Thank you for standing by. At this time, I would like to welcome everyone to the OrthoFix second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Julie Dewey.

Thank you, and good morning, everyone. Welcome to Orthofix's second quarter 2026 earnings call. I'm Julie Dewey, Orthofix's Chief IR and Communications Officer. Joining me today are President and Chief Executive Officer Massimo Calafiori and Chief Financial Officer Julie Andrews. Earlier today, Orthofix released its financial results for the second quarter and did June 30, 2026. A copy of the press release and supplemental presentation are available on our Investor Relations website, and a replay of this call will be posted shortly after we conclude. Before we begin, please note that our remarks include forward-looking statements. These statements involve risks and uncertainties, and actual results may differ materially. All statements, other than those of historical facts, are forward-looking statements. We do not undertake any obligation to revise or update such forward-looking statements. Factors that could cause actual results to differ materially are discussed in our most recent filings with the SEC and may be included in our future filings with the SEC. We will also reference certain non-GAAP financial measures during today's call, including certain growth rates presented on a pro forma, constant currency basis and excluding discontinued M6 artificial disc product lines. Reconciliations to the most directly comparable U.S. GAAP measures and additional information are included in our press release and supplemental materials. Here's today's agenda. Massimo will start with business performance and operational highlights. Julie Andrews will follow with our financial results and guidance. Then we'll open the call for Q&A. With that, I'll turn the call over to Massimo to discuss our second quarter performance and the progress we're making across our strategic priorities. Massimo?

