Company: OFIX
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0000950170-25-026066
Chunk: 291

Company: Orthofix Medical Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 7
Chunk 291
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. Vesting probability is assessed based upon forecasted financial results metrics or applicable milestones associated with the grant and requires significant judgment.

As part of the Merger, our Board of Directors determined to treat the transaction as a "Change in Control" under applicable agreements and equity plans. As a result, all outstanding and previously granted performance-based and market-based restricted stock units were converted to time-based restricted stock units. We used the Monte Carlo valuation methodology to calculate the fair value of the performance-based and market-based restricted stock units. The value is recognized as expense over the requisite service period and adjusted for forfeitures as they occur. 

Determining the appropriate fair value model and calculating the fair value of employee stock awards requires estimates and judgments. Our share-based compensation is a "critical accounting estimate" because changes in the assumptions used to develop estimates of fair value or the requisite service period could materially affect key financial measures, including gross profit, operating income, and net income.

Non-GAAP Financial Measures

We believe that providing non-GAAP financial measures that exclude certain items provides investors with greater transparency to the information used by senior management in its financial and operational decision-making. We believe it is important to provide investors with the same non-GAAP metrics that senior management uses to supplement information regarding the performance and underlying trends of our business operations in order to facilitate comparisons to historical operating results and internally evaluate the effectiveness of our operating strategies. Disclosure of these non-GAAP financial measures also facilitates comparisons of our underlying operating performance with other companies in the industry that also supplement their GAAP results with non-GAAP financial measures.

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The non-GAAP financial measures used in this Annual Report may have limitations as analytical tools and should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are that they exclude items that reflect an economic cost that can have a material effect on cash flows. Similarly, certain non-cash expenses, such as equity compensation expense, do not directly impact cash flows, but are part of total compensation costs accounted for under GAAP.

Constant Currency

Constant currency is a non-GAAP measure, which is calculated by using foreign currency rates from the comparable, prior-year period, to present net sales at comparable rates. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to analyze net sales without the impact of changes in foreign currency rates. 

Adjusted EBITDA

Adjusted EBITDA represents earnings before interest income (expense), income taxes,