Orthofix (OFIX) Q4 2025 Earnings Call Transcript

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Date

Tuesday, Feb. 24, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Massimo Calafiore
• Chief Financial Officer — Julie Andrews
• Vice President, Investor Relations and Corporate Communications — Julie Dewey

Takeaways

• Total global net sales -- $218,600,000 for the fiscal fourth quarter, representing a 3% increase, with contributions from Bone Growth Therapies and U.S. limb reconstruction.
• Global spinal implants, biologics, and enabling technologies sales -- $112,300,000 in the fiscal fourth quarter; partial offset from softness in biologics and a strategic shift to a Voyager earn-out model.
• Bone Growth Therapies net sales -- $68,300,000 in the quarter, up 7%; management expects 2%-3% market growth, attributing outperformance to new surgeon additions and competitive conversions.
• Global limb reconstruction net sales -- $38,000,000 in the fiscal fourth quarter, driven by 8% U.S. growth following a focused commercial strategy.
• Pro forma non-GAAP adjusted gross margin -- 71.4%; driven by productivity improvements, with partial offset from increased international spinal implant sales mix.
• Pro forma non-GAAP adjusted EBITDA -- $29,200,000 for the fiscal fourth quarter, or 13.4% of net sales; margin expanded by approximately 230 basis points year over year.
• Free cash flow -- $16,800,000 generated in the fiscal fourth quarter; $3,100,000 for the full year excluding restructuring charges tied to M6 discontinuation.
• Total cash balance -- $85,100,000 at quarter-end, including restricted cash.
• 2026 net sales guidance -- $850,000,000 to $860,000,000; midpoint implies approximately 5.5% constant currency year-over-year growth.
• 2026 non-GAAP adjusted EBITDA guidance -- $95,000,000 to $98,000,000; positive free cash flow projected for the year, excluding potential legal settlements.
• 2026 adjusted gross margin outlook -- Approximately 72.5%, citing ongoing productivity improvements in manufacturing and distribution.
• 2026 capex guidance -- $45,000,000 to $50,000,000 expected in capital expenditures.
• Operating expense guidance -- Operating expenses as a percent of net sales expected to be flat to 2025 after normalizing for lower variable and incentive compensation and higher depreciation and stock-based comp.
• Depreciation and amortization -- $38,000,000–$39,000,000 for 2026 expected on an adjusted basis.
• Stock-based compensation -- $31,000,000 projected for 2026.
• Interest and other expenses -- Approximately $6,000,000 per quarter expected in 2026.
• Long-term financial targets timeline extension -- Company extended its three-year financial targets by one year (now running through 2028) to fully capture benefits from spine channel optimization.
• 2026–2028 long-term growth targets -- Net sales CAGR of 6.5%-7.5% targeted; mid-teens non-GAAP adjusted EBITDA margin as a percentage of net sales for 2028; positive free cash flow anticipated for 2026–2028, excluding legal settlements.
• Distributor network impact -- Over 75% of U.S. net sales in Q4 were from the top 30 distributor partners, up from less than half in the prior year and representing a 55% increase in contribution.
• 7D Flash Navigation Voyager earn-out -- 30% growth in placements for 2025; earn-out customers exceeded purchase commitments by more than 50%.
• Tariff impact -- Guidance includes an anticipated $1,000,000–$2,000,000 headwind in 2026.
• CMS TEAM pilot program -- Program contributes a 1% headwind to BGT revenue in Q1 2026; described as immaterial for the full year.

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Risks

• Julie Andrews said, "we do not expect to generate positive free cash flow in every quarter" in 2026, noting seasonally lower collections in Q1 due to annual bonus and commission payments.
• Management disclosed that growth timing benefits from spine channel optimization have shifted, resulting in the one-year extension of long-range financial targets.
• Softness in biologics sales attributed to distributor transition, with management noting a need for operational improvements to return to market pace.
• Guidance for free cash flow specifically excludes impacts from potential legal settlements, the timing and amount of which is uncertain.

