Orthofix Medical Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: 2024 was a year of strong execution, with Orthofix exceeding guidance. U.S. spine fixation grew 12%, BGT had a record year, and orthopedics set sales records. The company strengthened its market position through innovation and strategic initiatives.
• Innovation and Portfolio: Launched new products such as Reef and WaveForm Interbody, and the TrueLok Elevate TBT system. FDA cleared FLASH EVD for cranial navigation. Focus on Vital Few initiatives to drive profitable growth.
• Financial Strength: Fourth quarter net sales were $215.7 million (+8% constant currency YOY). Adjusted EBITDA margin expanded, and free cash flow was $15.2 million. A new term loan was negotiated for better capital structure.

Segment Performance

• Global Spinal Implants, Biologics and Enabling Technologies: Fourth quarter revenue was $116 million, with year-over-year growth of 4.5%. U.S. spine fixation grew 12% due to strong market demand for Reef and WaveForm Interbody products and distributor network expansion.
• Bone Growth Therapies (BGT): Q4 revenue was $63.9 million, growing 9% overall. BGT fracture grew 10% driven by investment in the fracture market sales channel. Growth is expected to moderate due to BGT Spine's #1 market share.
• Global Orthopedics: Q4 revenue was $35.8 million, growing 18% globally. U.S. orthopedics grew 21% led by TrueLok and Fitbone products, while international orthopedics grew 17%.

Guidance

• 2025 Net Sales: Expected to be $818 million to $826 million, with constant currency growth midpoint of 6.5%. Excludes sales from discontinued M6 artificial discs and includes ~$4 million foreign currency impact.
• EBITDA: Projected to be $82 million to $86 million, representing 180 basis points of EBITDA margin expansion.
• Long-Term Targets: Increased long-term net sales CAGR from 2025-2027 to 6.5%-7.5% from the prior 6%-7% target.

Risks

• Discontinuation of M6 Products: The decision to sunset noncore orthopedic products like the M6 artificial discs, as they were a headwind to top line growth, to focus resources on profitable growth areas such as deformity correction in spine.

Question and Answer

• Q: Discontinuation of M6, reasons and impact? A: Massimo Calafiore stated the exit from M6 was due to the focus on deformities in spine and freeing resources for future strategy. The impact is considered in the financial guidance.
• Q: M&A thoughts? A: Massimo Calafiore mentioned the company's strong balance sheet creates opportunity to evaluate M&A if it fits the portfolio, but the focus is on executing current strategies.
• Q: 7D adoption and portfolio pull-through? A: Massimo Calafiore noted 7D had a record year with 150% YOY earn-out growth, driving stickiness and portfolio conversion with surgeon partners.
• Q: 2025 guide, margin impact from M6? A: Julie Andrews explained the EBITDA guide accounts for M6 exit and foreign currency, with margin expansion offsetting some headwinds from M6 discontinuation.