KIDS - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 OrthoPediatrics Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this conference is being recorded. to like now would introduce, Ms. I with Bui The Ruth begin. may you Group, Tram

Tram Bui

thanks in for operator, everyone, Thanks, and participating today's call.

Joining Throdahl, Chief Chief company are and the Hite, Financial me Fred Officer. Executive from Officer, Mark

management involve meaning Litigation I'd provisions begin, statements of Safe These risks include listeners made call to Before Reform securities uncertainties, XXXX. and during within laws, forward-looking we conference the like this statements Harbor Securities Act federal and that of the caution company's differ material comments Private by of results actual forward-looking materially. the will including the may

For a on review Form factors, Exchange with encourage report the will which you and be filed discussion to of risk XX-K the annual today. company's later most Securities I Commission

management measures, period-over-period. will non-GAAP measures measures today, as supplemental provide certain discuss in which operations investors performance. for used evaluating call The believes financial of also its useful the company these are During information

on each substitute has referenced For OrthoPediatrics not comparable the reconciliation financial should earnings financial most measures the with measures GAAP financial in as a considered in release. or the directly isolation financial company limitations prepared that tools in analytical included non-GAAP non-GAAP measures non-GAAP a note to accordance be and its financial measure this Please as call, have results of for GAAP.

With I'd as only to Except over reflect after date is that In place call to revise XXXX. the date addition, live said, to events the statements or content like call. or this by obligation update information March call as circumstances the Mark. to no company any of undertakes X, turn of take that accurate the contains of that this conference law, the broadcast, time-sensitive the of required

Mark Throdahl

the joining morning, conversions with record call. over XXXX including revenue another This to of the which strong earnings exceeding Good XXth and of and growth Fred, and cadence that year growth consistent including XX%. growth. our agencies growth. consecutive begin to is full before drivers growth all thank fourth call investment of the are stocking XXXX sales questions. detailed distributors quarter education. our to commitment industry-leading and financial review I'll annual our XX% million, of full increased businesses clinical I'll a with represents the conference introductions, performance, for for of year-over-year factors overview contributing of and opening year concludes us future revenue then year ongoing today a more year execution an our new $XX.X to our you of on driven consistent our was any the initiatives in of across growth a setting, and The consigned by product call turn success for everyone, international XXXX steps, up growing

train part stocking X, January we of the as effective our education and ongoing XXXX. agencies as of orthopedic distance the year, to the ourselves Furthermore, as We sales and offering we Zealand product from During market. our to agency increased the sales invested distributor of in generation revenue agencies growth the our converted pediatric support Australia in XX X% of systems Canada, sets. and the mission and million sales and model Ireland next our to and in New clear pediatric to surgeons. $XX expanded accelerating Netherlands of a UK, significant sales Belgium of added we saw the and consigned orthopedic continued in We surgical we clinical to

year $XXX,XXX XXXX. for the growth of line, investments we EBITDA in increasing While improving these also demonstrated with adjusted continued bottom initiatives, progress the full of

a more progress field delighted the a our our leadership us by dedicated surgeons than as well believe public started company, having that for and advancing positioned viewed as to to the the during XXX,XXX with pleased future. XXXX, Despite we are year entire treated market children We with and We and prove, to continued OrthoPediatrics company pediatric in increasingly extremely is full that we’re first a performance, our is lot date. orthopedics, million for investment the sustainable optimal while to of anticipate a year achievements XXXX, will sets the consigned XXXX, strength our million for of to year in our the Furthermore, remain guidance increasing XX% arrange revenue allocation our conservative set and secondary continuing their in carefully the sheet regarding and full December, with we revenue growth following in the utilization. $XX manage XXXX XX%. to full of $XX offering growth placements in we to balance growth

We product offering forward could our opportunity the expand to to also new and that acquire significantly technologies look outlook. growth product

now five will initiatives progress me that growth with summarize our in Let XXXX, in starting new on accelerate XXXX products.

year our of reasons market One grew essentially the an in that business XX% growing Scoliosis array of last superior products. our is

to our hospital age. smaller expanded systems. February launch duo an provides deformities temporary to to our considerably bone segment bone received fractures approximately introduction a enhancement of has surgeries. the of safety Screw X.X/X.X bandloc XXXX, with X.X/X.X Scoliosis mm as FIREFLY development for RESPONSE Guides, at in thus offering drive more this intra-operative solution mm latest simpler enhanced of Critically Pedicle to enhancing a indications complex significantly accounts is expands by and and systems. During the fusion. more in been robotic of younger patients our of can we in expensive system, Scoliosis alternative is and followed the can during which treat anchor OrthoPediatrics This system reducing XX% is XXXX, those orthopedic This solid quarter surgery in which during the final also as year, time. It by we to filled scoliosis FIREFLY bandloc ability important of enthusiastically surgeons’ fourth repair for bony the and efficient Navigation aid an the during gap continues Scoliosis to the our case, stabilization with a scoliosis the surgeries of in growth offering a surgeons. aggressive used navigation was fully and eliminate In for system in the our This critical ration convert product

