Orthofix Medical Inc. Q3 FY2025 earnings call

• Orthofix delivered strong quarter with consistent execution and financial discipline, achieving solid year-over-year and sequential revenue growth led by U.S. Spine and Orthopedics.
• 7th consecutive quarter of adjusted EBITDA margin expansion and sustained positive free cash flow generation.
• U.S. Spine Fixation net sales up 8%, procedural volume up 10%, driven by adoption of 7D FLASH navigation system and momentum across spine portfolios; top 30 U.S. distributor partners grew net sales 25% y/y in Q3.
• Limited market release of VIRATA Spinal Fixation system, engineered to optimize surgical workflow; U.S. pedicle screw market projected to grow 4%-5% CAGR through 2030.
• Orthopedics business had standout quarter with U.S. Orthopedics growing 19% due to TrueLok Elevate launch and new product introductions; Bone Growth Therapies grew 6% outperforming market.

Global Spinal implants, biologics and enabling Technologies delivered $108.6 million in pro forma net sales, up 6% year-over-year. Bone Growth Therapies achieved $61.2 million in net sales, reflecting 6% growth outperforming the market. Global Orthopedics grew 6% to $33.6 million in the third quarter, led by 19% growth in the U.S. as a result of the market release of TrueLok Elevate and the FITBONE Bone Transport nail. U.S. Spine Fixation saw net sales increase 8%, with procedural volume up 10%. International Spine Fixation net sales grew by 8.6% year-over-year.

• Narrowed 2025 full-year pro forma net sales guidance to $810 million to $814 million with midpoint $812 million, unchanged from prior guidance.
• Raised 2025 full-year pro forma non-GAAP adjusted EBITDA guidance range to $84 million to $86 million.
• Expect gross margins to be approximately 72% for the second half of 2025; operating expenses to improve by ~200 basis points vs 2024; stock-based compensation expense ~$28M-$29M; adjusted depreciation and amortization ~$38M; interest and other expenses ~$5M per quarter.
• Anticipate formal 2026 guidance on Q4 call; VIRATA full launch in 2027 and continued acceleration of TrueLok Elevate to drive growth.

Q: On 2025 revenue guidance, beat 3Q on pro forma by about $3 million but midpoint unchanged, and 4Q revenue implies slight decel.

A: Julie Andrews said they set guidance appropriately considering comparability to strong Q4 2024.

Q: About 2027 financial targets and path to 6.5%-7.5% CAGR.

A: Julie Andrews noted 2026 guidance not provided, with 2027 more weighted due to full VIRATA launch mid-2026 and continued acceleration of TrueLok Elevate; Massimo added momentum from new distributors continuing to benefit in '26 and '27.

Q: Strength in U.S. Spine, key drivers.

A: Massimo said key drivers include encouraging momentum from recent distributor transitions where top 30 U.S. distributor partners grew net sales 25% y/y in Q3 and 33% trailing 12-month; innovation pipeline with VIRATA and 7D FLASH navigation; and placements of 7D units up year-to-date.

Q: Distributor increases and transition, particularly domestically.

A: Massimo said it's a combination of expansion and consolidation, consolidating distributors in some areas and adding new ones in regions with poor presence.

Q: PBT with TrueLok Elevate and studies/publications.

A: Massimo said they believe in clinical validation, with interest in the surgeon community around the procedure and organization focused on validating Elevate, expecting other centers to study the surgical technique.