Summary

Orthofix Medical (NASDAQ:OFIX) delivered fiscal fourth-quarter revenue growth supported by strength in Bone Growth Therapies and limb reconstruction while gross margin and adjusted EBITDA margins expanded. Leadership set 2026 guidance for 5.5% constant currency revenue growth at the midpoint, along with further gains in adjusted EBITDA, gross margin, and targeted capex. The company revised its long-term targets and extended its financial plan by one year to allow additional time for spine channel optimization actions to fully materialize, confirming a new timeline for delivering 6.5%-7.5% net sales CAGR and mid-teens EBITDA margin by 2028.

• The share of U.S. net sales from the top 30 distributors increased substantially, with management highlighting their contribution as foundational to future growth consistency.
• Management stated, "we expect to introduce over a dozen value creating products over the next eighteen months," signaling a robust innovation pipeline spanning spine, orthopedics, and BGT portfolios.
• Biologics performance lagged due to channel transitions, with internal leadership changes and sales network scaling set as priorities for improvement.
• Transition to the Voyager earn-out model for 7D Flash Navigation produced over 50% above-promise utilization, supporting recurring revenue in enabling technologies.
• The company acknowledged tariff-related headwinds and the possible timing of legal settlements affecting reported free cash flow, both factored or excluded in guidance as appropriate.

Industry glossary

• IDN (Integrated Delivery Network): A system of healthcare providers and facilities under a parent organization, designed to offer coordinated care and streamline purchasing decisions for medical device vendors.
• 7D Flash Navigation: Orthofix’s proprietary surgical navigation platform providing advanced imaging and intraoperative guidance for spine procedures.
• Voyager earn-out program: A recurring revenue model where spine navigation systems are deployed in exchange for purchase volume or usage-based commitments, replacing traditional hardware capital sales.
• BGT (Bone Growth Therapies): A suite of Orthofix's medical devices designed to enhance bone healing in spinal fusion and fracture management.
• M6 Disc: An artificial disc product line previously offered by Orthofix, now discontinued, with specified financial results excluded from ongoing operational reporting.
• TruLock Elevate and FitBone: Branded orthopedic products targeting limb lengthening and reconstruction applications within Orthofix’s portfolio.
• CMS TEAM pilot program: A Centers for Medicare & Medicaid Services test program adjusting reimbursement for specific episode-of-care categories, cited here for its temporary effect on BGT revenue growth.

Full Conference Call Transcript

Massimo Calafiore, and Chief Financial Officer, Julie Andrews. Today’s press release and supplemental presentation are available on the Events and Presentations page in the Investors section of orthofix.com, and 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. 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 various non-GAAP financial measures. Reconciliations to U.S. GAAP and additional details are in our press release and supplemental materials. Unless otherwise stated, net sales growth rates are on a pro forma constant currency basis and exclude the discontinued M6 artificial disc product lines, and all results of operations will be on a non-GAAP as-adjusted basis. Here is today’s agenda. Massimo will start with business performance and operational highlights, Julie Andrews will follow with our financial results and our 2026 outlook. Then we will open the call for Q&A. With that, I will turn the call over to Massimo.

Massimo Calafiore: Thank you, Julie, and good morning, everyone. I appreciate you joining us today. The first quarter capped a year of meaningful operational progress for Orthofix Medical Inc. We delivered strong, consistent performance in Bone Growth Therapies and U.S. limb reconstruction. And the work we did to finalize our spine commercial channel supported double-digit net sales growth in our global spine fixation business. This momentum contributed to our eighth consecutive quarter of adjusted EBITDA growth and a standout quarter of free cash flow generation. Collectively, these results show the positive impact of our focused commercial initiatives and margin enhancement efforts, providing a solid foundation as we enter 2026. Further demonstrating our progress, let me highlight several key accomplishments.

Global Spine Fixation Q4 net sales grew 10% for the year in U.S., and in Q4, spine fixation net sales grew 6% for the year and 5% for the quarter. While distributor transition implemented earlier in 2025 created some temporary pressure during the quarter, performance improved meaningfully as we exited Q4. With this transition now largely behind us, variable access to important IDN accounts and a strengthened highly aligned distributor network in place, we believe that business is set up well for 2026. Building on that momentum, our spine commercial channel optimization efforts continued to strengthen sales productivity.

In Q4, our top 30 U.S. distributor partners grew net sales 25% year over year and 27% on a trailing twelve-month basis, a clear validation of our focused channel strategy. Turning to enabling technologies, 7D Flash Navigation continued to be a powerful differentiator across our surgical ecosystem. Voyager earn-out placement grew 30% in 2025, and our earn-out customers are collectively their purchase commitments by more than 50%, demonstrating strong utilization and engagement. Looking ahead, one of the most exciting milestone for 2026 will be the full market release of our Verata spinal fixation system in the second half of the year.

Verata is purpose built for the $2,000,000,000 U.S. pedicle screw market, pairing a proprietary screw design with intuitive instrumentation that integrates seamlessly with the 7D navigation platform. We believe Verata will enhance surgical efficiency, strengthen surgeon confidence, and serve as a multiyear growth catalyst for our U.S. Spine business in 2026, 2027, and beyond. Shifting gears, we have rebranded our orthopedics business as Alimbra Construction, to reflect our strategic focus on four high-value clinical categories: lean preservation, limb lengthening, complex fracture management, and extremity deformity correction. Together, these represent an estimated $2,600,000,000 market opportunity, and we believe Orthofix Medical Inc. is well positioned given our comprehensive portfolio of internal and external fixation solution.

From our perspective, few companies are prioritizing this market, which give us an opportunity to elevate the care pathway in a category with meaningful long-term growth potential. In 2025, we sharpened our focus on high-return opportunities in this business by streamlining our product portfolio, strengthening organizational alignment, and refining our commercial strategy. These actions draw sustained momentum. U.S. Limb Reconstriction grew 8% in Q4 and 16% for the full year. This performance was driven by the global launch of TRULOC Elevate, FeetBond bond transport, and FeetBond trochantering plantering nails, each expanding our addressable market, enhancing our product mix, and fortifying our leadership position as we had in 2026.

Turning to Bone Growth Therapy, the BGT business remained a consistent performer, delivering accelerating momentum throughout the year a strong sequential fourth-quarter growth that benefited from procedural cross selling. Fourth-quarter growth reached 7%, more than double the market rate, driven by increased utilization and higher prescribing velocity across both spun fusion and fracture management. With its consistent performance and healthy margin, BGT continues to be an important contributor to our overall progress. As we enter 2026, our priorities are clear: sharpen commercial execution, drive deeper market penetration and adoption of our 7D system, improved gross margin through targeted operational initiatives, and maintain targeted capital allocation with a continued focus on adjusted EBITDA expansion and free cash flow generation.

With full-year contribution from TRULOC Elevate and FITBON, the planned second half of full commercial launch of Verada, ongoing benefits from our optimization of our spine commercial channel, a renewed focus on advancing our biologics portfolio, and sustain momentum across limb reconstruction and BGT business, we believe the company is well positioned to deliver durable top-line growth, expanding margin, and strong free cash flow in 2026. Today, we also announced that we are recalibrating the timeline for our three-year financial targets to fully capture the anticipated benefit of our spine commercial channel optimizations.

Over the past year, the decision to optimize our spine commercial channel has proven to be the right one, strengthening our foundation and driving measurable improvement in execution and distributor productivity. At the same time, the scope and rigor of this transformation required us to implement these changes with deliberate care to increase the likelihood of long-term success. As a result, while the underlying fundamentals of our strategy remains strong, the timing of certain growth benefit has shifted, and we are extending our long-range plan timeline by one year to fully capture expected operational and commercial leverage created by these channel enhancements. This adjustment reflects our commitment to disciplined execution.

It should position us to deliver sustainable above-market growth and margin expansion as these initiatives mature. In closing, 2025 was a year defined by strength and commercial capabilities, disciplined execution, and meaningful new product launches from our innovation pipeline. Delivered another year of significant adjusted EBITDA gains and positive free cash flow generation excluding the impact from M6. As we move into 2026, we are carrying the momentum forward with disciplined commercial execution and targeted capital deployment. While our work is not yet complete, and certain benefits from our spine initiatives are expected to continue to build over time, we are increasingly confident in our ability to execute.

