Are we all set? All right. Well, good morning, everybody. Thank you for joining us. My name is Matt Blackman, the newest member of the TD Cowen MedTech research team. Welcome to the, I was told, 46th annual TD Cowen Healthcare Conference, almost as old as I am. I'm thrilled today to have with us the senior leadership from Orthofix. To my left, Julie Andrews, the CFO. To my far left, many of you know Julie Dewey. Thank you both for making the trip up here. Really great to see you. I thought, you know, maybe we'd start sort of big picture.
You've accomplished a lot in two years, and I thought it might just be helpful to take a step back and, Julie, just tell us what you and the team sort of walked into when you joined again about two years ago. You know, talk to how the company was positioned competitively. You've had significant overhaul of the management team, portfolio, and I think in particular, you know, where you've chopped a lot of wood is on the sort of financial health of the business. Then we'll transition, and we'll talk about what you've done to fix all that.
Thank you. Thanks, Matt. Yeah. When we stepped in two years ago, you know, we inherited a company that had strong assets, but an operating model and financial profile that weren't positioned to deliver sustainable, profitable growth. Strategically, the portfolio had real strengths, a leadership position in Bone Growth Therapy and a differentiated enabling technology platform, but these assets weren't leveraged in a coordinated way. The SeaSpine merger had brought, you know, much needed innovation to the spine business, but also brought along with it complexity and cash burn in a commercial channel that was fragmented and inconsistent. In addition, you know, the organization had experienced senior leadership turnover, and what we walked into was a business that was capital constrained, low levels of profitability and overly dependent on a fragmented U.S. commercial channel.
We were very clear-eyed, that the business foundation needed to be reset and rebuilt before, you know, the story could inflect. That's what we've been focused on, you know, over the past two years.
You know, take us through, again, a lot has happened, you know, whether it's on the Salesforce side, in the spine business, realigning, reprioritizing, different assets within BGT, Limb Recon, just maybe the highlights of what you've accomplished over these last two years. You know, the next question will be, you know, where we go from here.
Yeah. You know, first, we focused the business on profitable growth and really reshaped the spend and capital allocation around profitable growth, optimized our commercial footprint, migrated our U.S. spine business to a far more aligned distributor base. Today, over 75% of our U.S. spine sales come from our top 30 distributors, up from less than half at the start of 2024. That shift alone has really meaningfully improved our execution and our predictability, particularly as we look into the future. We hired a world-class leadership team, you know, with extensive MedTech experience and really deep expertise and experience in the spine and orthopedic space.
We refinanced our debt in November of 2024, and that, you know, with lowered interest rates and better terms, but also we added extra capacity to bolster our access to capital and really shore up our liquidity. This really, you know, optimized our capital structure and supports our long-term profitable growth. At the same time, we really ignited our innovation engine. We're entering right now an 18-month cycle of more than 12 launches across, you know, our businesses, but that includes our Verata Open and Verata MIS platforms and really positions us well for multi-year growth across spine, BGT, and Limb Reconstruction. This financial impact is really showing up.
We had eight consecutive quarters of EBITDA margin expansion, and we've moved from a business that was burning cash, you know, two years ago at the end of 2023, had used more than $100 million in cash to, you know, where we were in 2025, just about breakeven, a use of $1 million in cash. That really provides the foundation for continued EBITDA margin expansion and sustained positive free cash flow.
I think that was my favorite charts that we put in our initiation was sort of the.
Yeah.
The before Massimo and Julie and the after Massimo and Julie.
Yeah.
It's pretty striking.
It's my favorite chart too.
Oh, thank you. I did think of you when we put that in there. All the heavy lifting you've had to do, certainly. I guess the last thing that's to come is sort of seeing that all that heavy lift translate into accelerating top-line growth. Obviously the sort of new product cycle is critical to that, but also the distribution realignment that you've done. I wanted to touch on a couple of things. I think you also gave a metric of that 75% of the business being the top 30 growing over the last 12 months at what-
27%. Yeah. 27% trailing 12-month growth out of that top 30 distributors. Something to be really excited about as we look into the future.