Thank you, Julie. And good morning, everyone. I appreciate you joining us today. Our second quarter results provide further evidence that the operational actions we have taken over the past year are showing up more clearly in the business. While that progress is encouraging, our transformation remains a work in progress, and we are staying disciplined in how we evaluate growth quality, commercial productivity, and returns. We delivered 5% pro forma cost and currency net sales growth over prior year, and so encouraging trends across several areas of the portfolio, including double-digit growth in global limb reconstruction and spine fixation, sequential momentum in biologics, and the restoration of Medicare reimbursement for bone growth stimulators, which removes a meaningful headwind for our therapeutic solutions business as we enter the second half of the year. While we recognize that transformations are rarely linear and not every part of the portfolio will improve at the same pace, we believe orthofix today is operating from a stronger position than it was a year ago. Our approach remains disciplined and focused. We believe the underlying drivers of our performance are becoming more constructive, supported by clearer execution priorities and better visibility in key parts of the business. With that context, let me walk through our business performance in Q2, starting with Spine. In Spine, Global Spine Fixation net sales grew 10% on a cost and currency basis, with US Spine Fixation net sales up 3% in the quarter. Our top 30 distributors, who represent approximately 80% of our spine fixation cells, continued to perform well. At the same time, we saw a steeper decline across the remaining smaller distributors, where productivity has been below our expectation for several quarters. We are actively evaluating where we can generate the best long-term returns among this group. As part of the process, we are being disciplined about where we invest resources and where we may choose to consolidate or exit relationships that are not delivering sustainable growth. This approach reflects our focus on profitable growth and strong returns. We expect these challenges with our smaller distributors to continue through the balance of the year. Longer term, our objective is to build a higher quality, more productive distributor network that can support sustainable growth, stronger adoption of new products, and better returns on future commercial investment. We are also preparing to bring new innovation into the channel. We completed our first clinical cases with our Birada Minimally Invasive System in Q2 and are continuing to prepare for the full market launch of our Virada spinal implant system later in the fourth quarter. Importantly, the initial surgeon feedback has been encouraging and supports our continued focus on building an integrated procedural platform that combines Birada with our inter-body solution, surgical Ascres technology, and 7D enabling technologies portfolio. Beyond spine, we believe early signs indicate that our focused execution is contributing to better performance in areas that have been under pressure. In biologic, we saw encouraging signs that the business is moving in the right direction. Net sales were approximately flat year-over-year, represented a marked improvement from the contraction we experienced through 2025. This was the second consecutive quarter of improved year-over-year performance, moving from double-digit declines last year to approximately flat performance in Q2. While we are encouraged by this progress, we believe more consistency is needed before declaring a sustained return to growth. Our priority now is converting this more constructive trajectory into durable growth, supported by stronger account engagement, higher utilization, and targeted commercial focus around key products, such as Osteukov, bioactive synthetic bone graft. To further support the long-term growth potential of the business, we are pairing improved commercial execution with targeted investment in clinical evidence generation. for OsteoCoV and Virtuos, and Product Registry for Strand Plus. This investment is intended to support a more durable recovery. We saw a different but equally important dynamic in therapeutic solutions, where underlying demand remained resilient, despite the reimbursement pressure that affected part of the quarter. Therapeutic Solutions, formerly bone growth therapies, delivered 3% year-over-year net sales growth, despite the impact from the medical reimbursement decrease that was in effect for a portion of the second quarter. That performance reinforces the durability of the franchise, which continued to benefit from steady demand, a strong margin profile, and favorable cash-general action characteristics. We were also pleased that CMS restored medical reimbursement for bone growth stimulator to its prior level following stakeholder feedback, including concerns we raised. This decision removes a meaningful headwind and supports improved second-half visibility, with utilization and prescribing trends during the quarter remaining constructive. As we return to a more supportive reimbursement environment, we plan to continue investing in elevating the patient and physician experience within the therapeutic solution franchise. During the quarter, we launched AxelSTEM 2.0. This award-winning bone growth therapy device was redesigned with a streamlined form factor to provide enhanced ease of use. It is now compatible with our StimOnTrack mobile app, a StimMD physician platform, giving patient and physician greater visibility into device utilization and therapy progression, further strengthening the value proposition of the franchise. We view therapeutic solutions as more than a highly profitable franchise. Its established physician and patient reach provides a valuable channel for evaluating adjacent growth opportunities where we see clear clinical relevance and attractive returns. Global limb reconstruction demonstrated solid performance during the quarter, supported by strong international momentum and sustained demand across key product families. Net sales grew 11% on a constant currency basis, led by the true lock, elevate, and fit bond. In the U.S., growth was below our expectation, but the primary dynamic was not a lack of clinical interest. Rather, we are still building the commercial infrastructure required to more consistently convert that interest into revenue in what remains an emerging limber reconstruction market. Our focus is on improving distributor productivity, expanding market development activities, increasing commercial consistency. As those capabilities mature, we expect U.S. performance to become more consistent over time. We also see opportunities to extend our limb reconstruction expertise into adjacent areas of unmet clinical need. One example is diabetic foot ulcers, a large and underserved market where we believe our core technologies may have broader clinical applications. Our near-term focus is on generating the clinical evidence needed to support a potential expanded indication, while maintaining a disciplined approach to investment and development. We view this as an important pipeline opportunity that could expand the reach of our limb reconstruction portfolio and support durable long-term growth. To recap, Q2 showed tangible progress in several areas of the business, while also reinforcing where continued execution is required. Our focus remains on improving quality of revenue, strengthening commercial productivity, and building a more consistent path to profitability and cash generation. Just as importantly, we believe the combination of focused innovation, a more productive commercial organization, and disciplined capital allocation position us to create sustainable long-term value for shareholders. With that, I'll turn the call over to Julie Andrews to review our financial results and guidance.

