KIDS - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the Q2 2019 OrthoPediatrics Corp. Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Bui. Tram

begin. may You

Tram Bui

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

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

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

of to Commission filed Exchange discussion report with most a on risk the annual and Securities on For factors, March I you recent was the review X, encourage Form XXXX. which XX-K, company's

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

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

this the circumstances of of the revise law, reflect events In addition, by to broadcast, call date place this that call. or the XXXX. only the as update of take after contains conference required live time-sensitive the no accurate statement August content undertakes of information that or obligation date any as is Except company X, to

Mark. the turn that With I'd said, to call over like to

Mark Throdahl

then progress in earnings second growth update set I'm performance year in over that initiatives summary joining on I'll initiatives. our our you pediatric leadership culture. conference year our our financial in the include our acquisitions, products, with a to and to orthopedics. have international clinical first in to everyone, executing revenue us call and review before the morning, greater quarter all turn and review thank detail XXXX opening strengthened corporate the of further for market guidance of quarter in achievements growth for our begin and call. half Good pleased today call the a Fred rooted instrument detailed the more the then engaging to review These full education, I'll any investments, up new our questions. XXXX

revenue of generated we million despite in strong driven quarter, growth the of record acquisition. Orthex growth, international favorable growth year sales prior by and second the & comparables the Trauma During XX% of $XX.X sales Deformity revenues improved the impact and

surgeon day the the our small-stature quarter scoliosis position and Although and Orthex. X our to by accounted in further growing prior products, almost DUO PNP X% impact there year, BandLoc of less was selling of new which market-leading unfavorable compared expanded and growth, we realizing including for base FEMUR,

either X relocating out quarter, These this quarter generate hospitals would million surgeon per during $X which summer were practice of business, sabbatical. season. to XX% significantly scoliosis on to our other domestic sales despite impacted the strength The surgeons surgeons the in their the surgery that fact of base expanding $XXX,XXX of key grew or second typically

of and that XX% time the of the impact confident anticipate summer these this market during in at sales excess While are we scoliosis to continue will drive our revenue we robust the favorable growth surgery in annually. big season gains returning practice future, well growth to surgeons share

small our is in look performing we surgeon reduce still scoliosis which inherent ahead, with the products to more surgeries relatively growing As size. will more of a base continue volatility business,

to that will in revenue guidance full growth Trauma business revenue present Furthermore, of updated positive March. the gives & of we're see our the [indiscernible] daily revenue sales robust with time, the XX% XX%, past also this well deformity to are confident we continue the addition year February [indiscernible] while continued At record The correction experienced past surgeries EBITDA the XXXX the quarter, pleased us Deformity achieve to generated we of improvements generate, and grew aggressive we over Orthex, drive XX%. selective trend that & in last systematic Deformity, Orthex. and makes which robust we us growth. Trauma average continues Our we a including growth together with years sales we

the Let our address now with deployments. set me progress of starting growth initiatives,

systems our instruments of is initiative implant surgical growth increasing access first more sets. children's and deployment Our through to

of an in quarter, $X.X sets, the the year. sales elective period achieve to strong on of in instrument $XX $XX first million were of consigned consigned has During $XX the to increase are we million year, the of also for prepared for half same compared the full surgeries. us last well in deployed and the surge for summer million set we XX% goal year This track to achieving now million sets us deployed deployments $X.X during keeps XXXX. million our It

New have significant products are made our progress. second initiative on recent which we

orthopedic We to we no other innovation develop patients, to surgeons new who our addresses pediatric that commitment demonstrate the and of offer a to channel to means typically unique continue needs products. pediatric have

screws and the received in received from foot, deformities treatment to as we in infusion address most new small of X the foot on This the children pediatric-specific provide system patients. clearance on first as XXX(k) the fractures cannulated well small-stature of wrist. which the PediFoot, factor week, ankle clearance XXX common systems, In FDA July, we bones

of launch the sizes. anticipate which X also in system, available a will epiphysis be femoral capital new slipped We

XX systems products this new systems from last we new offer are together quarter. later will surgical with Orthex, to systems launched these XX compared year, When

PNP We rod are for continuing scoliosis neuromuscular development growing scoliosis products a of early and treatment. Tibia,

or our opportunities novel mentioned productive we internal initiative. with to license acquire continue highly which development approached have past, to product represents we in As the be addition in our programs, technologies, to compelling third

to Inc. with rights technology will for partnership & Vilex, angle Tennessee, system $XXX commercialized and Deformity LLC, that closed a In systems. and Orthex million a completed which Trauma its Medical in future Vilex our CoorsTek be acquired in we segment the Deformity we biggest business. PediFoot market variable April, & and In Trauma [indiscernible] collectively our licensing the opened new in gap June,

