Orthofix Medical Inc. (OFIX)

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 the "Company," "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

We are a global medical technology company dedicated to advancing healing and restoring mobility for patients with complex musculoskeletal conditions. Headquartered in Lewisville, Texas, we offer a differentiated portfolio of spinal implants, therapeutic solutions, limb reconstruction systems, biologics and enabling technologies, including the 7D FLASH Navigation System. Our technology-enabled solutions are designed to support surgeons across the continuum of care and improve outcomes for patients. Learn more at Orthofix.com and follow us on LinkedIn. Information included on our website is not incorporated into, nor does it otherwise create a part of, this report.

Notable financial metrics in the second quarter of 2026 and recent achievements include the following:

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Second quarter 2026 reported net sales of $210.9 million, representing an increase of 4% on a reported basis and 5% on a pro forma constant currency basis compared to second quarter 2025.

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Generated double-digit constant currency growth in Global Spine Fixation and Global Limb Reconstruction, reflecting strong international performance and continued demand across key growth platforms.

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Therapeutic Solutions (formerly Bone Growth Therapies) delivered 3% year-over-year net sales growth despite a temporary Medicare reimbursement headwind affecting bone growth stimulators during part of the second quarter. For additional discussion of this matter, see Note 16 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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Biologics stabilized and began to regain momentum, supported by focused commercial execution.

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Second quarter 2026 reported net loss of $(15.8) million and non-GAAP adjusted EBITDA of $20.1 million.

Results of Operations

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

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Net Sales by Product Category and Reporting Segment

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

* Results above for each of Spinal Implants, Biologics, and Enabling Technologies; Global Spine; and pro forma net sales exclude the impact from discontinuation of its M6-C artificial cervical disc and M6-L artificial lumbar disc product lines (together, the "M6 artificial discs" or "M6 product lines"). Since pro forma net sales represent a non-GAAP measure, see the reconciliation above of the Company's pro forma net sales to its reported figures under U.S. GAAP. The Company's reported figures under U.S. GAAP represent each of the pro forma line items discussed above plus the impact from discontinuation of the M6 product lines.

Global Spine

Global Spine offers the following product categories:

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Therapeutic Solutions 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. Therapeutic Solutions 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.

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Spinal Implants, Biologics, and Enabling Technologies is comprised of a broad portfolio of spine fixation implant products used in surgical procedures of the spine, 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, and primarily within the U.S. for Biologics.

Three months ended June 30, 2026 compared to 2025

Net sales of $173.2 million, an increase of $3.4 million or 2.0% on a reported basis

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Therapeutic Solutions net sales increased $1.6 million, or 2.5%, largely driven by an increase in gross order volumes from our continued investment in our direct sales channels for both the spine and fracture markets, with this growth partially offset by unfavorable changes in average sales price as a result of billing requirement modifications and Medicare fee

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schedule changes instituted by the Centers for Medicare & Medicaid Services (“CMS”) for dates of service on or after May 18, 2026 (these changes were then withdrawn by CMS on July 1, 2026)

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Spinal Implants, Biologics, and Enabling Technologies net sales, excluding sales from the M6 product lines, increased $4.2 million, or 4.0%, primarily due to continued sales growth from our highest-volume distribution partners within Spine Fixation. Growth in these areas was partially offset by a decline in Enabling Technologies. This decrease in Enabling Technologies is primarily due to our deliberate strategy to prioritize the Voyager Earnout program, which incentivizes purchase commitments of our Spine Fixation and Biologics products over the term of each agreement, over the pursuit of capital sales

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Net sales from the M6 product lines decreased $2.4 million, or 97.4%, as a result of the discontinuation of the M6 product lines in 2025 to focus resources and investments on more profitable growth opportunities

Six months ended June 30, 2026 compared to 2025

Net sales of $337.1 million, an increase of $3.4 million or 1.0% on a reported basis

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Therapeutic Solutions net sales increased $4.3 million, or 3.7%, largely driven by increases in gross order volumes from our continued investment in our direct sales channels for both the spine and fracture markets, with this growth partially offset by unfavorable changes in average sales price as a result of billing requirement modifications and Medicare fee schedule changes instituted by CMS in May 2026 (these changes were then withdrawn by CMS on July 1, 2026)