A great leading indicator, and again, before you get some of the contributions from these new products coming as well.
Correct. Yeah.
Could you also talk a little bit about this? This is going a little off script, I apologize, but I think there was an effort within this distributor relationship to move to, I don't know if exclusive is right, but more exclusive bag carrying. Is that what's playing out with this top 30?
I mean, what our, you know, approach was as we really optimized our spine channel, our U.S. commercial channel, was to really move to more scalable, exclusive distributor partnerships or meaningfully exclusive distributor partnerships. That's what we've really seen play out, which is, you know, for us, you know, when we joined, there was, you know, I don't even wanna say the number of spine distributors that we had, but, and I'd say distributors was sometimes a bit of a euphemism for a guy with a relationship with one surgeon. Now we're really moving to, you know, businesses that are large distributor partners, you know, many reps that are representing us in the field with strong surgeon relationships. A much more stable and predictable sales force and sales channel.
Okay. I think I've even used this in our conversations. We may have even put it in the note. It feels like the business itself is primed for better growth ahead and more profitable growth ahead. You've painted a picture. You have a three year LRP. Tell us what this could be in the next three years, what you expect it to be in terms of the top line growth, and then we'll drill down into the individual segments.
Okay. Thank you. Yeah. I mean, we're looking at, you know, we envision Orthofix as, you know, a scaled, consistently growing, innovation-driven MedTech company with a strong commercial engine, more efficient operating model, and a financial profile that really is leveraging the full and reflecting the full leverage of the transformation we take. As we look at our LRP over the next three years, you know, we're targeting 6.5% to 7.5% net sales CAGR from 2026 to 2028, mid-teens Adjusted EBITDA margin in 2028. That's going from, we just completed 2025 at just north of 10.5%, you know, meaningful expansion from where we are, even though we've already seen some meaningful expansion, continued meaningful expansion, positive free cash flow generation.
You know, we really feel like we've built a foundation, and now we're ready to kind of leverage and fully capture what we've built.
One of the questions that I get that, you know, people are asking is that 6.5%-7%, that's great. I think you exited, you'll correct me if I'm wrong, at an improved organic growth rate in 25, but still not at that 6.5%-7%, and maybe it was around 4% organic.
Mm-hmm.
Just bridge us over the next few years, how you climb into that range, and I think we'll probably leave it to the individual franchise conversation, but, we'll talk to sort of what, if there are individual products in particular that help you, that help you walk that growth rate higher.
I think as you think about, you know, our bridge and our kind of inflection point on our revenue growth is, one, really fully capturing the benefits of our distributor transitions and the optimization of our commercial channel. You know, we've already talked about some of that of the statistics there, but now 75% of our growth is coming from, or 75% of our sales is coming from this top 30 distributor group that's growing, you know, trailing 12 months, 20%-27%. We have a very strong innovation pipeline that's coming up. More than a dozen launches over the next 18 months.
We'll have the full commercial launch of Verata, you know, which is our open Verata Open, which is our new DGen Pedicle Screw System. We'll have our alpha launch of Verata MIS in the second half of 2026 as well. These are platform launches that we'll be building onto Verata over the next couple of years. Really represents a multi-year growth opportunity for us in spine. You know, we'll have a full year contribution from TrueLok Elevate and our FitBone bone transport and trochanteric nails. We're really excited about what those launches have to do, and we can get into some more details when we talk about...
You're also gonna anniversary in 2026. I know there was one particular price headwind that you were facing, and so that gives you some natural lift. Probably anniversary some of the dislocation, which inevitably happens when you realign and optimize the sales force. You've got some of those tailwinds as well, just things just not being as bad as the prior years. That's sort of how I think about it.
