656
$
476,623
Liabilities and shareholders’
equity
Current liabilities
Accounts payable
$
32,322
$
26,459
Current portion of finance lease
liability
624
2,590
Other current liabilities
48,151
76,781
Total current liabilities
81,097
105,830
Long-term portion of finance lease
liability
19,571
19,890
Other long-term liabilities
19,042
13,969
Total liabilities
119,710
139,689
Contingencies
Shareholders’ equity
Common shares $0.10 par value; 50,000
shares authorized;
20,000 and 19,837 issued and outstanding
as of June 30,
2022 and December 31, 2021,
respectively
2,000
1,983
Additional paid-in capital
323,738
313,951
Retained earnings
19,029
21,000
Accumulated other comprehensive loss
(2,821
)
—
Total shareholders’ equity
341,946
336,934
Total liabilities and shareholders’
equity
$
461,656
$
476,623
ORTHOFIX MEDICAL INC.
Non-GAAP Financial Measures
The following tables present reconciliations of operating income
(loss), net income (loss), EPS, and net cash from operating
activities, in each case calculated in accordance with U.S.
generally accepted accounting principles (“GAAP”), to, as
applicable, non-GAAP financial measures, referred to as "EBITDA,"
"Adjusted EBITDA," "Adjusted net income (loss)," "Adjusted EPS,"
and "Free cash flow" that exclude items specified in the tables.
The GAAP measures shown in the tables below represent the most
comparable GAAP measure to the applicable non-GAAP measure(s) shown
in the table. A more detailed explanation of the items excluded
from these non-GAAP financial measures, as well as why management
believes the non-GAAP financial measures are useful to them, is
included following the reconciliations. The non-GAAP adjusted
results shown below and within this press release, which exclude
the items specified in the reconciliation tables below, should not
be construed as a substitute for, or a better indicator of, the
Company’s performance than the Company’s GAAP results.
EBITDA and Adjusted EBITDA
Three Months Ended June 30,
2022
(Unaudited, U.S. Dollars, in
thousands)
Total Orthofix
Global Spine
Global
Orthopedics
Corporate
Operating income (loss)
$
6,641
$
17,551
$
(2,290
)
$
(8,620
)
Other income (expense), net
(3,192
)
(810
)
(1,736
)
(646
)
Depreciation and amortization
4,461
2,137
1,441
883
Amortization of acquired intangibles
2,051
1,888
163
—
EBITDA
$
9,961
$
20,766
$
(2,422
)
$
(8,383
)
Share-based compensation
4,449
1,957
252
2,240
Foreign exchange impact
2,991
664
1,801
526
Strategic investments
1,824
39
270
1,515
Acquisition-related fair value
adjustments
(10,714
)
(10,714
)
—
—
Loss on investment securities
123
—
—
123
Legal judgments/settlements
148
110
39
(1
)
Succession and transition charges
68
44
7
17
Medical device regulation
2,257
1,431
830
(4
)
Business interruption - COVID-19
316
313
3
—
Adjusted EBITDA
$
11,423
$
14,610
$
780
$
(3,967
)
As a % of net sales
9.7
%
12.4
%
0.7
%
-3.4
%
Six Months Ended June 30,
2022
(Unaudited, U.S. Dollars, in
thousands)
Total Orthofix
Global Spine
Global
Orthopedics
Corporate
Operating income (loss)
$
3,563
$
28,918
$
(6,562
)
$
(18,793
)
Other income (expense), net
(4,128
)
(735
)
(2,477
)
(916
)
Depreciation and amortization
9,752
4,759
2,962
2,031
Amortization of acquired intangibles
4,276
3,717
559
—
EBITDA
$
13,463
$
36,659
$
(5,518
)
$
(17,678
)
Share-based compensation
8,697
3,411
853
4,433
Foreign exchange impact
4,233
1,037
2,512
684
Strategic investments
2,794
102
415
2,277
Acquisition-related fair value
adjustments
(16,214
)
(16,214
)
—
—
Loss on investment securities
188
—
—
188
Legal judgments/settlements
341
116
223
2
Succession and transition charges
78
54
7
17
Medical device regulation
4,293
2,837
1,466
(10
)
Business interruption - COVID-19
659
641
18
—
Adjusted EBITDA
$
18,532
$
28,643
$
(24
)
$
(10,087
)
As a % of net sales
8.3
%
12.8
%
0.0
%
-4.5
%
Three Months Ended June 30,
2021
(Unaudited, U.S. Dollars, in
thousands)
Total Orthofix
Global Spine
Global
Orthopedics
Corporate
Operating income (loss)
$
4,267
$
14,212
$
(1,037
)
$
(8,908
)
Other income (expense), net
951
398
645
(92
)
Depreciation and amortization
5,324
2,638