We believe the traction behind our strategy and the strength of our innovation engine position us well as we advance towards our long-term financial goals and create sustainable value for our shareholders. Thank you for your continued support. I will now turn the call over to Julie Andrews.

Julie Andrews: Thank you, Massimo, and good morning, everyone. Before we dive into the numbers, a quick reminder. All net sales growth rates referenced today are pro forma constant currency, excluding M6 disc discontinuation impacts. I encourage you to review the reconciliations in our press release and the supplemental materials posted on our website, which include pro forma results through Q4 to support your modeling. Total global net sales in Q4 reached $218,600,000, a 3% increase, supported by strong performances in our Bone Growth Therapies and U.S. limb reconstruction segment. Global spinal implants, biologics, and enabling technologies delivered $112,300,000 in net sales for Q4.

Our performance was supported by targeted distributor transitions in key geographies, partially offset by softness in biologics, our strategic shift from 7D capital sales to the Voyager earn-out program. As a reminder, we are still annualizing the impact of the previously disclosed price decrease at a major account which continues to affect year-over-year comparisons. Bone Growth Therapies, or BGT, net sales were $68,300,000, up 7%, significantly outperforming the market. We expect 2% to 3% driven by new surgeon additions and competitive conversions, especially in the fracture channel. Global limb reconstruction sales were $38,000,000 in the fourth quarter, driven by 8% U.S. growth.

This performance reflects our sharpened focus on the core limb reconstruction pillars and the deliberate the emphasis of products that are not aligned with the strategy. We expect to return to double-digit growth in 2026 as these portfolio and commercial refinements continue to take hold. Moving down the P&L, pro forma non-GAAP adjusted gross margin was 71.4%, reflecting the impact of the M6 discontinuation and productivity improvements, partially offset by unfavorable geography mix due to increased net sales in international spinal implants biologics, enabling technologies. As Massimo noted, this marks our eighth consecutive quarter of EBITDA margin expansion and an outstanding quarter of robust free cash flow generation, underscoring the scalability of our model and operational discipline.

Fourth-quarter pro forma non-GAAP adjusted EBITDA was $29,200,000, or 13.4% of net sales, year-over-year margin expansion of approximately 230 basis points. We delivered exceptionally strong free cash flow of $16,800,000 in Q4, a clear demonstration of the strength and scalability of our business model. For the full year, free cash flow when excluding restructuring charges tied to the M6 discontinuation was $3,100,000. Notably, reported free cash flow was nearly breakeven for 2025, a significant achievement that underscores a meaningful financial progress we made throughout the year. We ended the quarter with $85,100,000 in total cash, including restricted cash, which provides us with the flexibility to continue investing in innovation supporting the long-term growth of the business.

Moving on to 2026 full-year guidance. We expect full-year net sales of $850,000,000 to $860,000,000, with a midpoint of $855,000,000. These expected net sales represent implied pro forma constant currency year-over-year growth of approximately 5.5% at the midpoint of the range. These projections are based on current foreign currency exchange rates and do not account for any further changes to exchange rates for the remainder of the year. We expect full-year non-GAAP adjusted EBITDA of $95,000,000 to $98,000,000, and we expect to generate positive free cash flow for the full year excluding the impact of any potential legal settlements.

While we are not providing quarterly guidance, I do want to provide you with some directional comments on the expected cadence of our business to assist you in modeling our quarterly performance. We expect normalized procedure volume seasonality throughout 2026 with a more meaningful contribution from newly launched products as the year progresses. Net sales growth is anticipated to be approximately 5% in the first half of the year and about 6% in the second half of the year. As a reminder, Q1 includes one less selling day than last year, while Q2 includes one additional selling day, each representing roughly a 1.6% impact on quarterly growth rate.

In addition, we previously indicated that CMS would begin the TEAM pilot program at some hospitals in January 2026 that covers a few episode-of-care categories, including BGT. Although we expect the annual impact from this program to be immaterial, it will have a one-time impact on our quarterly growth rate in Q1 of approximately 1%. Now for some specifics on the individual line items on the P&L for 2026. We expect adjusted gross margins for the full year to be approximately 72.5% as we continue to focus on productivity improvement within our manufacturing and distribution operations.