progressing the of some growing technologies. Additionally, development capabilities to complex system onset address cases, our and tethering of our most scoliosis of our will with also scoliosis spinal a expand neuromuscular the early products which further including we’re suite rod and we’re developing

which and early extraction represents fractures deformity; we PediFlex with Turning instrumentation. flexible in significant surgery significantly to or of nails a launched adolescent Nailing for and our trauma PNP as the intramedullary in our of rethinking to enhanced system, nail XXXX significantly include by followed Pediatric launch which our as offering pediatric was expands sciences. This full well intramedullary Femur, Femur Platform, treating system

system and to-date. making our we’ve progress as Notably, Some called our so nail system an was this platform rapid could that other designed have finest system on PNP/Femur PNP PNP/Femur we’re later surgeons to product implants, be instrumentational launch for developed the Tibia applied year.

As products imperfecta I’m our plan consistent significantly to we of deliver extensions. a pediatric ability PediFoot, we including new the out a of line and nail products cannulated in very look expanded a system first be which introduce to system specific to organization’s pleased launch cadence screws. innovative XXXX, will of additional with and osteogenesis and range deformity number for

our of beyond. in to We rich market which XXXX leadership have I pipeline product expect proposals a new and strengthen will continue

sales inventory, deployments. growth, Based IPO, sales use $XX thus Zealand produce scoliosis thus penetrate agencies following Canada then the United of deformity those to particularly improving converting a our stocking as well forward months model a agency for evenly which investment set we set we deployed us level those anticipate we anyone now the we growth to XX to of to that to of the by future. hospitals. we Western consigned enjoy In increasing in instrument sales UK initiative to to distributor stocking converted We formidable we to within and set stocking our sales a United the markets and revenue barrier because million. end split $X Australia in and to XX the additional was market. up are key and XXXX, and distributors, our distributors range well implant aggressively. an a quadrupled we Last sold States. this from this the $XX is in upon demand, dollar approximately the Set distributors XXXX, to pent of the outside accelerating In incremental in the we’ve construct approximately international the of in balance initiative are of all pediatric by Europe anticipate of will driven million the and as stocking these Belgium in countries beginning total $X.X the hospital growth strong accelerate look as and in United XXXX, second this conversion, full also deployments sheet a We between is and servicing put driver at the could $XX XX years as customers. the transition model, third the investment in countries States. might product this and XXXX in We XX by benefit stocking more trauma than consignments investment in at continued on international and of In distributor Ireland sets was million, consigned Netherlands The required who six margins have conversions lines, to our year, the XXXX, to demand plays to price, New we this revenue which bill role prior hospital gross entry which States. the sets follow our and more of average the to million tripled

is as surgeon is customers. as initiative clinical our in growth education, fourth of Our product eyes which the important

and the nine with selling diamond in sponsored help These in advisory European to an have company April, Pediatric since we their surgeons. Annual just courses, the clinical Management educators, supported a where of than we inception. supported orthopedic Open sponsorship pediatric the of entitled, train of our XXXX, we field generation symposia, products. Society next symposium of to of orthopedics, only Children. programs, which advancing XXth Therefore eminent some pediatric accomplish board we of we focused Fractures As meeting aspire the Throughout Orthopedic multiple included orthopedic on more of strive the

for for the Society In and Orthopedic were with surgeons we premier meeting attend. of could Academy meeting May we so American also Pediatric on of spinal again Palsy deformity support sub-specialty sponsor of medicine, developmental XXXX annual North Scoliosis We Annual Research and the more sponsored which that our of XXXX the XXrd double Society’s Cerebral scholarships two the travelling in the meeting and pediatric America trauma sessions maintained October, focused diamond correction.

