Business segment information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Business segment information

9. Business segment information

The Company has four reporting segments: Bone Growth Therapies (formerly referred to as BioStim), Spinal Implants (formerly referred to as Spine Fixation), Biologics, and Orthofix Extremities (formerly referred to as Extremity Fixation).The tables below present net sales, which includes product sales and marketing service fees, by reporting segment:

	Three Months Ended September 30,
(U.S. Dollars, in thousands)	2018		2017		Change
Bone Growth Therapies	$	48,059	$	44,427		8.2	%
Spinal Implants		22,102		20,155		9.7	%
Biologics		14,636		15,218		-3.8	%
Orthofix Extremities		26,911		25,447		5.8	%
Net sales	$	111,708	$	105,247		6.1	%

	Nine Months Ended September 30,
(U.S. Dollars, in thousands)	2018		2017		Change
Bone Growth Therapies	$	142,433	$	136,140		4.6	%
Spinal Implants		66,689		60,782		9.7	%
Biologics		43,639		45,866		-4.9	%
Orthofix Extremities		79,203		74,139		6.8	%
Net sales	$	331,964	$	316,927		4.7	%

The primary metric used in managing the Company is non-GAAP net margin, which is an internal metric that the Company defines as gross profit less sales and marketing expense. The table below presents non-GAAP net margin by reporting segment:

	Three Months Ended September 30,						Nine Months Ended September 30,
(U.S. Dollars, in thousands)	2018			2017			2018			2017
Bone Growth Therapies	$	21,151		$	18,285		$	61,395		$	54,887
Spinal Implants		1,812			2,122			5,960			6,825
Biologics		6,654			6,010			18,981			18,651
Orthofix Extremities		8,295			7,723			23,455			20,901
Corporate		(122	)		(103	)		(524	)		(308	)
Non-GAAP net margin	$	37,790		$	34,037		$	109,267		$	100,956
General and administrative		22,705			18,068			64,457			56,759
Research and development		9,598			6,935			24,426			21,246
Changes in fair value of contingent consideration		1,580			—			2,689			—
Operating income	$	3,907		$	9,034		$	17,695		$	22,951
Interest income (expense), net		(181	)		(15	)		(615	)		106
Other income (expense), net		(5,054	)		479			(5,785	)		(3,284	)
Income (loss) before income taxes	$	(1,328	)	$	9,498		$	11,295		$	19,773

Geographical information

The table below present net sales by geographic destination for each reporting unit and for the consolidated Company:

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. Dollars, in thousands)	2018		2017		2018		2017
Bone Growth Therapies
U.S.	$	48,039	$	44,427	$	142,378	$	136,128
International		20		—		55		12
Total Bone Growth Therapies		48,059		44,427		142,433		136,140
Spinal Implants
U.S.		16,829		17,085		53,261		51,170
International		5,273		3,070		13,428		9,612
Total Spinal Implants		22,102		20,155		66,689		60,782
Biologics
U.S.		14,634		15,202		43,623		45,816
International		2		16		16		50
Total Biologics		14,636		15,218		43,639		45,866
Orthofix Extremities
U.S.		7,254		6,804		21,193		20,124
International		19,657		18,643		58,010		54,015
Total Orthofix Extremities		26,911		25,447		79,203		74,139
Consolidated
U.S.		86,756		83,518		260,455		253,238
International		24,952		21,729		71,509		63,689
Net sales	$	111,708	$	105,247	$	331,964	$	316,927