Orthofix Medical Q3 2026 Earnings Call Transcript

Orthofix Medical (NASDAQ:OFIX) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Orthofix Medical reported Q3 2026 net sales of $207.9 million, a 2.3% increase year-over-year, driven by growth in Limb Reconstruction and Therapeutic Solutions, offset by weaker spine performance.

The company is focusing on consolidating resources behind key commercial partners and simplifying its product portfolio, with emphasis on the upcoming full market launch of the VIRADA spinal implant system.

Challenges in the U.S. Spine segment include market softness and supplier delays, with recovery plans being implemented to improve inventory and instrument set availability.

Global Limb Reconstruction saw a 9% growth driven by international demand, while U.S. Biologics showed signs of stabilization with sequential sales roughly flat.

Orthofix Medical updated its full-year 2026 guidance to $825 million to $830 million in net sales and adjusted EBITDA of $86 million to $88 million, citing spine market softness and supply chain delays.

Management highlighted strategic initiatives such as improving U.S. Spine execution, maintaining financial discipline, and investing in high-growth areas like Limb Reconstruction and Therapeutic Solutions.

Full Transcript

OPERATOR

Hello everyone. Thank you for joining us and welcome to the Orthofix Medical Q3 2026 earnings call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Julie Dewey. Please go ahead.

Julie Dewey (Chief IR and Communications Officer)

Thank you and good morning everyone. Welcome to Orthofix Medical’s third quarter 2026 earnings call. I’m Julie Dewey, Orthofix Medical’s Chief IR and Communications Officer. Joining me today are our President and Chief Executive Officer, Massimo Calafiore, and our Chief Financial Officer, Julie Andrews. Earlier today, Orthofix Medical released financial results for the third quarter ended September 30, 2026. The press release and supplemental presentation are available on our investor relations website. A replay of this call will be posted shortly after we conclude.

Before we begin, please note that our remarks include forward-looking statements. These statements involve risks and uncertainties and actual results may differ materially. All statements other than those of historical facts are forward-looking statements. We do not undertake any obligation to revise or update such forward-looking statements except as required by law. Factors that could cause actual results to differ materially are discussed in our most recent filings with the SEC and may be included in our future filings with the SEC.

We will also reference certain non-GAAP financial measures during today’s call, including certain growth rates presented on a pro forma constant currency basis and excluding discontinued M6 artificial disc product lines. Reconciliations to the most directly comparable U.S. GAAP measures and additional information are included in our press release and supplemental materials. Here’s today’s agenda. Massimo will begin with business performance and operational highlights. Julie Andrews will then review our financial results and guidance. After that, we’ll open the call for questions. With that, I’ll turn the call over to Massimo to discuss our third quarter performance. Massimo.

Massimo Calafiore (President and CEO)

Thank you, Julie, and good morning everyone. I appreciate you joining us today. While third quarter results were below our expectation, we saw continuous strength in Limb Reconstruction and Therapeutic Solutions and further stabilization in U.S. Biologics. In U.S. Spine, market softness and unplanned supplier delays created inventory and instrument set constraints. We have a clear recovery plan and are accelerating actions to improve execution and position the business for stronger performance.

We are concentrating resources behind our strongest partners and highest value technology, simplifying the portfolio, and aligning costs with a more focused business. These actions are intended to establish a stronger foundation for growth, profitability, and cash generation over time. To recap these actions in more detail. First, we are concentrating resources behind our strongest commercial partners. We are accelerating exits from non-strategic, lower-performing relationships and redeploying instrument sets to faster-growing core distributors. These distributors now generate around 80% of U.S. spinal implant revenue, with a similar concentration among core products. We have already seen these strategies work in markets where we consolidate the distribution around stronger partners.

Our core partners’ consigned assets turn around 20% faster than the loaner-heavy model used by many distributors we are exiting. This allows existing sets to support more procedures and revenue with less incremental investment. Second, we are simplifying our product portfolio and concentrating investment behind our highest value technologies. We are focusing inventory, capital, and commercial support on differentiated platforms with the greatest growth potential, including VIRADA. We continue to expect the full market launch of our VIRADA spinal implant system for open procedures later in the fourth quarter.

Third, we are aligning costs and organizational resources with a more focused business. As we simplify the network and portfolio, we expect to reduce support costs and redirect resources towards the opportunities with the strongest growth and return potential. Fourth, we are focusing our innovation pipeline on technologies with the greatest potential to drive adoption and long-term growth. That includes VIRADA and further integration of our enabling technologies, such as the 7D navigation system, for which we received two 510(k) clearances this quarter covering additional software enhancements.

