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10-Q

Orthofix Medical Inc. (OFIX)

10-Q 2024-08-06 For: 2024-06-30
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Added on April 09, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 0-19961

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ORTHOFIX MEDICAL INC.

(Exact name of registrant as specified in its charter)

Delaware 98-1340767
(State or other jurisdiction of<br><br>incorporation or organization) (I.R.S. Employer<br><br>Identification No.)
3451 Plano Parkway,<br><br>Lewisville, Texas 75056
(Address of principal executive offices) (Zip Code)

(214) 937-2000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ☐ Accelerated filer ☒
Non-Accelerated filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of August 2, 2024, 38,174,785 shares of common stock were issued and outstanding.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.10 par value per share OFIX Nasdaq Global Select Market

Table of Contents

Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 4
Condensed Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023 4
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024, and 2023 5
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2024, and 2023 6
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024, and 2023 7
Notes to the Unaudited Condensed Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 32
Item 4. Controls and Procedures 32
PART II OTHER INFORMATION
Item 1. Legal Proceedings 34
Item 1A. Risk Factors 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 34
Item 3. Defaults Upon Senior Securities 34
Item 4. Mine Safety Disclosures 34
Item 5. Other Information 34
Item 6. Exhibits 34
SIGNATURES 38

Forward-Looking Statements

This Quarterly Report 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. All statements, other than statements of historical fact, contained in this report, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential,” or “continue” or the negative version of those terms and other similar expressions. Forward-looking statements include, but are not limited to, statements about:

  • our future operations, sales, expenses, and financial performance;
  • our operating results;
  • our intentions, beliefs, and expectations regarding the anticipated benefits of the merger with SeaSpine Holdings Corporation ("SeaSpine"), including the anticipated synergies and cost-savings from the merger;
  • our plans for future products and enhancements of existing products;
  • anticipated growth and trends in our business;
  • the timing of and our ability to maintain and obtain regulatory clearances or approvals;
  • our belief that our cash and cash equivalents, investments, and access to our credit facilities will be sufficient to satisfy our anticipated cash requirements;
  • our relationships with customers and distributors;
  • our manufacturing abilities and the performance of our suppliers;
  • our ability to achieve market penetration and the success of our expansion efforts;
  • anticipated trends and challenges in the markets in which we operate; and
  • the impact of investigations, claims, and litigation.

Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates, and assumptions. Any or all forward-looking statements that we make may turn out to be wrong (due to inaccurate assumptions that we make or otherwise), and our actual outcomes and results may differ materially from those expressed in forward-looking statements. Potential risks and uncertainties that could cause actual results to differ materially include, but are not limited to, those set forth in Part I, Item 1A under the heading Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 10-K"); Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2023 10-K; and elsewhere throughout the 2023 10-K, and in our reports filed with the U.S. Securities and Exchange Commission (the "SEC") subsequent to the date we filed the 2023 10-K with the SEC. You should not place undue reliance on any forward-looking statements. Further, any forward-looking statement in this report speaks only as of the date hereof, unless it is specifically otherwise stated to be made as of a different date. Except as required by law, we undertake no obligation to update, and expressly disclaim any duty to update, our forward-looking statements, whether as a result of circumstances or events that arise after the date hereof, new information, or otherwise.

Trademarks

Solely for convenience, our trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

Item 1. Financial Statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Balance Sheets

(U.S. Dollars, in thousands, except par value data) December 31,<br>2023
Assets
Current assets
Cash and cash equivalents 26,366 $ 33,107
Restricted cash 2,500 4,650
Accounts receivable, net of allowances of 8,368 and 7,130, respectively 125,361 128,098
Inventories 210,040 222,166
Prepaid expenses and other current assets 21,798 32,422
Total current assets 386,065 420,443
Property, plant, and equipment, net 154,111 159,060
Intangible assets, net 108,310 117,490
Goodwill 194,934 194,934
Other long-term assets 38,578 33,388
Total assets 881,998 $ 925,315
Liabilities and shareholders’ equity
Current liabilities
Accounts payable 50,362 $ 58,357
Current portion of long-term debt 4,688 1,250
Current portion of finance lease liability 734 708
Other current liabilities 100,183 104,908
Total current liabilities 155,967 165,223
Long-term debt 113,315 93,107
Long-term portion of finance lease liability 18,160 18,532
Other long-term liabilities 48,552 49,723
Total liabilities 335,994 326,585
Contingencies (Note 8)
Shareholders’ equity
Common shares 0.10 par value; 100,000 shares authorized;    38,039 and 37,165 issued and outstanding as of June 30,    2024, and December 31, 2023, respectively 3,804 3,717
Additional paid-in capital 764,538 746,450
Accumulated deficit (219,607 ) (150,144 )
Accumulated other comprehensive loss (2,731 ) (1,293 )
Total shareholders’ equity 546,004 598,730
Total liabilities and shareholders’ equity 881,998 $ 925,315

All values are in US Dollars.

The accompanying notes form an integral part of these condensed consolidated financial statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands, except per share data) 2024 2023 2024 2023
Net sales $ 198,620 $ 187,016 $ 387,228 $ 362,220
Cost of sales 63,871 67,465 125,237 132,340
Gross profit 134,749 119,551 261,991 229,880
Sales and marketing 100,224 99,249 200,267 193,040
General and administrative 33,994 34,177 65,642 82,988
Research and development 18,049 19,424 37,541 42,731
Acquisition-related amortization and remeasurement (Note 12) 7,388 3,333 12,784 7,467
Operating loss (24,906 ) (36,632 ) (54,243 ) (96,346 )
Interest expense, net (4,943 ) (1,266 ) (9,501 ) (2,555 )
Other income (expense), net (2,510 ) (20 ) (3,784 ) 656
Loss before income taxes (32,359 ) (37,918 ) (67,528 ) (98,245 )
Income tax expense (1,084 ) (1,508 ) (1,935 ) (2,119 )
Net loss $ (33,443 ) $ (39,426 ) $ (69,463 ) $ (100,364 )
Net loss per common share:
Basic $ (0.88 ) $ (1.07 ) $ (1.84 ) $ (2.77 )
Diluted (0.88 ) (1.07 ) (1.84 ) (2.77 )
Weighted average number of common shares:
Basic 38,020 36,762 37,787 36,252
Diluted 38,020 36,762 37,787 36,252
Other comprehensive income (loss), before tax
Unrealized gain (loss) on debt securities — 381 1,671 318
Reclassification adjustment for historical unrealized gain on debt security (1,671 ) — (1,671 ) —
Currency translation adjustment (400 ) 457 (1,438 ) 950
Other comprehensive income (loss), before tax (2,071 ) 838 (1,438 ) 1,268
Income tax benefit (expense) related to other comprehensive income — — — —
Other comprehensive income (loss), net of tax (2,071 ) 838 (1,438 ) 1,268
Comprehensive loss $ (35,514 ) $ (38,588 ) $ (70,901 ) $ (99,096 )

The accompanying notes form an integral part of these condensed consolidated financial statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited, U.S. Dollars, in thousands) Number of<br>Common<br>Shares<br>Outstanding Common<br>Shares Additional<br>Paid-in<br>Capital Accumulated Deficit Accumulated<br>Other<br>Comprehensive Income (Loss) Total<br>Shareholders’<br>Equity
At December 31, 2023 37,165 $ 3,717 $ 746,450 $ (150,144 ) $ (1,293 ) $ 598,730
Net loss — — — (36,020 ) — (36,020 )
Other comprehensive income, net of tax — — — — 633 633
Share-based compensation expense — — 8,800 — — 8,800
Common shares issued, net 245 24 (1,852 ) — — (1,828 )
At March 31, 2024 37,410 $ 3,741 $ 753,398 $ (186,164 ) $ (660 ) $ 570,315
Net loss — — — (33,443 ) — (33,443 )
Other comprehensive loss, net of tax — — — — (2,071 ) (2,071 )
Share-based compensation expense — — 9,959 — — 9,959
Common shares issued, net 629 63 1,181 — — 1,244
At June 30, 2024 38,039 $ 3,804 $ 764,538 $ (219,607 ) $ (2,731 ) $ 546,004
(Unaudited, U.S. Dollars, in thousands) Number of<br>Common<br>Shares<br>Outstanding Common<br>Shares Additional<br>Paid-in<br>Capital Retained<br>Earnings (Accumulated Deficit) Accumulated<br>Other<br>Comprehensive<br>Loss Total<br>Shareholders’<br>Equity
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
At December 31, 2022 20,162 $ 2,016 $ 334,969 $ 1,251 (1,376 ) $ 336,860
Net loss — — — (60,938 ) — (60,938 )
Other comprehensive income, net of tax — — — — 430 430
Share-based compensation expense — — 13,020 — — 13,020
Common shares issued in connection with SeaSpine merger 16,047 1,605 375,140 — — 376,745
Common shares issued, net 254 26 (1,984 ) — — (1,958 )
At March 31, 2023 36,463 $ 3,647 $ 721,145 $ (59,687 ) $ (946 ) $ 664,159
Net loss — — — (39,426 ) — (39,426 )
Other comprehensive income, net of tax — — — — 838 838
Share-based compensation expense — — 13,246 — — 13,246
Common shares issued, net 270 26 1,142 — — 1,168
At June 30, 2023 36,733 $ 3,673 $ 735,533 $ (99,113 ) $ (108 ) $ 639,985

The accompanying notes form an integral part of these condensed consolidated financial statements

ORTHOFIX MEDICAL INC.

