Orthofix (OFIX) Q2 Revenue Rises 2%

Orthofix Medical (OFIX 13.46%), a medical device and biologics company specializing in spinal, orthopedic, and bone growth products, reported results for Q2 2025 that modestly beat expectations on both GAAP earnings and non-GAAP revenue. The company announced its earnings for the quarter ended June 30 on August 5, 2025. GAAP revenue totaled $203.1 million for Q2 2025, exceeding the analyst estimate of $196.19 million (non-GAAP). Meanwhile, net loss per share narrowed to $(0.36) on a reported (GAAP) basis, better than the expected $(0.49) (GAAP). Despite ongoing reported losses, the quarter saw improvement in margins (non-GAAP pro forma adjusted gross margin of 72.7%), positive free cash flow of $4.5 million, and continued new product execution. Results marked another quarter of incremental progress against operational and commercial goals.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding the Business and Success Drivers

Orthofix Medical develops, manufactures, and sells medical devices and biologics for spine fusion, complex fracture management, and bone healing. Its product mix includes spinal hardware for spinal fusion, bone growth stimulator devices for bone repair, biologics for surgical procedures, as well as limb lengthening and reconstruction products. The company also offers enabling technologies like navigation systems.

Recent business strategy has focused on three areas: bringing new products to market, optimizing distribution through mergers and commercial reorganization, and managing regulatory requirements. Key success factors include maintaining a broad and innovative product offering, executing on commercial partnerships and mergers, and building a strong sales network to reach surgeons and hospitals. Continued R&D investment and securing regulatory approvals also play a major role in product pipeline and market competitiveness.

Quarter Highlights: Segment Trends and Notable Developments

In the quarter, U.S. Spine Fixation net sales rose 5%, while procedure volumes increased 7% from the prior-year period. Management signaled that ongoing channel restructuring might cause near-term disruption but expects this to create a stronger sales foundation later in the year.

The Bone Growth Therapies segment—focused on devices like AccelStim that use external stimulation to promote bone healing—reported pro forma net sales of $62.6 million, up 5.8%. BGT Fracture, which focuses on bone repair following trauma, grew 7%. The AccelStim 2.0 device, which integrates compliance tracking for physicians, received regulatory clearance in Q1 2025. Orthofix maintained its market leadership here.

Global Orthopedics sales climbed 8.9% on a pro forma basis, with U.S. Orthopedics net sales grew 28% compared to Q2 2024. This segment includes products for limb reconstruction and lengthening, such as the TrueLok external fixation system and Fitbone nail system. The company launched the TrueLok Elevate Transverse Bone Transport (TBT) System -- the first device cleared by the U.S. Food and Drug Administration (FDA) for a surgical technique to treat limb deformities and non-union fractures. This launch, along with the U.S. debut of the Reef L Interbody System for lumbar spinal fusion, added to recent product introductions that aim to address a wider range of patient cases.

Spinal Implants, Biologics, and Enabling Technologies (excluding the discontinued M6 disc line) experienced a 1.6% sales increase (non-GAAP, pro forma). Here the company targets surgical products, including artificial implants and graft materials for spinal repair, as well as enabling technology like surgical navigation systems. Management continues to implement channel transitions and expects improved scalability as new sales structures mature through year-end. Distributor transitions are ongoing in the U.S. and are expected to drive growth over time, but are currently causing some drag on results, as discussed by management on a non-GAAP as-adjusted basis. One-time restructuring and legal costs were recorded, most notably $4.0 million tied to ongoing legal matters and $3.7 million related to product discontinuations.

Gross margin expanded by 0.7 percentage points (70 basis points) to 72.7% on a pro forma non-GAAP basis compared to Q2 2024, helped by ongoing cost management and the impact of discontinued low-margin products. Adjusted EBITDA margin (non-GAAP) grew 0.7 percentage points, marking six straight quarters of incremental improvement. Free cash flow was positive at $4.5 million, and Cash, cash equivalents, and restricted cash rose to $68.7 million as of June 30, 2025, up from $60.5 million as of March 31, 2025. S,G&A (selling, general, and administrative) expenses as a percent of sales declined by 0.2 percentage points on a non-GAAP basis.

Research and development (R&D) expenses totaled $14.6 million, or 7.3% of pro forma net sales (non-GAAP), down slightly from the prior year. Management highlighted continued synergy gains following the SeaSpine merger and reinforced the importance of investing in technology to drive future growth.

Looking Ahead: Guidance and Future Considerations

Orthofix reaffirmed its full-year 2025 outlook, including pro forma net sales guidance of $808 million to $816 million (excluding sales from the discontinued M6 product lines), pro forma non-GAAP adjusted EBITDA guidance of $82 million to $86 million, and an expectation of positive free cash flow (excluding the impact of restructuring charges related to the discontinuation of the M6 product lines). Pro forma net sales, excluding discontinued M6 disc products, are anticipated to reach between $808 million and $816 million, representing about 5.0% constant currency sales growth. Adjusted EBITDA (non-GAAP) is forecast at $82 million to $86 million. The company expects to generate positive free cash flow, excluding one-time restructuring costs linked to the discontinuation of M6 discs. No changes or updates were made to long-term guidance during this release.

As the company continues toward margin improvement, investors will want to watch the progress of its U.S. distribution transformation, the success of new products like AccelStim 2.0 and TrueLok Elevate, and the broader impact of commercial realignment. The company remains exposed to operational risks, including regulatory investigations and legal matters. One-time costs associated with restructuring and discontinuation of product lines could also impact interim results.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.