The combination of these actions and the supplier delays are creating near-term net sales pressure as we exit lower value business. We expect this transition to unfold over the coming quarters, with the anticipated fourth quarter impact reflected in our updated guidance. We are carefully sequencing relationship exits and asset redeployment with the goal of maintaining surgical support and product availability while positioning our strongest partners for growth.

We expect progress in stages. First, we anticipate improved inventory and instrument set availability and utilization among core distributors. Next, we expect stronger growth from core products and partners over time. We expect those improvements to support better channel productivity, profitability, and cash conversion. While Spine remains our most immediate focus, we continue to make progress in several other parts of the portfolio. U.S. Biologics net sales were roughly flat sequentially despite the typical seasonal softness, providing another sign of stabilization. October offered another encouraging data point as the business returned to positive year-over-year growth. Our priority is to build on this momentum through stronger account execution, higher utilization, and continued focus on priority products, including OsteoCove.

In global Limb Reconstruction, growth in the quarter was driven by strong international demand and continued adoption of FITBONE and TrueLok Elevate. These two platforms are driving the majority of the franchise’s growth and address large, unpenetrated markets where we believe our differentiated technology can support sustained growth. In the U.S., we remain focused on increasing distributor productivity and expanding market development activities to convert clinical interest into broader adoption and net sales growth.

As those capabilities mature, we expect improved U.S. growth and greater predictability. We also continue to invest in innovation across Limb Reconstruction. In September, we submitted a 510(k) premarket notification for an automated version of the TrueLok Elevate system designed to improve the patient experience and support a key growth driver. We are also pursuing potential additional indications, including diabetic foot ulcer, a large and underserved market where we believe our core technologies may have broader clinical applications.

These investments are intended to expand our addressable market, strengthen our clinical differentiation, and support long-term value creation. Turning to Therapeutic Solutions, the business delivered 4% volume growth, which was above market growth, while maintaining attractive margins and strong cash generation, reinforcing its role as a stable contributor to the portfolio. Our priority is to improve prescription conversion and use digital capabilities, including AccellStim 2.0 and STIM onTrack, with the goal of strengthening physician and patient engagement while maintaining investment discipline.

Taken together, our immediate priority is improving U.S. Spine execution while sustaining momentum across the stronger areas of our portfolio. Across the business, we remain focused on disciplined execution, thoughtful capital allocation, and measurable progress. With that, I’ll turn the call over to Julie Andrews to review our third quarter financial results and outlook.

Julie Andrews (Chief Financial Officer)

Thank you, Massimo, and good morning. For purposes of consistency, the growth rates I’ll reference today are on a pro forma constant currency basis and exclude the discontinued M6 product lines. Third quarter reported net sales were 207.9 million, an increase of 2.3% year over year. Growth in limb reconstruction and therapeutic solutions helped offset weaker performance in spine; the drivers varied by business. Let me walk you through the quarter in more detail.

Global spinal implants, biologics and enabling technologies generated 107.4 million in net sales, a decrease of approximately 1% versus the prior-year period. Global spine fixation net sales increased 1% on a constant currency basis while U.S. spine fixation declined 5%. Performance was affected by a softer market-driven procedural environment and continued declines among smaller distributors. In addition, supplier delays and instrument set constraints limited our ability to consistently support demand among our top 30 distributors, whose pace of growth weakened but remained above the market.

The financial effects of these actions are reflected in our updated guidance, which I’ll discuss shortly. In Biologics, stabilization in the U.S. continued in the third quarter with net sales roughly flat sequentially despite typical seasonal softness. While the recent trend is encouraging, we recognize that sustained improvement is still needed. Therapeutic Solutions generated 64 million in net sales, up 4% year over year. The business continued to deliver steady revenue growth, strong margins and cash generation. Global Limb Reconstruction delivered net sales of 36.4 million in the third quarter, an increase of 9% on a constant currency basis. Growth was driven by strong international demand and continued adoption of Fitbone and Trulock Elevate. U.S. growth was essentially flat in the quarter, but we believe the underlying trajectory and portfolio mix are improving.