Condensed Consolidated Statements of Cash Flows

Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023
Cash flows from operating activities
Net loss $ (69,463 ) $ (100,364 )
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization 28,894 25,997
Inventory reserve expenses 13,759 17,057
Amortization of inventory fair value step up 6,094 21,085
Amortization of operating lease assets, debt costs, and other assets 2,986 3,319
Provision for expected credit losses 1,573 490
Deferred income taxes 1,180 815
Share-based compensation expense 18,759 26,266
Change in valuation of investment securities 3,992 (492 )
Change in fair value of contingent consideration 4,240 (1,300 )
Other 4,863 (372 )
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable 710 5,615
Inventories (8,571 ) (33,168 )
Prepaid expenses and other current assets 2,717 275
Accounts payable (7,501 ) 1,800
Other current liabilities (9,977 ) (6,425 )
Other long-term assets and liabilities (3,866 ) (134 )
Net cash used in operating activities (9,611 ) (39,536 )
Cash flows from investing activities
Capital expenditures for property, plant, and equipment (19,887 ) (23,823 )
Capital expenditures for intangible assets (646 ) (831 )
Cash acquired in the SeaSpine merger — 29,419
Other investing activities (50 ) (500 )
Net cash provided by (used in) investing activities (20,583 ) 4,265
Cash flows from financing activities
Proceeds from issuance of common shares 3,191 2,377
Payments related to tax withholdings for share-based compensation (3,775 ) (3,167 )
Payments related to finance lease obligation (346 ) (320 )
Borrowings under credit facility 40,000 51,000
Repayment of borrowings from credit facility (15,000 ) —
Payment of debt acquired from SeaSpine merger — (26,899 )
Contingent consideration milestone payment — (920 )
Payment of debt issuance costs and other financing activities (2,392 ) (280 )
Net cash provided by financing activities 21,678 21,791
Effect of exchange rate changes on cash (375 ) 387
Net change in cash and cash equivalents (8,891 ) (13,093 )
Cash, cash equivalents, and restricted cash at the beginning of period 37,757 50,700
Cash, cash equivalents, and restricted cash at the end of period $ 28,866 $ 37,607
Components of cash, cash equivalents, and restricted cash at the end of period
Cash and cash equivalents $ 26,366 $ 37,607
Restricted cash 2,500 —
Cash, cash equivalents, and restricted cash at the end of period $ 28,866 $ 37,607
Noncash investing activities - Purchase of intangible assets $ 50 $ —

The accompanying notes form an integral part of these condensed consolidated financial statements

ORTHOFIX MEDICAL INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Business and basis of presentation

Description of the Business

Orthofix Medical Inc. (the “Company” or "Orthofix") is a leading global spine and orthopedics company with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. Its products are distributed in more than 60 countries worldwide.

The Company is headquartered in Lewisville, Texas, where it conducts general business, product development, medical education and manufacturing, and has primary offices in Carlsbad, CA, with a focus on spine and biologics product innovation and surgeon education, and Verona, Italy, with an emphasis on product innovation, production, and medical education for orthopedics. The combined company’s global research and development, commercial, and manufacturing footprint also includes facilities and offices in Irvine, CA, Toronto, Canada, Sunnyvale, CA, Maidenhead, UK, Munich, Germany, Paris, France, and São Paulo, Brazil.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair statement have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Form 10-K for the year ended December 31, 2023. Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for other interim periods or the year ending December 31, 2024.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition; contractual allowances; allowances for expected credit losses; inventories; valuation of intangible assets; goodwill; fair value measurements, including contingent consideration; litigation and contingent liabilities; tax matters; and share-based compensation. Actual results could differ from these estimates.

2. Recently adopted accounting standards, recently issued accounting pronouncements

Adoption of Accounting Standards Update ("ASU") 2022-03 - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In June 2022, the Financial Accounting Standards Board ("FASB") issued ASU 2022-03, which clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale and to introduce new disclosure requirements. The Company adopted this standard effective January 1, 2024, on a prospective basis. Adoption of this standard did not have a material impact to the Company's consolidated balance sheet, statements of operations, or cash flows, but did modify the Company's disclosures related to certain investments. Refer to Note 7 for the Company's updated disclosures on investments in equity securities subject to capital sale restrictions.

Adoption of ASU 2023-07 - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, which enhances and improves disclosures about operating segment's revenues, measures of profit/loss, and expenses to enable investors to better understand an entity's overall performance and assess potential future cash flows. The amendment requires that an entity disclose (i) significant expenses that are regularly provided to the Chief Operating Decision Maker ("CODM"), (ii) other segment items by reportable segment including a description of its composition, (iii) all annual disclosures required by Topic 280 in interim periods, (iv) additional measures of a segment's profit or loss used by the CODM in assessing segment performance and allocation of resources, and (v) title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. The Company adopted this standard effective January 1, 2024, on a prospective basis. Refer to Note 11 for the Company's updated business segment disclosures. 8

Recently Issued Accounting Pronouncements

Topic Description of Guidance Effective Date Status of Company's Evaluation
Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative (ASU 2023-06) Adds interim and annual disclosure requirements to a variety of subtopics in the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and repurchase agreements. The guidance will be applied prospectively. The effective date will be the date when the SEC's removal of the related disclosure requirement becomes effective, with early adoption prohibited. Various The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.
Improvements to Income Tax Disclosures (ASU 2023-09) Enhance the transparency and decision usefulness of income tax disclosures to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and<br>prospects for future cash flows. The amendments are to be applied prospectively, but retrospective application is permitted. January 1, 2025 The Company is currently evaluating the impact this ASU may have on its consolidated financial statements.

Other recently issued ASUs, excluding those ASUs which have already been disclosed as adopted or described above, were assessed and determined not applicable, or are expected to have minimal impact on the Company's condensed consolidated financial statements.

3. Mergers and acquisitions

Merger with SeaSpine

On January 5, 2023, the Company and SeaSpine completed an all-stock merger of equals (the "Merger") to create a leading global spine and orthopedics company with highly complementary portfolios of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. As a result of the Merger, each share of SeaSpine common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.4163 shares of Orthofix common stock. 9

During the fourth quarter of 2023, the Company finalized its valuation of assets acquired and liabilities assumed. The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date:

(U.S. Dollars, in thousands) Final Acquisition Date Fair Value Assigned Useful Life
Assets acquired:
Current assets
Cash and cash equivalents $ 29,419
Accounts receivable, net 35,313
Inventories 132,636
Prepaid expenses and other current assets 4,590
Total current assets 201,958
Property, plant, and equipment, net 68,863
Customer relationships 33,100 13 years
Developed technology 47,200 6 - 8 years
In-process research and development ("IPR&D") 5,750 Indefinite
Other long-term assets 20,501
Total identifiable assets acquired $ 377,372
Liabilities assumed:
Current liabilities
Accounts payable $ 21,602
Other current liabilities 43,521
Total current liabilities 65,123
Long-term borrowings under SeaSpine credit facility 26,298
Other long-term liabilities 32,823
Total liabilities assumed 124,244
Net identifiable assets acquired $ 253,128
Total fair value of consideration transferred 376,745
Residual goodwill $ 123,617

The Company recognized ($0.1) million and $0.1 million in direct acquisition-related costs, which excluded integration-related activities that were expensed during the three and six months ended June 30, 2024, respectively, compared to $3.3 million and $9.8 million expensed during the three and six months ended June 30, 2023, respectively. These costs are included in the condensed consolidated statements of operations and comprehensive loss, primarily within general and administrative expenses. The Company's results of operations included net sales from SeaSpine of $71.5 million and $142.0 million for the three and six months ended June 30, 2024, respectively, and net losses of $20.4 million and $34.7 million from SeaSpine for the three and six months ended June 30, 2024, respectively. This compares to $64.4 million and $125.3 million of net sales from SeaSpine for the three and six months ended June 30, 2023, respectively, and net losses of $24.9 million and $52.8 million for the three and six months ended June 30, 2023, respectively.

Due to the completion of the Merger on January 5, 2023, all SeaSpine financial results for fiscal year 2023, except for the first four days of January, were included in the Company's condensed consolidated statement of operations and comprehensive loss. Therefore, the Company did not prepare unaudited pro forma financial information for the three and six months ended June 30, 2023 or 2024, on the basis that the Merger was completed on January 1, 2023.

4. Inventories

Inventories were as follows:

(U.S. Dollars, in thousands) June 30,<br>2024 December 31,<br>2023
(Unaudited)
Raw materials $ 29,455 $ 28,390
Work-in-process 57,115 53,510
Finished products 123,470 140,266
Inventories $ 210,040 $ 222,166

5. Leases

A summary of the Company's lease portfolio as of June 30, 2024, and December 31, 2023, is presented in the table below:

(U.S. Dollars, in thousands) Classification June 30,<br>2024 December 31,<br>2023
(Unaudited)
Right-of-use assets ("ROU assets")
Operating leases Other long-term assets $ 18,579 $ 19,869
Finance leases Property, plant and equipment, net 15,839 16,345
Total ROU assets $ 34,418 $ 36,214
Lease Liabilities
Current
Operating leases Other current liabilities $ 3,733 $ 3,477
Finance leases Current portion of finance lease liability 734 708
Long-term
Operating leases Other long-term liabilities 15,710 17,125
Finance leases Long-term portion of finance lease liability 18,160 18,532
Total lease liabilities $ 38,337 $ 39,842

Supplemental cash flow information related to leases was as follows:

(Unaudited, U.S. Dollars, in thousands) Six Months Ended<br>June 30, 2024 Six Months Ended<br>June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 4,311 $ 3,751
Operating cash flows from finance leases 417 428
Financing cash flows from finance leases 346 320
ROU assets obtained in exchange for lease obligations
Operating leases 721 15,368
Finance leases — —

11

6. Long-term debt

The carrying values of the Company's outstanding debt obligations as of June 30, 2024, and December 31, 2023, were as follows:

(U.S. Dollars, in thousands) June 30,<br>2024 December 31,<br>2023
(Unaudited)
Initial Term Loan and Delayed Draw Term Loan
Principal amount $ 125,000 $ 100,000
Unamortized original debt discount (3,769 ) (4,331 )
Unamortized debt issuance costs and lenders fees (3,228 ) (1,312 )
Total indebtedness from initial term loan and delayed draw term loan 118,003 94,357
Revolving Credit Facilities
Principal amount outstanding — —
Total indebtedness outstanding $ 118,003 $ 94,357
Current portion of long-term debt $ 4,688 $ 1,250
Long-term debt 113,315 93,107
Total indebtedness outstanding $ 118,003 $ 94,357

On January 10, 2024, the Company borrowed $15.0 million under its senior secured revolving credit facility (the "Revolving Credit Facility") as part of its Financing Agreement with Blue Torch Finance LLC. On March 22, 2024, the secured delayed draw term loan facility (the "Delayed Draw Term Loan") of $25.0 million was fully funded and the proceeds were used to repay the $15.0 million outstanding under the Revolving Credit Facility.

The Financing Agreement contains financial covenants requiring the Company to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). As of June 30, 2024, the Company was in compliance with all required financial covenants.

On March 15, 2024, the Company entered into Amendment No.1 to the Financing Agreement with Blue Torch Finance LLC (the "First Amendment"). Under the terms of the First Amendment, the parties agreed to reduce the number of business days to submit a notice of borrowing for the Delayed Draw Term Loan, and redefine certain terms within the asset coverage financial covenant. The maturity date remains November 6, 2027, for each of the Initial Term Loan, Delayed Draw Term Loan, and Revolving Credit Facility.

As of June 30, 2024, the Company had no borrowings on its available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($5.9 million).

7. Fair value measurements and investments

The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:

June 30,<br>2024 December 31,<br>2023
(Unaudited, U.S. Dollars, in thousands) Level 1 Level 2 Level 3 Total Total
Assets
Neo Medical convertible loan agreement $ — $ — $ — $ — $ 6,760
Neo Medical preferred equity securities — 10,942 — 10,942 4,951
Other investments — — — — 1,309
Total $ — $ 10,942 $ — $ 10,942 $ 13,020
Liabilities
Lattus contingent consideration $ — $ — $ (12,740 ) $ (12,740 ) $ (8,500 )
Deferred compensation plan — (1,644 ) — (1,644 ) (1,674 )
Total $ — $ (1,644 ) $ (12,740 ) $ (14,384 ) $ (10,174 )

12

Neo Medical Convertible Loan Agreement and Equity Investment

Since October 2020, the Company has held preferred equity securities of Neo Medical SA, a privately held Swiss-based company developing a new generation of products for spinal surgery ("Neo Medical") and a Convertible Loan Agreement, pursuant to which the Company loaned Neo Medical CHF 4.6 million, or $5.0 million, at the date of issuance (the “Convertible Loan”).

In April 2024, the Company converted the Convertible Loan into shares of Neo Medical preferred equity securities. The preferred equity securities are recorded in other long-term assets and are considered an investment that does not have a readily determinable fair value. As such, the Company measures this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The Company's equity investment with Neo Medical is subject to certain sales restrictions, such as right of first refusal, tag-along provisions, and drag-along provisions. Permitted transfers include (i) sales of shares to an affiliate of such shareholder, (ii) transfer of shares as part of a compensation package offered to employees, or (iii) Neo Medical may repurchase shares at a price no greater than that originally paid by the shareholder.

The table below presents a reconciliation of the beginning and ending balances of the Company’s investment in Neo Medical preferred equity securities:

(Unaudited, U.S. Dollars, in thousands) 2024 2023
Fair value of Neo Medical preferred equity securities at January 1 $ 4,951 $ 6,084
Conversion of loan into preferred equity securities 8,224 —
Foreign currency remeasurement recognized in other income (expense), net — —
Unrealized loss recognized in other expense, net (2,233 ) —
Fair value of Neo Medical preferred equity securities at June 30 $ 10,942 $ 6,084
Cumulative unrealized gain (loss) on Neo Medical preferred equity securities $ (2,953 ) $ 413

The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, which was measured at fair value using significant unobservable inputs:

(Unaudited, U.S. Dollars, in thousands) 2024 2023
Fair value of Neo Medical Convertible Loan at January 1 $ 6,760 $ 7,140
Gains (losses) recorded for the period
Recognized in other comprehensive income 1,671 117
Interest recognized in interest income, net 162 238
Foreign currency remeasurement recognized in other income (expense), net (602 ) 195
Reversal of expected credit loss recognized in other income (expense), net 260 —
Conversion into preferred equity securities (8,224 ) —
Realized foreign currency loss recognized in other income (expense), net (27 ) —
Fair value of Neo Medical Convertible Loan at June 30 $ — $ 7,690
Contractual value of Neo Medical Convertible Loan at June 30 $ — $ 6,340
Allowance for credit loss recognized in other income (expense), net — —
Amortized cost basis of Neo Medical Convertible Loan at June 30 $ — $ 6,340

Other Investments

Other investments represent assets and investments recorded at fair value that are not deemed to be material for disclosure on an individual basis. The fair value of these assets is based upon significant unobservable inputs, such as probability-weighted discounted cash flow models, requiring the Company to develop its own assumptions. Therefore, the Company has categorized these assets as Level 3 financial assets.

Lattus Contingent Consideration

In connection with the Merger, the Company assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus Spine LLC ("Lattus") executed in December 2022. Under the terms of the agreement, the Company may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). 13

The estimated fair value of the Lattus contingent consideration is determined using a Monte Carlo simulation and a discounted cash flow model requiring significant inputs which are not observable in the market. The significant inputs include assumptions related to the estimated future sales of the products, revenue risk-adjusted discount rates, revenue volatility, and discount rates matched to the timing of payments. The following table provides a reconciliation of the beginning and ending balances for the Lattus contingent consideration measured at estimated fair value using significant unobservable inputs (Level 3):

(Unaudited, U.S. Dollars, in thousands) 2024 2023
Lattus contingent consideration estimated fair value at January 1 $ 8,500 $ —
Contingent consideration assumed in the Merger — 11,200
Increase (decrease) in fair value recognized in acquisition-related amortization and remeasurement 4,240 (1,300 )
Lattus contingent consideration estimated fair value at June 30 $ 12,740 $ 9,900

The following table provides quantitative information related to certain key assumptions utilized within the valuation as of June 30, 2024:

(Unaudited, U.S. Dollars, in thousands) Fair Value as of<br> June 30, 2024 Unobservable inputs Estimate
Lattus Contingent Consideration $ 12,740 Counterparty discount rates 13.7% - 14.3%
Revenue risk-adjusted discount rates 7.5% - 8.2%

8. Commitments and Contingencies

In addition to the matters described in the paragraphs below, in the normal course of its business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies. The Company believes any losses related to these matters are individually and collectively immaterial as to a possible loss and range of loss.

Arbitration claims with former executives

In September 2023, the Company’s Board of Directors (the "Board") terminated the employment of Keith Valentine, John Bostjancic, and Patrick Keran, who had served respectively as the Company’s President and Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer. The Board’s decision followed an investigation conducted by independent outside legal counsel and directed and overseen by the Company’s independent directors. As a result of the investigation, the Board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the Company’s values and culture. The Company notified each of Messrs. Valentine, Bostjancic, and Keran that their respective terminations were being made for “Cause,” as defined in applicable employment-related agreements (including each executive’s respective Change in Control and Severance Agreement, dated June 19, 2023). The Company also notified each of Messrs. Valentine, Bostjancic, and Keran that it did not believe it was required to make any further payments to them, other than payment of salary through September 12, 2023. The Board also requested that Mr. Valentine resign as a director, which he did in October 2023.

In January 2024, the Company received written notices of arbitration claims from counsel to Messrs. Valentine, Bostjancic, and Keran. Each of the arbitration claims asserts that the respective former executive was wrongfully terminated for “Cause” because the former executive’s conduct did not meet the contractually applicable definition of “Cause.” The claims seek relief for, among other things, alleged breach of contract, defamation, false light invasion of privacy, deceit, as well as indemnification and advancement for attorneys’ fees. The three former executives seek severance payments, as well as the value of forfeited equity grants under applicable change in control and severance agreements and further damages as a result of purported defamatory statements. The Company disagrees with many of the assertions contained in the written notices of arbitration claims and intends to vigorously defend the asserted claims. Due in part to the preliminary nature of this matter, the Company currently cannot reasonably estimate a possible loss, or range of loss, that may arise from the arbitration claims.

Commitments

As a result of the Merger, the Company became party to agreements with certain distributor partners that provide the Company with an option to purchase, and an option for those partners to require the Company to purchase, the distribution business of those partners at specified future dates. At such time, the Company or distributor may (in certain cases, subject to satisfying certain conditions) submit written notice to the other of its intention to exercise its rights and initiate or require the purchase. Upon receipt of the written notice, the Company and the distributor will work in good faith to consummate the purchase. Under certain of these agreements, the purchase price would be paid in shares of the Company's common stock, whereas for others, the purchase price 14

can be paid in cash or shares at the Company's option. Based on the closing price of the Company's common stock as of June 30, 2024, assuming the options under all the relevant agreements were exercised, the estimated total number of shares the Company would issue under these agreements was approximately 0.3 million shares for agreements that must be settled in shares of the Company's stock. The Company has received notification from one such distributor, who has notified the Company of its decision to exercise its buyout option. The Company is currently in negotiations with this distributor in regard to the consummation of the potential acquisition.

Italian Medical Device Payback (“IMDP”)

In 2015, the Italian Parliament introduced rules for entities that supply goods and services to the Italian National Healthcare System. A key provision of the law is a ‘payback’ measure, requiring medical device companies in Italy to make payments to the Italian government if medical device expenditures exceed regional maximum ceilings. Companies are required to make payments equal to a percentage of expenditures exceeding maximum regional caps.

