Sales Performance

Sales amounted to USD 719 million in 2022, compared to USD 719 million in 2021, corresponding to a 4% increase organic, a 7% increase including acquisitions (local currency growth) and a flat reported growth (USD growth).

Currency movements in 2022 impacted sales growth negatively by USD 47 million, which corresponds to about a 7%-point negative effect on the reported growth rate.

In 2022, Össur completed acquisitions of entities with combined annual sales of USD 19 million, including the acquisition of Naked Prosthetics, a leading provider of functional finger prostheses for finger and partial hand amputees.

Product Segments

Prosthetics sales in 2022 amounted to USD 456 million and increased by 4% organic. Sales of bionic products accounted for 21% of prosthetics component sales in 2022. Bionic sales growth was strong towards the end of the year, accounting for 25% of prosthetics component sales in Q4 2022, mainly driven by Power Knee sales. Going into 2023, the demand for this first motor powered prosthetic knee continues to be high. Bracing & Supports sales in 2022 amounted to USD 263 million and increased by 3% organic.

Operations

Gross profit in 2022 amounted to USD 440 million or 61% of sales compared to USD 455 million or 63% of sales in 2021. Gross profit margin in 2022 was 62% excluding special items, mainly in connection to cost saving initiatives announced in Q3 2022. Supply chain challenges, including sourcing of raw materials and components, continued to have a short-term negative effect on productivity. In addition, supply chain cost increases adversely affected cost of goods sold by USD 13 million in 2022 from pre-pandemic levels in 2019.

Operating expenses (OPEX) amounted to USD 375 million or 52% of sales in 2022. In Q3 2022, Össur made organizational changes and initiated cost savings to support further growth and profitability, and simplified operations to better leverage key strategic locations. Total annual cost savings amount to USD 15 million and are expected to materialize from the beginning of 2023. Össur plans to reinvest around one third of the cost savings into Össur’s emerging markets platform and digital initiatives. One-time implementation cost of USD 15 million in connection to the organizational changes and cost savings initiatives were a substantial part of higher OPEX for the year. Excluding special items, OPEX was 51% of sales in 2022.

Management remains focused on managing cost with the ultimate objective to maintain and increase profitability as sales continue to normalize.

Operating Profit

In 2022, EBITDA before special items amounted to USD 128 million or 18% of sales compared to EBITDA before special items of USD 149 million or 21% of sales in 2021. The EBITDA margin before special items in 2022 was below a normalized level, both due to adverse impact on sales as well as higher supply chain related cost and OPEX. COVID-19 impacted sales in China and sales to Russia have been suspended from 24 February 2022 due to the ongoing war in Ukraine. In addition, shortage of certain raw materials and components, primarily for the new Power Knee, adversely affected sales. In addition, higher freight cost and raw material inflation increased cost of goods sold affecting profitability.

Financial Items, Income Tax and Net Profit

Net financial expenses in 2022 amounted to USD 9 million, compared to USD 11 million in 2021.

Income tax amounted to USD 13 million in 2022, corresponding to a 23% effective tax rate.

Net profit in 2022 amounted to USD 43 million, compared to USD 66 million profit in 2021. Diluted earnings per share in 2022 amounted to 10.3 US cents compared to 15.5 US cents in 2021 .

Cash Flow

Cash generated by operations amounted to USD 92 million or 13% of sales in 2022 compared to USD 128 million or 18% of sales in 2020. Cash generated by operations was adversely affected by receivables inventory buildup, largely as safety stock due to long lead times and uncertainty in the supply chain.

Capital expenditures amounted to USD 26 million in 2022 or 4% of sales, in line with guidance, compared to USD 27 million, also 4% of sales in 2021.

Bank balances and cash equivalents amounted to USD 77 million at the end of 2022 and USD 56 million of existing facilities were undrawn. Bank balances and cash equivalents in addition to undrawn credit facilities at the end of 2022, therefore, amounted to USD 133 million.

Capital Structure

Net Interest-Bearing Debt

Net interest-bearing debt, including lease liabilities, at year-end 2022 amounted to USD 404 million compared to USD 363 million at year-end 2021. Net interest-bearing debt to EBITDA before special items corresponded to 3.2x at year-end 2022, above the target range in Össur’s Capital Structure and Capital Allocation Policy (2.0x-3.0x NIBD/EBITDA before special items), due to higher net debt in connection to renewals of lease agreements, lower cash generated by operations and adverse FX impact.

Share Buybacks and Dividends

On 6 October 2022, Össur completed a share buyback program that was initiated on 14 February 2022, and on 10 October, Össur initiated a new share buyback program. The purpose of the program is to reduce Össur’s share capital and adjust the capital structure with a desired capital level of 2.0-3.0x net interestbearing debt to EBITDA, by distributing capital to shareholders in line with Össur’s Capital Structure and Capital Allocation Policy. As the leverage was 2.8x at the end of Q3 2022, at the upper end of the desired level, Össur decided to temporarily pause share buybacks from 25 October 2022. Össur continues to pause the share buybacks as the leverage was 3.2x, above the target level, at year-end 2022.

At year-end 2022, treasury shares totaled 2,711,302.