Thank you, Massimo, and good morning. For purposes of consistency, the growth rates I'll reference today are on a pro forma, constant currency basis and exclude the impact from discontinued M6 product lines. From a financial perspective, Q2 results reflected improving revenue trends across several areas of the portfolio, while profitability was impacted by geographic mix and continued investment in priority growth initiatives. Let me briefly review performance by business segment. Global Spinal Implants, Biologics, and Enabling Technologies generated $109 million in net sales, an increase of 4% versus the prior year period. Growth was led by spine fixation, which benefited from continued international momentum and timing of international distributor orders. Therapeutic Solutions generated $64.2 million in net sales, up 3% year-over-year. The business grew despite temporary reimbursement pressure, reinforcing our view that underlying demand remained resilient. With Medicare reimbursement restored, we expect Therapeutic Solutions to contribute more favorably in the second half. Global limb reconstruction delivered net sales of $37.7 million in the second quarter, an increase of 11%. Growth was driven by strong international demand and continued adoption of key product families, including Trulock Elevate and Fitbone. While growth in the U.S. was more modest during the quarter, our second-half assumptions reflect greater commercial productivity, the lapping of sun-setting product lines, and continued prioritization of our highest return growth opportunities. Moving down the P&L, non-GAAP adjusted gross margin was 71.7%, reflecting an unfavorable geography mix during the quarter. Adjusted EBITDA was $20.1 million. While net sales trends improved during the quarter, profitability was impacted by geographic mix, credit losses in certain international markets, and continued investment in key launches partially offset by ongoing cost optimization initiatives. We remain confident that the resource alignment and cost actions underway will support our full-year profitability outlook. We ended the quarter with $104.4 million in total cash, including restricted cash, providing us with flexibility to support both our operating priorities and strategic investments. Before turning to guidance, I want to provide context around our European MDR strategy for spying that is reflected in our updated net sales outlook and is important to understand and model appropriately. As background, C-SPINE made the decision in 2022 to exit the European spine market and focus resources on the U.S., and that strategy remained in place following the merger. Accordingly, we had not been pursuing MDR compliance for the spine portfolio. More recently, one of our largest European distributors expressed strong interest in continuing to sell some of our spine products in its territory. We entered into a strategic contractual arrangement under which the distributor is funding our MDR certification-related work required to support continued market access for these spine products. This allows us to preserve a targeted opportunity in Europe while maintaining our disciplined investment priorities. To support this arrangement, the distributor intends to purchase sufficient inventory in 2026 to maintain continuity of supply and ensure continued market access while MDR certification and related country-specific market access requirements are completed. These purchases are included in our updated 2026 Net Sales Outlook. The key takeaway is that we expect this arrangement to contribute approximately $15 million of incremental net sales in 2026 with the majority expected to be recognized in q4 we are calling this out explicitly because it would be a discrete timing benefit and should be distinguished from the underlying run rate performance of the business as a result the arrangement is also expected to create an approximately 22 million dollar net sales headwind in 2027 while mdr requirements are completed let me now turn to our updated full year outlook again all measures are provided on a non-gap pro forma basis are based on current foreign currency exchange rates and do not contemplate any additional exchange rate changes during the remainder of the year we now expect full year 2026 net sales in the range of 845 million to $855 million, representing approximately 5% pro forma constant currency growth at the midpoint and an increase of approximately $7 million from the outlook we provided in May. The updated outlook reflects underlying business trends plus several discrete factors that are shaping our expectations for the balance of the year. First, Medicare reimbursement for bone growth stimulators has been restored to its prior level, retroactive to May 18, 2026. Second, our strategic arrangement with our European distributor contributes revenue associated with inventory purchases tied to the MDR transition. Third, we are seeing encouraging trends across several areas of the business, including stabilization in biologics and continued strength in portions of limb reconstruction. And fourth, those positives are offset by ongoing softness among smaller U.S. fine distributors whose performance remains below our expectations and is reflected in our outlook for the balance of the year. We are increasing our adjusted EBITDA guidance range to $95 million to $98 million. While the MDR-related distributor revenue carries a different margin and timing profile than our core revenue, the restoration of Medicare reimbursement, ongoing cost actions, and continued operational progress returns our profitability outlook to the level we expected before the Medicare reimbursement reduction was introduced in May. Our focus remains on balancing net sales growth, profitability, and cash generation as we execute against our long-term value creation priorities. As you think about the second half, we expect third quarter net sales to generally be consistent with Q2 as reimbursement restoration and improving trends in several businesses are expected to be largely offset by ongoing softness among smaller US fine distributors looking to the fourth quarter sequential growth is expected to be driven by the timing of inventory purchases associated with the European distributor arrangement and normal seasonality we currently expect the majority of the approximately 15 million 2026 net sales benefits to be recognized in q4 i also want to note that the european distributor arrangement creates a temporary free cash flow timing headwind in 2026 as some cash receipts are projected to occur in 2027 while inventory related cash outflows occur this year importantly this timing dynamic does not change our view of the underlying cash-generating potential of the business are the quality of earnings reflected in our outlook. Taken together, we believe our updated outlook reflects more favorable performance indicators in key areas of the business, balanced by the timing of the MDR-related net sales benefit and the continued softness among smaller U.S. spine distributors. We remain focused on improving growth quality, expanding profitability, and strengthening cash generation. Now let me turn it back to Massimo for closing remarks. Massimo.

