Orthofix(US:OFIX)2026-02-24 14:30Financial Data and Key Metrics Changes - Total global net sales in Q4 reached $218.6 million, a 3% increase supported by strong performances in Bone Growth Therapies and U.S. limb reconstruction segments [12] - Pro forma non-GAAP adjusted gross margin was 71.4%, reflecting the impact of the M6 discontinuation and productivity improvements [15] - Fourth quarter pro forma non-GAAP adjusted EBITDA was $29.2 million, or 13.4% of net sales, with year-over-year margin expansion of approximately 230 basis points [15] - Free cash flow for Q4 was exceptionally strong at $16.8 million, demonstrating the strength and scalability of the business model [15] Business Line Data and Key Metrics Changes - Global spine fixation Q4 net sales grew 10% for the year and in Q4, with U.S. spine fixation net sales growing 6% for the year and 5% for the quarter [4] - Bone Growth Therapies (BGT) net sales were $68.3 million, up 7%, significantly outperforming the market [13] - U.S. limb reconstruction sales were $38 million in Q4, driven by 8% U.S. growth [14] Market Data and Key Metrics Changes - U.S. limb reconstruction grew 8% in Q4 and 16% for the full year, driven by successful product launches [7] - The spine commercial channel optimization efforts led to a 25% year-over-year growth in net sales from the top 30 U.S. distributor partners [5] Company Strategy and Development Direction - The company has rebranded its orthopedics business as limb reconstruction, focusing on four high-value clinical categories, representing an estimated $2.6 billion market opportunity [6] - The full market release of the VIRATA Spinal Fixation System is anticipated in the second half of 2026, expected to enhance surgical efficiency and serve as a multi-year growth catalyst [6] - The company is recalibrating its three-year financial targets to fully capture the anticipated benefits of its spine commercial channel optimization [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 with strong momentum and a solid foundation for growth, driven by new product launches and improved distributor performance [11] - The company expects to deliver durable top-line growth, expanding margins, and strong free cash flow in 2026 [9] - Management highlighted the importance of disciplined execution and targeted capital deployment to create sustainable long-term shareholder value [22] Other Important Information - The company expects full-year net sales of $850 million-$860 million for 2026, representing implied pro forma constant currency year-over-year growth of approximately 5.5% [16] - Adjusted growth margins for the full year are expected to be approximately 72.5% [19] Q&A Session Summary Question: Clarification on CMS impact on BGT - Management clarified that the CMS change will have about a 1% impact in Q1 specific to BGT revenue only [31] Question: Long-range plan (LRP) and margin improvement - Management indicated that the delay in the LRP reflects the extensive work done to strengthen the foundation and optimize the distributor transition [32][33] - They emphasized the focus on gross margin expansion and productivity improvements to achieve mid-teens EBITDA and positive free cash flow [35] Question: 2026 revenue guidance specifics - Management expects above-market growth for BGT and limb reconstruction, with U.S. limb reconstruction returning to double-digit growth in the second half of 2026 [40] Question: 7D placements and biologics portfolio - Management reported a 30% increase in 7D placements in 2025 and expressed confidence in the biologics portfolio's potential for recovery and growth [48][50] Question: Tariff impact and legal settlements - Management confirmed that the tariff impact is included in the 2026 guidance, expecting about $1 million-$2 million impact [54] - They acknowledged having taken an accrual for a legal settlement in Q3 [56]