KIDS - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Quarter Four and Full Year of 2019 OrthoPediatrics Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to conference like speaker to now Ms. today, would hand over the your I Ruth Group. from Bui Tram Thank you. Please ahead. go

Tram Bui

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

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

Before Act statements made conference management comments listeners of by Safe meaning the Private I'd of of we Litigation include laws, during the forward-looking Harbor including like the begin, will caution that to call XXXX. within this Reform federal Securities securities provisions

and uncertainties and company's risks material involve statements forward-looking may results materially. the differ These actual

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

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

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

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

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

Mark Throdahl

on for quarter you thank earnings full-year fourth And our conference and call. everyone. joining us XXXX morning, today Good

year strong with a results We as our our finish public full second fourth a quarter are XXXX, company. which very was to drove that pleased

to orthopedics. our growth company generated clear continued distance pediatric in Systematic another record and execution of leader initiatives the the performance, integrated as

our education, development, of a after sales to set conversion include will review force initiatives, provide Fred investments, which distributors I'll culture. growth these product This of open clinical offering, international and which review, expansion questions. we'll sales the call morning, to domestic financial then stocking acquisitions, agencies,

We significant million, XXXX sales as consecutive represents XX% year our annual industry-leading to of performance by build growth evidenced our continued revenue momentum which growth. exceeding in to $XX.X XXth XX%

performance More helping importantly, in this results children XXXX. from XX,XXX

Medicine/Other reported quarter, with the During revenue XX% strength Scoliosis Trauma our resulting total in quarter. XX%, we in growing business, growth Sports fourth and growing entire across growing XX% Deformity XX%, and the

part new sets driven $XX.X and revenue during that launching XXXX impact of on in a will year significantly This robust deploying by was greater million growth in beyond. the seven increase surgical and systems have

for also which million. addressable external proved to our with the entry acquisition pivotal OrthoPediatrics expands be XXXX our fixation, and into a Orthex $XXX by market of year

in performance XXXX, and produced increases or sales improved expense increased competitive not which full-year which the unplanned strong XXXX the strengthened was by regulatory, to position. XX% in our at adjusted have million for Our the $X.X and which margin, quality of significant despite gross EBITDA

growth, line top also objective. bottom as secondary of goal line while a primary the improving pursue to continues steadily company The the

the the of from As capital same supported XX% leverage in market, at by XXX raise the we with portfolio the period look ahead strengthened on we believe sales sheet quarter, that XXXX. fourth of up impact the end OrthoPediatrics to from the domestic December, in the balance the XXXX, consultants of a the product successful force pediatric can orthopedic strongest

our execute revenue to that initiatives at confident supports grow sales full-year projections. XX%. to XX% growth on will guidance a on XXXX performance pace organization continues our to our support Based we sales are to in XXXX, domestic The we continue of our

are we launches. in the sets million recent that growth beginning investing product sufficient believe efficient rollout revenue deploying full while increasingly systems, to XXXX from capital $XX million consigned also in will of $XX to because We also be realize

highlight an introductions, bringing aggressive seven execution Throughout offering of integrated the products. the our cadence new Let with maintained me systems, progress with of now on total surgical XX these growth product we starting product to XXXX, systems. initiatives, new

further a we was broadest medical this result December introduction filler products of of in QuickPack line pediatric we're market, As orthopedic substitute the partnership The pleased with of bone syringe recent domestic bone biomaterials. void new committed synthetic dual mixing US developing a on and with the bone to expand in the the manufacturing technology synthetic a launch graft company of Graftys, XXXX.

bone system delivery efficient and its and oncology per increases closes line, in remote product QuickPack when used OP our surgeries. defects and commonly with conjunction works fill gap and systems, a surgical revenue to product cavities other in This case. trauma seen in significant

angle CoorsTek In from in addition treat star initiated to the locking year. system we technology, pediatric-specific system the the deformities This domestic the to first of variable earlier QuickPack, incorporates the November, licensed we screw launch PediFoot, feet. in lock, of

the with system flat foot we of that sophisticated initial anatomic Based cavus line More club The process. in specifically, slide the system innovative designed during opening lateral an and wedge is and the movement to of and column screws foot, foot, feedback, product expanded greater addressing correction smallest and valgus in osteotomies, hallux to flexibly offers product effectiveness closing instrumentation this lengthening, provides calcaneal our forward focus osteotomies plates deformities. bones in on the and XXXX. rollout positive foot this procedures, look on arthrodesis follows