Yeah. I mean, if you think about the work that we did, kind of, I would say, somewhat, you know, quietly and behind the scenes, while, you know, in the U.S., we still were growing the spine market at above market growth rates. During that time, we also terminated more than 60 distributors in the Limb Reconstruction business. We sunset over 30 product lines to get more focus, we've had an awful lot going on behind the scenes. This, you know, certainly created some headwind, now we, you know, we believe we're phased as we start to anniversary all of those to really get into where, you know, a new cycle and an inflection point.
Could you juxtapose Sorry, I forgot how many products you said you were launching over the next 18 months, maybe compare that?
Over a dozen.
Over a dozen. The prior 18 months, what was that number?
Uh, I would-
Smaller?
Yeah, smaller. I would say, you know, single digits, probably low, lowest single digits. I think we're really excited about, you know, this next, you know, kind of cycle that we're entering into and the focus that we have there.
I just wanted to touch on the mid-teens EBITDA. That feels to me like a milepost rather than a goalpost.
Mm-hmm.
Right, so if you're able to sustain this 6.5%-7.5%, somewhere in that range type growth rate on the top line, I suspect, I mean, it's a different organization today, but, you know, legacy Orthofix had approached 20% EBITDA margins. Is there anything structurally that prevents you from moving above and beyond that mid-teens number?
I don't think so. I mean, we've talked about it before. Yeah, it's a, it's a milepost, not a goalpost, and I think, you know, our businesses and particularly, you know, spine, and Limb Reconstruction are really about scale. I think we have, you know, a bit of a journey that we'll be on in terms of our EBITDA margin expansion over a number of years.
Cash flow obviously also improving. Some of that's working capital. What's left to do to continue to clean that up such that you continue to drop through more money, more revenues to the bottom line?
Yeah. Yeah. I mean, we still have some, you know, hangover that we're working through on the legal side. I think, you know, our line of sight is this year we believe that we'll be clearing most of that. It's been quite a headwind in our free cash flow and expect it to be this year as well. I think and we've been very disciplined and very focused on the working capital, which has really helped kind of turn the story around, is really our working capital focus. We certainly won't lose sight of that. I think we've, you know, gotten, you know, the low-hanging fruit there certainly.
As we go forward, a much lower level of, you know, legal expense and legal settlement, and continued kind of focus on improved working capital.
Just to be clear, on the legal side, this is not product related. This is-
Not product related, yeah.
... related to,
The former leadership team.
... the former leadership team.
Correct.
Correct. That's important too. Then how do we think about CapEx in general, particularly in light of 12 new products over the next 18 months. Is there a investment cycle that needs to happen over the next, call it 12-18 months, as you build out sets and such, or within the bounds of what we've seen historically?
Yeah, I think it's gonna be a little, a little more this year. I think we guided actually, we gave external guidance on this number when we did our announcement last week. $45 million-$50 million for 2026 is what we're expecting. Again, that's up from about $35 million for the past couple of years. That's to support our launches, as well as, you know, some of our targeted initiatives to improve gross margin do have a capital outlay. We expect obviously a good return on that investment in order to make that. This year will be a little bit heavier and probably next year as well, but very, you know, sustainable within our revenue growth and profile, and so we feel good about that.
Shifting some of, you know, what we've been outlaying on other restructuring and legal things to the business.
Okay. This is where I open the kimono a little bit and take a hit.
Yeah.
I just want you to, in your view, and Julie, you as well, you know, what are we missing? What are investors missing? What I'm missing a lot.
I was so hoping you would ask that question.
'cause I, you know, for full disclosure, I am hold-rated. Obviously spend quite a bit of time on the story. Tell me, what am I wrong about?
I think when we sit, you know, when we sit here, it's really how underappreciated, just how much heavy lifting has gone on at Orthofix and how fundamentally different we are as a company today over the past, you know, couple of years. I don't think that necessarily has been fully appreciated. As you look over the last two years in all the areas of the company that have been rebuilt, you've got the effects of the work that was done, are fully showing up yet. When you think about things like our optimized commercial channel that Julie talked about, all the product launches that are coming up, the innovation pipeline even beyond that, you know, 2027, 2028 and beyond.