While x-ray primarily pediatric circular proprietary Vilex and is Hexapod about company a targeting and their are we both ankle patients software. excited of foot surgical XX technology Orthex systems fixation Cora-based planning and adults, the potential with

highly conjunction planning Paley simplifies in a the treat and Lavi, length will primarily dramatically discrepancies. injuries was Dr. Dror courses our Abraham is been our use. software well We deformity relationship Paley rapidly training conduct adopted addition pediatric it used since has in and as Dr. on clearance, data Vilex, FDA continue orthopedics strengthening significant product the its clinical Orthex Founder Institute and of congenital surgeon has promising and by pediatric deformities Orthex advantages long-standing surgeons on of by with point-and-click limb to and who line. look of Paley, is in one XXXX. of correction patented Developed to Palm software West Orthex' to chromatic pediatric most assets differentiated with proprietary orthopedic amassing Beach, forward with introduced hardware grown as Orthex

a that surgical sells in to addressed number beyond Vilex procedures system. systems expand our those of Orthex, Beyond PediFoot

in address imminent and be able surgeries of most of will and PediFoot, the With the launch foot the ankle systems to children. Vilex OrthoPediatrics

not for acquisition may approximately XX% treat total & who intramedullary Vilex/Orthex It for The surgeon to pediatric practice the and specialists also system it of growing coverage addressable create being our correction our partner. with nail increases Trauma pull-through that children our developed the now a European hospital, from to deformity base Deformity. will market expands XX% include in

system and train representatives We on this sales product. on our are into to revolutionary the track integrate to OrthoPediatrics Orthex

focus remain orthopedics advanced We exclusive thus, the a adult process product and, for on finding committed have an line. to buyer Vilex' of pediatric

disposition interest to special and a Board significant these assets be the management's to offered in assets in anticipate assist supervise be We formed for have Committee there authorized to will advisors engaged this process. have We sale. of

Orthex, growing year. XX% sales last surgical by believe We increasing organization, our of including to numbers are our support XXX in growth to size our XX sufficient the to instrument organization support bringing of To domestic up surgeon sales near-term number second new goals. and consultants these quarter, the systems sets, the consigned compared sales grew representatives, customers, domestic

to We have allow the impact a us the powerful leverage of will Vilex acquisition. sales and system, distribution which

to This sales new brings agencies. presence also fourth distributors to our to selectively initiative, our us international We deepen growth. while in markets stocking converting and distributors seek international appointing

international from to XX During and presence [indiscernible] international we maintained agencies. sales XX our distributors X expanded the increased from countries, to quarter, XX XX

managing for the director. established OrthoPediatrics with several key stocking Netherlands to appointed in a and new progress new discussions continue a Europe. in Europe headquarters We conversion We distributors

We presence that X unique of of go systematic world. everywhere global is strong surgical approvals in also our we this recently for expansion Canada. received in adoption the the believe regulatory solutions evidence our and demand We

fifth to clinical which initiative as be surgeon may just growth important as our The education, is our products. customers

aspire surgeons. of the and want more than products pediatric sell next surgeons central orthopedics, we pediatric the orthopedics in training is We of entire orthopedic because the to this do are We generation advance leader to just to field to effort. pediatric

training young new surgeons. the our a President Officer attending programs fellows residents, is on Training Chief quarter, of working who Clinical and Medical Education, and with current In hired our Vice we second Sales expanding for

than X,XXX the members are the surgeons industry. We community, to surgeon one very more of orthopedic as its only also have DocMatter of kind in excited our

the acquisition, also Annual of level and our Lengthening sponsor size. additional Gold Orthex sponsor We our of the research Limb at in symposia Spine major of have societies who was would the of the the Society major young Diamond and July, able level Meeting annual to were as by and with education challenges we ongoing well early fund support North Double Baltimore fund provided in where Building European dysplasia Limb not company a XXXX surgical America, of Society on developmental X support we become to Orthopedic lead Deformity day as a have an symposium of additional subspecialty We International Course entitled our for leading annual Advanced continue attend. followed a the education our of included been We meeting extraordinary an Meeting XX the Research of maintained of the the to This the Pediatric sponsor grant and hip. Scoliosis which organized of support Orthopedic Course, X again surgeons otherwise the in April Techniques Pediatric the events. scholarships to field. our in Society on Reconstruction we

last, our a to foundational our growth me initiative, brings corporate This culture.