Thank you, Julie. Q2 was an important proof point in our transformation. We made progress in several parts of the business, but we remain focused on consistent execution, disciplined investment, and improving the quality of our growth. We believe Orsofix is entering the second half with greater clarity, more favorable trends across several businesses, and a focused approach to driving profitable growth and cash generation. Our priorities remain clear. Improving commercial productivity, advancing differentiated innovation and generating the clinical evidence needed to support future growth opportunity. Our objective is not growth at any cost. It is durable, profitable growth supported by better commercial productivity, disciplined investment, and stronger business fundamentals. Before we take your questions, I want to thank our team members and commercial partners around the world for their continued commitment and execution. With that, let's open the call for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Caitlin Roberts with Canaccord Genuity. Please go ahead.

Thanks for taking the questions. I guess just to start on guidance, you, you know, you increase the guidance again, but not as much as prior to the CMS changes, maybe some more color on what's changed since that time, whether that's, you know, the partial quarter impact of the pricing change or, you know if there's more in there from possibly the small fine distributor challenges any any color on that would be great yeah thanks caitlin so the updated outlook reflects a combination of underlying business trends and several discrete factors that are shaping our expectations for the balance of the year so first on the positive side we have the restoration of the medicare

reimbursement which is approximately a 12 million dollar benefit as well as the european distributor arrangement, which is expected to contribute approximately $15 million of incremental net sales in 2026. We're also seeing stabilization across and encouraging trends across several areas of the business, including biologics and portions of our limb reconstruction business. At the same time, those factors are being offset by the ongoing softness among our smaller U.S. fine distributors, where performance remains below our expectations. And that's what we're And we, you know, we believed it was important to be transparent about both the progress we're seeing in the execution risk that remains. And those are the factors that are influencing our reset of our guidance.

Yeah. And, you know, like every transformation is not always linear. And we didn't change our main thesis to be very disciplined on prioritizing quality revenue. So what we see, the softness on this 20% of our smaller distributor is not related to demand, it's really related to spine channel, and we didn't feel to change how we operate in the business. But at the same time, I think that it's very important to highlight the fact that we are maintaining our EBITDA target. At the same time, we are doubling down on innovation. I'm sure that you heard about our investment. We're making biologics. Biologics is the recovery very well. We are strongly believe on our product and investing on clinical evidence for osteocorps, virtuos, and start a big registry for Strength Plus. In orthopedics, we see a great opportunity with this diabetic foot ulcer, and we just submitted our IDE to the FDA, and we're waiting for their feedback. and all of this to open up a great, very great, and potentially very lucrative opportunity for the organization.

Understood.