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Spinal Implants, Biologics, and Enabling Technologies net sales, excluding sales from the M6 product lines, increased $5.7 million, or 2.7%, primarily due to continued sales growth from our highest-volume distribution partners within Spine Fixation, with this growth partially offset by a decline in Biologics and Enabling Technologies. This decrease in Enabling Technologies is primarily due to our deliberate strategy to prioritize the Voyager Earnout program over the pursuit of capital sales

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Net sales from the M6 product lines decreased $6.6 million, or 95.3%, as a result of the discontinuation of the artificial disc product lines in 2025 to focus resources and investments in more profitable growth opportunities

Global Limb Reconstruction

Global Limb Reconstruction offers products and solutions for the underserved limb reconstruction market that encompasses four pillars: deformity correction, limb lengthening, complex fracture management, and limb preservation. Global Limb Reconstruction sells its products through a global network of distributors and sales representatives to hospitals, healthcare organizations, and healthcare providers.

Three months ended June 30, 2026 compared to 2025

Net sales of $37.7 million, an increase of $4.4 million or 13.2% on a reported basis and 11.0% on a constant currency basis

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U.S. net sales growth of $0.2 million, or 1.6%, largely due to growth from new products launched in the past three years, partially offset by the timing of large capital sales orders

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International sales increase of $3.5 million, or 15.0% on a constant currency basis, primarily driven by sales of new products launched in the past three years

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Net sales increase of $0.7 million due to movement in foreign currency exchange rates, which had a favorable impact during the quarter

Six months ended June 30, 2026 compared to 2025

Net sales of $70.5 million, an increase of $7.4 million or 11.8% on a reported basis and 7.2% on a constant currency basis

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U.S. net sales were relatively flat compared to the prior year

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International sales increase of $4.5 million, or 10.1% on a constant currency basis, primarily driven by sales of new products launched in the past three years and partially offset by the timing of large tender orders and capital sales in the prior year

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Net sales increase of $2.9 million due to movement in foreign currency exchange rates, which had a favorable impact during the quarter

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Gross Profit

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with "Forward-Looking Statements" and our consolidated financial statements and notes thereto appearing elsewhere in this Annual Report. The discussion and analysis below is focused on our 2025 and 2024 financial results, including comparisons of our year-over-year performance between these years. Discussion and analysis of our 2023 fiscal year, as well as the year-over-year comparison of our 2024 financial performance to 2023, is located in Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 25, 2025, which is available on our website at www.orthofix.com and the SEC’s website at www.sec.gov.

Executive Summary

Orthofix is a global medical technology company headquartered in Lewisville, Texas. By providing medical technologies that heal musculoskeletal pathologies, we deliver exceptional experiences and life-changing solutions to patients around the world. Orthofix offers a comprehensive portfolio of spinal hardware, bone growth therapies, specialized orthopedic solutions, biologics, and enabling technologies, including the 7D FLASH navigation system.

In January 2023 we completed a “merger of equals” transaction with SeaSpine whereby we acquired SeaSpine via an all-stock merger. For additional discussion of the merger with SeaSpine, see Note 4 of the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report. The shares of common stock of Orthofix, as the corporate parent entity in the combined company structure, continue to trade on NASDAQ under the symbol "OFIX".

In February 2025, we announced our intent to discontinue our M6-C artificial cervical disc and M6-L artificial lumbar disc product lines (together, the "M6 artificial discs" or "M6 product lines") in order to allocate associated resources and investments to more profitable growth opportunities. All pro forma measures contained within this discussion of our operating results exclude the impact of this decision to discontinue the product lines.