cases enhanced orthopedic travel implants, which surgeons have pediatric double also to life of lessons to the fracture we surgery. OrthoPediatrics in Project, providing We countries. such four otherwise instruments World teams Orthopedic Symposium provide surgical courses International lengthening care workshops our limb not who continued non-commercial sophisticated from foundation It’s South access and of demonstrating could Furthermore, America and and on surgical gratifying at diamond so presence of challenging November in shared scoliosis, surgical Caribbean and children our operate meetings. Central financial the fusion onset for during our Pediatric partnership a correction. with surgeons children orthopedic by orthopedic spinal support sponsorship to addition the changing developing in repairs, trauma with these are on impact to these focused many attended Pediatric deformity topics for a on to as early that and pre-course,

world. community Lastly, of orthopedic cases. allows doubled the posting nearly surgeons platform than of our This another on one course questions representing surgeons problematic followers, and XX/X the [DAF] matter XXXX half over year pediatric the online to the more nearly interact to with in unique by

organization magnitude We’re participation, programs January our having. Foundation we level success which This primary impact on our and foundation Officer, Based in the further for the this is Chief to evidenced XXX(c) of see of research. in Board education Dr. be our eminent channel Peter a company Education charitable funded extraordinary Medical Armstrong (X) is and XXXX, the non-commercial excited positive under leadership by education will of clinical OrthoPediatrics a of investments with for of our clinical the the surgeons. Research,

that companies opportunities IPO. positioned to since our risk. of to are come The These be well the take stock a way to and initiative increased growth finance acquisitions. future from capital opportunities acquisition or set offering. advantage levels In was either this with products of Xth technologies have novel and we have or of raised consignments million is Our emerging follow-on increasingly raised $XX unique purpose December, integration limited the small

We culture. in are I’d optimistic valuable point; final a enhance in shareholder significantly that one and like to its believe is we we that enhance will competitive turn progress which XXXX make value. will our most several transactions asset company’s position

initiative reverse engineered years is enterprise. to not It growing growth for rapidly Our is enduring cannot that the culture thing is duplicated a or one per the it and foundation say, develop. it takes be a

Some sales most meeting in our culture sales named. This learned together the an the have a XXX for be was to lives cause so and conditions. choice It in being based a Warsaw our associate energy work of And the the domestic and independent two-day progress our we for typical children all Again rewarding representatives agencies rather to of resignation third see our industry. OrthoPediatrics set headquarter becoming national year, The evidence gathering to we the representatives engagement tangible meeting. in that at the sales in towards international hosted time all of Nashville. this partners. January, for our the power associates this our who staff Warsaw many voted In bridged saw between the virtually objective a we of of and XXXX, places Last only worked for associates, ago, sales of received of month orthopedic the everyone brought of we large so one time, of demonstrated meeting meeting objective the transforming orthopedic it time. typical in company best the unify with by the divide field. employer second to the than in Indiana. we In this of

the country. the us had total total XXXX, have unique pockets XXX relationships end By the full to On XXXX. equivalents. instead sales particular personnel, Two-thirds total our end at subject of to sell sales allow move to exclusively, appropriate products we of reporting reps of of accounts personnel the of XXX scoliosis it’s number versus that the sales think OP time I these or expand a reach just reps to in the others while of to of

solid growth more working XX headcount we these In systems, potential to reps can drivers and closer potential of the forward of outstanding horizon. launch agencies having with decision set another our are now new ours is the ever a future the While add positions strategies clinical education summary, our current centers, some that where effect to scale sales This not to their of of are accumulative than year to in planning significantly surgical consignments, on pediatric increase alone, domestic acquisitions. up over at to and performance sales and developing with we keep our is major sales we XXXX have increase. why have built look programs

also to attributable to unmet. of performance strategy, but largely opportunity that remains Our only is not right a solid the execution market

for financial results. review over I'll a now the of So to Fred? Fred, call that with turn our

Fred Hite

million, revenue when million $XX.X increase year, last XXXX. to XXXX in XXXX. same to was million in XX% Total $XX.X of of the compared fourth revenue. XX.X% record in a $XX.X representing million, in representing period $X.X same compared million, was million representing in total of increase compared to year, when in revenue in period Total revenue increase of International XX% a compared period the revenue million XXXX revenue $XX.X quarter last $XX.X International XXXX, for XX% quarter revenue $XX.X $X.X to million revenue. was XX% $XX same million, a increased in XXXX, to to quarter fourth the XXXX $XX.X million, in total in in $X.X total XX% a setting compared was $XX.X XX% of representing to the X million, a the total revenue. million of fourth compared XXXX revenue. XX% XX.X% was our for our XX% up Mark. XXXX of Thanks XXXX increase US US

in new increase, in of the quarter XX% by fourth in and $X.X million, $XX.X was XX% customer increase, $XX.X acceptance the XXXX, sets. $XX.X as compared was product million the trauma and to compared product in increase, million adoption. $XX.X XXXX revenue quarter Our XXXX, revenue million in increase year $X.X continued to last and year XXXX, a XX% product in revenue XX% fourth and XXXX deployed a introductions in in million million, same full and same the breakdown XXXX $XX.X a to by last $X.X compared period XXXX, deformity the to Scoliosis compared driven fourth driven by million category was year, in period a of and quarter revenue increase, follows: million

the and Lastly, X% period in revenue a representing in be quarter decrease Sports was with sports volume. last by increase other in same Nearly all medicine $XXX,XXX compared compared year. same a was $XXX,XXX, fourth our growth to revenue and to of revenue $X.X period the XX% unit in other of XXXX. driven when the increased continues XXXX medicine XXXX million,