In the third quarter of 2022, the Italian Ministry of Health provided guidelines to the Italian regions and provinces on seeking payback of expenditure overruns relating to the years ended December 31, 2015, through December 31, 2018. Since receiving the guidelines, several regions and provinces have requested payment from affected medical device companies, including the Company. The Company has taken legal action to dispute the legality of such measures. In July 2024, the Italian Constitutional Court issued two judgments following public hearings on the matter held in May 2024. These judgments (i) declared the payback system itself as constitutionally legitimate and (ii) extended previously communicated reductions in the payback liability for certain fiscal years to all medical device companies, regardless of whether or not they had waived their legal claims on the matter.

The Company accounts for the estimated cost of the IMDP as sales and marketing expense and periodically reassesses the liability based upon current facts and circumstances. As a result, the Company recorded an expense of $0.3 million and $0.6 million for the three and six months ended June 30, 2024, respectively, and an expense of $0.3 million and $0.6 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, the Company has accrued $8.0 million related to the IMDP, which it has classified within other long-term liabilities; however, the actual liability could be higher or lower than the amount accrued once all legal proceedings are resolved and upon further clarification of the IMDP by the Italian authorities for more recent fiscal years.

9. Accumulated other comprehensive loss

The components of and changes in accumulated other comprehensive loss were as follows:

(Unaudited, U.S. Dollars, in thousands) Currency<br>Translation<br>Adjustments Neo Medical Convertible Loan Other Investments Accumulated Other<br>Comprehensive Loss
Balance at December 31, 2023 $ (1,065 ) $ (228 ) $ — $ (1,293 )
Other comprehensive income (loss) (1,438 ) 1,671 — 233
Income taxes — — — —
Reclassification adjustment to:
Other expense, net — (1,671 ) — (1,671 )
Balance at June 30, 2024 $ (2,503 ) $ (228 ) $ — $ (2,731 )

10. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments: Global Spine and Global Orthopedics. Within the Global Spine reporting segment, there are two product categories: (i) Bone Growth Therapies, and (ii) Spinal Implants, Biologics, and Enabling Technologies. 15

The table below presents net sales by product category by reporting segment:

Three Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Change
Bone Growth Therapies $ 59,135 $ 52,662 12.3 %
Spinal Implants, Biologics, and Enabling Technologies 108,899 105,314 3.4 %
Global Spine 168,034 157,976 6.4 %
Global Orthopedics 30,586 29,040 5.3 %
Net sales $ 198,620 $ 187,016 6.2 %
Six Months Ended June 30,
--- --- --- --- --- --- --- ---
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Change
Bone Growth Therapies $ 111,612 $ 100,376 11.2 %
Spinal Implants, Biologics, and Enabling Technologies 217,715 206,806 5.3 %
Global Spine 329,327 307,182 7.2 %
Global Orthopedics 57,901 55,038 5.2 %
Net sales $ 387,228 $ 362,220 6.9 %

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Product sales $ 185,417 $ 174,078 $ 361,248 $ 336,326
Marketing service fees 13,203 12,938 25,980 25,894
Net sales $ 198,620 $ 187,016 $ 387,228 $ 362,220

Product sales primarily consist of the sale of bone growth therapies devices, spinal implants, certain biologics, enabling technologies, and orthopedics products. Marketing service fees are received from MTF Biologics (“MTF”) based on total sales of biologics tissues sourced from MTF and relate solely to the Global Spine reporting segment. The Company partners with MTF to provide certain allograft solutions (HCT/Ps) for various spine, orthopedic and other bone repair needs, with this partnership allowing the Company to exclusively market certain biologic offerings.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Allowance for expected credit losses beginning balance $ 8,398 $ 6,691 $ 7,130 $ 6,419
Addition resulting from the Merger with SeaSpine — — — 137
Current period provision for expected credit losses 197 282 1,573 490
Write-offs charged against the allowance and other (184 ) 6 (203 ) (120 )
Effect of changes in foreign exchange rates (43 ) 36 (132 ) 89
Allowance for expected credit losses ending balance $ 8,368 $ 7,015 $ 8,368 $ 7,015

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11. Business segment information

The Company's operations are managed through two reporting segments: Global Spine and Global Orthopedics. These reporting segments represent the operating segments for which the Chief Executive Officer, who is also the CODM, reviews financial information and makes resource allocation decisions among businesses. The primary metric used by the CODM in managing the Company is adjusted earnings before interest, tax, depreciation, and amortization (“adjusted EBITDA”, a non-GAAP financial measure). Adjusted EBITDA represents earnings before interest income (expense), income taxes, depreciation, and amortization, and excludes the impact of share-based compensation, gains and losses related to changes in foreign exchange rates, charges related to the SeaSpine merger and other strategic investments, acquisition-related fair value adjustments, gains and/or losses on investments, litigation and investigation charges, charges related to initial compliance with regulations set forth by the European Union Medical Device Regulation, and succession charges.

Corporate activities are comprised of operating expenses not directly identifiable within the two reporting segments, such as human resources, finance, legal, and information technology functions. The Company neither discretely allocates assets, other than goodwill, to its operating segments nor evaluates the operating segments using discrete asset information.

Global Spine

The Global Spine reporting segment offers two primary product categories: (i) Bone Growth Therapies and (ii) Spinal Implants, Biologics, and Enabling Technologies.

The Bone Growth Therapies product category manufactures, distributes, sells, and provides support services for market leading devices used adjunctively in high-risk spinal fusion procedures and to treat both nonunion and acute fractures in the orthopedic space. These Class III medical devices are indicated as an adjunctive, noninvasive treatment to improve fusion success rates in the cervical and lumbar spine as well as a therapeutic treatment for non-spine acute and nonunion fractures. This product category uses distributors and a direct sales channel to sell its devices to hospitals, healthcare providers, and patients, in the U.S.

Spinal Implants, Biologics, and Enabling Technologies is comprised of (i) a broad portfolio of spine fixation and motion preservation implant products used in surgical procedures of the spine, (ii) one of the most comprehensive biologics portfolios in both the demineralized bone matrix and cellular allograft market segments, and (iii) image-guided surgical solutions to facilitate degenerative, minimally invasive, and complex surgical procedures. Spinal Implants, Biologics, and Enabling Technologies products are sold through a network of distributors and sales representatives to hospitals and healthcare providers on a global basis for Spinal Implants and Enabling Technologies, and primarily within the U.S. for Biologics.

Global Orthopedics

The Global Orthopedics reporting segment offers products and solutions for limb deformity correction and complex limb reconstruction with a focus on use in trauma, adult and pediatric limb reconstruction, and foot and ankle procedures. This reporting segment specializes in the design, development, and marketing of external and internal fixation orthopedic products that are coupled with enabling digital technologies to serve the complete patient treatment pathway. We sell these products through a global network of distributors and sales representatives to hospitals, healthcare organizations, and healthcare providers.

17

The following table presents adjusted EBITDA, the primary metric used in managing the Company, by reporting segment:

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Adjusted EBITDA by reporting segment
Global Spine $ 27,688 $ 21,258 $ 47,578 $ 36,239
Global Orthopedics 179 (135 ) (1,313 ) (91 )
Adjusted EBITDA $ 27,867 $ 21,123 $ 46,265 $ 36,148
Reconciling items:
Corporate operating expenses $ 11,234 $ 11,204 $ 21,967 $ 23,025
Interest expense, net 4,943 1,266 9,501 2,555
Depreciation and amortization 14,032 13,327 28,894 25,997
Share-based compensation expense 9,959 13,246 18,759 26,266
Foreign exchange impact 851 (269 ) 2,439 (852 )
SeaSpine merger-related costs 5,897 8,206 10,376 28,946
Strategic investments 311 309 431 970
Acquisition-related fair value adjustments 6,117 8,149 10,334 19,785
Interest and loss on investments 1,813 — 1,553 —
Litigation and investigation costs (277 ) 1,291 1,983 1,760
Succession charges 5,346 262 7,556 262
Medical device regulation — 2,050 — 5,679
Loss before income taxes $ (32,359 ) $ (37,918 ) $ (67,528 ) $ (98,245 )

The following table presents depreciation and amortization by reporting segment:

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Global Spine $ 11,044 $ 10,368 $ 22,973 $ 19,967
Global Orthopedics 2,191 1,719 4,398 3,348
Corporate 797 1,240 1,523 2,682
Total $ 14,032 $ 13,327 $ 28,894 $ 25,997

Geographical information

The table below presents net sales by geographic destination for each reporting segment and for the consolidated Company:

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Global Spine
U.S. $ 159,191 $ 147,360 $ 311,056 $ 286,817
International 8,843 10,616 18,271 20,365
Total Global Spine 168,034 157,976 329,327 307,182
Global Orthopedics
U.S. 7,742 7,223 15,896 13,859
International 22,844 21,817 42,005 41,179
Total Global Orthopedics 30,586 29,040 57,901 55,038
Consolidated
U.S. 166,933 154,583 326,952 300,676
International 31,687 32,433 60,276 61,544
Net sales $ 198,620 $ 187,016 $ 387,228 $ 362,220

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The following data includes net sales by geographic area:

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
U.S. $ 166,933 $ 154,583 $ 326,952 $ 300,676
Italy 5,257 5,262 10,259 10,117
France 3,510 2,811 6,026 5,271
United Kingdom 2,623 2,540 5,254 5,320
Germany 2,393 2,721 4,498 5,359
Brazil 1,708 1,882 3,236 2,765
Others 16,196 17,217 31,003 32,712
Net Sales $ 198,620 $ 187,016 $ 387,228 $ 362,220

The following data includes property, plant, and equipment by geographic area:

(U.S. Dollars, in thousands) June 30,<br>2024 December 31,<br>2023
(Unaudited)
U.S. $ 138,757 $ 142,727
Italy 9,571 10,187
Germany 2,388 3,030
Others 3,395 3,116
Total $ 154,111 $ 159,060

12. Acquisition-related amortization and remeasurement

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions and (ii) remeasurement of any related contingent consideration arrangements, which are recognized immediately upon acquisition. Components of acquisition-related amortization and remeasurement are as follows:

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Amortization of acquired intangibles $ 4,318 $ 4,633 $ 8,544 $ 8,767
Changes in fair value of contingent consideration 3,070 (1,300 ) 4,240 (1,300 )
Total $ 7,388 $ 3,333 $ 12,784 $ 7,467

13. Share-based compensation

Components of share-based compensation expense are as follows:

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Cost of sales $ 514 $ 482 $ 1,090 $ 953
Sales and marketing 1,436 2,551 3,103 4,800
General and administrative 7,447 9,167 12,995 18,271
Research and development 562 1,046 1,571 2,242
Total $ 9,959 $ 13,246 $ 18,759 $ 26,266

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Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 2024 2023
Stock options $ 1,382 $ 2,397 $ 2,500 $ 5,153
Market-based stock options 499 — 826 —
Time-based restricted stock awards and units 6,254 10,235 12,127 20,081
Market-based / performance-based restricted stock units 1,303 113 2,141 113
Stock purchase plan 521 501 1,165 919
Total $ 9,959 $ 13,246 $ 18,759 $ 26,266

Pursuant to the Merger Agreement, the equity awards of SeaSpine (including stock options and restricted stock units) outstanding as of immediately prior to the closing of the Merger were converted into equity awards denominated in shares of Orthofix common stock. The Company issued options to purchase 1.9 million shares of Orthofix common stock and 0.5 million shares of time-based vesting restricted stock in connection with the conversion of such awards. The estimated fair value of the portion of the SeaSpine equity awards for which the required service period had been completed at the time of the closing of the Merger was treated as purchase consideration. The remaining estimated fair value is recorded as compensation expense over the remainder of the service period associated with the awards.

During the three months ended June 30, 2024, and 2023, the Company issued 0.6 million and 0.3 million shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units. During the six months ended June 30, 2024, and 2023, the Company issued 0.9 million and 0.5 million shares, respectively, of common stock related to stock purchase plan issuances, stock option exercises, and the vesting of restricted stock awards and units.

Inducement plans

During 2024, the Company has appointed several new executives, including a new President and Chief Executive Officer, Chief Financial Officer, Chief People & Business Operations Officer, Chief Legal Officer, President of Global Spine, Chief Investor Relations and Communications Officer, President of Global Operations and Quality, and Chief Human Resources Officer. As inducements to accept employment with the Company, the individuals were awarded grants including, dependent on the individual, (i) market-based and/or time-based stock options, (ii) time-based restricted stock units, (iii) time-based cliff vesting restricted stock units, and (iv) market-based restricted stock units, valued in the aggregate across all award types at approximately $21.4 million.

14. Income taxes

Generally, income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs. Due to the impact of losses not benefited by the Company’s U.S. and Italian operations, the Company determined the estimated annual effective tax rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate. As such, the Company has calculated the tax provision using the actual effective rate for the three and six months ended June 30, 2024. Due to the impact of temporary differences on the U.S. current tax liability without any deferred tax benefit, the actual effective rate may vary in future quarters.

For the three months ended June 30, 2024, and 2023, the effective tax rate was (3.3%) and (4.0%), respectively. For the six months ended June 30, 2024, and 2023, the effective tax rate was (2.9%) and (2.2%), respectively. The primary factors affecting the Company’s effective tax rate for the three and six months ended June 30, 2024, were certain losses not benefited and tax amortization on certain acquired intangibles.

15. Earnings per share (“EPS”)

For the three and six months ended June 30, 2024, no adjustments were made to net income for purposes of calculating basic and diluted EPS. The following is a reconciliation of the weighted average shares used in diluted EPS computations.

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited, In thousands) 2024 2023 2024 2023
Weighted average common shares-basic 38,020 36,762 37,787 36,252
Effect of dilutive securities
Unexercised stock options and stock purchase plan — — — —
Unvested restricted stock units — — — —
Weighted average common shares-diluted 38,020 36,762 37,787 36,252

There were 7.1 million and 7.0 million weighted average outstanding stock options and restricted stock units not included in the diluted EPS computation for the three months ended June 30, 2024, and 2023, respectively, and 6.9 million and 7.1 million weighted average outstanding stock options and restricted stock units not included in the diluted EPS computation for the six months ended June 30, 2024, and 2023, respectively, because inclusion of these awards was anti-dilutive.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Orthofix Medical Inc.’s (sometimes referred to as “we,” “us” or “our”) financial condition and results of operations should be read in conjunction with the discussion under the heading “Forward-Looking Statements” and our condensed consolidated financial statements and related notes thereto appearing elsewhere in this Form 10-Q.

Executive Summary

Following our merger (the "Merger") with SeaSpine Holdings Corporation ("SeaSpine"), which was completed in January 2023, we are a leading global spine and orthopedics company with a comprehensive portfolio of biologics, innovative spinal hardware, bone growth therapies, specialized orthopedic solutions, and a leading surgical navigation system. Headquartered in Lewisville, Texas, our spine and orthopedic products are distributed in more than 60 countries via our sales representatives and distributors. For more information, please visit www.Orthofix.com. Information included on our website is not incorporated into, or otherwise creates a part of, this report.

Notable financial metrics in the second quarter of 2024 and recent achievements include the following:

  • Second quarter 2024 net sales of $198.6 million, an increase of 6% on a reported and constant currency basis compared to second quarter 2023
  • Bone Growth Therapies net sales growth of 12% compared to second quarter 2023, marking six consecutive quarters with double-digit net sales increases
  • U.S. Spine Fixation net sales growth of 12%, driven by distribution expansion and further penetration in existing accounts
  • Global Orthopedics net sales growth of 5% on a reported basis and 6% on a constant currency basis compared to second quarter 2023
  • Significant improvement in cash usage, paving the way for earlier than expected positive free cash flow for the second half of 2024
  • Announced appointments of four new executive team members, further strengthening the breadth and depth of the Company's leadership team

Results of Operations

The following table provides certain items in our condensed consolidated statements of operations as a percent of net sales:

Three Months Ended<br>June 30, Six Months Ended<br>June 30,
(Unaudited) 2024<br>(%) 2023<br>(%) 2024<br>(%) 2023<br>(%)
Net sales 100.0 100.0 100.0 100.0
Cost of sales 32.2 36.1 32.3 36.5
Gross profit 67.8 63.9 67.7 63.5
Sales and marketing 50.4 53.0 51.7 53.3
General and administrative 17.1 18.3 17.0 22.9
Research and development 9.1 10.4 9.7 11.8
Acquisition-related amortization and remeasurement 3.7 1.8 3.3 2.1
Operating loss (12.5 ) (19.6 ) (14.0 ) (26.6 )
Net loss (16.8 ) (21.1 ) (17.9 ) (27.7 )

Net Sales by Product Category and Reporting Segment

Our operations are managed through two reporting segments: Global Spine and Global Orthopedics. The following tables provide net sales by product category by reporting segment:

Three Months Ended<br>June 30, Percentage Change
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Reported Constant Currency
Bone Growth Therapies $ 59,135 $ 52,662 12.3 % 12.3 %
Spinal Implants, Biologics, and Enabling Technologies 108,899 105,314 3.4 % 3.4 %
Global Spine 168,034 157,976 6.4 % 6.4 %
Global Orthopedics 30,586 29,040 5.3 % 6.3 %
Net sales $ 198,620 $ 187,016 6.2 % 6.4 %
Six Months Ended<br>June 30, Percentage Change
--- --- --- --- --- --- --- --- --- --- ---
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Reported Constant Currency
Bone Growth Therapies $ 111,612 $ 100,376 11.2 % 11.2 %
Spinal Implants, Biologics, and Enabling Technologies 217,715 206,806 5.3 % 5.3 %
Global Spine 329,327 307,182 7.2 % 7.2 %
Global Orthopedics 57,901 55,038 5.2 % 5.1 %
Net sales $ 387,228 $ 362,220 6.9 % 6.9 %

Global Spine

Global Spine offers the following product categories:

  • Bone Growth Therapies, which manufactures, distributes, sells, and provides support services for market-leading devices used adjunctively in high-risk spinal fusion procedures and treats both nonunion and acute fractures in the orthopedic space. Bone Growth Therapies uses distributors and a direct sales channel to sell its devices and provide associated support services to hospitals, healthcare providers, and patients in the U.S.
  • Spinal Implants, Biologics, and Enabling Technologies is comprised of a broad portfolio of spine fixation and motion preservation implant products used in surgical procedures of the spine, which includes one of the most comprehensive biologics portfolios in both the demineralized bone matrix and cellular allograft market segments and image-guided surgical solutions to facilitate degenerative, minimally invasive, and complex surgical procedures. Spinal Implants, Biologics, and Enabling Technologies products are sold through a network of distributors and sales representatives to hospitals and healthcare providers on a global basis for Spinal Implants and Enabling Technologies, primarily within the U.S. for Biologics.

Three months ended June 30, 2024 compared to 2023

Net sales of $168.0 million, an increase of $10.1 million or 6.4%

  • Bone Growth Therapies net sales increased $6.5 million, or 12.3%, largely driven by (i) an increase in gross order volumes resulting from our continued investment in our direct sales channel for both the spine and fracture markets, (ii) capitalization of cross-selling opportunities, and (iii) continued growth and adoption of AccelStim, which is used in the healing of fresh and nonunion fractures
  • Spinal Implants, Biologics, and Enabling Technologies net sales increased $3.6 million, or 3.4%, primarily due to increased sales growth from new and existing high-volume distribution partners, particularly within Spinal Implants and Biologics, which saw growth in each of our cervical, interbody, thoracolumbar, and demineralized bone matrices franchises

Six months ended June 30, 2024 compared to 2023

Net sales of $329.3 million, an increase of $22.1 million or 7.2%

  • Bone Growth Therapies net sales increased $11.2 million or 11.2%, driven by (i) an increase in gross order volumes resulting from our continued investment in our direct sales channel for both the spine and fracture markets, (ii) capitalization of cross-selling opportunities, and (iii) continued growth and adoption of AccelStim

  • Spinal Implants, Biologics, and Enabling Technologies net sales increased $10.9 million, or 5.3%, primarily due to increased sales growth from new and existing high-volume distribution partners, particularly within Spinal Implants and Biologics, which saw growth in each of our cervical, interbody, thoracolumbar, and demineralized bone matrices franchises

Global Orthopedics

Global Orthopedics offers products and solutions that allow physicians to successfully treat a variety of orthopedic conditions specifically related to limb reconstruction and deformity correction unrelated to the spine. Global Orthopedics distributes its products world-wide through a network of distributors and sales representatives to sell orthopedic products to hospitals and healthcare providers.

