LEWISVILLE, Texas–(BUSINESS WIRE)–Orthofix Medical Inc. (NASDAQ:OFIX) today reported its financial results for the third quarter ended September 30, 2019. Net sales were $113.5 million, loss per share (“EPS”) was ($2.14) and adjusted EPS was $0.41.
“While we are very pleased with the sales trajectory of the M6 cervical disc in the U.S. and the continued strong performance of Biologics tissue sales, spine leadership vacancies, the delay of several large stocking orders in Extremities and the uncertainty around the CEO transition timing negatively impacted other parts of our business in the third quarter,” said Brad Mason, President and Chief Executive Officer. “The good news is that these issues are temporary and not reflective of the core value proposition at Orthofix and the opportunity for growth and shareholder value creation. Jon Serbousek hit the ground running and is fully engaged and focused on recruiting candidates for the vacant leadership positions. We expect the momentum of the M6-C disc and the experience and value that the new spine leadership team brings will have a positive impact on future performance.”
Financial Results Overview
The following table provides net sales by major product category by reporting segment:
Gross profit increased $0.9 million to $88.6 million. Gross margin decreased to 78.1% compared to 78.5% in the prior year period.
Based on the initial success observed in our launch of the M6-C artificial cervical disc in the U.S. market, our long-term forecasts of net sales now indicate a greater likelihood of achieving the potential revenue-based milestone payments associated with the Spinal Kinetics acquisition. As such, we recognized expenses during the quarter of $22.3 million associated with the remeasurement of these potential milestone payment liabilities.
Net loss was ($40.5) million, or ($2.14) per share, compared to net loss of ($1.2) million, or ($0.07) per share in the prior year period, primarily driven by the remeasurement of the potential Spinal Kinetics milestone payment liabilities discussed above. Adjusted net income from continuing operations was $7.9 million, or $0.41 per share, compared to adjusted net income of $8.3 million, or $0.44 per share in the prior year period.
EBITDA was ($20.8) million, compared to $3.6 million in the prior year period, largely due to the remeasurement of the potential Spinal Kinetics milestone payment liabilities. Adjusted EBITDA was $20.3 million, or 17.9% of net sales, compared to $21.4 million, or 19.2% of net sales, in the prior year period.
As of September 30, 2019, cash, cash equivalents, and restricted cash totaled $57.5 million compared to $72.2 million as of December 31, 2018. Cash flow from operations for the nine months ended September 30, 2019 decreased $8.7 million to $20.1 million when compared to the prior year period, while free cash flow decreased $12.9 million to $5.2 million.
As of September 30, 2019, the Company had no outstanding indebtedness and borrowing capacity of $125 million under its previous credit facility. On October 25, 2019, the Company, and certain of its wholly-owned subsidiaries, entered into a Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent, and certain lender parties thereto. The Amended Credit Agreement provides for a $300 million secured revolving credit facility maturing in October 2024.
Orthofix will host a conference call today at 4:30 PM Eastern time to discuss the Company’s financial results for the third quarter of 2019. Interested parties may access the conference call by dialing (844) 809-1992 in the U.S. and (612) 979-9886 outside the U.S., and referencing the conference ID 5592946. A replay of the call will be available for two weeks by dialing (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and entering the conference ID 5592946. A webcast of the conference call may be accessed by going to the Company’s website at www.orthofix.com, by clicking on the Investors link and then the Events and Presentations page.
Orthofix Medical Inc. is a global medical device company focused on musculoskeletal products and therapies. The Company’s mission is to improve patients’ lives by providing superior reconstruction and regenerative musculoskeletal solutions to physicians worldwide. Headquartered in Lewisville, Texas, Orthofix’s spine and orthopedic extremities products are distributed in over 70 countries via the Company’s sales representatives and distributors. For more information, please visit www.orthofix.com.
This communication 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. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, 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 further update any such statement, or the risk factors described in Part I, Item 1A under the heading Risk Factors in our Form 10-K for the year ended December 31, 2018, to reflect new information, the occurrence of future events or circumstances or otherwise.