We expect operating expenses as a percent of net sales to be approximately flat to 2025 as we normalize for lower variable and incentive compensation and increased depreciation and stock-based compensation. Assist you with modeling EBITDA, expect adjusted depreciation and amortization expense for the full year 2026 to be in the range of approximately $38,000,000–$39,000,000. Stock-based compensation expense is expected to be $31,000,000 for the year. Now let us touch briefly on the items below the operating income line. Our expectation for interest and other expenses approximately $6,000,000 per quarter. We expect adjusted EBITDA margin enhancements of 70 basis points to be weighted more towards the back half of the year due to the timing of revenue and R&D investment.

This margin enhancement is driven by productivity improvements, SG&A leverage, and is partially offset by increased variable and incentive compensation as well as investment in innovation and clinical evidence. As a reminder, Q1 historically carries heavier expense loads due to industry conferences and resets of payroll taxes and annual benefits such as 401(k) matching. Additionally, due to the phasing of R&D projects, the previously mentioned CMS TEAM pilot program, certain one-time expenses, we do not anticipate EBITDA leverage in Q1 of this year versus 2025.

With regard to free cash flow, please keep in mind that while we expect to generate positive free cash flow for the full year 2026, excluding the impact of any potential legal settlements, we do not expect to generate positive free cash flow in every quarter. To provide additional color, we expect $45,000,000 to $50,000,000 in capital expenditures this year. As a reminder, Q1 in particular has historically been the lowest cash flow quarter due to the payment of the prior year’s annual bonuses and Q4 commissions, among other items. Our full-year outlook in place, I would like to spend a moment on our long-range plan.

As Massimo mentioned, we are updating our three-year financial targets better reflect the timing of revenue and margin benefits from our spine commercial channel optimization. By extending the timeline to 2028, our long-range plan now better matches the pace progress we are seeing, the ramp-up in commercial leverage we expect to deliver. We think this provides a clearer view of our anticipated growth trajectory and the solid financial foundation expected to support our strategy.

Our refreshed 2026 to 2028 targets include 6.5% to 7.5% net sales CAGR from 2026 through 2028, mid-teens non-GAAP adjusted EBITDA as a percentage of net sales for full year 2028, and positive free cash flow generation 2026 through 2028 excluding the impact of any potential legal settlements. We believe these targets build on our positive momentum, position the company for sustained profitable growth, underpinned by a stronger financial profile and a clear path to long-term value creation. In closing, we expect 2026 be a year defined by consistent execution and disciplined financial management.

With a strengthened commercial foundation, a differentiated innovation pipeline, clear visibility into margin expansion and positive free cash flow generation, we believe Orthofix Medical Inc. is well positioned for profitable growth. Remain grounded in operational rigor, disciplined capital deployment, and prioritizing high-value opportunities across our spine, VGT, and limb reconstruction portfolios with the objective of creating sustainable long-term shareholder value. Now let me turn it back to Massimo for closing remarks. Massimo?

Massimo Calafiore: Thank you, Julie. I am very pleased with the progress we made in 2025. We successfully executed several high-impact initiatives, from optimizing our spine distributor network to restructuring the biologics commercial channel and launching multiple new products. We believe this action strengthen our commercial platform and have set us up for accelerated growth in the year ahead. We also fortified our financial foundations, delivering significant adjusted EBITDA gains and generating near breakeven free cash flow. Have entered 2026 with optimists and real momentum. Our new U.S. spine distributors are fully onboarded and already contributing to our growth.

As the year gets underway, we are seeing clear signs of progress with encouraging traction across key procedural segments and in our priority geographies. And here is an important milestone. As Q4 2025, more than 75% of our U.S. net sales were driven by our top 30 distributor partners. 2024, this group drove less than half of our net sales, representing an increase of 55% in their shares of our total revenue. This strategically aligned commercial channel is elevating productivity, sharpening execution, and we believe is the means for enabling more consistent and predictable sales performance a sticker surgeon relationship, as we move through 2026.