in employers mentioned Indiana, in as and places work orthopedic OrthoPediatrics this we voted of one of company's to we the most in one have our attractive increasingly best we again is the believe greatest the viewed was differentiator. past, As are industry. the

committed to are engagement that culture We of organization. the which good commitment only from everywhere were is in come hierarchy of and providing a ideas, the

most taken Our or culture employee and reproduced has it our satisfaction. develop, be critical to years cannot it It is reverse drives asset. engineered

have of profitability. For satisfaction studies directly many correlated with shown employee and, levels years, satisfaction customer higher that thus, is

the me Fred? Fred call to Let our now turn over results. review financial to

Fred Hite

Thanks, Mark.

the for from XXXX when million As June up second of in XXXX. a June X the $XX.X to XX% Total a operations. Vilex Orthex quarter of million, include was impact to $XX.X in same quarter in impact of discontinued compared reminder, the results second period XXXX is The revenue the included record-setting XX.

points accounted less there for quarter which As X unfavorable selling the growth. of in Mark day percentage year, was to compared almost X mentioned, prior

$X.X revenue In XX% total the of quarter in million year, increase $XX.X the to same to the revenue. our $XX.X second period year, last $X.X second compared in of period U.S. compared XX% in XX% International representing to million, million XXXX, last our when representing total revenue. million XX% was revenue of the same a XXXX quarter increased

& last was Trauma to second quarter XXXX revenue quarter are second the $X.X we of in the Deformity million product quarter XX% when was the breakdown rate selling XXXX $XX.X of temporary category increase from significant same revenue season. Our experienced by a as encouraged summer period compared first million, in growth sales This we elective a has deformity in surgeries, the slowdown very when the and by during performance year. improved follows:

or the million, new total mentioned, as a locations increasing adoption X conversion compared are Scoliosis partially trauma the on the out confidence key revenue in our guidance. to of very we changing practice which, reflects product to offset temporary $X.X by in to increase due and the performance, year $X.X million period growth season, Similar significant scoliosis selling which encouraged year, our sales sabbatical. XXXX summer second us domestic was same XX% and surgeon surgeons Mark last new by in provides deformity during quarter

quarter second a in last Lastly, revenue when sports medicine/other to compared year. XX% of in increase $XXX,XXX, the period $XXX,XXX was representing same XXXX the

when was compared in last expenses. acquisition-related $X.X year. the The in was million XX% second by expenses last an in quarter flat down marketing million the Gross were in second period the million [indiscernible] quarter XXXX the increased $XXX,XXX second XX% profit was $X.X to Sales quarter to $XX.X to $X.X last administrative the in quarter the million second quarter to a the is compared Moving statement. compared income year. Gross $XX.X same XXXX expenses increase increase when margin General in in and $X.X second of million, year. same increase period of XX% approximately XX%, expenses comparable XXXX to the million, and driven XXXX. which in

grew G&A over X% these prior Excluding fees, year. by

same the and second and which in improved Total was $X.X to $XX.X quarter million year, XX% compared million compared XXXX $X.X $X.X the driven quarter million expenses the XXXX. revenue period second loss compared Research was in increase XXXX, and in the for in loss the a development quarter million $X.X second quarter XXXX operating second operating quarter of expenses in by second million the to were an XXXX to $XX.X to higher controlled spending. million last

debt reported for there profit to second of to Adjusted costs as adjusted $XXX,XXX that related to $XXX,XXX, EBITDA note was last our same fees. Interest in adjustment adjust second for negative longer was company of in $XXX,XXX the and to EBITDA expense has no increase $XXX,XXX the been period our of XXXX XXXX expense as legal public well acquisition. Vilex second the interest compared we the in previously of to a to reconciliation The year. XX% quarter XXXX. quarter Please increased unusual XXXX increase the an and increase of a that Orthex quarter for compared related in

loss to second million year. per or including quarter a per common net continued $X.X and loss operations in discontinued last loss $X.X operations, $X.X compared of share period was Net from $X.XX improved stockholders million basic Total the the attributable in to a XXXX to diluted period share loss, million from same EPS includes impact basic noting discontinued last well or compared quarter loss per for It diluted a is worth of the to $XXX,XXX of year. our $X.X million that as operations and unfavorable $X.XX of in loss second as XXXX deal-related share same the the $XXX,XXX expenses. of

our to balance Turning sheet.