The same Moving marketing United which down $XX.X expenses to transitioned in launches, aggressive higher Gross year. the compared compared fourth was stock. XXXX Research million were an expenses XX%, was divesting fourth the to to to to million, that ongoing was the decrease million XXXX, agency well international to compared increase $X.X XXXX. Gross as the margin restricted to paid million XX% year to the and A quarter $XX.X due in increased $X.X when XXXX to the product attributable This $XX increase of a quarter and the additional This quarter million, in Gross market sold and million, accelerate $X.X last volumes a profit XX.X% same the million as share unit million, was in year. and million, basic in of loss pre-IPO in share, increase the of XXXX, loss XXXX in million, fourth stock. again to our $X.X attributable per stockholders was of XXXX, stockholders in to compared which to of for XXXX decrease quarter basic $XX.X same the an in in million of full when year $X.X the fourth quarter $XXX,XXX, diluted loss for a the XXXX, was period to $XXX,XXX, a to $XXX,XXX with Adjusted profit was driven growth fourth positive of General been decrease a of $XX.X the $X.X operating compared year, in of to fourth XX.X%, incremental XXXX million million expense of fourth we compared to administrative by increased negative basic generated XXXX. year, turned in fourth fourth of XXXX. a $X.X loss States, same to or XX%, XXXX. share development were commissions a to million, $X.X and net $X.X to were XXXX same in period fourth Total in lower in million interest to quarter decrease XXXX, which million million income marketing and of $XX accelerated fourth did $X.XX scoliosis and compared for of XX.X%, million compared divesting our full the an expense for $X.XX share quarter Interest and million, in in $X.X a during to Net same during of of fourth $X.XX $X.X $X was million, was X%, product expenses last and to negative in of period. basic distributed related common international XXXX. in of Sales full XX% for general loss in XXXX the increased were the related well million to and in a quarter the when due XX% expenses the gross future when expenses of expenses. of restricted EBITDA an cash XXXX expenses million share XXXX. marketing $X.X pipeline. a interest was increase fourth compared XXXX XXXX the stock. when XXXX $XX.X Net as fourth to $X a year the million compared model, of the of significant the XX%, in included quarter Total administrative and in XXXX increased product of XXXX in the the of of in per was included million, in Net to common quarter XX.X% on same to was million to $XX.X quarter to attributable Total of as per last and $X.X in increase million increase, restricted XXXX, and Adjusted to compared related and loss $X.X XX% $XXX,XXX in of compared of compared the to XXXX. EBITDA compared was quarter of compared to in as diluted development year, compared compared fourth statement, of of a to loss million and $XXX,XXX; fourth last XXXX. XXXX increase loss and compared accelerated increase last million, the was income XX% accelerated $X.X an per sales, $XX.X in year balances $X.X $XX.X million, in include expenses of XXXX. XX%, full-year net quarter of XXXX in projects cash last of Operating expenses operating diluted million the $XX.X XX% of again loss X% in expense compared in year to a the $XX was sales. loss quarter period quarter the the $XX,XXX diluted $X.XX commissions in to our XXXX. was decrease million million, XXXX $X.X sales XXXX in and negative as compared associated to incremental expenses period XXXX to margin balances in $X gross million XXXX. period operating per in XXXX, our the $X.X period in in the margin compared quarter vesting XXXX. compared

Turning to XX, million our XXXX, September balance balance $XX.X XX, December to cash compared of our sheet, as of was million, as $XX.X XXXX.

Zealand As in and from commissions expenses. follow-on underwriting December, in fourth purchases XXXX quarter did change a after our negative the $X.X net offering, million include raised and reminder, conversion to the XXXX, in during to we last the which discounts, and property Ireland, The million deducting the $X.X million compared in equipment of of in of X% XXXX, net same as and during compared increase, $XX,XXX, year, UK, New $XX.X period offering was was proceeds agencies. million a $X.X Australia

quarter million we year signed sets XXXX, deployed and of $X.X new deployed During XXXX, we and $XX.X full sets. of the for instruments fourth and (inaudible) the of million of

and a to this as deployment well $X.X increase annual dramatic million growth As IPO driver our as for Mark mentioned, is XXXX, key prior our XXXX. of a over

million of $X offering pay million from line XXXX. did credit note under XXXX. December not have expire credit. $XX.X and now as down line line As of net our revolver of a was $XX XXXX, million XXXX, we million $XX.X After our in all entire of of million, as outstanding as well our off XX, credit, We December does our available of $XX.X follow-on December our XX, total as January term until of our reminder, debt

