Orthofix Medical NASDAQ: OFIX reported second-quarter results that management said reflected improving operating trends across several businesses, while continued weakness among smaller U.S. spine distributors remained a headwind. The company reiterated its focus on commercial productivity, disciplined investment and profitable growth rather than pursuing revenue growth at any cost.
President and Chief Executive Officer Massimo Calafiore said the company generated 5% pro forma constant-currency net sales growth from the prior-year period, excluding discontinued M6 artificial disc product lines. Growth was supported by double-digit increases in global limb reconstruction and spine fixation, sequential improvement in biologics, and the restoration of Medicare reimbursement for bone growth stimulators.
“Our transformation remains a work in progress,” Calafiore said, adding that Orthofix is operating from a stronger position than it was a year earlier but that improvements will not occur uniformly across the portfolio.
Spine Growth Offset by Smaller Distributor Weakness
Global spine fixation sales rose 10% on a constant-currency basis during the quarter, including 3% growth in U.S. spine fixation sales. Calafiore said the company’s top 30 distributors, which account for about 80% of spine fixation sales, continued to perform well.
However, Orthofix saw a steeper decline among its remaining smaller distributors, where productivity has been below management’s expectations for several quarters. The company expects those challenges to persist through the rest of 2026 and is evaluating which relationships merit continued investment, consolidation or potential exit.
Calafiore said the issue was tied to distributor-channel productivity and asset utilization rather than demand. He said Orthofix is being selective in allocating assets to smaller distributors that do not generate sufficient returns, aiming to concentrate a larger share of revenue with its highest-performing distribution partners over time.
The company also reported completing its first clinical cases using its VIRATA minimally invasive system during the second quarter. Orthofix is preparing for a full market launch of the VIRATA spinal implant system later in the fourth quarter. Management said early surgeon feedback has been encouraging and that it views VIRATA as part of an integrated procedural platform alongside its interbody, surgical access and 7D enabling technologies offerings.
Biologics Stabilizes, Therapeutic Solutions Benefits From Reimbursement Change
Global spinal implants, biologics and enabling technologies produced $109 million in net sales, up 4% from the prior-year period on the company’s pro forma constant-currency basis. Spine fixation led the growth, aided by international momentum and the timing of distributor orders.
Biologics sales were approximately flat year over year, marking a second consecutive quarter of improved comparisons after the business recorded double-digit declines in 2025. Calafiore said management sees the stabilization as encouraging but needs greater consistency before characterizing it as a sustained return to growth.
Orthofix is seeking to support the business through commercial efforts around OsteoCove bioactive synthetic bone graft and investment in clinical evidence for OsteoCove and Virtuos, as well as a product registry for Strand Plus.
Therapeutic solutions generated $64.2 million in net sales, a 3% year-over-year increase despite the impact of a temporary Medicare reimbursement reduction during part of the quarter. The Centers for Medicare & Medicaid Services restored reimbursement for bone growth stimulators to its earlier level, retroactive to May 18, 2026.
Chief Financial Officer Julie Andrews said the reimbursement restoration represents an approximately $12 million benefit. Management expects therapeutic solutions to contribute more favorably in the second half, citing resilient demand and constructive utilization and prescribing trends.
During the quarter, Orthofix launched AccelStim 2.0, a redesigned bone growth therapy device compatible with the company’s STIM onTrack mobile application and STIM MD physician platform.
Limb Reconstruction Rises 11%
Global limb reconstruction sales increased 11% to $37.7 million, driven by international demand and adoption of the TrueLok Elevate and Fitbone product families. U.S. growth was more modest, which management attributed to the need to build commercial infrastructure and improve distributor productivity in the emerging domestic limb reconstruction market.
Orthofix said its second-half assumptions include stronger commercial productivity, the lapping of sunsetting product lines and prioritization of higher-return opportunities. The company also cited diabetic foot ulcers as a potential future opportunity and said it has submitted an investigational device exemption application to the FDA related to that area.
Guidance Raised, With European Distributor Order Driving Fourth Quarter
Orthofix raised its full-year 2026 net sales outlook to a range of $845 million to $855 million, an increase of about $7 million from its May outlook. At the midpoint, the forecast represents about 5% pro forma constant-currency growth.
The company also increased its adjusted EBITDA outlook to $95 million to $98 million. Second-quarter adjusted EBITDA was $20.1 million, while non-GAAP adjusted gross margin was 71.7%. Andrews said profitability was affected by unfavorable geographic mix, credit losses in certain international markets and continued investment in launches, partly offset by cost optimization actions.
The revised sales outlook includes a strategic arrangement with a large European distributor that is funding MDR certification-related work for certain spine products. The distributor intends to purchase inventory during 2026 to support continuity of supply while certification and country-specific access requirements are completed.
- The arrangement is expected to add about $15 million of net sales in 2026, with most of the benefit anticipated in the fourth quarter.
- Orthofix expects the arrangement to create an approximately $22 million net sales headwind in 2027 while MDR requirements are completed.
- The arrangement is also expected to create a temporary 2026 free-cash-flow timing headwind because some cash receipts are projected for 2027 while inventory-related cash outflows occur this year.
For the third quarter, management expects sales to be generally consistent with second-quarter levels, as the reimbursement recovery and improving trends in several businesses are expected to be offset by continued softness among smaller U.S. spine distributors. Fourth-quarter sequential growth is expected to reflect the European distributor inventory purchases and normal seasonality.
Orthofix ended the quarter with $104.4 million in total cash, including restricted cash. The company did not provide an updated free-cash-flow outlook or reinstate free-cash-flow guidance.
About Orthofix Medical (NASDAQ:OFIX)
Orthofix Medical Inc NASDAQ: OFIX is a global medical device company focused on the design and development of innovative orthopedic and spinal solutions. The company's core business is divided into two segments: spine and orthopedics. In the spine segment, Orthofix offers a range of titanium implants, biologics and portable bone growth stimulation devices designed to support spinal fusion, deformity correction and minimally invasive procedures. Its orthopedic segment encompasses products for fracture fixation, external fixation systems, trauma care and sports medicine, providing surgeons with implantable devices and instruments for complex bone reconstruction and healing.
Orthofix's product portfolio includes strut systems, bone growth stimulators, interbody fusion devices and fixation hardware that address various indications such as degenerative disc disease, spinal deformities, non-unions and long-bone fractures.
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