As outlay $XX.X in of as significant June well of to our balance XXXX. was deployed the sets. acquisition Vilex/Orthex XX, balance XX, XXXX, as million million, This our million which cash $XX reflects of the compares as $XX.X cash cash March increase for

for term portion through As a of consideration the Capital. a $XX reminder, a the million Vilex/Orthex new funded cash from Squadron we acquisition loan

year, set second consigned $X.X reflecting deployment. Including during the the of during quarter last period were $X.X during and of quarter million same second to increase sets property during quarter the million deployed equipment to $X.X implants, of were the second $X.X compared Purchases million the compared million XXXX XXXX. in

of $XX the to year deployed now half XXXX in XXXX. deployment us half first increase brings have XXXX This $X.X in of is first million compared total track a plans. on to million and set XX% We our of the sets

million, million $XX.X loan. XXXX, of total term XX, was including debt As June the $XX

the of Vilex Mark line. As we have advanced buyer had for process mentioned, -- product adult the a finding

completed, expect a asset the outstanding have our is to we there and offered to assets to sale, the authorized reduction significant significant We be and process. interest Committee in of engaged advisors management's in We special a for when debt the assist have formed balance. supervise in disposition Board these anticipate

we our guidance, including of annual XXXX terms growth, for XX% In revenue updated guidance to Orthex. XX% to

in remain range consigned on track to million of $XX to in we Additionally, increase XXXX. million to investment annual our a sets $XX

is financial information for As a financial August the pro XXXX. expected forma reminder, filed on XX, be XKA, of no to later and OrthoPediatrics Vilex incorporating than statements

back me for Mark let closing to the turn call remarks. Now over

Mark Throdahl

orthopedics. lead second in widen momentum Thanks, Fred. OrthoPediatrics' we as pediatric ongoing Overall, quarter our our reflect results

rigorous our the Our product focus, multiple initiatives extraordinary employees. execution across the success is and of commitment systematic growth of

significant new and deployments, business. and new growth pleased the from report are We products we to sales contributions acquisition. look We the increases exciting forward scale initiatives to representatives ongoing the instrument our set these as growth of opportunity in Orthex

now With that, the like [indiscernible]. I'd to up call open Operator?

Operator

[Operator Instructions].

Stifel. comes Your from first question from Wise Mr. of line Rick the

Frederick Wise

things exciting going of Lots on, clearly.

Thanks with out day day just selling the single for the topic. in calling second start the me quarter. Let

But there? you selling follow comp there about in targeted to all second fewer and to help that, in we and or are just moving the quarter are first you half extra have look than a through us anyway bit XX% As think half, on think your And the we clearly over half second comps tough second range. that a days the the Maybe help to tougher to anything total. the had grew to to get pieces. are drivers going

second any how how So help day -- think about you're us And half should selling more to the second issues? through, half. specifically, going we think

Fred Hite

year. Yes. growth. the that us was We had Good percentage of The you, day quarter points less half unusual, to picked in we back the hear by selling from about that X second hurt up in X second Rick. of so the

obviously, it not the whole. for So be year, Typically, will issue. that's an

called haven't out the in it past. we So

last goes, XX%. it of over XX%. the quarter international comp year, by the our XXXX, quarter by grew as first the In far As grew second in business

XX% quarter is top So of comparison to grow our international that business second in pretty on impressive. the by

bit completed Scoliosis. with as been that, included the but really new we we domestic feel higher on $XX where as those about of particularly combined performance a in second season, the growth, the guidance, businesses picked very up is business both XX%-ish to selling summer about in the international to up revenue returned which year, And today, at Trauma million and the good X July. our What In sets deployed, has is the during Deformity record some confident But June being the little feel months we're a for half in driving growth, normalized extraordinary well in half second & comps. sets of more our sure.

Mark Throdahl

market. will encouraged I FDA systems by X approved fact very we that entering be think the that, developed have and have by new we're been recently, the the

We have seen very strong new in conversions scoliosis. user

We the have first of users, the over of in half scoliosis them been just and XXX added XX have year.

are So finally, X our there's the it, These began already surgeon to an are who have using expands Orthex, which, surgeon share from course, and And owned first conversion. June, but these not conversions. were that point, market guys option. of that large have of in total then we some seen our I [indiscernible] in encouraging it's of that we very extraordinary, And then, it system of sort customers signs. weeks and showed evaluate think,

Frederick Wise

that, -- few we do Good $X.X quarter? know wondering and million. was I And I And Orthex I 'XX, could Mark, about stuff. a following if the as forward? in weeks, going in think it's how get on half did to you the know was in well contribution the what second we it

X You're months. an owner for

frame seen our potentially. in you're than we've maybe Orthex help we doing Just us how it should create the to to past, expectations faster take and growth even what -- to understand for

Mark Throdahl

this of them hand, of your organization it companies, other contributor is the the unless we selling when to let we on that won't moment the X June. And divided persuasive our safely Rick. very was soliciting group devices about now heart And worked and external of who that have groups. But competitive But here Orthex company. significant selling because say a limited into was group in individuals disclose in fixation Well, question, conversions. our me experience there first other of standpoint, a Fred I trying customers, had of a think has they from growth the to not that has been at interest he can trained out for contribution that much change

the trained fourth be quarter. will will the quarter, be group this third group second trained The in

selling course trained so in we through an the technology. will this organization And year this have entire of

about encouraged So Fred, surgeon Orthex pull-through I are from that think other would make that current we have. will base the of comments any you that? to there like we be a

Fred Hite

long That's and This high-value these Scoliosis are -- our to able conversion absolutely get be and confident surgeries, so our people in right. cycle long, one, very like trained that takes to The that converted. much surgery more business is overnight, continue complex we're that, the the they're that time number to to positive will process not initial add very, a gets It's long all by it's years the and are to that growth business an it but to help very surgeon. of signs encouraged very immediate, for in come.

Frederick Wise

else on from Obviously, -- one just be you Is love to you is that. the you just And XX% clear, could extra I Great. -- the is to I I going plus range. bit from XX% me bumped guys Or everything and conservative. that seems is to the know And Fred XX% Orthex? just one last It are seems guidance. know that a XX%, conservative. it of second Orthex? it clarify if to this, up Just that, want part only

potential seems the the sales I'll given force, OUS, given new it the you Orthex, Gosh, expanded given let it the extra -- products, the Given question. But anyway, just sets, given answer conservative.

Fred Hite

Right.

is limited they surgeons. very very which Canada volatile. outside They U.S., those the of same of both many of stocking -- revenue, that have are Orthex. When So of what impact and we hands, They monthly and -- business it distributors some in at it's distributors the they Colombia. that our very had include the look number great, a business in our does Orthex includes core had a sales their had of obviously, the

of We're hands, ahead and obviously just get this of don't delivering what want that experience consistent of can revenue for get do having And more is it conservative. we very, We've about such see that's in to of but our and yes, how I the myself weeks my excited very until ahead to don't comes but so just Orthex want only thing business, impact to it's I myself. on disappoint expectations in that it just it. great on our too in July, some three which don't it in. tremendous had much part we and see, had then with a obviously is We asset conservative something hands. build seeing very

Operator

comes Your from O'Brien of next the line question Piper Matt from Jaffray.

Kevin Farshchi

is actually for quick A This ones Kevin Matt Farshchi me. for O'Brien. on few

The first, following on up question. the previous

drivers business think wanted the strategies conservative investment now broad up the Just to is an And the this get in your range? million, equation it risk to on if how from that of and then I a to the And approach bottom the strokes the And follow-ups. company is and what the keep that the side range deployment year. the specifically, and top set outperformance just demand you of have for on to adjusted, are of same? the not, few rest of that the $XX with

Fred Hite

Kevin. Thanks, Sure.

we that bit plan. of are set delay in in we in the quarter, caught on March the but A deployment little a up basically first right So April.

monthly is And so on selling revenue surgeon a as season, $XX so -- the get sets for right goal the before and with is the out expected. in field which we million now, and hands June perfectly basis. The us into many the July, of plan the on summer what large to they're that

a got a left but left other our excited as to for systems, we're of the get right second $XX the it mentioned we So X very systems. was about. then million legacy have lot on of year new to that out. is What few We've screw new our for available us cannulated which half systems, I that be will plan plan. We're

which the system, is coming. have PediFoot We

launched be will later those this So year.

available out where to sets field then the legacy we some additional so into systems those other have demand. -- and strong funds And get there's

suppliers. of million. finish what we're kind that? and that million So of our It is $XX in we'll change right $XX plan, demand we to probably have kind What and just we from will range, deliveries have coming in on what

Mark Throdahl

seen These this July comments, of with set Fred's far the we had cope been And any for enormous just not made have volume to to and Kevin. us have amplify would We we August. deployments June, fewer so extraordinary have to numbers. possible on in simply demand it had business able meet in

we're So have investment wise, that investment been think decisions and the already. seeing of I very those that fruits

Kevin Farshchi

on not base makes ton second the It ton seems on surgeon you put sense. sense. can in issue side, point the But bit a scoli quarter. a of it transitory. makes The a a of That finer touched in the little My is one you of these then in on And larger space. these cases your about the how I'm visibility might on past, return? anything on front? from the competitors that additionally, think And many market. thinking you perspective were engaged that Has changed

Mark Throdahl

posture No. see this dramatic competitive change any We the area. in really don't in

are on a way, I converted that surgeons second basis. pediatric-specific have, any track every potential indication close In reduced that the that systems. absolutely target many in no products. monthly hiatus these to we fact, in competitors on We that watch personally have. closely. of were volume us of new in to over other product user there's quarter can development, we scoliosis see, if assure surgeon And very, the anything, large emphasis course, by very you major the X who We

they when We other have and return come every expectation and will, us back systems response practice, products. they our utilize to our to

for to that, able something otherwise, to growth we the despite $XXX,XXX million we $X that on of loss future. that a I'm would've trajectory scoliosis So we a to XX% as just the the thing very like garner. were maintain expected And good view would impressed

Operator

Your the next comes from line question of William Margaret from Blair. Kaczor

Anna Nussbaum

sets FUMER, comps whether anything instrument products want And temporary there we some view a quarter new tougher to Orthex, products, momentum then with should are you is little to some confident notable? How bit I to jump ability you? those in of Anna FUMER discuss to the for in the addition things? could Deformity. on new you the of or Trauma be growth seen continued This drivers offset and it How else is Margaret. anniversarying last & of slowdown behind

Mark Throdahl

that confident well absolutely this anomaly behind are confident April. seen of March us. saw -- were is in we and Look, and in Anna. We thanks, Well, March that in February we

fact, confident of of In during our now. were call, confident earnings that that, we and last we're

terms cannulated launched be our But we've we've we which a been suite FEMUR adoption the to in system, day. ones of of very an growth expansion intramedullary cycle will any see been screw a And uptake that contributor the well screws I this profile. think screw has as in offering our given last of And on this is that continue. a in almost in to of cannulated instrumentation long improved drivers, that year. adopted been PNP sales, surgical the and very as satisfied quickly. was to The expect systems dramatic would is significant nail cannulated June are are of business, omnipresent continued since

of product PediFoot more far I require the we'll expect contribution a think But one? to on starting see very we're time Any significant, that would of because company's that materially of thoughts, be but think Fred, to Okay. in that PediFoot from the year. back fortunes we a will quick the although, period see that line. contribute X. will, half I other

Anna Nussbaum

you... do how then And

Mark Throdahl

we... do Operator, Anna?

Operator

line. her sorry, removed yes, was I'm being from sir, -- the she

Fred Hite

move we Can on? Okay.

Mark Throdahl

Yes.

Thank back, we could Let's you. comes could move on. perhaps you her -- question. And follow-up ask let her if Anna

Operator

Sure, sir.

Okay.

like line Here, again? we the Would her Ms. line you of have open Margaret. to me

Fred Hite

Yes.

Mark Throdahl

Yes. Yes. Yes.

Fred Hite

are back? you Anna,

Anna Nussbaum

on... just to I up wanted follow

Fred Hite

you and thought up. defended we hung you'd We

Anna Nussbaum

And for your to of those see leverage other some view in the we period? pipeline the we strong us conversions? you for remind year? the remainder benefits Where should for areas cadence of for of expectations gross the the margin of the can international the could How of some sustainability

Fred Hite

Great Yes. question.

