OrthoPediatrics(US:KIDS)2025-05-08 19:37PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) OrthoPediatrics Corp.'s unaudited Q1 2025 financial statements report a $10.7 million net loss, with total assets at $470.3 million and liabilities at $123.1 million Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased slightly to $470.3 million, driven by lower cash, while total liabilities increased to $123.1 million, reducing stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $33,439 | $43,820 | | Inventories, net | $119,752 | $117,005 | | Total current assets | $232,059 | $237,173 | | Total assets | $470,250 | $473,209 | | Liabilities & Equity | | | | Accounts payable - trade | $14,199 | $8,908 | | Total current liabilities | $37,505 | $33,962 | | Total liabilities | $123,104 | $118,643 | | Total stockholders' equity | $347,146 | $354,566 | Condensed Consolidated Statements of Operations Net revenue for Q1 2025 increased 17.3% to $52.4 million, but operating loss widened to $11.0 million due to increased general and administrative expenses, resulting in a $10.7 million net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net revenue | $52,411 | $44,685 | | Gross profit | $38,262 | $32,174 | | Operating loss | $(10,981) | $(9,723) | | Net loss | $(10,659) | $(7,805) | | Net loss per share (basic and diluted) | $(0.46) | $(0.34) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $4.2 million in Q1 2025, but overall cash, cash equivalents, and restricted cash decreased by $10.3 million, ending at $35.4 million Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,156) | $(6,690) | | Net cash used in investing activities | $(5,987) | $(3,679) | | Net cash used in financing activities | $(126) | $(573) | | Net decrease in cash, cash equivalents and restricted cash | $(10,348) | $(9,463) | | Cash, cash equivalents and restricted cash, end of period | $35,429 | $23,564 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the Boston O&P acquisition, a new $100 million credit facility, revenue growth from U.S. sales and Trauma/Deformity, and ongoing legal proceedings - On January 5, 2024, the Company acquired Boston Brace International, Inc. ("Boston O&P") for a total consideration of $21.8 million, consisting of $21.5 million in cash and $0.2 million in common stock3739 - In August 2024, the company entered into a new credit agreement with Braidwell LP, including a $25 million initial term loan (with a $25 million delayed draw option) and issued $50 million in 4.75% convertible senior notes due 2030. This replaced the previous MidCap credit facility536068 Revenue by Geography and Category (Q1 2025 vs Q1 2024, in thousands) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | By Geography | | | | U.S. | $40,891 | $34,305 | | International | $11,520 | $10,380 | | By Product | | | | Trauma and deformity | $37,867 | $33,302 | | Scoliosis | $13,664 | $10,203 | | Sports medicine/other | $880 | $1,180 | | Total | $52,411 | $44,685 | - The company is involved in a software ownership dispute with IMED Surgical, which re-initiated arbitration in September 2024. It is also a party to a wrongful death lawsuit related to its acquired Boston O&P business, for which it is indemnified by the sellers9399101 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 17% revenue growth to strong product performance, while operating loss increased due to higher G&A costs, supported by $60.8 million in liquidity and new financing Results of Operations Net revenue increased 17% to $52.4 million driven by Trauma and Deformity and Scoliosis sales, while operating expenses grew 18% due to higher sales and G&A costs Q1 2025 vs Q1 2024 Results of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net revenue | $52,411 | $44,685 | 17% | | Cost of revenue | $14,149 | $12,511 | 13% | | Sales and marketing expenses | $16,572 | $14,169 | 17% | | General and administrative expenses | $30,280 | $24,730 | 22% | | Research and development expenses | $2,351 | $2,998 | (22)% | | Net loss | $(10,659) | $(7,805) | 37% | - The 17% revenue increase was driven by strong global performance. Trauma and deformity sales grew 14% to $37.9 million, and Scoliosis sales grew 34% to $13.7 million125126127 - The 22% increase in General and Administrative expenses was primarily due to additional personnel from clinic acquisitions and a $1.0 million increase in stock compensation130 Liquidity and Capital Resources As of March 31, 2025, the company held $60.8 million in liquidity, improved operating cash flow, and secured a new $100 million financing arrangement to support capital needs - As of March 31, 2025, the company had cash, cash equivalents, restricted cash, and short-term investments totaling $60.8 million135 - Net cash used in operating activities improved to $4.2 million for Q1 2025, compared to $6.7 million for Q1 2024136137 - In August 2024, the company secured a $100 million financing arrangement with Braidwell LP, comprising a $50 million term loan facility and $50 million in convertible notes, to support its capital needs140141 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency exchange rate fluctuations, with no material changes since the 2024 Annual Report - The company's greatest potential market risk exposures are interest rate risk from its indebtedness and foreign currency exchange rate risk150 - No material changes in market risk have occurred since the 2024 Annual Report on Form 10-K150 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of the end of the period, disclosure controls and procedures were effective152 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls154 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, including a software dispute and a wrongful death lawsuit, with no expected material adverse effects - The company is involved in various legal proceedings arising in the ordinary course of business, with details on specific cases referenced in Note 12 of the financial statements156 Item 1A. Risk Factors No material changes to risk factors since the 10-K, except for expanded discussion on international business risks, including potential impacts from new U.S. tariffs - The company highlights risks of doing business internationally, including changes in trade policy, tariffs, and geopolitical relations159161 - Recent U.S. trade policy changes, such as a 10% baseline reciprocal tariff on imports, could significantly increase product costs and adversely impact financial results160162 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales and has not repurchased shares under its approved stock repurchase program - There were no unregistered sales of equity securities in the quarter163 - A stock repurchase program was approved in August 2024, but no shares have been repurchased under it166 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None167 Item 4. Mine Safety Disclosures Not applicable, as the company reported no mine safety disclosures - None168 Item 5. Other Information No additional Form 8-K information was reported, and no director or officer adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - During the three months ended March 31, 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement171 Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including agreements for acquisitions, debt financing, and required certifications