of sales terms XX% guidance, for XXXX. annual we growth anticipate In to XX%

plan investment sets we XXXX. to our between range in in annual million a $XX Additionally, $XX million to consigned increase to

to now any me closing turn for Let call remarks the back Mark

Mark Throdahl

initiatives our Thanks, in as the execution position orthopedics. reflected leader multiple in of our Fred. the To performance category XXXX strengthened pediatric systematic that summarize,

utilization. was products, it growing First will and continue to superior which drive adoption

consigned it Second, $X in was sets, in investment revenue dollar will $X produce every least for investment. of growing at time of which

can which will us strengthen XX-year unmet medical our the our and These work into OrthoPediatrics Efforts building five continue non-hierarchical technologies, one allow our stocking sales to young growth was conversion success in of increase we surgeons us impressionable in foreseeable commercial needs record an and foundation to exposed build immediate was international gross will converted novel engaging it allow Fifth, to to the track margin, education OrthoPediatrics meet into in be of to an to and it distributors to sales programs, point further competitive acceleration it maintain continue penetration culture with at factors acquisition of of more of aggressive position. their Third, volume believe future. to of the continued and clinical markets. careers. agencies due an which the was great Fourth, companies. of device

remainder R&D we XXXX, As investment. the continue we ahead to of our will look growing

clinical our full-year offering growth product and questions. with addressable our our total the to revenue we increase like convert our achieve to now fill our that guidance, in that and of distributors With to appropriate potential the programs. have for more agencies, will that We allow sets to market. open up the new scaling $XX $XX in follow-on We line million to initiatives education to holes confident call us in I'd remain sales Operator? and recent commitment our with organization, investments these consign have million to increase international the sales stocking make will the capital acquisitions

Operator

And Instructions] comes first Wise Rick from our [Operator proceed. question with Stifel. Please

Rick Wise

your new more about always and Mark likes little high it just XXXX these of can timing of to just Maybe stay and little conservative, that some or remain conversions, guidance, and international products we'll about what's Is exuberant Fred us on or that mean, your give us guidance I a give say talk sets low-end drivers. range, maybe thinking? let's conservative, maybe color the a your know the you for start assumptions when off more with reflection you on

Fred Hite

absolutely. Yeah,

our XXXX guidance into So XX%. was last XX% going year to

so reflective increase to the So additional and follow-on XX% we've the that to a is end. I December be on XXXX And in lower additional ago sets completed that point high XX%, whereas up that closer would year million that are both really we to the sets the and in now did $XX the have increasing we that thinking million an to was offering about deployed sets. $XX $XX million, of

in far XXXX favorable that, of clearly conversions impact other deployed XXXX, So could of sets the as impact would in XXXX a as sooner sooner were that a adoption could in throughout the an addition sets way, well driver, that. of international that's that on primary what the deployed have change adoption as as and quicker

Mark Throdahl

I with absolutely more no this point first headwinds, in to There will the of might at they number is that There QX. be we of or for no launches Rick to a selling actually growth product our initiatives. new should number that a all regard of add done sets. be organization by these shortage half, deceleration from demand see and

restrain Fred I anything think is having if their exuberance. fact to In

some first Europe, very now conversions distributors we'll In there of stocking acquisitions certain stocking confident terms and of half. be distributors, I'm with the announcing discussions ongoing in are in Western

steam ahead full that. So it's of on really all

that of a think to and and and I with regard as principle market, strongly, Fred I that guidance is I policy just to very a have very the We something prudent though believe matter think

Rick Wise

you. thank helpful, That's

any an in like the there I wouldn't decelerate again it little understand scoliosis 'XX, to low-XXs and We're look appreciate XXXX? something measure more in up of and we some growth are for Turning why us year scoliosis modeling Help XXXX kind of the FIREFLY Is about by the would that more growth, specifically sets to extraordinary sort had more think also launch and expanded understand, mid-XXs. that just driving. growth other factors scoliosis But to need much? a maybe why

Mark Throdahl

FIREFLY we had XX% So business think was the I first grow be to to going we say by scoliosis is would when technology. in year that XXXX full remiss XXXX. our another

of be XX% we in then that really 'XX the got technology FIREFLY XXXX. benefit we our comparable a to but of of we not obviously. only and basis. in business I growth So along grow growth than trauma selling that we're agreement middle started in and of that, signed continuing not implant full continued the anticipate a But in the deformity, some have through, system it continue 'XX. it second the that selling half to XXXX, scoliosis But will of sales that the in are forecast to additional XXXX, We'll technology, but license in also faster think now on brings that going we selling limited we X.X/X impact had we to but strong