1,716
970
Amortization of acquired intangibles
2,235
1,784
451
—
EBITDA
$
12,777
$
19,032
$
1,775
$
(8,030
)
Share-based compensation
3,900
1,618
606
1,676
Foreign exchange impact
(1,061
)
(378
)
(775
)
92
Strategic investments
1,150
152
634
364
Acquisition-related fair value
adjustments
(1,089
)
(714
)
—
(375
)
Legal judgments/settlements
61
1
59
1
Succession and transition charges
613
392
62
159
Medical device regulation
1,987
602
559
826
Business interruption - COVID-19
26
4
10
12
Adjusted EBITDA
$
18,364
$
20,709
$
2,930
$
(5,275
)
As a % of net sales
15.1
%
17.1
%
2.4
%
-4.3
%
Six Months Ended June 30,
2021
(Unaudited, U.S. Dollars, in
thousands)
Total Orthofix
Global Spine
Global
Orthopedics
Corporate
Operating income (loss)
$
1,351
$
22,324
$
(3,899
)
$
(17,074
)
Other income (expense), net
(1,739
)
(218
)
(793
)
(728
)
Depreciation and amortization
10,532
5,252
3,337
1,943
Amortization of acquired intangibles
4,470
3,569
901
—
EBITDA
$
14,614
$
30,927
$
(454
)
$
(15,859
)
Share-based compensation
7,621
3,126
1,132
3,363
Foreign exchange impact
1,601
246
626
729
Strategic investments
2,561
152
1,734
675
Acquisition-related fair value
adjustments
1,475
1,850
—
(375
)
Legal judgments/settlements
2
(50
)
105
(53
)
Succession and transition charges
643
422
62
159
Medical device regulation
3,811
1,105
1,066
1,640
Business interruption - COVID-19
47
6
16
25
Adjusted EBITDA
$
32,375
$
37,784
$
4,287
$
(9,696
)
As a % of net sales
14.3
%
16.6
%
1.9
%
-4.3
%
Adjusted Net Income (Loss)
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, U.S. Dollars, in
thousands)
2022
2021
2022
2021
Net income (loss)
$
2,489
$
2,420
$
(1,971
)
$
(3,396
)
Foreign exchange impact
2,991
(1,061
)
4,233
1,601
Strategic investments
1,817
1,181
2,782
2,633
Acquisition-related fair value
adjustments
(10,714
)
(1,089
)
(16,214
)
1,475
Amortization of acquired intangibles
2,051
2,242
4,282
4,481
Loss on investment securities
123
—
188
—
Legal judgments/settlements
148
61
341
2
Succession and transition charges
68
613
78
643
Medical device regulation
2,260
1,987
4,296
3,811
Business interruption - COVID-19
318
28
663
51
Long-term income tax rate adjustment
(37
)
(82
)
819
(1,562
)
Adjusted net income (loss)
$
1,514
$
6,300
$
(503
)
$
9,739
Adjusted EPS
Three Months Ended
June 30,
Six Months Ended
June 30,
(Unaudited, per diluted share)
2022
2021
2022
2021
EPS
$
0.12
$
0.12
$
(0.10
)
$
(0.17
)
Foreign exchange impact
0.15
(0.05
)
0.21
0.08
Strategic investments
0.09
0.06
0.14
0.13
Acquisition-related fair value
adjustments
(0.53
)
(0.05
)
(0.81
)
0.08
Amortization of acquired intangibles
0.10
0.11
0.21
0.22
Loss on investment securities
0.01
—
0.01
—
Legal judgments/settlements
0.01
—
0.02
—
Succession and transition charges
—
0.03
—
0.03
Medical device regulation
0.11
0.10
0.22
0.19
Business interruption - COVID-19
0.02
—
0.03
—
Long-term income tax rate adjustment
—
—
0.04
(0.07
)
Adjusted EPS
$
0.08
$
0.32
$
(0.03
)
$
0.49
Weighted average number of diluted common
shares
(treasury stock method, in millions)
20.1
20.0
20.0
19.9
Cash Flow and Free Cash Flow
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2022
2021
Net cash from operating activities
$
(12,622
)
$
264
Net cash from investing activities
(13,161
)
(9,792
)
Net cash from financing activities
(1,324
)
(6,528
)
Effect of exchange rate changes on
cash
(1,204
)
(243
)
Net change in cash and cash
equivalents
$
(28,311
)
$
(16,299
)
Six Months Ended June
30,
(Unaudited, U.S. Dollars, in
thousands)
2022
2021
Net cash from operating activities
$
(12,622
)
$
264
Capital expenditures
(11,703
)
(9,792
)
Free cash flow
$
(24,325
)
$
(9,528
)
Constant Currency
Constant currency is a non-GAAP measure, which we calculate 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 financial measure, which we calculate by
adding interest income (expense), net; income tax expense
(benefit); and depreciation and amortization to net income. EBITDA
provides management with additional insight to its results of
operations. EBITDA is the primary metric used by our Chief
Operating Decision Maker in managing our business.
Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted
EPS
These non-GAAP financial measures provide management with
additional insight to its results of operations and reflect the
exclusion of the following items:
- Share-based compensation expense – costs related to our
share-based compensation plans, which include stock options,
restricted stock, performance-based or market-based restricted
stock, and our stock purchase plan; see the share-based
compensation footnote in our Form 10-Q for the quarter ended June
30, 2022 for an allocation of these costs by consolidated statement
of operations line item; note that certain share-based compensation
costs are instead included within medical device regulation for
2021 and 2022
- Foreign exchange impact – gains and losses related to foreign
currency transactions, which are recorded as other income
(expense), net
- Strategic investments – costs related to our strategic
investments, such as due diligence and integration costs, which are
primarily recorded as general and administrative expenses
- Acquisition-related fair value adjustments – comprised of (i)
gains and losses related to remeasurement of contingent
consideration to fair value, which are recorded as operating
expenses and (ii) recognized costs related to acquired in-process
research and development assets, which were expensed
immediately
- Amortization of acquired intangibles – amortization of
intangible assets acquired in business combinations or asset
acquisitions, including items such as developed technologies,
customer relationships, trade names, manufacturing agreements, and
other intangible assets, which are recorded in cost of sales or
operating expenses
- Loss on investment securities – net gains or losses recognized
(realized or unrealized) within other income (expense), net
relating to certain of our investments
- Legal judgments/settlements – adverse or favorable legal
judgments or negotiated legal settlements, which are recorded as
general and administrative expenses
- Succession and transition charges – costs related to the
transition of certain named executive officers and certain targeted
restructuring costs, including any cessation and onboarding
amounts, accelerated share-based compensation expense, consulting
services, and other related expenses, which are primarily recorded
as general and administrative expenses
- Medical device regulation – incremental costs incurred (i) to
establish initial compliance with the regulations set forth by the
European Union Medical Device Regulation (“MDR”) and the U.S. Food
and Drug Administration related to our currently-approved medical
devices, which are recorded primarily as research and development
expenses, and (ii) related to rationalization of certain product
lines that we do not expect to continue to market subsequent to the
effective date of these regulations, which are recorded primarily
as costs of sales
- Business interruption – COVID-19 – gains and losses related to
the realized effects the COVID-19 pandemic has had on our business
operations, which consist primarily of (i) certain legislative
relief received as a result of the COVID-19 pandemic, (ii) costs
associated with the redesign of certain products in response to
supply chain disruption, and (iii) incremental costs incurred to
enhance the safety and sanitation of our facilities
- Long-term income tax rate adjustment – reflects management’s
expectation of a long-term normalized effective tax rate of 27% for
2021 and 28% for the fiscal year 2022 results and outlook, which is
based on current tax law and current expected adjusted income;
actual reported tax expense will ultimately be based on GAAP
earnings and may differ from the expected long-term normalized
effective tax rate due to a variety of factors, including the
resolutions of issues arising from tax audits with various tax
authorities, the ability to realize deferred tax assets, and the
tax impact of certain reconciling items that are excluded in
determining Adjusted Net Income and Adjusted EPS
Free Cash Flow
Free cash flow is a non-GAAP financial measure, which is
calculated by subtracting capital expenditures from cash flow from
operating activities. Free cash flow is an important indicator of
how much cash is generated or used by our normal business
operations, including capital expenditures. Management uses free
cash flow to measure progress on its capital efficiency and cash
flow initiatives.
Usefulness and Limitations of Non-GAAP Financial
Measures
Management uses non-GAAP measures to evaluate performance
period-over-period, analyze the underlying trends in our business,
assess performance relative to competitors, and establish
operational goals and forecasts that are used in allocating
resources. Management uses these non-GAAP measures as the basis for
evaluating the ability of the underlying operations to generate
cash. In addition, management uses these non-GAAP measures to
further its understanding of the performance of our business
units.
Material Limitations Associated with the Use of Non-GAAP
Financial Measures
The non-GAAP financial measures used in this press release 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 and can have a material effect on cash flows.
Similarly, certain non-cash expenses, such as share-based
compensation, do not directly impact cash flows, but are part of
total compensation costs accounted for under GAAP.
Compensation for Limitations Associated with Use of Non-GAAP
Financial Measures
We compensate for the limitations of our non-GAAP financial
measures by relying upon GAAP results to gain a complete picture of
our performance. The GAAP results provide management with the
ability to further understand our performance based on a defined
set of criteria. Management believes that the non-GAAP measures
reflect the underlying operating results of our businesses and
provide an important measure of our overall performance. We provide
detailed reconciliations of the non-GAAP financial measures to the
most directly comparable GAAP measures above and encourage
investors to review these reconciliations.
Usefulness of Non-GAAP Financial Measures to Investors
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. Management believes it is important to
provide investors with the same non-GAAP metrics it uses to
supplement information regarding the performance and underlying
trends of our business operations in order to facilitate
comparisons to our historical operating results and internally
evaluate the effectiveness of our operating strategies. We believe
that 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20220805005043/en/
Orthofix Medical Inc. Alexa Huerta P: 214-937-3190 E:
alexahuerta@orthofix.com
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