You look at all the operational improvements that have gone on just to make the company structurally better. I think those are at the beginning of being reflected and not yet fully in the, in the valuation. I think collectively, we believe all of those elements position us in a favorable way right now, and it's a good opportunity for folks to learn more about the company and where we're going.
Agreed. 2026 is also a year where some of the noise, we've talked about some of it, but also we haven't mentioned M6-C...
Right
... that goes away.
Yep.
The, you know, the real growth trajectory-
Yeah
... of the spine franchise in particular, I think begins to show without having to X out certain things.
Mm-hmm
okay, fair enough. Now let's talk about the business, and we're gonna start with Bone Growth Therapy, which, I think, not misunderstood, but maybe underappreciated part of the story. I think I've been pleasantly surprised at the sustainable level of growth above the end market, and I think that's a testament to the portfolio, which I think is arguably the broadest of any on the market. May be helpful if we take a step back, just help people understand what that segment is, and, you know, why that portfolio is unique, and then we can take it from there.
Yeah. Thanks, Matt. Yeah, Bone Growth Therapy, I mean, for us, it's a really important foundational business. We're market leaders in the spine segment of that business. We have, over 50% market share. Within fracture, which we really opened up in the last few years, we have opportunity there still. We're a number two market share player there, and we believe that we can further penetrate that market. We certainly, you know, our portfolio and our clinical indications are stronger than, you know, our competitors. We really have, you know, proven that we can be a consistent, strong executors there, not only led by our product portfolio, but we have a really strong commercial channel.
I would say a best-in-class back office support network, which is really important, in this market with you know, when you're working with durable medical equipment.
You sort of touched on it, the synergies maybe are not sort of immediately apparent for folks. I know I get a lot of people saying, "Well, why don't they just monetize that business and sell it?" Well, tell us why it's core to the business. I think there is a cross-selling opportunity, but there's also it helps fund the rest of the business as well. Maybe sort of talk to that. That'd be helpful.
I mean, you know, cross-selling is really important with that business kind of both ways, right? We have integrated call points. Many of the surgeons who, you know, use us for spine or limb recon solutions are the same clinicians that are treating nonunions or fracture. It, you know, gets our foot in the door for our, you know, BGT business. Conversely, our BGT business is often in accounts where they may not be using our spine or Limb Reconstruction products. Again, it's kind of an avenue in to a call point that we may not naturally have.
We're finding that, you know, as we deepen kind of our penetration with an enabling technology like 7D or with our new implants or with biologics, we're also able to then bring BGT in as an incremental value driver. You know, the reverse also being true. We think it's a powerful part. It is, you know, a higher margin part of the business and does actually, you know, help, you know, fund as we're in growth cycles on spine and Limb Reconstruction, help fund those businesses. We also see that, you know, we believe we have an untapped opportunity in fracture, really being at the beginning of our story on Limb Reconstruction in the U.S. that we can more systematically target Limb Reconstruction surgeons-
Yeah
... with our BGT portfolio.
Can you just remind us again the size of the fracture subsegment of the market?
It's about $250 million.
All right.
Yeah.
You're number two in that space.
Yes.
Is it a wide, still a wide-?
It's still a wide, yeah, a pretty wide gap.
These are typically the same physicians that are prescribing the nonunion stuff too, or no? Is it a separate call point? I'm just sort of trying to understand how you grind that higher.
Yeah. It's typically a, you know. The same physicians are typically doing nonunion and fracture together. It is a pretty fragmented market though. It's very different from spine. As we're able to go into more accounts with our, you know, market, now we believe a market-leading, Limb Reconstruction portfolio, we're getting access to those surgeons who we may not have really naturally had a call point with in the past.
That's gonna be a good segue in a second, but I just wanna make sure, anything, I think we're, you know, worry is not the right word but, you know, reimbursement, sort of the regulatory backdrop in BGT, anything to be sensitive to there?