Our innovation pipeline has never been stronger as we anticipate a variety of meaning product launches and product enhancement that extend across every major segment of our business. In fact, we expect to introduce over a dozen value creating products over the next eighteen months to drive sustained momentum. These include the full market launch of the Verata open system and the alpha launch of the Verata MIS system the 2026, next generation automation enhancement for key limb reconstruction systems like TruLock elevates and fishbone, technology-enabled advancements within our BGT portfolio designed to further strengthen surgery engagement and patient adherence, and additional platform extensions enabling technology upgrades that enhance efficiency and reinforce our competitive position.

And we believe we have the right team in place, aligned, disciplined, and focused on our priorities to drive profitable growth. Finally, we believe our financial foundation is strong. We are optimistic about the opportunities ahead, and we believe we are making the right investments to elevate our execution and create durable, long-term value for our shareholders. Before we move to Q&A, I want to express my sincere gratitude to the entire OrthoVic teams and our commercial partner. Commitment to supporting surgeon and patient is what fuels our progress and defines who we are.

We are excited about where we are headed, and together, we are continuing to build Orthofix Medical Inc. into the arrival partner in med tech delivering exceptional experiences and life-changing solution. With that, let us go ahead and open the call for your questions. I would like to remind everyone in order to ask one question and one brief related follow-up, press star then the number one on your telephone keypad.

Operator: And your first question comes from the line of Mathew Blackman with TD Cowen. Please go ahead. Good morning, everybody. Can you hear me okay?

Mathew Blackman: Good morning. Can you hear me okay?

Massimo Calafiore: Yes, Matt. Perfect. Good morning.

Mathew Blackman: Thanks. I’m going to start with just a clarification question for Julie. On the CMS impact you’re going to see in BGT, just to clarify: the one-point headwind you called out, is that isolated to the BGT franchise? And is that in the first quarter, or is that a full-year impact to the total top line? Just want to make sure I capture that impact correctly, and then I’ve got one follow-up.

Julie Andrews: Hi, Matt. Good to talk to you again. Yes, the CMS change that we talked about is an immaterial impact for the year overall. We will have about a 1% impact in the quarter specific to BGT revenue only.

Mathew Blackman: Okay, appreciate that. And then my follow-up is on the LRP. Maybe if you could take a step back and reflect a bit more on what’s essentially taking a year longer to manifest in the business relative to the original LRP. It sounds like from your comments, Massimo, that the channel optimization initiative took a little bit longer to execute. Just want to make sure there’s nothing else going on. And then, Julie, on your end, beyond the top line, what do you need to execute on most critically for the margin and cash generation profile to continue to improve? Thanks.

Massimo Calafiore: Thank you, Matt. This reflects all of the work we did in the last couple of years. Our goal was to create a company with a stronger foundation and much more focus on how we go to market. We made the right decision to be very aggressive in pursuing our distributor transition. As you heard, 75% of our U.S. net sales now are coming from our top 30 distributors in spine. This is going to give us much stronger predictability about how we go to market and the network we need in order to deliver the meaningful innovation coming in the next eighteen months.

We are very excited about the Verata launch and the dozen-plus products coming across all business units to support growth. To materialize that, we needed a strong foundation. We’re taking the right decisions to create long-term value.

Julie Andrews: Thanks, Matt. On getting to mid-teens EBITDA and positive free cash flow: we’re executing our gross margin expansion plan, a 300-basis-point improvement from 71% to 74%. Our 2026 guide on gross margin, 72.5%, puts us on track to achieve that by 2028. Specifically, we’re driving productivity improvements across manufacturing and distribution, leveraging fixed costs and moderating SG&A expense growth while continuing to invest in innovation and the commercial channel, including automation enhancements to drive back-office efficiency. Alongside continued focus on working capital management and improved asset utilization, these actions will generate positive free cash flow.

Operator: Your next question comes from the line of Thomas Stephan with Stifel. Please go ahead.

Thomas Stephan: Great. Hey, everyone. Good morning. I’ll start with the 2026 revenue guide. Maybe for you, Julie, can you flesh out the three main line items a bit quantitatively? You mentioned above-market growth for BGT—any finer points numerically for the 2026 revenue guide would be helpful. And qualitative commentary would be great as well.

