OrthoPediatrics(KIDS) - 2024 Q1 - Quarterly Results

Executive Summary & Highlights This section provides an overview of OrthoPediatrics Corp.'s strong Q1 2024 performance, key business developments, and CEO commentary Q1 2024 Performance Overview OrthoPediatrics Corp. reported a strong start to 2024, outperforming expectations with a 41% year-over-year increase in first-quarter revenue to $44.7 million. The company also raised its full-year 2024 revenue guidance Table: Total Revenue | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Total Revenue | $44.7 million | $31.6 million | +41% | - Helped nearly 28,000 children in Q1 2024, an increase of 47% from Q1 2023[6] - Increased full year 2024 revenue guidance to $200.0 million to $203.0 million from $197.0 million to $200.0 million, representing growth of 34% to 36% compared to prior year[6][16] CEO Commentary CEO David Bailey expressed satisfaction with the company's strong Q1 performance, highlighting market share gains and healthy revenue growth. He emphasized the combined impact of legacy products, new launches, and the expanding specialty bracing business as key drivers for continued growth and profitability - Outperformed expectations and delivered healthy revenue growth, continuing to take share across the entire business[4] - Growth driven by multiple levers, including continued legacy product growth, new product launches, and a rapidly expanding specialty bracing business[4] - Positioned well to capitalize on opportunities for the remainder of 2024 and beyond[4] Key Business Developments During the first quarter of 2024, OrthoPediatrics launched a new fixation system for early onset scoliosis and completed the acquisition of Boston Orthotics & Prosthetics, significantly enhancing its Specialty Bracing Division - Launched RESPONSE™ Rib and Pelvic Fixation System to treat children with early onset scoliosis ("EOS")[6] - Announced acquisition of Boston Orthotics & Prosthetics ("Boston O&P"), expanding OrthoPediatrics Specialty Bracing Division ("OPSB") with pediatric orthotics management business[6] First Quarter 2024 Financial Results This section details OrthoPediatrics' financial performance for Q1 2024, covering revenue, profitability, and balance sheet highlights Revenue Analysis OrthoPediatrics achieved robust revenue growth in Q1 2024, with total revenue increasing 41% to $44.7 million. This growth was primarily fueled by organic expansion in Trauma and Deformity and Scoliosis products, further augmented by the Boston O&P acquisition Table: Total Revenue | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Total Revenue | $44.7 million | $31.6 million | +41% | - The increase in revenue was driven primarily by organic growth in Trauma and Deformity and Scoliosis products as well as the addition of Boston O&P[5][7] Total Revenue Total revenue for Q1 2024 increased by 41% year-over-year, reaching $44.7 million Table: Total Revenue | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Total Revenue | $44.7 million | $31.6 million | +41% | Geographic Revenue U.S. revenue grew 44% to $34.3 million, while international revenue increased 33% to $10.4 million in Q1 2024 Table: Geographic Revenue (in millions USD) | Geographic Segment | Q1 2024 Revenue | Q1 2023 Revenue | YoY Change | % of Total Revenue (Q1 2024) | | :----------------- | :-------------- | :-------------- | :--------- | :----------------------------- | | U.S. | $34.3 million | $23.8 million | +44% | 77% | | International | $10.4 million | $7.8 million | +33% | 23% | - International revenue growth was primarily driven by increased procedure volumes and additional set sales[5] Product Category Revenue Trauma & Deformity and Scoliosis product categories showed strong growth of 42% and 44% respectively in Q1 2024 Table: Product Category Revenue (in millions USD) | Product Category | Q1 2024 Revenue | Q1 2023 Revenue | YoY Change | | :--------------- | :-------------- | :-------------- | :--------- | | Trauma & Deformity | $33.3 million | $23.4 million | +42% | | Scoliosis | $10.2 million | $7.1 million | +44% | | Sports Medicine/Other | $1.2 million | $1.1 million | +5% | - Trauma and Deformity growth was driven by growth across numerous product lines (Cannulated Screws, PNP Femur, PediPlate, external fixation, Pega systems) coupled with the addition of Boston O&P[7] - Scoliosis growth was driven by increased sales of RESPONSE and ApiFix systems, revenue from 7D technology, and the addition of Boston O&P[7] Profitability Analysis Gross profit increased 37% to $32.2 million, but the gross margin declined to 72% due to specific sales dynamics. Operating expenses rose 30%, contributing to an increased net loss of $7.8 million, though Adjusted EBITDA loss improved to $1.1 million Table: Profitability Metrics (in millions USD) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Gross Profit | $32.2 million | $23.6 million | +37% | | Gross Margin | 72% | 75% | -3 ppts | | Total Operating Expenses | $41.9 million | $32.2 million | +30% | | Net Loss | $(7.8) million | $(6.8) million | +14.7% | | Adjusted EBITDA | $(1.1) million | $(2.1) million | +47.6% (less loss) | - The change in gross margin was primarily driven by increased set sales to international stocking partners as well as lower purchase price adjustments[8] - The increase in total operating expenses was mainly driven by the addition of Boston O&P as well as incremental personnel required to support ongoing growth[9] Gross Profit & Margin Gross profit rose 37% to $32.2 million, while gross margin decreased by 3 percentage points to 72% in Q1 2024 Table: Gross Profit & Margin (in millions USD) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Gross Profit | $32.2 million | $23.6 million | +37% | | Gross Margin | 72% | 75% | -3 ppts | - Gross margin change primarily driven by increased set sales to international stocking partners and lower purchase price adjustments[8] Operating Expenses Total operating expenses increased 30% to $41.9 million in Q1 2024, driven by sales & marketing and general & administrative costs Table: Operating Expense (in millions USD) | Operating Expense | Q1 2024 | Q1 2023 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Sales & Marketing | $14.2 million | $12.5 million | +13% | | General & Administrative | $24.7 million | $17.2 million | +44% | | Research & Development | $3.0 million | $2.4 million | +23% | | Total Operating Expenses | $41.9 million | $32.2 million | +30% | - Sales and marketing increase driven primarily by increased sales commission expenses coupled with additional employees to support the OPSB business lines[10] - General and administrative expenses increase driven primarily by the addition of Boston O&P as well as personnel and resources to support the continued expansion of the business[11] Net Loss & EPS Net loss increased to $7.8 million, resulting in a basic and diluted net loss per share of $(0.34) in Q1 2024 Table: Net Loss & EPS (in millions USD, except EPS) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Net Loss | $(7.8) million | $(6.8) million | +14.7% | | Net Loss per Share (Basic & Diluted) | $(0.34) | $(0.30) | +13.3% | - Total other expense was $0.6 million for Q1 2024, compared to $1.2 million of other income for Q1 2023, primarily due to the absence of a favorable fair value adjustment of contingent consideration and additional interest expense[12] Adjusted EBITDA Adjusted EBITDA loss improved by 47.6% to $(1.1) million in Q1 2024, indicating reduced operational loss Table: Adjusted EBITDA (in millions USD) | Metric | Q1 2024 | Q1 2023 | YoY Change | | :----- | :------ | :------ | :--------- | | Adjusted EBITDA | $(1.1) million | $(2.1) million | +47.6% (less loss) | Balance Sheet & Cash Flow Highlights As of March 31, 2024, cash and equivalents decreased to $49.7 million, largely due to the $22.0 million payment for the Boston O&P acquisition. The company reported net cash used in operating activities of $6.7 million Table: Cash and Equivalents (in millions USD) | Metric | March 31, 2024 | December 31, 2023 | Change | | :----- | :------------- | :---------------- | :----- | | Cash, Cash Equivalents, Short-term Investments & Restricted Cash | $49.7 million | $82.3 million | $(32.6) million | - Cash usage in the first quarter 2024 includes $22.0 million paid for Boston O&P[15] - Net cash used in operating activities was $6.69 million in Q1 2024, compared to $6.46 million in Q1 2023[29] Full Year 2024 Financial Guidance This section outlines OrthoPediatrics' updated financial projections for the full year 2024, including revenue and Adjusted EBITDA guidance Full Year 2024 Financial Guidance Summary OrthoPediatrics increased its full-year 2024 revenue guidance to $200.0 million to $203.0 million, reflecting 34% to 36% growth over 2023. The company reiterated its Adjusted EBITDA guidance of $8.0 million to $9.0 million and annual set deployment of less than $20.0 million Table: Full Year 2024 Financial Guidance (in millions USD) | Metric | Previous Guidance (FY2024) | Updated Guidance (FY2024) | YoY Growth (Updated) | | :----- | :------------------------- | :------------------------ | :------------------- | | Revenue | $197.0M - $200.0M | $200.0M - $203.0M | 34% - 36% | | Adjusted EBITDA | $8.0M - $9.0M | $8.0M - $9.0M | (Reiterated) | | Annual Set Deployment | < $20.0M | < $20.0M | (Reiterated) | Additional Information This section provides details on the Q1 2024 conference call, forward-looking statements, non-GAAP financial measures, and an overview of OrthoPediatrics Corp Conference Call Details OrthoPediatrics will host a conference call on May 7, 2024, at 8:00 a.m. ET to discuss the Q1 2024 results, with a live and archived webcast available on its investor relations website - Conference call scheduled for Tuesday, May 7, 2024, at 8:00 a.m. ET to discuss the results[18] - A live and archived webcast of the event will be available at www.orthopediatrics.com, on the Investors page in the Events & Presentations section, for at least 90 days[18] Forward-Looking Statements This press release contains forward-looking statements, identifiable by specific terminology, which are subject to various risks and uncertainties, including those related to COVID-19 and factors detailed in the company's SEC filings. OrthoPediatrics disclaims any obligation to update these statements unless legally required - Forward-looking statements are identified by words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "could," "believe," "estimate," "project," "target," "predict," "intend," "future," "goals," "potential," "objective," "would" and other similar expressions[19] - Forward-looking statements involve risks and uncertainties, many of which are beyond OrthoPediatrics' control, including risks related to COVID-19 and factors set forth in the company's Annual Report on Form 10-K[19] - OrthoPediatrics assumes no obligation to update forward-looking statements to reflect actual results, subsequent events, or circumstances or other changes affecting such statements except to the extent required by applicable securities laws[19] Use of Non-GAAP Financial Measures The report utilizes non-GAAP financial measures like organic revenue, adjusted loss per share, and Adjusted EBITDA to provide a consistent evaluation of underlying business performance. These measures are reconciled to their GAAP equivalents and are intended as supplemental information, not as substitutes for GAAP results - Non-GAAP financial measures include organic revenue, adjusted loss per share, and Adjusted EBITDA[20] - Organic revenue excludes revenue from acquired businesses owned for less than one year to measure underlying performance consistently[20] - Adjusted EBITDA represents net loss, plus interest expense, net plus other expense, provision for income taxes (benefit), depreciation and amortization, stock-based compensation expense, fair value adjustment of contingent consideration, acquisition related costs, nonrecurring professional fees, and the cost of minimum purchase commitments[20] - These non-GAAP measures are useful to investors as supplemental information but should not be considered as alternatives to, or superior to, GAAP measures[20][21] About OrthoPediatrics Corp. Founded in 2006, OrthoPediatrics is an orthopedic company exclusively dedicated to advancing pediatric orthopedics. It offers 71 systems across trauma and deformity, scoliosis, and sports medicine/other procedures, distributed globally in the United States and over 70 other countries - Founded in 2006, OrthoPediatrics is an orthopedic company focused exclusively on advancing the field of pediatric orthopedics[22] - Currently markets 71 systems that serve three of the largest categories within the pediatric orthopedic market: trauma and deformity, scoliosis, and sports medicine/other procedures[22] - Distributes its products in the United States and over 70 countries outside the United States[22] Financial Statements This section presents OrthoPediatrics' condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and supplemental revenue breakdowns Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of OrthoPediatrics' financial position as of March 31, 2024, and December 31, 2023, detailing assets, liabilities, and stockholders' equity. Notable changes include a decrease in cash and short-term investments, and increases in inventories, property and equipment, and goodwill Table: Condensed Consolidated Balance Sheet (Selected, in thousands USD) | Balance Sheet Item (Selected) | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------- | :---------------------------- | :------------------------------- | | Total current assets | $203,725 | $226,496 | | Total assets | $437,185 | $438,745 | | Total current liabilities | $45,820 | $41,666 | | Total liabilities | $66,601 | $61,720 | | Total stockholders' equity | $370,584 | $377,025 | - Cash and cash equivalents decreased from $31,055 thousand as of December 31, 2023, to $21,602 thousand as of March 31, 2024[25] - Goodwill increased from $83,699 thousand as of December 31, 2023, to $91,481 thousand as of March 31, 2024[25] Condensed Consolidated Statements of Operations The condensed consolidated statements of operations present OrthoPediatrics' financial performance for the three months ended March 31, 2024, and 2023, detailing net revenue, cost of revenue, gross profit, operating expenses, and net loss, reflecting increased revenue but also higher operating costs and net loss Table: Condensed Consolidated Statements of Operations (Selected, in thousands USD) | Statement of Operations Item (Selected) | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net revenue | $44,685 | $31,588 | | Gross profit | $32,174 | $23,561 | | Total operating expenses | $41,897 | $32,152 | | Operating loss | $(9,723) | $(8,591) | | Net loss | $(7,805) | $(6,806) | | Net loss per share – basic and diluted | $(0.34) | $(0.30) | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows outline the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023. The report shows a net decrease in cash, cash equivalents, and restricted cash in Q1 2024, primarily due to investing activities including the Boston O&P acquisition Table: Condensed Consolidated Statements of Cash Flows (in thousands USD) | Cash Flow Activity | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :----------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(6,690) | $(6,461) | | Net cash (used in) provided by investing activities | $(3,679) | $32,310 | | Net cash used in financing activities | $(573) | $(36) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(9,463) | $25,675 | | Cash, cash equivalents and restricted cash, end of period | $23,564 | $36,137 | - Investing activities in Q1 2024 included $20,693 thousand for the acquisition of Boston O&P, net of cash acquired[29] Net Revenue by Geography and Product Category (Supplemental) This supplemental table provides a detailed breakdown of OrthoPediatrics' net revenue for the first quarters of 2024 and 2023, categorized by geographic location (U.S. and International) and by product segment (Trauma and Deformity, Scoliosis, Sports Medicine/Other), illustrating the specific drivers of revenue growth Table: Product Sales by Geographic Location (in thousands USD) | Product Sales by Geographic Location | 2024 (in thousands) | 2023 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | U.S. | $34,305 | $23,800 | | International | $10,380 | $7,788 | | Total | $44,685 | $31,588 | Table: Product Sales by Category (in thousands USD) | Product Sales by Category | 2024 (in thousands) | 2023 (in thousands) | | :------------------------ | :------------------ | :------------------ | | Trauma and deformity | $33,302 | $23,395 | | Scoliosis | $10,203 | $7,072 | | Sports medicine/other | $1,180 | $1,121 | | Total | $44,685 | $31,588 | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP net loss to non-GAAP Adjusted EBITDA and GAAP diluted loss per share to non-GAAP adjusted diluted loss per share, outlining the specific adjustments made to present a clearer view of the company's operational performance - Reconciliations are provided for Net Loss to Non-GAAP Adjusted EBITDA and Diluted Loss Per Share to Non-GAAP Adjusted Diluted Loss Per Share[32][35] Reconciliation of Net Loss to Adjusted EBITDA This reconciliation details adjustments from GAAP net loss to non-GAAP Adjusted EBITDA for the three months ended March 31, 2024 and 2023 Table: Reconciliation of Net Loss to Adjusted EBITDA (in thousands USD) | Adjustment Item | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net loss | $(7,805) | $(6,806) | | Interest expense (income), net | $637 | $(210) | | Provision for income taxes (benefit) | $(2,531) | $(574) | | Depreciation and amortization | $5,028 | $3,848 | | Stock-based compensation | $2,799 | $2,113 | | Fair value adjustment of contingent consideration | — | $(670) | | Acquisition related costs | $245 | — | | Adjusted EBITDA | $(1,108) | $(2,053) | Reconciliation of Diluted Loss Per Share to Adjusted Diluted Loss Per Share This reconciliation outlines adjustments from GAAP diluted loss per share to non-GAAP adjusted diluted loss per share for the three months ended March 31, 2024 and 2023 Table: Reconciliation of Diluted Loss Per Share to Adjusted Diluted Loss Per Share (USD) | Adjustment Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Loss per share, diluted (GAAP) | $(0.34) | $(0.30) | | Accretion of interest attributable to acquisition installment payable | $0.01 | $0.02 | | Fair value adjustment of contingent consideration | — | $(0.03) | | Acquisition related costs | $0.01 | — | | Minimum purchase commitment cost | $0.02 | $0.01 | | Loss per share, diluted (non-GAAP) | $(0.30) | $(0.29) |