OrthoPediatrics(US:KIDS)2022-08-06 16:08Financial Data and Key Metrics Changes - In Q2 2022, the company generated total revenue of $32.9 million, representing a growth of 23% compared to Q2 2021 [4][17] - Adjusted EBITDA reached a record of $2.1 million, compared to a profit of $1.2 million in Q2 2021 [6][20] - Gross profit margin was 75.9%, down from 76.6% in Q2 2021, primarily due to increased set sales to international distributors at zero margin [19] Business Line Data and Key Metrics Changes - Trauma and deformity revenue was $22.6 million, a 26% increase year-over-year, with organic growth of approximately 11% excluding MD Orthopedics [8][18] - Scoliosis revenue was $9.4 million, reflecting a 23% increase compared to the prior year, driven by improved elective procedure volumes in June [9][18] - Sports Medicine/Other revenue declined by 15% to $939,000 compared to the prior year [18] Market Data and Key Metrics Changes - U.S. revenue was $25 million, a 15% increase from Q2 2021, driven by organic growth across scoliosis and trauma [17] - International revenue reached $8 million, representing a 61% increase year-over-year, primarily due to increased procedure volumes and set sales [18] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions, including MD Orthopedics and Pega Medical, to enhance its competitive position and drive future growth [10][12] - New product development is a priority, with the launch of the Drive Rail external fixation system and plans for additional product launches in the coming months [13] - The company aims to penetrate the estimated $600 million nonsurgical market, with a focus on expanding its product offerings and market presence [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating 20% or greater organic revenue growth in 2022, supported by improving elective procedure volumes and a strong backlog of deferred cases [16][21] - The company anticipates continued growth driven by an increased active surgeon base and expanded product portfolio [21] - Management noted that the competitive strength of the business has never been greater, positioning the company well for future success [22] Other Important Information - The company ended Q2 2022 with $52.5 million in cash and restricted cash, with $19 million available on its line of credit [20] - The company plans to deploy between $24 million and $26 million of new sets in 2022, representing year-over-year growth of 80% to 90% [21] Q&A Session Summary Question: Can you provide insights on MD Ortho's performance and guidance? - Management indicated that MD Ortho generated $2.6 million in Q2 and expects a more normalized run rate of approximately $1.7 million per quarter moving forward [24][25] Question: What are the specific areas targeted in the nonsurgical space? - The focus is on integrating MDO and expanding in the lower extremity nonsurgical bracing market, with six new products in the development pipeline [27][28] Question: How is the international market performing? - Management noted positive trends in international purchasing, indicating a tailwind for growth as the surgical environment normalizes [30][31] Question: What are the expectations for 2023? - Management believes the acquisitions and robust R&D pipeline position the company for continued growth, with a commitment to at least 20% organic growth [32] Question: How is the scoliosis segment performing compared to peers? - The company has seen a bounce back in scoliosis procedures, driven by increased adoption of its products and new users [34][35] Question: What is the significance of the FD nail from Pega? - The FD nail opens up a significant market opportunity, addressing a unique need in pediatric orthopedics with limited competition [41] Question: How is the backlog being managed? - Management indicated a $2.5 million backlog in the U.S. primarily related to elective procedures, with expectations for recovery in the coming quarters [42][43] Question: What is the outlook for the Orthex product? - Orthex is expected to improve as elective procedures recover, with positive impacts anticipated from the backlog [43] Question: How is the balance sheet being managed post-acquisitions? - The company has a strong cash position and plans to use cash for set builds and acquisitions, while also generating positive adjusted EBITDA [47]