than margin the saw dramatically mix. first So that's gross second the year, as higher a of quarter, driven the on last lot quarter and we

sales, domestic over quarter of the higher with overall sales as business, the XX%. was it percentage on margin the a first second in the that much quarter. the up side increases mix that gross of gross to So than And and margin domestic XX%

by that. very So encouraged we are

rate, Orthex that, margin primarily at domestic is, helps addition In additional domestic mix. to we've now higher again, that which gross -- which the overall added business,

strong the particularly our down another quarter to margin fall quarter margin year. our gross that sales lower, of sales the And third year, when side, in fourth quarter, have the the of which on gross the are because domestic similar is So of mix again then our highest last business. will then will

very that. margin, to is conversion well. additional that going your as have that gross forward, of will so Orthex question, or for far countries margin growth as drivers a our we're help excited impact agency to about positive model distributors into your and second of additional us As point going then gross And

year. the -- conversion -- We very Belgium excited this the have about Holland and earlier Netherlands

have new We headquarters. a

new we going of a director, XXXX. one have we're And soon. the will confident a help second XXXX, in that And half who's up importantly, in place, starting that to year. takes other margin very see conversion be margin there of We will more half gross least at but of our our that gross when little conversion all second next the bit for

Operator

from Your next question Ryan from comes of the line BTIG. Zimmerman

Samuel Brodovsky

Ryan. for actually Sam It's on

dynamic any impacting large how set out? scoliosis then your a And the going updates between to deployed deployment such And about what are you get think & dispersion you're little of a sets Deformity half? the for should on sets? revenue back sets we into that bit. have Do wanted the and seeing seeing back you newly just any ratio So Trauma

Fred Hite

as all rate confident immediately. to does that's -- with very sets But then, that sets we're we significant IPO, rate. the Sam. expected for high Yes. from as the and that utilization since It deployed. deliver full IPO always being every sets, be. since on utilization to hear range That the the we've XX Good XX revenue -- it anywhere from Great at we're in return we've we not all of question, launches very that of happen months to increased expect said to $X which you. into utilization takes those of The since and that is that and the pleased are get that to deployed getting those dollar those

it'll sets getting to XX deployed here really in of XX that sets. those season, take full were utilization first months the up to in get to all So summer the benefit half, selling some the we're but the

in of us that the expect fully definitely dollar mix every standard true, deployment we're and lower, & are for combination sets is little that lower. dollar the utilization of set is little is gets revenue is But very and have of & expectation. trauma Deformity a industry. we're & seeing, Deformity that versus The As the traditionally return, The and which Trauma the the those again, business which to a higher far our to And Deformity, as scoliosis a Trauma scoliosis deployed. with we continue. pleased what

Samuel Brodovsky

system with characterize kind or scoliosis it being Great. summer to portfolio? small-stature has new surgeons interact it'll first be you increasing a out. it season convert to of to your be launch how has surgeons being sales going? whether surgeons, Can then to more been percentage turning that able of with greater And broader how And the been force the able the

Mark Throdahl

business converting ended. in terms uptake, it the but a of to been as enabled has just Thanks, very Sam. OrthoPediatrics. a -- quarter to by first said, a a half, very in normal-sized certainly the I a its to was he'll that for consider it legitimate actually both fact, Well, it small-stature surgeon And and significant spine has wait and successful a complete we to in system think without us of contributor objection a that remove offering throughout the system, have

has offerings. system a become to us is is level, it small-stature one that the could our offering goal from relevant our think And say So could relevant. I made through that simply XX,XXX one surgeons has potential. And that more always foot unlocked more product to say

Operator

of comes Matson Mike question the from next line Needham. from Your

David Saxon

David on for is Mike. This actually

to on their expect a surgeons of quick high-volume be returning one First, X do questions. follow-up just When practice? Kevin's those to you

Mark Throdahl

a be -- that end come will We the of over to have that I take when don't expect has see the Fred's on occurring they back would I that into and they though, don't entered would terms guidance, calculus would so, I'd in and of that. that, impact this half have say, have we not of year. then or year any by come specific next the back.

David Saxon

then for it about more to profile any about Or do is the initiatives can the then And it adding secondarily, sales there experienced reps? average reps? Are with like these rep can up is just proportionally -- you hires? Okay. sales. drive new your looks Are productivity? your so talk you rep about just And

Mark Throdahl

Yes. is thing think Training Clinical That's VP a ran have very formally interesting guy question. Education. creating and hired can field productive, Well, Institute. of people educator, to a here mind, He X of that with an the mind, the my month Sales dynamite regard comes more we who in trained of that top he our where already a the to This in making we absolutely us classroom is I the them he's proposing both with is is in number learning a and can improvements been training more dynamic learn environment make in in the and sessions. a Zimmer

