Orthofix Medical Inc. Revenue Disclosure

Revenue Recognition

The Company accounts for a contract when there is (i) approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. The Company’s contracts may contain one or more performance obligations. If a contract contains more than one performance obligation, the Company allocates the total transaction price to each of the performance obligations based upon the observable standalone selling price of the promised goods or services underlying each performance obligation. The Company recognizes revenue when control of the promised goods or services is transferred to the customer, which typically occurs at a point in time upon shipment, delivery, or utilization, in an amount that reflects the consideration which the Company expects to be entitled to in exchange for the promised goods or services. The consideration for goods or services reflects any fixed amount stated per the contract and estimates for any variable consideration, such as discounts, to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

The following sections discuss the Company’s revenue recognition policies by significant product category:

Bone Growth Therapies

Bone Growth Therapies revenue is largely attributable to the U.S. and is comprised of third-party payor transactions and wholesale revenue.

The largest portion of Bone Growth Therapies revenue is derived from third-party payors. This includes commercial insurance carriers, health maintenance organizations, preferred provider organizations, and governmental payors, such as Medicare. Revenue is recognized when the product is fitted to and accepted by the patient and all applicable documents required by the third-party payor have been obtained. Amounts paid by third-party payors are generally based on fixed or allowable reimbursement rates. These revenues are recorded at the expected or preauthorized reimbursement rates, net of any contractual allowances or adjustments. Certain billings are subject to review by the third-party payors and may be subject to adjustment.

Wholesale revenue is related to the sale of the Company’s bone growth stimulators directly to durable medical equipment suppliers. Wholesale revenues are typically recognized upon shipment and receipt of a confirming purchase order, which is when the customer obtains control of the promised goods.

Biologics

Biologics revenue is largely attributable to the U.S. and is mostly processed from within the Company’s Irvine facility. In addition, the Company has a long-standing collaborative arrangement with MTF that provides exclusive global marketing rights to MTF's Virtuos and Trinity Elite, and exclusive rights to market the FiberFuse tissues in the U.S. Per the terms of the agreement, MTF sources the tissue, processes it to create the allografts, packages, and delivers the tissue to the customer. The Company receives marketing fees from MTF based on sales of products covered under the collaborative arrangement. MTF is considered the principal in these arrangements; therefore, the Company recognizes marketing service fees on a net basis within net sales upon shipment of the product to the customer and receipt of a confirming purchase order.

Spinal Implants and Global Limb Reconstruction (formerly "Global Orthopedics")

Spinal Implants and Global Limb Reconstruction products are distributed world-wide, with U.S. sales largely comprised of commercial revenue and international sales derived from both commercial revenue and stocking distributor arrangements.

Commercial revenue is largely related to the sale of the Company’s Spinal Implants and Global Limb Reconstruction products to hospital customers. The customer obtains control and revenues are recognized when these products have been utilized and a confirming purchase order has been received from the hospital.

Other revenues within the Spinal Implants and Global Limb Reconstruction product categories are derived from stocking distributors, who purchase the Company’s products and then re-sell them directly to customers, such as hospitals. For stocking distributor arrangements, it is the Company’s policy to recognize revenue upon shipment and receipt of a confirming purchase order, which is when the distributor obtains control of the promised goods. The transaction price for revenue recognition is estimated based upon the Company’s historical collection experience with the stocking distributor.

Enabling Technologies

Enabling technologies revenue is primarily comprised of sales of the 7D Flash Navigation Systems and related instruments to hospitals, healthcare providers, and stocking distributors. Revenue is typically recognized from these sales upon installation of the system at the site of the purchasing hospital or upon shipment to a stocking distributor and receipt of a confirming purchase order, as this represents the point in time when the performance obligation has been satisfied.

Product Sales and Marketing Service Fees

Marketing service fees are received from MTF based on total sales of biologics tissues and relate solely to the Biologics product category within the Global Spine reporting segment, whereas product sales primarily consist of the sale of Bone Growth Therapies, Spinal Implants, non-MTF sourced Biologics, Enabling Technologies, and Global Limb Reconstruction products. Marketing service fees received from MTF were $46.9 million, or approximately 30% of total Biologics revenues, for the year ended December 31, 2025. As MTF is the single supplier for certain allografts in the Company’s Biologics portfolio, derived from deceased donors for their bone grafts and living donors for their amnion grafts, any event or circumstance that would impact MTF’s continued access to donors or the Company’s ability to market these tissues may adversely impact the Company’s financial results.

Revenues exclude any value added or other local taxes, intercompany sales, and trade discounts. Shipping and handling costs for products shipped to customers are included in cost of sales, and were $8.9 million, $9.9 million, and $9.5 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Accounts receivable and related allowances

Payment terms vary by the type and location of the Company’s customers and the products or services offered. The term between invoicing and when payment is due is generally not significant.

The Company’s allowance for expected credit losses represents the portion of the receivable’s amortized cost basis that an entity does not expect to collect over the receivable’s contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions.

The following table provides the detail of changes in the Company’s allowance for expected credit losses for the years ended December 31, 2025, and 2024: