Orthofix Medical Inc. (OFIX)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 net sales were $215.7M (+8% YoY constant currency) with non-GAAP adjusted EBITDA of $23.9M (11.1% margin); GAAP diluted EPS was $(0.75), and free cash flow was $15.2M .
• Segment strength: U.S. Spine Fixation +12%, Bone Growth Therapies +9% (BGT Fracture +10%), Global Orthopedics +18% constant currency; record year for 7D FLASH Navigation placements .
• FY25 guidance: net sales $818–$826M (ex-M6 discs; ~6.5% constant currency growth midpoint), adjusted EBITDA $82–$86M, positive FCF (ex-M6 restructuring); long-term net sales CAGR target raised to 6.5–7.5% (from 6–7%) .
• Strategic portfolio actions: discontinuation of M6 artificial disc lines (2024 sales $23.4M) to focus capital on higher-return spine fixation/deformity opportunities; management emphasized margin and FCF discipline as catalysts .

What Went Well and What Went Wrong

• What Went Well

  • Broad-based topline strength: record Q4 net sales ($215.7M), non-GAAP gross margin 71.1%, adjusted EBITDA up 22% YoY; strong free cash flow conversion ($15.2M) .
  • U.S. market-led performance: U.S. Spine Fixation +12% YoY, aided by WaveForm and Reef interbody adoption and distributor expansion; management highlighted “record number of 7D FLASH Navigation System placements” in 2024 .
  • CEO tone on execution and momentum: “Our fourth quarter results reflect outstanding performance across all three major product lines... We enter 2025 with great momentum” (Massimo Calafiore) .

• What Went Wrong

  • GAAP profitability remains challenged: Q4 GAAP net loss $(29.1)M; diluted EPS $(0.75); YoY net loss widened vs Q4 2023 amid higher interest and non-operating expense .
  • Non-GAAP adjusted gross margin down ~110 bps YoY (71.1% vs 72.2%) due to mix and adjustments, even as EBITDA improved .
  • Biologics growth variability and portfolio rationalization: management is sunsetting non-core orthopedics SKUs and discontinuing M6 discs (headwind to reported growth), requiring investor vigilance on transition and any near-term dislocation; FY25 FX headwind (~$4M) also weighs on reported growth .

Financial Results

Note: S&P Global Wall Street consensus was not available at time of analysis due to data access limits; estimate comparisons are therefore not shown.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our fourth quarter results reflect outstanding performance across all three major product lines... We enter 2025 with great momentum as two integrated organizations” — Massimo Calafiore, President & CEO .
• “We delivered record fourth quarter and full year results... prioritized investment in innovation... and focus on improving margins and cash” — Julie Andrews, CFO .
• On 7D earn-outs: “The vast majority... is exceeding our expectation... creating higher stickiness between our device, our product and the enabling tech” — CEO .
• On M6 exit: “We saw that with the decrease of demand on M6... not worth to invest... we wanted to start 2025 from a much cleaner slate” — CEO .

Q&A Highlights

• M6 discontinuation rationale: demand down; focus resources on deformity/spine fixation; phase-out to minimize gaps; FY25 guide contemplated M6 impact (2024 M6 sales $23.4M) .
• EBITDA vs Street: FY25 adjusted EBITDA guide ($82–$86M) above consensus “just over $80M” per CFO’s commentary; implies margin outperformance and M6 less profitable than perceived .
• 7D traction: record year; earn-outs +150% YoY; strong portfolio pull-through at sites; long-run driver of sustained spinal implant share gains .
• FY25 cadence: Q1 below low-end of full-year growth range due to international stocking timing; FX headwind heavier in Q1/Q3; Q1 OpEx seasonally high; EBITDA margin improvement weighted to 2H .
• FY25 financial guardrails: gross margin ~71%; OpEx −~100 bps; D&A ~$38–$40M; SBC ~$33–$34M; interest & other ~$5M/quarter; positive FCF excluding M6 restructuring .

Estimates Context

• S&P Global consensus for Q4 revenue/EPS was unavailable at time of analysis, so beat/miss vs Street cannot be assessed.
• On the call, management noted FY25 adjusted EBITDA guidance ($82–$86M) is above Street modeling “just over $80M,” implying upward pressure to consensus margins; however, this is based on call commentary rather than S&P Global data .

Key Takeaways for Investors

• Execution improving: Orthofix delivered record Q4 net sales and stronger non-GAAP margins, with positive free cash flow, indicating operational discipline and cash conversion traction .
• U.S. Spine momentum sustainable: product innovation (Reef/WaveForm), distributor upgrades, and 7D earn-outs are driving above-market growth, with early indications of durable pull-through .
• Portfolio focus to lift quality of growth: discontinuing M6 and sunsetting non-core ortho SKUs should enhance growth, margin mix, and capital efficiency in FY25–27 .
• FY25 guide credible: net sales $818–$826M (ex-M6) and EBITDA $82–$86M, with 2H-weighted margin improvement; monitor Q1 seasonality and FX (~$4M headwind) for near-term prints .
• Long-term targets upgraded: net sales CAGR raised to 6.5–7.5%; management reiterates mid-teens adjusted EBITDA by 2027 and positive FCF through the plan period (ex-M6 restructuring) .
• Watch key catalysts: AccelStim 2.0, Reef L full launch, TrueLok Elevate TBT scaling, and continued 7D deployments; these should support share gains in spine and limb reconstruction .
• Risk checks: GAAP losses persist; non-GAAP margin improvement must be sustained; biologics and international orthopedics have quarter-to-quarter variability; execution on portfolio transition will be critical .

Appendix: Additional Data Points

• Full-year 2024 net sales $799.5M (+7.1% constant currency), adjusted EBITDA $67.4M (8.4% margin), GAAP net loss $(126.0)M, cash & restricted cash $85.7M as of 12/31/24 .
• Q4 non-operating expense and interest rose vs prior year, weighing on GAAP EPS; adjusted reconciliations provided across SG&A, R&D, and non-operating expense .