Julie Andrews: We continue to expect above-market growth for BGT, as you mentioned. We also expect above-market growth for our limb reconstruction business. We noted that the second half will see the U.S. return to double-digit growth in limb reconstruction. And we expect another year of performance similar to what we saw in our global spine business. As a reminder, we finished 2025 at 10% global growth in spine.

Thomas Stephan: Got it. That’s great. And then my follow-up is also on the LRP. You grew about 4% pro forma this year, maybe closer to 4.5% constant currency in the back half on revenue, guiding to 5% to 6% in 2026. For the long-term targets, do you still view 6.5% to 7.5% as the right long-term revenue CAGR, even though it’s pushed out a year? And, Massimo, given the product launches and commercial optimization, what’s your level of confidence that 6.5% to 7.5% is the right target for top-line growth for Orthofix Medical Inc.?

Massimo Calafiore: We made meaningful investments in both the commercial channel and innovation. Starting in the second half of this year, we expect to see the positive impact of the combination of the two. The Verata launch is important—it’s one of the products that will propel the organization to the next level in spine. There’s strong technology coming in limb reconstruction between our FitBone and TRULOC product lines. We’re also making enhancements around the 7D platform and in biologics. We’ve made these investments while delivering EBITDA margin expansion and free cash flow. Everything is progressing as we outlined, and we’re very excited about where we are today and what we’re building for tomorrow.

Operator: Your next question comes from the line of Caitlin Cronin with Canaccord Genuity. Please go ahead.

Mikaela (for Caitlin Cronin): Hi, everyone. This is Mikaela on for Caitlin. Thanks for taking the question. First, could you provide some additional color on 7D placements in 2025 and the install base?

Julie Andrews: We had a 30% increase in our placements in 2025. We don’t disclose the specific install base number, but we’re excited that collectively our earn-out units exceeded their purchase volume commitments by more than 50%, which we believe validates our strategy to move from capital sales to an earn-out model.

Mikaela (for Caitlin Cronin): That’s helpful, thanks. And then you mentioned a renewed focus on advancing the biologics portfolio. Can you provide more color on what that means strategically and how to think about its contribution over the next couple of years?

Massimo Calafiore: We made internal leadership adjustments to give biologics a clear, central focus. We recognize there’s work to do, but we believe we have a strong portfolio. We saw some decline last year, primarily due to distributor transition. Now we’re focused on scaling the commercial network and execution. We’ve made changes we believe will optimize our sales channel, and we expect U.S. biologics performance to get back to market pace as we continue to focus here. I’m confident we’ll see positive momentum in this portfolio this year—work ahead, but we’re excited about the foundation.

Operator: Your next question comes from the line of Michael Petusky with Barrington Research. Please go ahead.

Michael Petusky: Yes, good morning. Julie, did you provide any commentary around tariff impact included in your guidance for ’26, and also the tariff impact in ’25? Thanks.

Julie Andrews: It’s included in our guidance. As we discussed mid last year, we expect about a $1,000,000 to $2,000,000 impact in 2026.

Michael Petusky: Okay, and that’s roughly where it came in ’25?

Julie Andrews: A little wider in ’25 because it wasn’t a full-year impact.

Michael Petusky: Okay. And then on potential legal settlements—have you reserved for a legal settlement at all?

Julie Andrews: We did take an accrual in Q3. You can refer to the 10-K for more information.

Michael Petusky: Thanks. Lastly, on free cash flow: it looks like you improved free cash flow from ’24 to 2025 by maybe $7.5 to $8 million. Is that a reasonable estimate for the improvement you might see in ’26 versus ’25—an additional $7–8 million?

Julie Andrews: Excluding legal settlements, that’s probably in the range to maybe slightly more. The legal settlements will impact that number.

Michael Petusky: And it sounds like you maybe expect legal settlements in this coming year.

Julie Andrews: Our guidance commentary references positive free cash flow excluding potential legal settlements. Timing is to be determined, but that’s the assumption.

Operator: There are no further questions at this time. I will now turn the call back over to Julie Dewey for closing remarks.

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

Operator: Ladies and gentlemen, thank you all for joining. You may now disconnect.

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