And then just any thoughts on the reinstating in LRP now with the pricing decision reversed and the guidance for this year increased? yeah i think we're still assessing where we are and looking at you know our actions particularly related to the smaller spine distributors and how that may uh impact our lrp over the next year or so understood thanks so much again if you would like to ask a question press star one on your telephone keypad and your next question comes from the line of tom stefan with steeple please go ahead

Great. Hey, guys. Thanks for taking the questions. I wanted to start off on the Europe MDR distributor order dynamic and core growth. Basically, as we think about apples to apples guidance on revenue compared to your previous outlook, we should be taking off that $15 million of sales that were not previously there. Like those are, that's incremental. Is that correct? Is we're trying to get to sort of quote unquote core growth? A, do I have, I guess to start, Julie, do I have that correct? Okay, got it. And so if we take out the $15 million tailwind in the back half, I mean, by my math, that would imply core growth on revenue of one to 2% in the second half. Hopefully I have that rate as well. So, you know, Julia or Massimo, why would growth slow to those levels in the core business just given 1H and 2Q are kind of in that mid-single-digit range on a pro forma constant currency basis? And then I'll have a couple follow-ups.

Yeah, Tom. So, I think when you're looking at it, I think you're in the range, you know, two to three percentage core growth rate. Again, I think if you look at our smaller U.S. fine distributors, we're seeing a decrease, a weakening there beyond what with our expectations, and that's what's really driving it in the back half of the year. And again, we're going to be, you know, probably a little bit more discretionary about how we think about those distributors and what we may do with those distributors, whether we continue to consolidate or exit weaker distributors that are not delivering our sustainable growth.

Yeah, look, we are, as I said before, we are intentionally prioritizing commercial channel quality. We didn't, we never changed our thesis. So we want productivity, a long-term value creation, overgrowth at all costs.

So this is, this is where we are today. got it okay great and probably a good segue into my my second question um just on the declines from the smaller distributors um you know you talked about how massimo you talked about how these headwinds will will persist rest of the year um i guess a two-parter here you know one can you elaborate on just why is this tracking weaker than expected if you can sort of flesh that out a little bit. And then two, as we think beyond this year, why won't this be a continued headwind or what specifically resolves this issue?

It's just the increased percentage of revenue that is going to be concentrated to our top distributor. So right now we're at 80% of our total revenue is in the hand of the top 30. So the exercise for us for the remainder of the year is within this 20% really pick and choose the partners we want to invest on. If you remember in earlier calls, we divided our overall commercial strategy in three different parts. One was focusing on distributors that were already at scale, two existing distributors that can create scale, and three, identify the smaller distributors in key areas of interest for us to invest on, and this is what we're going to keep going. I think that what is creating right now, the, you know, like the headwind that we're seeing is mostly based on asset utilization. We're very disciplined about how we give assets in order to produce the revenue. If the asset on turn is not a good investment for us to keep feeding this smaller shop, because in order to do that, we should totally change our investment thesis, increasing cash spending for bad revenue. So naturally, you see that the work that you are doing is going to just to restate the growth that you are seeing from our top partner over time. Similar to what we did in biologics, you see we were very disciplined despite the head in the last year. We were very focused and now we start to see we bear the fruit of our strategy. So I'm not expecting this to change into SPI.

Got it. That's great. I'll squeeze in one more quick one, if that's okay. Julie, for you, just appreciate the free cash flow commentary and maybe some of the moving parts around the EU MDR order and timing around inventory. But any way you can help us, you know, kind of quantify where 2026 free cash flow may land, you know, any sort of range would be super helpful. Thanks, everyone.

Thanks, Tom. I mean, we're not providing an updated outlook on free cash flow for the year. We haven't reinstated our guidance there. you know, I think, you know, the value of the order, $15 million, you know, you can kind of estimate and look at what our previous guidance was related to free cash flow and take those factors into consideration.

There are no further questions at this time. I will now turn the call back over to Julie Dewey for closing remarks.

Thank you, everyone, for your questions and for joining us today. We appreciate your time and interest. If you need any additional information, please reach out we look forward to updating you next quarter this concludes our call today ladies and gentlemen thank you all for joining you may now disconnect.