Notable financial results in 2025 include the following:

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Net sales of $822.3 million, including sales from our M6 artificial cervical and lumbar discs, and pro forma net sales of $811.9 million, excluding net sales from our M6 discs, representing an increase of 2.9% on a reported basis and 4.1% on a pro forma constant currency basis compared to the prior year

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Global Spine Fixation net sales growth of 10.1% on both a reported and pro forma constant currency basis over the prior year, inclusive of U.S. Spine Fixation net sales growth of 5.5% compared to prior year

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Bone Growth Therapies ("BGT") net sales of $247.2 million, representing growth of 5.9% compared to the prior year

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Global Limb Reconstruction net sales of $134.7 million, representing growth of 8.4% on a reported basis and 5.3% on a constant currency basis over the prior year, inclusive of U.S. Limb Reconstruction growth of 15.8% compared to the prior year

Results of Operations

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

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Net Sales by Reporting Segment

The following table provides net sales by major product category by reporting segment:

Global Spine

Global Spine offers the following products categories:

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BGT 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. BGT 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.

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Spinal Implants, Biologics, and Enabling Technologies is comprised of a broad portfolio of spine fixation implant products used in surgical procedures of the spine, 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, and primarily within the U.S. for Biologics.

2025 Compared to 2024

Net sales increased $12.3 million or 1.8%

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BGT net sales increased $13.8 million, or 5.9%, driven by (i) favorable changes in average sales prices, (ii) increases in gross order volumes from our continued investment in our direct sales channels for both the spine and fracture markets, and (iii) continued market share growth of AccelStim

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Spinal Implants, Biologics, and Enabling Technologies net sales, excluding sales from the M6 product lines, increased $11.6 million, or 2.8%, primarily due to increased sales growth from new and existing high-volume distributor partners within Spine Fixation, which saw growth in its cervical, interbody, and thoracolumbar franchises; growth in these areas was partially offset by a decline in Biologics

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Net sales from the M6 product lines decreased $13.0 million, or 55.4%, as a result of the announcement and discontinuation of the product lines in 2025 to focus resources and investments in more profitable growth opportunities

Global Limb Reconstruction

Global Limb Reconstruction offers products and solutions for the underserved limb reconstruction market that encompasses four pillars: deformity correction, limb lengthening, complex fracture management, and limb preservation. Global Limb Reconstruction sells its products through a global network of distributors and sales representatives to hospitals, healthcare organizations, and healthcare providers.

2025 Compared to 2024

Net sales increased $10.5 million, or 8.4% on a reported basis and 5.3% on a constant currency basis

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U.S. growth of $5.3 million, or 15.8%, largely due to investments made in recent product launches, commercial execution within our sales channel, and from growth within our TrueLok and Fitbone product lines

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International growth of $1.2 million, or 1.4% on a constant currency basis, primarily driven by sales from new products launched in the past three years and partially offset by large orders made by NGOs in the prior year

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Increase of $3.9 million due to movement in foreign currency exchange rates, which had a favorable impact on net sales in 2025

Gross Profit

2025 Compared to 2024

Gross profit increased $20.1 million, or 3.7%

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Increase in gross profit driven by net sales growth across BGT, Spinal Implants, Enabling Technologies, and Limb Reconstruction product categories

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Increase in gross profit of $12.2 million driven by a reduction in amortization of the inventory fair value step-up recognized in the Merger, which was amortized over the expected sales cycles of the acquired inventory and concluded in December 2024

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Partially offset by a decrease in gross profit of $4.6 million resulting from increased inventory reserve expenses, primarily driven by our decision to discontinue the M6 product lines in order to focus resources and investments on more profitable growth opportunities

Sales, General, and Administrative Expense

2025 Compared to 2024

Sales, general, and administrative expense increased $21.8 million

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Increase of $17.6 million associated with certain legal matters, including ongoing arbitration proceedings with former executives and related securities class action and shareholder derivative complaints

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Increase of $10.1 million related to impairments of certain assets, restructuring costs, and losses incurred as a result of our decision to discontinue the M6 product lines

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Increase of $4.1 million in certain compensation related costs, including commissions, due to increased headcount and net sales

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Partially offset by a decrease of $9.9 million in succession charges and share-based compensation expense, primarily as a result of changes made in our executive leadership positions in the prior year

Research and Development Expense

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2025 Compared to 2024

Research and development expense decreased $7.8 million

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Decrease of $3.5 million as a result of our decision to discontinue the M6 product lines, wi

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