Fitbone and Trulock Elevate each grew in excess of 20%, providing encouraging evidence that the transition toward high-growth limb reconstruction opportunities is gaining traction. The remaining pressure was concentrated in a limited number of product lines and distributor relationships rather than across the franchise. Moving down the P&L, non-GAAP adjusted gross margin was 70.7%, reflecting an unfavorable geographic mix during the quarter. Adjusted EBITDA was 26 million, or 12.5% of pro forma net sales, compared with 24.6 million or 12.1% in the prior-year period. The improvement primarily reflected continued cost discipline and resource alignment, partially offset by lower spine revenue, unfavorable geographic mix and reduced operating leverage. We ended the quarter with 86.9 million in cash, cash equivalents and restricted cash.

The change in cash primarily reflected working capital timing, investment in instrument sets ahead of the commercial launch of Verada, and inventory to support our European MDR strategy. Let me now turn to our updated full-year outlook. Again, all measures are provided on a non-GAAP pro forma basis, reflect current foreign currency exchange rates, and exclude the discontinued M6 product lines. Our outlook does not contemplate any additional exchange rate changes during the remainder of the year. We now expect full-year 2026 pro forma net sales in the range of 825 million to 830 million. The revised guidance reflects third quarter performance, continued softness in the spine market, and the anticipated impact of accelerated actions to improve U.S. spine commercial execution, inventory and instrument set availability, and productivity.

It also reflects the timing of international limb reconstruction orders and foreign exchange headwinds. We now expect full-year 2026 non-GAAP adjusted EBITDA of 86 million to 88 million. The impact of lower revenue and unfavorable mix is expected to be partially offset by continued cost discipline, lower incentive compensation and resource allocation actions. Looking to the fourth quarter, we expect sequential growth from two primary drivers: normal seasonality and inventory purchases under the European Distributor Arrangement. As previously disclosed, most of the approximately 15 million 2026 net sales benefit from the European Distributor Arrangement should be recognized in the fourth quarter. As a reminder, the European Distributor Arrangement creates a temporary free cash timing headwind in 2026 because inventory-related cash outflows occur this year while cash receipts are expected in 2027.

This timing does not change our view of the business’s underlying earnings power, cash-generating potential or long-term economics. Consistent with our standard practice, we expect to provide formal 2027 guidance on our fourth quarter call. As previously disclosed, our European MDR strategy for spine is expected to create an approximately 22 million net sales headwind in 2027 while MDR requirements are completed. This is a temporary, regulatory-driven impact that reflects the timing of revenue recognition, not a change in underlying demand. As we move through this transition, our focus remains on disciplined execution. Now let me turn it back to Massimo for closing remarks. Massimo.

Massimo Calafiore (President and CEO)

Thank you, Julie. Our priorities are improve U.S. spine execution, stabilize Biologics, build on the strengths of Limb Reconstruction and Therapeutic Solutions, and maintain financial discipline. The actions are underway, and our focus is translating them into measurable operating and financial progress. We look forward to updating you as we execute against these priorities. Before we take your questions, I want to thank our employees and commercial partners for their continued commitment to supporting surgeons and patients around the world. With that, let’s open the call for questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. Please limit yourself to one question and a couple of follow-ups. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matt Blackman with TD Cowen. Your line is open. Please go ahead.

Drew (Analyst at TD Cowen)

Hi everyone, it’s Drew on for Matt today. Massimo, maybe just to start with you — and apologies, this is a bunch of questions rolled into one — but we all know about the ongoing efforts to revamp the distributor network in spine. Can you discuss a bit more what you’re seeing in terms of market softness versus the distributor network, and really what’s the lift ahead to get this business even to a market-level growth? What are the steps over the next three months, six months and 12 months?

How should we be thinking about that and the impact for the Verada launch as well?

Massimo Calafiore (President and CEO)

Yeah, thank you for the question. This quarter has been, let’s say, more difficult than the precedent because, as you said, we saw a market softness that normally is not impacting us, but we saw it happening in some of our top customers, indicating that the procedure volume was not as strong as we saw the previous quarter. Together, combining the optimization that we are doing around our distributor network, we had some delays on delivery of instrumentation and implants from some of our key suppliers. We took measures to make sure they are going back on track, and so this is reflected in our, let’s say, refined guidance. But the strategy is not changing. I think now our business is concentrated — 80% of our business is concentrated in our top distributors. We are moving ahead, stabilizing our supply chain, and we made a lot of investment, as you know, as previously said, on the launch of Verada, which is on track to be in Q4.