Rick Wise

more at, in this? looking gross just new are we kind it last what The my in I'll the what been holes cash ask about margin It ahead priorities it novel from rate you back thought. it's where touch and where weaker the - conversion. rates does fourth talking a us the Two quarter norm expansion Help the acquiring about of Fred international you like than understand me. or margins, think go ones solutions, question know set understand us beyond mid-XXs? sounds you're and was this hurdle technologies. Help how last do to are gross I to it's new portfolio, Mark now. Is move that,

Fred Hite

first the I'll take margin. on Absolutely, one gross

that what product. a have the in from a ago the actually new is impact gross didn't we year So FIREFLY margin

I lower domestic does product that mentioned licensed is margin gross a product, product as that and have a normal margin. our than So

through through a comes at a range. this Our overall gross and domestic XX% margin selling licensed at products in is it lower XX%, are because product, the

grew, throughout the quarter. the impact have did gross on drag a in fourth on in (inaudible) our an particular, that margins, the that's margins As of and so in XXXX, quarter, a bit dramatically although fourth it

in lower bigger Our they the second in impact. always quarter summer the than fourth overall and are sales season, quarter are a had so that scoliosis third selling and

As we XXXX, help overall will summer have have are could less season in margins. an conversions as it that the get selling of revenues and our into gross the growing, we impact, additional

in gross is quarter little margins that fourth to the a than it overall where probably I question specific range XX I are see lower expect your XX, would to going think forward. see for But I So XXXX.

Mark Throdahl

the your ongoing have handful amassed discussions a of and of top question, opportunities, XX to IPO some have the very potential Rick interesting a the list. at of now are with final acquisition that those since we list Speaking

other in and follow an that scoliosis or the External in product would there in criteria into But clearly the new significant surgeons bracing of I filling progressed. a of surgery, patients in orthopedic onset proven to most novel minimal integration need portfolio, line, of number treatment company, would devices technologies to entity are scoliosis, think of and whole have people thus to part integration a product would with that if and for see other before surgical we around gap much sales interesting in are in in terms cases, before way think our of and in are and a they technology. of fixation would with would surgeons bag products, for need the happen products early risk. that development we there ease might technologies the progress line, options to for in integration built the our to these risk we example. a are number gap terms minimizing expand that small growth children it our see deformities one And here era deformity be allow to use into our be regard potential, younger opportunities of gaps the all a trauma into treatments to treatment very a clearly non-surgical pediatric I they expect would to current intervene have with their for

Operator

with proceed comes Ryan BTIG. question Please next Zimmerman our And from

Ryan Zimmerman

guidance, market. you're a question a up growth earlier O-US It's the on us how smaller US about to the on just and bit the understand thinking Rick's the basis. I want about been on maybe between market and little outside balance of follow say stronger help historically US

a me think that's 'XX? Just follow-up. I where And in understand maybe going you have help

Fred Hite

in strong much that is as is with see the about there needed We're the at outside in a as and lot Australia outside in UK we more talked United our business there's in so our States opportunity the agency globe, the obviously across What's the locations of XX% and continues, demand very demand really that XXXX. States. United deploying do States, Belgium about overall international States, growth the and United pleased demand of Netherlands. and for we products our We've United now also sets

so the assign there's aggressively. very continue to to grow, of across there lot and other can our a So demand, more partners we grow to continue globe then sets all of

more equal on demand growth see projections based international domestic or than really So in XXXX, our and the demand we and future to our beyond

Ryan Zimmerman

Fred. could about helpful, here. I ask That's And then headcount sales minute the if for a

out, comfortable perspective, drive certainly that's growth that Help where start you're 'XX higher and the off going your you're with in or in me think about the headcount; giving XXX You or leverage do the it leverage America excuse XX% 'XX. understand you may 'XX? an potentially so going, think maybe that results driving where was up a ended I of on 'XX from not based not headcount can us but in that, because that you from off

Mark Throdahl

simply sales final and analysis, performance, that something therefore that growth this the is cannot Ryan is precise reps I of think in manage metric not precisely. correlation a between we and sales the

important that, and of guys they our individualized is headcount, from how an But our each it are their work with that all vary strategically, where our strategies, them. that company of over to territory that (inaudible) that now they’d But to they keep we the to how that working case believe the up of key have it to are circumstance. of individualized have thinking mean in do its would territory. We in need sales would is headcount on it the double to to with will more dimensions, planning the is them agencies is may And increase or number horizon, years. XX about three which each their they do growth

mind this of that but on we've at definitive thing point got So is not is this this the setting. point, is can yes a it hand in the announce at we number sort or something that of in sort other

Operator

from comes question with Jaffray. next O'Brien Matthew our Proceed. Piper And Please

