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Fair value measurements and investments | 3 Months Ended
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Mar. 31, 2025
Fair Value Measurements And Investment Disclosure [Abstract] |
Fair value measurements and investments | 6. Fair value measurements and investments The fair value measurements of the Company’s financial assets and liabilities measured on a recurring basis were as follows:
|  | March 31, 2025 |  |  | December 31, 2024 |
(U.S. Dollars, in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Total |
|  |  |  |  |  |  |  |  |  |  | (Unaudited) |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Neo Medical convertible loan agreement |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Neo Medical preferred equity securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Lattus contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | (14,790 | ) |  | $ | (14,790 | ) |  | $ | (15,400 | )
Deferred compensation plan |  |  | — |  |  |  | (1,719 | ) |  |  | — |  |  |  | (1,719 | ) |  |  | (1,703 | )
Total |  | $ | — |  |  | $ | (1,719 | ) |  | $ | (14,790 | ) |  | $ | (16,509 | ) |  | $ | (17,103 | )
Neo Medical Convertible Loan Agreement and Equity Investment On October 1, 2020, the Company purchased shares of Neo Medical’s preferred stock for consideration of $5.0 million and entered into a Convertible Loan Agreement (the "Convertible Loan") pursuant to which Orthofix loaned Neo Medical CHF 4.6 million, or $5.0 million at the date of issuance. In April 2024, the Company converted the Convertible Loan into shares of Neo Medical preferred equity securities. On November 14, 2024, the Company sold and transferred all shares of Neo Medical's preferred equity securities for CHF 6.6 million, or $7.4 million. The table below presents a reconciliation of the beginning and ending balances of the Company’s investment in Neo Medical preferred equity securities:
(Unaudited, U.S. Dollars, in thousands) |  | 2025 |  |  | 2024 |
Fair value of Neo Medical preferred equity securities at January 1 |  | $ | — |  |  | $ | 4,951 |
Foreign currency remeasurement recognized in other income (expense), net |  |  | — |  |  |  | — |
Unrealized loss recognized in other expense, net |  |  | — |  |  |  | — |
Fair value of Neo Medical preferred equity securities at March 31 |  | $ | — |  |  | $ | 4,951 |
Cumulative unrealized loss on Neo Medical preferred equity securities |  | $ | — |  |  | $ | (720 | )
The following table provides a reconciliation of the beginning and ending balances of the Convertible Loan, which was measured at fair value using significant unobservable inputs:
(Unaudited, U.S. Dollars, in thousands) |  | 2025 |  |  | 2024 |
Fair value of Neo Medical Convertible Loan at January 1 |  | $ | — |  |  | $ | 6,760 |
Gain recognized in other comprehensive income (loss) |  |  | — |  |  |  | 1,671 |
Interest recognized in interest income, net |  |  | — |  |  |  | 135 |
Foreign currency remeasurement recognized in other income (expense), net |  |  | — |  |  |  | (471 | )
Expected credit loss recognized in other income (expense), net |  |  | — |  |  |  | 260 |
Fair value of Neo Medical Convertible Loan at March 31 |  | $ | — |  |  | $ | 8,355 |
Contractual value of Neo Medical Convertible Loan at March 31 |  | $ | — |  |  | $ | 6,683 |
Allowance for credit loss recognized in other income (expense), net |  |  | — |  |  |  | — |
Amortized cost basis of Neo Medical Convertible Loan at March 31 |  | $ | — |  |  | $ | 6,683 |
Lattus Contingent Consideration In connection with the merger with SeaSpine Holdings Corporation ("SeaSpine") in 2023 (the "SeaSpine Merger"), the Company assumed a contingent consideration obligation under a purchase agreement between SeaSpine and Lattus Spine LLC ("Lattus") executed in December 2022. Under the terms of this agreement, the Company may be required to make installment payments to Lattus (the "Lattus Contingent Consideration") at certain dates based on future net sales of certain products (the "Lateral Products"). The estimated fair value of the Lattus Contingent Consideration is determined using a Monte Carlo simulation and a discounted cash flow model requiring significant inputs which are not observable in the market. The significant inputs include assumptions related to the timing and probability of launch dates for the Lateral Products, estimated future sales of the Lateral Products, revenue risk-adjusted discount rate, revenue volatility, and discount rates matched to the timing of payments. The following table provides a reconciliation of the beginning and ending balances for the Lattus Contingent Consideration measured at estimated fair value using significant unobservable inputs (Level 3):
(Unaudited, U.S. Dollars, in thousands) |  | 2025 |  |  | 2024 |
Lattus Contingent Consideration estimated fair value at January 1 |  | $ | 15,400 |  |  | $ | 8,500 |
Change in fair value recognized in acquisition-related amortization, impairment, and remeasurement |  |  | (610 | ) |  |  | 1,170 |
Lattus Contingent Consideration estimated fair value at March 31 |  | $ | 14,790 |  |  | $ | 9,670 |
The following table provides quantitative information related to certain key assumptions utilized within the valuation as of March 31, 2025:
(Unaudited, U.S. Dollars, in thousands) |  | Fair Value as of March 31, 2025 |  |  | Unobservable inputs |  | Estimate
Lattus Contingent Consideration |  | $ | 14,790 |  |  | Counterparty discount rates |  | 10.4% - 10.8%
|  |  |  |  | Revenue risk-adjusted discount rates |  | 7.2% - 7.7%

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