So what I’m expecting now is going through this current quarter, but I see that we’re going to be pretty well positioned for 2027. So in brief, you’re going to see an improvement at this stage. But the strategy is not changing. We are laser focused on making sure our top distributors are well equipped to drive the growth together with 7D.

Drew (Analyst at TD Cowen)

Got it. And just as a follow-up there, when you look at the distributor network, I think you’re saying that there was some market softness. But just to push you on that a little bit, what’s your confidence that this is actually procedural softness versus any type of market share loss in the quarter, or as you’re thinking about the fourth quarter?

Massimo Calafiore (President and CEO)

Yeah, because of what I said before, we saw always a pretty stable performance, especially in our top accounts. And just the cases were not here this quarter. I don’t believe that we are losing market share per se. I think that our core distributors are still growing well above the market, and that for us is our leading indicator of how we are performing. As I said before, everything else is kind of part of our strategy. We talked for several quarters about the fact that we are exiting a bunch of distributors that now represent just 20% of our business.

And this quarter and in Q4, we need just to deal with this temporary disruption of our supply chain. But the fixes are underway to be ready to close the year strong and start 2027.

Drew (Analyst at TD Cowen)

Got it. And Julie, just turning to you — obviously we all want to know 2027 and your thoughts there, and there’s a lot of moving pieces — but as a general framework, should we be thinking that Limb Reconstruction and Therapeutic Solutions can grow at or above market levels, and that maybe the fourth quarter spine revenue, or implied spine revenue, is at least a reasonable way to think about a run rate for 2027?

Julie Andrews (Chief Financial Officer)

Yeah, I mean, you know, Drew, we’re not providing guidance. I think generally our comments and what we’ve seen in our performance with Therapeutic Solutions and Limb Reconstruction is, you know, above-market growth. And then, you know, we do have the MDR headwind next year against the spine business that will be impacting that growth rate overall. So I think, you know, it’s early to comment on exactly what spine will look like, but I think generally, you know, once you take out the Q4 — or the 2026 MDR revenue, we should expect to see a, you know, kind of a Q3–Q4 performance as we enter 2027.

Drew (Analyst at TD Cowen)

Thanks. All for me. Thank you.

OPERATOR

Thank you. Your next question comes from the line of Tom Stephen with Stifel. Your line is open. Please go ahead.

Tom Stephen (Analyst at Stifel)

Great. Hey guys, thanks for taking the questions. I’ll try to stick with 2027. So, on a core revenue basis, backing out the Europe dynamics, directionally should we still be thinking about positive revenue growth next year — again considering Limb Reconstruction and Therapeutic Solutions? And then it sounds like, Massimo, to your comments, you feel you’ll be pretty well positioned for ’27 on the U.S. spine side. So, again, on a kind of core revenue basis, is positive revenue growth kind of directionally the right place to be when thinking about ’27?

And I have a follow-up.

Julie Andrews (Chief Financial Officer)

Yeah, again, not providing full guidance on 2027, but, yeah, I mean, backing out the MDR, we would expect our core revenue to be in the positive territory as we work through these supplier issues in the fourth quarter and come out with a full quarter of Verada launch for Q1 of 2027.

Tom Stephen (Analyst at Stifel)

Got it. Super helpful. And then I’ll shift gears a little bit. Massimo, this might be for you, but, you know, as we look at segment performance, it’s been a little varied. I hope that that’s fair to say. Limb Reconstruction strong. Biologics, it sounds like, is stabilizing in what appears to be maybe a tougher environment. BGT still solid and then conversely, spine fixation a bit weaker. So, Massimo, can you just give us the latest on kind of the company’s current view of the portfolio and maybe potential opportunities to monetize, to rationalize, optimize, et cetera.

Massimo Calafiore (President and CEO)

Yeah, thank you for the question. And you’re right. Right now our story kind of has two different sides. You know, the strategy that we implemented in the last couple of years is clearly bearing fruit in some sides of the business, and I was very pleased to see Biologics start to perform as we were expecting ending the year. So that one, I think, reflects that the choices that we made are paying off. Around our spine segment, if you think about it, we have been very consistent on the measures that we took. This quarter has been a little choppy for some market dynamics and some unexpected delays from some of our core suppliers. So it’s not, you know, we don’t talk about another one. I comment about strategic decisions that we want to take. I want to just comment that we are not changing our strategy when it is just to go through some temporary conditions that we’re seeing in spine and keep positioning the organization and all of the segments to perform as we expect.