Yeah, I can take that one. We are really well-positioned in our BGT business from an overall reimbursement standpoint. We've got robust clinical data, which of course is the foundational element for that. We did mention on our earnings call that CMS initiated the team's pilot program in January in a few episode of care categories that one of those categories being BGT. We mentioned that the annual impact of that program is immaterial. We expect the annual impact to be immaterial. We do see an overall 1% headwind on our Q1, but that'll be a one-timer and, you know, after that.
What is that? Yeah, I didn't get a chance to. Is that one point on price or one point on utilization?
On our overall company growth.
No, that I understand.
Yeah.
But what is-
It's just, it's timing of utilization-
Okay.
Basically. Yeah.
Right.
It's not price, it's timing of utilization.
Okay.
Basically, you know, the important thing to take away, we don't expect it to change physician prescribing behavior, but in terms of just managing that, the hospital will need to manage the timing of it a little bit more closely.
Got it. Okay. Let's segue and now talk about Limb Reconstruction. Maybe sort of same framework, just tell us what it is, the backdrop of that market and where you're positioning. I think, you know, most importantly, some of the new products that I think are finally going to have some commercial traction. I've been talking about the Limb Reconstruction business and FitBone for, like, five years. Particularly in the international market, it's been waiting for it in the U.S. Give us just some flavor of what that business is, how you're positioned in it, and why it's gonna be a growth driver from here.
Okay. Thanks, Matt. Yeah. I mean, I think, you know, in my seat, the business that I'm probably most excited about is our Limb Reconstruction business, and really it kind of goes back to our really focused strategy that we now have in this business. We've even gone through very recently here in Q1 a rebranding. We used to refer to it as orthopedics. We now call it our Limb Reconstruction business, and that's how you'll see us refer to it in the future. We've really are focusing around four high-value clinical categories: Limb Preservation, limb lengthening, complex fracture management, and extremity deformity correction. These represent a $2.6 billion market opportunity. You know, it's really focused on, you know, we've had strength outside the U.S., but really a very small business inside the U.S.
We're really focused on executing in the U.S. and really capturing that market opportunity in the U.S., and this is driven by our more focused portfolio and our efforts there. We had the global launch last year of TrueLok Elevate, FitBone, bone transport in the U.S., and a FitBone trochanteric lengthening nail. This will be our first year of all of those launches, and they really expanded our addressable market and, you know, strengthened our competitive positioning. We have a more aligned commercial strategy. We brought in some real talent in our commercial leadership organization in 2025. You know, I think we've sunset products that weren't core to what we're focusing on and believe that we really have momentum as we go in the future. The U.S. business grew 16% last year.
It was at Q4, it was at 8%. That was kind of that lower growth rate was driven by the sunsetting of those products that we talk about. As we Go to the second half of this year, we expect the U.S. Limb Reconstruction business to return to double-digit growth and kind of maintain that over a number of years. Then we have, you know, I'd say a continued cadence of innovation and evidence that we're bringing to that. We're layering in next-generation automation into TrueLok Elevate and FitBone, and then really also focusing investments on clinical evidence where particularly on the TrueLok Elevate side, that is a market really development opportunity. Very large TAM, not treated how we're trying to treat the market today and turn our procedure into standard of care.
Investing in that clinical evidence, is going to be really important to developing that market. Together, these elements, you know, we believe give us a much stronger platform to scale the U.S. Limb Reconstruction business in a disciplined, sustainable way.
How big a business do you think this could be in five years if we think about the mix, the U.S. in particular? I'm honestly not trying to back into long-term guidance by franchise, it would seem to me that just given where the portfolio is today, the small base you have, and the outsized growth, that it should be a more substantial piece of the business when we are here for the 51st annual.
Yeah
annual TD Cowen conference.
I think, you know, it is a small base that we're starting from, right? Even though it is going to be, you know, a strong growth driver for Orthofix and growing above, you know, the corporate average over the next several years, it is starting from $35 million-$40 million base. I would say what's exciting to me is we have a long horizon for this. It's a great market opportunity, you know, I think, you know, the sky could be the limit. I'm not putting a number on it today, but it's gonna be, you know, a meaningful contributor as it progresses over the coming years.
Can you compare and contrast? Obviously, the end market is growing faster, I would think, than traditional spine.
Mm-hmm.
Also the capital intensity and the competitive intensity as well. When I think about some of these end markets, I don't think about a lot of innovation. I think about some of the big companies, and I don't know if Synthes is a big competitor, but there's dislocation. It would seem like you're coming at a time when there's opportunity as well to capitalize.
You know.
You know, what's been a fairly stagnant in terms of innovation market.
Limb Reconstruction is fundamentally different market than, you know, the traditional U.S. spine fusion, and we believe that difference is a strategic advantage for Orthofix. It is. You know, spine's very consolidated with, you know, several large players driving most of the volume, whereas in Limb Reconstruction, there's very few companies that are really prioritizing this space. We believe that we're the first to really create this category and call it Limb Reconstruction, and really put very focused efforts around building out this business. We believe, you know, this creates room for a focus leader to elevate the care pathway and expand the market. It's really defined by, you know, clinical evidence and by complexity and specialization, and that's, you know, Orthofix does that really well.
It's kind of a move away from kind of commodity procedures into something that's very specialized. Then very attractive economics and long-term growth drivers, so healthier mix, durable demand, you know, higher valued cases. We believe that, you know, this is gonna be a strategic and financial complement to our business.
When we think about contribution margins, probably outsized relative to some of the other, particularly the core spine business.
Over time. I mean, you know, right now, again, it's a small, not at scale business, but over time we believe that will be the case.
As you build the revenue base in particular.
Mm-hmm.
Okay, I got a minute and 50 seconds to punch through. Enabling tech, I think the other area of interest here is your versioning enabling tech franchise, in particular 7D. In a minute and 37 seconds, can you just tell us what from a navigation standpoint 7D does? I think most important, just compare and contrast with the other big pieces of capital we see being sold by your competitors, how it's different.
Yeah. All right, I'll start, and Julie, I'm sure, will tag on. 7D, excuse me, is a offers really fast, highly accurate, radiation-free navigation, something other navigation systems don't. This isn't a robot. This is a navigation system. Just to, you know, compare and contrast there. It's has machine-vision technology, so think about a self-driving car, to really help that surgeon navigate through complexity in a streamlined way, facilitating the workflow. Has a small footprint, so it works really well in a regular OR or in a more space-constrained ASC. All in a package that I'll let Julie talk about the economics of it, but you don't have to just purchase it straight capital.
We offer a Voyager earn-out program, which is a program that, we will place the unit in a facility, and then, you know, they're using our hardware, and over time, they earn the piece of equipment. That's why that's been really a focus for us, particularly in the last year versus, you know, straight capital. We'll take everybody's money, but, you know, if they wanna go with a different model, we have that too in addition to a lease program. It's a really, you know, very, you know, piece of equipment, piece of navigation equipment that's becoming more and more a reflection and, you know, indispensable piece of equipment for surgery today.
Julie, if you could just finish on the success you're seeing in the pull-through for those Voyager programs, which is pretty impressive.
Julie talked about the Voyager earn-out program, where we had 30% increase in placements last year. What we're seeing is that collectively, the accounts that we have an earn-out system with are kind of over-prescribing to their volume commitment, over-purchasing their volume commitment by more than 50%. That's a great thing. I think, you know, Matt, just really quickly kind of to wrap up, you know, Orthofix today I think is fundamentally stronger than where we were three, you know, two years ago, commercially aligned, innovation driven, and operating with far greater financial discipline. We think the opportunity ahead is meaningfully greater than what's reflected today.
Massimo's done a pretty good job too. Thank you so much. Really appreciate it. It's great to see both of you. Thank you all for attending.
You as well. Thank you, Matt.