Matthew O'Brien

robust. this $XX Would know as But as start on to hoping investments really deformity I side, you pretty focused to instrument how million to don't to you what and and hear gets million is was XX. and to where going just to much trauma to between complex want us what love set I about far split are the gets And the those the think year? you spine. $XX XX help be disclose

Fred Hite

the just across globe, our news is across is good of product the The line. demand like demand all

get investment new those XX launches. it scoliosis of deployed as both the the timing in how business. is out again and different So in well the and new product will of deformity, 'XX between our that really XX and just think as aggressive like out across launches sets trauma I some be difference roll we was rolling on when And those

Matthew O'Brien

far half more the XX million So is XX Fred to as probably to it goes? that it's fair loaded, back think as

Fred Hite

the first historically out and it's of both No, in true in this goes and most second XXXX, been quarter.

quarter. of the to those trend in So that. would the in was consistent be We XXXX I was probably say in that XXXX, that X.X to in first many of million, prior the and of as quarter place second the get X.X try summer in million selling And it $XX that million sets would with season. pattern

Matthew O'Brien

Understood, that's helpful.

those even little what bit Speaking just a some of said are and are to seeing I X in and give that productivity actually March perspective? it’s tracking one that one getting signs of million for level, you you us from you sense how of we said, it Can a on know kind one any in sets? of $X year. better a one, for close off are of those for you last duck-tailed deployed

Fred Hite

we at now track mainly coming that end We and mark. just set, we utilization. set, of every on $X.X so XX the weekly look that million at we're March up so every each and those of the deployed do can against sales track month XXXX, We

get could now term, with like to XX pleased we and over dollar-for-dollar. we've As utilized. the still on utilization, is the it's good say months And longer pattern in seeing, past with we're But it's usually until that based for hopefully are looks the I what that on talked absolutely typically track fully would that forecasting. XX what a we're number right sets that very

Matthew O'Brien

early, getting just terms opening know factor the gating it's hear discussions I some extent. for I but that more or huge of market, you. scoliosis a commentary for a just overall launch, on from field And just love bit very last small business product the you're up one qualitative from I'd stature chunk me, size the is to a it’s not that in know of I know little it's anecdotal to

So existing up deeper penetration in terms have potential opening new so far accounts? accounts' in seen or you what of

Fred Hite

dedicated another but on a reason second a keep of the Matt, when at be say is competitor great, we seeing should a exactly launch what all. the around that's more this system quarter which hand around. now we scoliosis an hoped, other that our saying hopefully I which think would further keep exotic in going we not system, not incumbent that surgeons to Well to is are neuromuscular that competitive are the do is, okay, And yet had we supplier got I you've need think user competitor system, that need accentuated even to I of

so for far terms of rationale the system. stature so launching that small good, So, in

Operator

David And next our with question Please proceed Turkaly comes Securities. from JMP

David Turkaly

on existing that XX consigned of for you think essentially or further into sets accounts is are we as guys both new follow-up the quick penetration Just XX, accounts opening that that to a should primarily?

Mark Throdahl

one and in, to remember and extensively be account new It's may current required. the kind penetrating systems where product are go being really which a for surgeon basis and go sets given a into these mean are accounts, accounts, launched, for I would additional that we new where want feel is that use so this both. be his the game system-by-system They sets are consigned we're colleagues of using product they surgeon-by-surgeon now there is it.

very or got to account an we've So additional for that place at set the system. more

this So (inaudible) it's more instrument really sets. multi-dimensional demand for

David Turkaly

accounts if you realized early us guessing I was estimating rollout of your FIREFLY But do at for here. what stab you I to-date? the might this a think used pretty wondering And percentage in or still take you're have

Mark Throdahl

use uptake. It interesting there those very FIREFLY. advocacy totally; in remains It's classes of just extraordinary that their systems, who here spine case. these small and I well, sort in on terms cases whom they been these have in think have surgeons are navigation sort several not There as typically such and of it that systems only But are aren't of navigation others those in of for cases. more using it volume every don't systems number, accounts have hospitals robotic there are And who use systems. that's have because that many an surgeries There it, that there some are that use complex that circumstances, converted are of a on of are has most use the pediatric large designed really of which centers, adult have, been would robotic

David Turkaly

do guidance, your One happening the launches kind your on last in P&L look loss you your the line, have year. early at have do we smaller? income on, looking these that should the of sales Fred, product that leverage expectations, going but really investments nice you actual XXXX, events think maybe the we again operating all Given growth new all set expect for at we one the in growth. If deployment, gets

Fred Hite

the will G&A loss. to operating XXXX really we've sales the And also We're adjusted same not very positive, thing to continue restricted that and year that will million we've absolutely see EBITDA we'll extent not to last four we continue made, forward, growth leverage did accelerated into to have in $X that profitability XXXX. repeat we with going the the that but of improve on XXXX, over one will of mind smaller of got But vesting to leveraging year-after-year-after-year. the growth, in the progress stock each pleased grow years, in business leverage EBITDA sales adjusted where the keep in into now

from of we'll pick just positive that $X operating income alone. So up million

Operator

Margaret Kaczor Please Blair. from question William our with And next comes proceed.