Three months ended June 30, 2024 compared to 2023

Net sales of $30.6 million, an increase of $1.5 million or 5.3%

  • U.S. growth of $0.5 million, or 7.2%, largely due to investments made in recent product launches and commercial execution within our sales channel and from our comprehensive surgeon education program
  • International growth of $1.3 million, or 5.9% on a constant currency basis, primarily driven by recent product launches in Europe
  • Partially offset by a decrease of $0.3 million due to movement in foreign currency exchange rates, which had an unfavorable impact on net sales in the second quarter of 2024

Six months ended June 30, 2024 compared to 2023

Net sales of $57.9 million, an increase of $2.9 million or 5.2%

  • U.S. growth of $2.0 million, or 14.7%, largely due to investments made in recent product launches, commercial execution within our sales channel, and from our comprehensive surgeon education program
  • International growth of 1.9% on a constant currency basis, driven by recent product launches in Europe and offset by the timing of certain stocking distributor orders
  • Increase of $0.1 million due to movement in foreign currency exchange rates, which had a favorable impact on net sales in 2024

Gross Profit

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Net sales $ 198,620 $ 187,016 6.2 % $ 387,228 $ 362,220 6.9 %
Cost of sales 63,871 67,465 (5.3 %) 125,237 132,340 (5.4 %)
Gross profit $ 134,749 $ 119,551 12.7 % $ 261,991 $ 229,880 14.0 %
Gross margin 67.8 % 63.9 % 3.9 % 67.7 % 63.5 % 4.2 %

Three months ended June 30, 2024 compared to 2023

Gross profit increased $15.2 million

  • Increase in gross profit driven primarily by net sales growth across all principal product categories
  • Increase of $6.4 million driven by a reduction of amortization of the inventory fair value step-up recognized in the Merger, which is being amortized over the expected sales cycles of the acquired inventory
  • Increase of $2.1 million driven by a reduction in certain inventory-related charges, primarily due to rationalization decisions made in the prior year related to the Merger

Six months ended June 30, 2024 compared to 2023

Gross profit increased $32.1 million

  • Increase in gross profit driven primarily by net sales growth across all principal product categories

  • Increase of $15.0 million driven by a reduction of amortization of the inventory fair value step-up recognized in the Merger, which is being amortized over the expected sales cycles of the acquired inventory

  • Increase of $2.8 million driven by a reduction in certain inventory-related charges, primarily due to rationalization decisions made in the prior year related to the Merger

Sales and Marketing Expense

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Sales and marketing $ 100,224 $ 99,249 1.0 % $ 200,267 $ 193,040 3.7 %
As a percentage of net sales 50.4 % 53.1 % (2.7 %) 51.7 % 53.3 % (1.6 %)

Three months ended June 30, 2024 compared to 2023

Sales and marketing expense increased $1.0 million

  • Increase of $2.5 million in variable compensation expenses, including commissions, largely resulting from changes in sales volume and sales mix
  • Increase of $1.4 million in depreciation expense related to an increase in deployed instrumentation to support increased sales demand
  • Partially offset by a decrease of $2.9 million in other compensation expenses, including share-based compensation, primarily due to the realization of synergies following the Merger

Six months ended June 30, 2024 compared to 2023

Sales and marketing expense increased $7.2 million

  • Increase of $5.3 million in variable compensation expenses, including commissions, largely resulting from changes in sales volume and sales mix
  • Increase of $4.3 million in depreciation expense related to an increase in deployed instrumentation to support increased sales demand
  • Partially offset by a decrease of $2.6 million in other compensation expenses, including share-based compensation, primarily due to the realization of synergies following the Merger

General and Administrative Expense

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
General and administrative $ 33,994 $ 34,177 (0.5 %) $ 65,642 $ 82,988 (20.9 %)
As a percentage of net sales 17.1 % 18.3 % (1.2 %) 17.0 % 22.9 % (5.9 %)

Three months ended June 30, 2024 compared to 2023

General and administrative expense decreased $0.2 million

  • Decrease of $1.7 million in share-based compensation expense primarily due to accelerated vesting of certain equity-based awards as a result of the Merger recorded in 2023
  • Reduction in general and administrative expenses by the realization of Merger-related synergies, primarily from headcount
  • Decrease in integration-related expenses of $1.1 million compared to prior year comprised professional and advisor fees and severance and retention costs. In addition, general and administrative expenses were further reduced by the realization of Merger-related synergies
  • Decrease of $0.8 million driven by a favorable change in litigation and investigation related costs, including the release of a $2.5 million accrual in the second quarter of 2024
  • Partially offset by an increase of $5.1 million in succession charges as a result of recent changes in executive leadership positions

Six months ended June 30, 2024 compared to 2023

General and administrative expense decreased $17.3 million

  • Decrease in integration-related expenses of $17.2 million compared to prior year comprised professional and advisor fees and severance and retention costs.
  • Reduction in general and administrative expenses by the realization of Merger-related synergies, primarily from headcount
  • Decrease of $5.3 million in share-based compensation expense primarily due to accelerated vesting of certain equity-based awards as a result of the Merger recorded in 2023
  • Partially offset by an increase of $7.3 million in succession charges as a result of recent changes in executive leadership positions
  • Further offset by an increase of $1.1 million driven by an unfavorable change in litigation and investigation related costs

Research and Development Expense

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Research and development $ 18,049 $ 19,424 (7.1 %) $ 37,541 $ 42,731 (12.1 %)
As a percentage of net sales 9.1 % 10.4 % (1.3 %) 9.7 % 11.8 % (2.1 %)

Three months ended June 30, 2024 compared to 2023

Research and development expense decreased $1.4 million

  • Decrease of $1.7 million in costs to comply with the European Union Medical Device Regulations
  • Decrease of $0.4 million related to merger and integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses were further reduced by the realization of Merger-related synergies.
  • Partially offset by an increase in product development and clinical expenses

Six months ended June 30, 2024 compared to 2023

Research and development expense decreased $5.2 million

  • Decrease of $4.0 million in costs to comply with the European Union Medical Device Regulations
  • Decrease of $1.8 million related to merger and integration-related expenses, primarily related to severance and retention costs. In addition, research and development expenses were further reduced by the realization of Merger-related synergies.
  • Partially offset by an increase in product development and clinical expenses

Acquisition-related Amortization and Remeasurement

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Acquisition-related amortization and remeasurement $ 7,388 $ 3,333 121.7 % $ 12,784 $ 7,467 71.2 %
As a percentage of net sales 3.7 % 1.8 % 1.9 % 3.3 % 2.0 % 1.3 %

Acquisition-related amortization and remeasurement consists of (i) amortization related to intangible assets acquired through business combinations or asset acquisitions and (ii) remeasurement of related contingent consideration arrangements, which are recognized immediately upon acquisition.

Three months ended June 30, 2024 compared to 2023

Acquisition-related amortization and remeasurement increased $4.1 million

  • Increase of $4.4M recognized in 2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger

  • Partially offset by a decrease of $0.3 million in amortization expense of intangible assets acquired in the Merger

Six months ended June 30, 2024 compared to 2023

Acquisition-related amortization and remeasurement increased $5.3 million

  • Increase of $5.5M recognized in 2024 associated with the remeasurement of a contingent consideration obligation with Lattus Spine LLC assumed in the Merger
  • Partially offset by a decrease of $0.2 million in amortization expense of intangible assets acquired in the Merger

Non-operating Income and Expense

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Interest expense, net $ (4,943 ) $ (1,266 ) 290.4 % $ (9,501 ) $ (2,555 ) 271.9 %
Other income (expense), net (2,510 ) (20 ) 12450.0 % (3,784 ) 656 (676.8 %)

Three months ended June 30, 2024 compared to 2023

Interest expense, net increased $3.7 million

  • Increase of $3.5 million attributable to an increase in outstanding indebtedness as part of our Financing Agreement in 2024 compared to prior year
  • Decrease of $0.2 million of interest income resulting from the conversion of the convertible loan with Neo Medical into preferred equity securities in the second quarter of 2024

Other income (expense), net decreased $2.5 million

  • Decrease of $1.1 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ($0.9 million) in the second quarter of 2024 compared to a gain of $0.3 million in the second quarter of 2023
  • Decrease of $1.4 million associated with the impairment of certain investments measured at fair value

Six months ended June 30, 2024 compared to 2023

Interest expense, net increased $6.9 million

  • Increase of $6.7 million attributable to an increase in outstanding indebtedness as part of our Financing Agreement in 2024 compared to prior year
  • Decrease of $0.3 million of interest income resulting from the conversion of the convertible loan with Neo Medical into preferred equity securities in the second quarter of 2024

Other income (expense), net decreased $4.4 million

  • Decrease of $3.3 million associated with changes in foreign currency exchange rates, as we recorded a non-cash remeasurement loss of ($2.4 million) in 2024 compared to a gain of $0.9 million in 2023
  • Decrease of $1.4 million associated with the impairment of certain investments measured at fair value
  • Partially offset by a $0.3 million increase associated with the reversal of a previously recognized estimate of expected credit losses recognized on the Neo Medical convertible loan

Income Taxes

Three Months Ended June 30, Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 % Change 2024 2023 % Change
Income tax expense $ 1,084 $ 1,508 (28.1 %) $ 1,935 $ 2,119 (8.7 %)
Effective tax rate (3.3 %) (4.0 %) 0.7 % (2.9 %) (2.2 %) (0.7 %)

Three months ended June 30, 2024 compared to 2023

  • The decrease in tax expense compared to the prior year period is primarily due to withholding tax of $0.6 million that did not recur in the same period in 2024
  • The primary factor affecting our tax expense through the second quarter of 2024 compared to the prior year period was tax amortization on certain acquired intangibles and financial statement losses not benefitted

Six months ended June 30, 2024 compared to 2023

  • The decrease in tax expense compared to the prior year period is partially attributable to amortization expense on long lived intangible assets offset by withholding tax in the prior year of $0.6 million that did not recur in 2024
  • The primary factor affecting our tax expense through the second quarter of 2024 compared to the prior year period was tax amortization on certain acquired intangibles and financial statement losses not benefitted

Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash at June 30, 2024, totaled $28.9 million compared to $37.8 million at December 31, 2023. The following table presents the net change in cash, cash equivalents, and restricted cash for the six months ended June 30, 2024, and 2023, respectively:

Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Change
Net cash used in operating activities $ (9,611 ) $ (39,536 ) $ 29,925
Net cash provided by (used in) investing activities (20,583 ) 4,265 (24,848 )
Net cash provided by financing activities 21,678 21,791 (113 )
Effect of exchange rate changes on cash (375 ) 387 (762 )
Net change in cash and cash equivalents $ (8,891 ) $ (13,093 ) $ 4,202

The following table presents free cash flow, a non-GAAP financial measure, which is calculated by subtracting capital expenditures from net cash from operating activities:

Six Months Ended June 30,
(Unaudited, U.S. Dollars, in thousands) 2024 2023 Change
Net cash used in operating activities $ (9,611 ) $ (39,536 ) $ 29,925
Capital expenditures (20,533 ) (24,654 ) 4,121
Free cash flow $ (30,144 ) $ (64,190 ) $ 34,046

Operating Activities

Cash flows from operating activities increased $29.9 million

  • Favorable change in net loss of $30.9 million
  • Unfavorable change of $6.5 million associated with non-cash gains and losses, such as for the amortization of the inventory fair value step-up recognized in the Merger, inventory reserve expenses, remeasurement of contingent consideration obligations, and share-based compensation expense
  • Favorable change of $5.6 million relating to changes in working capital accounts, primarily attributable to changes in inventories, trade accounts payable, and other current assets

Two of our primary working capital accounts are accounts receivable and inventory. Days sales in receivables were 57 days at June 30, 2024, compared to 55 days at June 30, 2023 (calculated using second quarter net sales and ending accounts receivable). Inventory turns improved to 1.2 times as of June 30, 2024 compared to 0.9 times as of June 30, 2023 (calculated using trailing twelve month cost of goods sold and ending net inventories).

Investing Activities

Cash flows from investing activities decreased $24.8 million

  • Decrease of $29.4 million attributable to cash acquired as a result of the Merger in 2023
  • Partially offset by a decrease in spend of $4.1 million in capital expenditures and $0.5 million in other investing activities

Financing Activities

Cash flows from financing activities decreased $0.1 million

  • Decrease of $2.1 million in debt issuance costs associated with the Financing Agreement with Blue Torch Financing LLC
  • Offset by an increase of $0.9 million associated with net borrowing activities related to our credit facilities and from our assumption of SeaSpine's outstanding indebtedness at the time of the Merger
  • Further offset by an increase in net proceeds of $0.2 million from the issuance of common shares and from the payment of a contingent consideration milestone of $0.9 million in the prior year

Credit Facilities

On November 6, 2023, we entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC and certain lenders party thereto. The Financing Agreement provides for a $100.0 million senior secured term loan (the “Initial Term Loan”), a $25.0 million senior secured delayed draw term loan facility (the “Delayed Draw Term Loan”), and a $25.0 million senior secured revolving credit facility (the “Revolving Credit Facility,” and together with the Initial Term Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each of which mature on November 6, 2027. As of June 30, 2024, we had $100.0 million outstanding under the Initial Term Loan and $25.0 million outstanding under the Delayed Draw Term Loan.

The Financing Agreement contains financial covenants requiring us to maintain a minimum level of liquidity at all times, a maximum consolidated leverage ratio (measured on a quarterly basis), and a minimum asset coverage ratio (measured on a monthly basis). As of June 30, 2024, we were in compliance with all required financial covenants.

On March 15, 2024, we entered into Amendment No.1 to the Financing Agreement with Blue Torch Finance LLC (the "First Amendment"). Under the terms of the First Amendment, the parties agreed to reduce the number of business days to submit a notice of borrowing for the Delayed Draw Term Loan, and redefine certain terms within the asset coverage financial covenant. The maturity date remains November 6, 2027, for each of the Initial Term Loan, Delayed Draw Term Loan, and Revolving Credit Facility.

As of June 30, 2024, we had no borrowings on our available lines of credit in Italy, which provide up to an aggregate amount of €5.5 million ($5.9 million).

Other

For information regarding contingencies, see Note 8 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.

Lattus Spine LLC ("Lattus") Contingent Consideration

Under the terms of a contingent consideration obligation in a purchase agreement assumed in the Merger, we may be required to make installment payments at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the contingent consideration arrangement as of June 30, 2024, was $12.7 million; however, the actual amount ultimately paid could be higher or lower than the estimated fair value of the contingent consideration. As of June 30, 2024, we classified the remaining contingent consideration liability of $5.9 million and $6.8 million within other current liabilities and other long-term liabilities, respectively. For additional discussion of this matter, see Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Legion Innovations, LLC Asset Acquisition

On December 29, 2022, we entered into a technology assignment and royalty agreement with Legion Innovations, LLC, a U.S.-based medical device technology company, whereby we acquired intellectual property rights to certain assets. As consideration, we paid $0.2 million in January 2023, with additional payments contingent upon reaching future commercialization and revenue-based milestones.

IGEA S.p.A Exclusive License and Distribution Agreement

In April 2021, we entered into an Exclusive License and Distribution Agreement (the “License Agreement”) with IGEA S.p.A (“IGEA”), an Italian manufacturer and distributor of bone and cartilage stimulation systems. As consideration for the License Agreement, we agreed to pay up to $4.0 million, of which $0.5 million was paid in 2021, with certain payments contingent upon achieving an FDA milestone.

In May 2022, we achieved FDA approval pertaining to the acquired technology, triggering a contingent consideration milestone obligation of $3.5 million. Of this amount, $1.5 million was paid in 2022, $1.0 million was paid in May 2023, and $1.0 million was paid subsequent to the reporting period in July 2024.

Off-balance Sheet Arrangements

As of June 30, 2024, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, cash flows, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations

There have been no material changes in any of our material contractual obligations as disclosed in our Form 10-K for the year ended December 31, 2023.

Critical Accounting Estimates

Our discussion of operating results is based upon the condensed consolidated financial statements and accompanying notes. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our critical accounting estimates are described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to our critical accounting estimates during the quarter covered by this report.

Recently Issued Accounting Pronouncements

See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status of recently issued or adopted accounting pronouncements.

Non-GAAP Financial Measures

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP financial measures used to supplement information regarding the performance and underlying trends of our business operations to facilitate comparisons to historical operating results and internally evaluate the effectiveness of our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their U.S. GAAP results with non-GAAP financial measures.

The non-GAAP financial measures used in this filing may have limitations as analytical tools and should not be considered in isolation or as a replacement for U.S. GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows.

Constant Currency

Constant currency is calculated by using foreign currency rates from the comparable, prior year period to present net sales at comparable rates. Constant currency can be presented for numerous U.S. GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates.

Free Cash Flow

Free cash flow is calculated by subtracting capital expenditures from net cash from operating activities. Management uses free cash flow as an important indicator of how much cash is generated or used by our normal business operations, including capital expenditures. Management uses free cash flow as a measure of progress on its capital efficiency and cash flow initiatives.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks as disclosed in our Form 10-K for the year ended December 31, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. As described below, as of December 31, 2023, management identified a material weakness in our internal control over financial reporting, which is an integral component of our disclosure controls and procedures. Our remediation efforts with respect to this material weakness are continuing, and we have determined that this material weakness is continuing as of June 30, 2024, as there have been no further control instances as of this date to conclude that the applicable controls have been remediated. As a result, our President and Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2024.

Material Weakness in Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in the Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation of reliable financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

In connection with the preparation and filing of the Annual Report for the year ended December 31, 2023 (the “2023 Annual Report”), the Company’s management, including our President and Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the framework set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Based on its evaluation, the Company’s management concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to a material weakness in the design and operation of certain management review controls pertaining to business combinations and assessing recoverability of goodwill, resulting from insufficient evidence supporting the precision over the determination of certain estimates and insufficient evidence supporting the operating effectiveness of the associated review controls. This material weakness did not result in any misstatements to the consolidated financial statements or disclosures.

Notwithstanding the material weakness, management has concluded that the financial statements included elsewhere in the 2023 Annual Report presented fairly, in all material respects, our financial position, results of operations, and cash flows in conformity with U.S. GAAP.

Remediation of the Material Weakness

Our management has worked, and continues to work, to strengthen our disclosure controls and procedures and internal control over financial reporting in connection with the material weakness described above. Subsequent to the identification of the material weakness, the Company has better aligned its current finance department staff to enhance the review and oversight of the accounting and finance functions. The Company has also added several key positions in its finance department, including a new Chief Financial Officer, a Senior Vice President of Finance and Strategy, and other supporting roles with backgrounds in financial reporting, technical accounting, and financial planning and analysis. The Company continues to implement the remediation efforts

described herein. These remediation efforts are being undertaken under the supervision of the Audit and Finance Committee of our Board of Directors.