But as said earlier, strategically the decisions that we made a couple of years ago in some of the segments are paying off. We need just to go through some temporary market dynamics.

Tom Stephen (Analyst at Stifel)

Makes sense. Thanks again.

OPERATOR

A reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question comes from the line of Caitlin Roberts with Canaccord. Your line is open. Please go ahead.

Caitlin Roberts (Analyst at Canaccord Genuity)

Great, great. Thanks for taking the questions. Just to start on the supply challenges specifically, what were they? Were the challenges concentrated in any product lines, and just where are you guys in recovering from that?

Massimo Calafiore (President and CEO)

It was, let’s say, concentrated on some delays in our instrument manufacturing, some specific product lines around that. But, you know, we took action and we started a strong collaboration with our suppliers, and we feel that we course-corrected what was supposed to be course-corrected with them. So I think that we are about to be out of this. So between end of Q4, we’re going to be again ready to support the end of the year and starting 2025. It was kind of unexpected, but, you know, we all worked together in order to rectify.

Caitlin Roberts (Analyst at Canaccord Genuity)

Understood. And then just any color on the 7D demand in the quarter and also the two 510(k)s that you called out.

Massimo Calafiore (President and CEO)

Yeah. So we keep investing in our technology platforms in general. You saw that on the 510(k)s that we got with 7D, which kind of enhances some of the capabilities that are already there, and we gained some optimization of the workflow. So very pleased about what we did there. When we started, our customer base increased, and we got a lot of feedback to make sure that the platform keeps improving, and the team did a fantastic job taking the comments and keeping upgrading the platform.

About this quarter, I don’t think that we are giving any general information about our performance. But what I can tell you is that now you start to see the regular seasonal demand for capital that you see every year.

Julie Andrews (Chief Financial Officer)

I will add this, Caitlin: our earn-out customers, what we’ve mentioned before, we still are seeing them exceeding their contracted spinal and hardware and biologics purchase commitments. So that continued into Q3 as well.

Caitlin Roberts (Analyst at Canaccord Genuity)

Understood, thanks so much.

OPERATOR

Your next question comes from the line of Mike Patuski with Barrington Research. Your line is open. Please go ahead.

Mike Patuski (Analyst at Barrington Research)

Good morning. Probably this is for Julie. Just on the supplier issue, I mean, when you sort of look at the reduced guidance, I mean, what percentage of that reduced guidance is associated with headwinds associated with the supplier issue?

Julie Andrews (Chief Financial Officer)

Yeah, we’re not providing exact, you know, breakout of all of the components, but I would say, you know, we had a miss in Q3 that’s contemplated in the guidance. And then as we look into Q4, you know, a combination of the supplier delays, market softness, which we saw in our top accounts, as well as then some international Limb Recon timing of orders and some FX headwind are the components that make it up.

Mike Patuski (Analyst at Barrington Research)

Okay. And I’m just curious, it feels like, you know, maybe somewhere in the last couple of quarters you’ve provided this and I don’t think I heard it today, but maybe I missed it. Did you guys disclose approximately how much your core distributors, your top distributors, grew in the quarter?

Julie Andrews (Chief Financial Officer)

We did not. We said they grew above market but weakened pretty significantly compared to the growth that we’ve seen. Which, again, we believe is two things: the supply challenges and then some market softness.

Mike Patuski (Analyst at Barrington Research)

Okay. I mean, could you say whether the growth was, you know, above or below 5%? I mean, like in any way? I would say give a sense.

Julie Andrews (Chief Financial Officer)

Yeah, I would say it slowed to the mid-single digits.

Mike Patuski (Analyst at Barrington Research)

Okay. All right. And then I suspect I know the answer to this, but I’m going to ask it anyway. Last quarter, you guys talked potentially, you know, reintroducing longer-term financial targets. Feels like maybe now’s not quite the time. But I’m just curious, when you come out with ’27, is there any chance that there’ll also be an LRP there? Or is ’27 enough work?

Julie Andrews (Chief Financial Officer)

You know, I think we’ll have to play that out over the coming months, Mike. We’re not committing to the timeline at the moment.

Mike Patuski (Analyst at Barrington Research)

Okay. All right. That’s all I’ve got. Thanks.

OPERATOR

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

Julie Andrews (Chief Financial Officer)

Thank you for your questions and for joining us today. We appreciate your time and interest in Orthofix Medical. If you need any additional information, please reach out. We look forward to updating you next quarter. And this concludes today’s call.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.