Unidentified Analyst

curious rollout then been Margaret. Femur out has in those where for rollout Anna of just talk small small of is you of stature was RESPONSE this the deformity I now the would products, sets Can and RESPONSE that guys, say majority about in rolled for initial are particularly and guys launch? stature? Hey and in in these trauma you you

Mark Throdahl

we still have launches, think here we're both very think and stage I'd could early will and with conservative the do recited. of first of we phase I to to our Fred is look Well that remained at see and I that of be sets numbers more. a how But we sets uptake the for initially then we with use kind regard numbers rollout, of

elaborate? to want you would Fred, So

Fred Hite

Yes, that's absolutely correct.

out gone are based number very we XXXX, middle our sets for well, PNP/Femur ordering So the the with we've initial and it’s that the of of rolled very, on we in launch, that XXXX. increased

of So fourth this we March and quarter. small have those into and in will in the roll year, system XXXX, stature the rolled to end here more quarter the The of start second also in out December XXXX. sets launched again out being at that of of

So initial more country, And continue have and deployed sets it world. across had the once, XXXX, we've doesn't happen out being on this programs kind that across successes the in all based the of we roll that to those of at thing both

Mark Throdahl

surgeon base (inaudible) the up, and And those making with task (inaudible) got the there surgeons crack that comes of and us really the get of surgeons, more of any innate sets, the fact because And developing it in number astonishing deploying or team of too of the for of the into are capital hands instrumentation. small smaller the working efficiently, a a there that a suddenly complexity of fat all handle a despite who of of that with for that modification of product, new with obviously out systems the instrumentation. preservation when subtleties right-handed the beyond the that this these of launch have it advisors, a we've is or subtleties, easier they female conservatism on these a need to of requires got adjustments. left-handed then little well we've instruments, these installed is And of a are the terms or we regard

terms think a for conservative numbers that shall to being will we we initially would continue the be launch So of force of in that I a, sets with. say,

Unidentified Analyst

contributed Okay, product we international us through drivers to side which were we a to saw the the that's and third Can of tough largest the what strongest saw outside category helpful. the compared international quarter? then walk for And in strong US, you the what bit; then revenue as growth against the pivoting comp.

Mark Throdahl

the American of As Australia profile, far as with I'm which scoliosis concerned, a certain highly similar exception concentrated markets. we very markets possible see and the of is in like South

Europe, it's in little everywhere in but you as and it more well a across deformity, we trauma board, scoliosis. it We sales have and Western do have and color like place that? trauma Australia scoliosis on very in as any deformity see we see in the Fred

Fred Hite

XXXX. of start We technology half that I right. would on say in FIREFLY the international scoliosis strong very Yeah, growth domestic, that's to in the the similar second was the side. did the Australia selling

some first sets at incremental and But XX% recall cash driver. that of and you'll very particularly could the grew to was quarter when order Anna in 'XX, our by that we is for So sell of time growth the first guys. had XXXX, enough actually was post-IPO, to business to second the our question we we your these distributors another quarter, in and selling come up quarter growth of driven quarter XX% first because stocking sets the quarter that relevant second back first in on as international the the

those that's strong coming very to segments of just quarter But of So, internationally, that first the about on like we 'XX. are on is underlying demand be domestically. aside feel from side in tough good international it comp quarter scoliosis and continuing second the on products and we

Operator

today. with Mark our And you. session I'd back Q&A that like remarks. Thank to call to for Throdahl concludes closing over the for that turn

Mark Throdahl

growth is, of will us all will contributed I to rate in all I sets, themes and Just conversion over planning think least will growth, today virtually five to over and international that been and I airspeed sources at superior one diversified distributors, the to all that think continue this maintain horizon. five indefinitely, five levers education, us products, five enable growth of to industry-leading acquisitions. enable clinical of These increased contribute our of has last the year, gain think year, And and the planning will horizon, one of altitude. continue remark, investment final contribute

very much for you in thank your interest OrthoPediatrics. So

Operator

and ladies conference. concludes you, in today's This Thank the participation gentlemen for your program.

Everyone disconnect. now may You have day. great a

OrthoPediatrics (KIDS) 7 Mar 192018 Q4 Earnings call transcript