So months the hopefully, a that a for required product large reduce such representing line. are sales feel that really X help comfortable to will representative XX historically new to

rep inexperienced our distributors, know companies, relatively been totally and we with reps thought some experienced we been there's clean are learned successful and habits hiring As both to company reps lot. they who pediatric see learn large are experienced bad the and because is coming sales to is some see distributors come the the that like different. so discover know Ironically, and & our Biomets, the quickly who they sales where zeal not not orthopedics have Nephew have a it who nothing understood of expectation many a cases or from that or they they sheet in interesting profile, has it nothing, Zimmer who people a new Smith

to that people answer participate linked denominator by in of is do array you wide for think comment? and a say that we question, these a foremost and is of attitude. who it common that's So hiring decisions, are want to but attitude a very to us I perhaps first broad because Fred, your the of do many thing truthful look

Fred Hite

Yes.

would cash caliber there questions long to hire would level sales lot sustain long had The to maintain we given I these to out IPO, of over I say are for were a exciting an this? the reps there other to we I say of Did dramatically. of this we IPO, has us looking who that to increased Prior funds thing to about And of people be many and of to the us confidence going think, and a last. the but lot how is it's to have that going come a was of IPO, the place to since are heard enough we the time since come join around it's, growth be. that have the

energized but encouraging with much which we've that And typically excited so since been very, the so to about second individual is quarter, IPO, in will and see. business a not just very is more the profile, the experienced them, bring which highly some

David Saxon

Great. adult the divestiture complications a any That's potential Any helpful. me. timing products from of idea And then unwinding perspective? and the Vilex for any on distributor last one of the from

Mark Throdahl

be formerly small a a who foot of done in obviously, that into think adult and delicate business I of foot company. side fourth we unwinding of executive, brought to CEO confident distributors, ankle was have adult but experienced a it's will a we're this the Well, bit with situation, the quarter. ankle And and the regard very

as has in and this a I stabilizing divide in product he, of wonderful invisible unwind so surgeon way think, us the to both as And adult line goal. appropriate job distributors a counseling way the well the is the customers, that Vilex which thing done to is for to

Operator

from from Your question Capital. line Mr. John the City Braatz Kansas next comes of

Jonathan Braatz

coverage do reps last to take to And number of is Mark, get to to a number? of And it do are would what how and geographically number necessary wise? think the -- get that you of Sort level? full question, think what as you product follow-up distributors the that long

Mark Throdahl

the outcome of ensure cases sticklers best, we a case impossible surgical when has see and to many rep systems. possible, we opportunity million generating is much to real of are excess find attend John, on And a he begins that the are patient selling of all of I of other is it's that our that is goes one territory cases as or to $X all a required. given not only that well to the think excess the attend we that also, in million, $X as want much but Well, it of things in the

are augmenting So continue roughly to always that a that of the and even scoliosis, increase selling we the that We've product that in focus not is distributors in something of indefinitely. being area. the our growth, through the however, would us number that that for to achieve an opportunities areas, see but horizon in by the That option. much, pace there permanent continuing there particularly revenue by track greater organization done and now would of is said, certain case, will have planning specialists be that we

of And organization so may further selling manner. it specialized the and well size that focused the in more but be that, increase would a

Jonathan Braatz

Fred, did you quarter recognize Orthex? maybe And it, from any recognize did I the you and missed in Okay. amortization -- charges

Fred Hite

Yes. Yes, we did.

did have of balance we in through month the and Xth intangibles, June that have, for Separately, has which XXth, on increased the we stuff an had the on asset we an So intangibles. put amortization the sheet. But for to sheet the in those that's does the have goodwill. balance sell all ready opening held Orthex, it Vilex we

Jonathan Braatz

you how Did much? disclose

Fred Hite

No.

what you a We off I'll I have the that up not how disclosed and is, head, actually, give but my look it call back. much. And don't know number of top

Operator

conference questions am I Throdahl. to no would the to back like turn showing now this Mark at time. I further Mr.

Mark Throdahl

Operator. you, Thank

execution So multiple enhance our in continue This see to systematic summary, continue multidimensional I to to strengthen think value. growth will market position. we It will shareholder continue initiatives. across growth

day. a good improving in lives to with conditions. and interest And your you lot, well our company our like Thanks children as the a have so orthopedic for cause of I'd of as thank

Operator

This you, concludes and Thank OrthoPediatrics Earnings QX Call. day. have Conference great Corp. XXXX a

OrthoPediatrics (KIDS) 10 Aug 192019 Q2 Earnings call transcript