We are in the process of implementing and continuing to refine the plan for remediation of the ineffective internal control over financial reporting described above. In addition, we have designed and are implementing the specific remediation initiatives described below:

  • Evaluating skill set gaps and hiring additional accounting, finance, and/or financial reporting personnel, as needed, with relevant public company accounting and financial reporting experience to develop and implement additional policies, procedures, and controls as it pertains to business combinations, asset acquisitions, and/or other processes heavily dependent on the usage of prospective financial information;
  • Providing ongoing training for key personnel responsible for internal control over financial reporting; and
  • Enhancing and/or implementing new controls over the completeness and accuracy of information used in financial reporting and forecasted financial results, particularly as it relates to the accounting for business combinations and goodwill impairment assessments.

We believe the remediation steps outlined above have improved and will continue to improve the effectiveness of our internal control over financial reporting. We are committed to remediating the material weakness and we are making progress in that effort. The actions we are taking are subject to ongoing senior management review, as well as oversight from the Audit and Finance Committee. When fully implemented and operational, we believe the measures described above will remediate the underlying causes of the control deficiencies that gave rise to the material weakness and will strengthen our internal control over financial reporting. However, remediation efforts are expected to continue beyond the quarter ended June 30, 2024. Further, we will not be able to fully remediate this material weakness until these steps have been completed and have been operating effectively for a sufficient period of time. We may also identify additional measures that may be required to remediate the material weakness in our internal control over financial reporting, necessitating further action.

Changes in Internal Control over Financial Reporting

Other than the remediation activities described above, there have not been any changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 8 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein, which is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in "Part I, Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We have not made any repurchases of our common stock during the second quarter of 2024.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the last fiscal quarter, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any "non-Rule 10b5-1 trading arrangement."

Item 6. Exhibits

10.1 Letter agreement, entered into on November 27, 2023, between Orthofix Medical Inc. and Massimo Calafiore (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 1, 2023 and incorporated herein by reference)
10.2 Orthofix Medical Inc. 2024 CEO Inducement Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)
10.3 Orthofix Medical Inc. 2024 CEO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)
10.4 Orthofix Medical Inc. 2024 CEO Inducement Plan – Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)
10.5 Orthofix Medical Inc. 2024 CEO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276433) filed January 8, 2024 and incorporated herein by reference)
10.6 Change in Control and Severance Agreement, dated as of January 8, 2024, between Orthofix Medical Inc. and Massimo Calafiore (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 9, 2024 and incorporated herein by reference)
10.7 Letter agreement, dated as of January 4, 2024, between Orthofix Medical Inc. and Julie Andrews (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated January 9, 2024 and incorporated herein by reference)
10.8 Orthofix Medical Inc. 2024 CFO Inducement Plan (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference).
10.9 Orthofix Medical Inc. 2024 CFO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)
--- ---
10.10 Orthofix Medical Inc. 2024 CFO Inducement Plan – Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)
10.11 Orthofix Medical Inc. 2024 CFO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (Registration no. 333-276506) filed January 12, 2024 and incorporated herein by reference)
10.12 Change in Control and Severance Agreement, dated as of January 15, 2024, between Orthofix Medical Inc. and Julie Andrews (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated January 17, 2024 and incorporated herein by reference)
10.13 Letter agreement, dated as of March 18, 2024, between Orthofix Medical Inc. and Andres Cedron (filed as Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q filed May 7, 2024, and incorporated herein by reference)
10.14 Orthofix Medical Inc. 2024 CLO Inducement Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration no. 333-278703) filed on April 16, 2024, and incorporated herein by reference)
10.15 Orthofix Medical Inc. 2024 CLO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration no. 333-278703) filed on April 16, 2024, and incorporated herein by reference)
10.16 Orthofix Medical Inc. 2024 CLO Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (Registration no. 333-278703) filed on April 16, 2024, and incorporated herein by reference)
10.17 Orthofix Medical Inc. 2024 CLO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-8 (Registration no. 333-278703) filed on April 16, 2024, and incorporated herein by reference)
10.18 Change in Control and Severance Agreement, dated as of April 15, 2024, between Orthofix Medical Inc. and Andres Cedron (filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q filed May 7, 2024, and incorporated herein by reference)
10.19 Letter agreement, dated as of February 2, 2024, between Orthofix Medical Inc. and Lucas Vitale (filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q filed May 7, 2024, and incorporated herein by reference)
10.20 Orthofix Medical Inc. 2024 CP&BOO Inducement Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration no. 333-278007) filed on March 15, 2024, and incorporated herein by reference)
10.21 Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration no. 333-278007) filed on March 15, 2024, and incorporated herein by reference)
10.22 Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Time-Based Annual Vesting Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (Registration no. 333-278007) filed on March 15, 2024, and incorporated herein by reference)
10.23 Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Time-Based Cliff Vesting Stock Unit Grant Agreement (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration no. 333-278007) on March 15, 2024, and incorporated herein by reference)
10.24 Orthofix Medical Inc. 2024 CP&BOO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.6 to the Company's Registration Statement on Form S-8 (Registration no. 333-278007) on March 15, 2024, and incorporated herein by reference)
10.25 Change in Control and Severance Agreement, dated as of March 15, 2024, between Orthofix Medical Inc. and Lucas Vitale (filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q filed May 7, 2024, and incorporated herein by reference)
--- ---
10.26 Orthofix Medical Inc. 2024 PGS Inducement Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.27 Orthofix Medical Inc. 2024 PGS Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.28 Orthofix Medical Inc. 2024 PGS Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.29 Orthofix Medical Inc. 2024 PGS Inducement Plan – Nonqualified Cliff Vesting Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.30 Orthofix Medical Inc. 2024 PGS Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.6 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.31 Orthofix Medical Inc. 2024 CIR&CO Inducement Plan (filed as Exhibit 4.7 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.32 Orthofix Medical Inc. 2024 CIR&CO Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.8 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.33 Orthofix Medical Inc. 2024 CIR&CO Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as Exhibit 4.9 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.34 Orthofix Medical Inc. 2024 CIR&CO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.9 to the Company's Registration Statement on Form S-8 (Registration no. 333-280101) filed on June 10, 2024, and incorporated herein by reference)
10.35 Orthofix Medical Inc. 2024 PGO&Q Inducement Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration no. 333-280277) filed on June 17, 2024, and incorporated herein by reference)
10.36 Orthofix Medical Inc. 2024 PGO&Q Inducement Plan – Performance Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration no. 333-280277) filed on June 17, 2024, and incorporated herein by reference)
10.37 Orthofix Medical Inc. 2024 PGO&Q Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (Registration no. 333-280277) filed on June 17, 2024, and incorporated herein by reference)
10.38 Orthofix Medical Inc. 2024 PGO&Q Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration no. 333-280277) filed on June 17, 2024, and incorporated herein by reference)
10.39 First Amendment to Financing Agreement, dated as of March 15, 2024, among Orthofix Medical Inc., certain subsidiaries of Orthofix Medical Inc. from time to time party thereto as guarantors, the lenders from time to time party thereto, and Blue Torch Finance LLC, as administrative agent and collateral agent (filed as an Exhibit 10.26 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, and incorporated herein by reference)
--- ---
10.40 First Amendment to Cooperation Agreement, entered into on April 19, 2024, by and among Orthofix Medical Inc. Engine Capital, L.P., Engine Jet Capital, L.P., Engine Lift Capital LP, Engine Capital Management, LP, Engine Capital Management GP, LLC, Engine Investments, LLC, Engine Investments II, LLC and Arnaud Ajdler (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 22, 2024, and incorporated herein by reference)
10.41 Amendment No. 5 to the Orthofix Medical Inc. Amended and Restated 2012 Long-Term Incentive Plan (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated June 20, 2024, and incorporated herein by reference)
10.42 Amendment No. 4 to the Orthofix Medical Inc. Second Amended and Restated Stock Purchase Plan (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated June 20, 2024, and incorporated herein by reference)
10.43 Orthofix Medical Inc. 2024 CHRO Inducement Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (Registration no. 333-280820) filed on July 15, 2024, and incorporated herein by reference)
10.44 Orthofix Medical Inc. 2024 CHRO Inducement Plan – Time-Based Stock Unit Grant Agreement (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration no. 333-280820) filed on July 15, 2024, and incorporated herein by reference)
10.45 Orthofix Medical Inc. 2024 CHRO Inducement Plan – Nonqualified Stock Option Grant Agreement (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (Registration no. 333-280820) filed on July 15, 2024, and incorporated herein by reference)
31.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1# Section 1350 Certifications of each of the Chief Executive Officer and Chief Financial Officer.
101.INS* Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ORTHOFIX MEDICAL INC.
Date: August 6, 2024 By: /s/ MASSIMO CALAFIORE
Name: Massimo Calafiore
Title: President and Chief Executive Officer
Date: August 6, 2024 By: /s/ JULIE ANDREWS
Name: Julie Andrews
Title: Chief Financial Officer

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Massimo Calafiore, certify that:

  1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2024, of Orthofix Medical Inc.;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2024 By: /s/ MASSIMO CALAFIORE
Name: Massimo Calafiore
Title: President and Chief Executive Officer, Director

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Julie Andrews, certify that:

  1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2024, of Orthofix Medical Inc.;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has material affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

  1. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 6, 2024 By: /s/ JULIE ANDREWS
Name: Julie Andrews
Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Orthofix Medical Inc. (“Orthofix”) on Form 10-Q for the quarterly period ended June 30, 2024, (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, Massimo Calafiore, President and Chief Executive Officer, Director, and Julie Andrews, Chief Financial Officer, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Orthofix.

Dated: August 6, 2024 /s/ MASSIMO CALAFIORE
Name: Massimo Calafiore
Title: President and Chief Executive Officer, Director
Dated: August 6, 2024 /s/ JULIE ANDREWS
Name: Julie Andrews
Title: Chief Financial Officer

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