the Similar the production up with In launched two efficiency pleased we and PediFoot, time room. in cannulated very are adoption demand. improve will that increasing meet screw ramp initial September, we the to systems to in reduce US and operating

scoliosis to and extension, XXXX, In launch a DUO also line global feedback the we initiated of major February excellent continues growing utilization. BandLoc that receive

early longer-term scoliosis advanced a tethering a are onset for projects, scoliosis We spinal growing system. rod and non-fusion which and our

further from a different its an We're adult develop spine the version development. licensed confident we're we its a we substantial a second generation the progress also current not pleased chosen is can with from had on rod device made novel company This use. on enhance that the scoliosis and technology and we growing that to support market, have pediatric

We States our in to and slipped of also system. anticipate system will launch in epiphysis United We the the RESPONSE the first capital femoral the FDA submitted products of completed neuromuscular both development half XXXX.

this This the year, system on also an domestically launch Osteogenesis for issues will surgery. many to the product use Imperfecta we primary plan associated the address currently with market in that

implants to Vilex that We launch also several system. our plan PediFoot in acquisition acquired expand the additional

a correction technology with and to in which from trauma Turning to that XX% click to up Vilex, expands revolutionary external million acquisition major June our opens The this opportunity. XX% acquire purpose novel new first software and fixation point Orthex, and was made market market this of a we XXXX. $XXX the deformity transaction our reach of was

product our account integration force. line This with our outside innovative transaction which treat will this that new surgeon correction sales deformity multiple base initial and pleased of pediatric Deformity closed of children conviction expanded the focused the this validate and approvals, to product pediatric external specialists of hospitals. gap Trauma offering in our hands with our and our technology thrive biggest who extremely We're in fixation

$XX run the process will an non-executive sale highest December. members. used Squadron down Squadron, acquisition, by more Capital by the dedicated we fulfilled to this million Vilex committee to of our of for submitted in Vilex assets after selling remain the a adult Fred of with reiterated pediatrics We to independent When this we bid provided in intention Squadron facility year-end. was detail. Proceeds describe board by our were the announced by pay to debt solely which commitment

time, and The primary our pediatric as accounts. differentiated novel combined discussions us provider initiate with for of first This building their of the brand attention pediatric broad and and deformity indicates Orthex considerable line the recognition products and becoming launched all gaining XXXX, OrthoPediatrics has, hospital new with source systems progress since in we are choice. existing about the new enabled products trauma IPO both the orthopedic from of to centers technology, have major

early a training external proceeding in stages. perspective, as and expected. conversions however, account our The penetration fixation as market From sales had process its broader we remains well are

technology This and training time. takes is complex a

we sell market a and and in second forward sets. formally the and third to However, our to deployment in have a US more Orthex continued addressable product fund qualified look specialist We been and of expand more Brazil. reps added have we rapid the additional as growth

Which brings me to another growth initiative – set deployments.

demonstrated an increase included strong the surgical million commitment $X.X year, XX% quarter. our our to full-year for During the fourth $XX compared solutions This million sets, the to of we deployed million consigning to children's in by superior XXXX. of access $XX.X increasing

XXXX. target set of our to meet We demand ability for beyond the million full-year are to with investments million $XX our $XX and pleased make increasing

set on And monitor million. will anticipate to and optimal to drive continue $XX We the set and deployments in return every between be each utilization. XXXX deployed $XX million we

previous previously systems and cannulated will As launched as our nailing such XXXX, in as of new screw as the majority two systems, FEMUR as such this products, well be capital focused PediFoot, platform on QuickPack. a system recently mentioned, investment pediatric other efficient launched Orthex

units, To of represents support quality the our and majority manufacturer, product contract in this the the our increased double which stock Warsaw size planning OP's located our minutes are portion volume a size we our warehouse late highest supply significant supplier. again of implant of XX XXXX. set in deployments lines of from consolidated hands the of in to business We doubled and and headquarters. to responsive our vast its XXXX is of X,XXX the most keeping growth

prototypes new product prototype rapid on a established also thus We in significantly lead development. used reducing times cell,

domestic agency we our Belgium Turning week. model to and the implemented during and in this and earlier our Italy Netherlands XXXX in international sales sales organizations,

in sell and be at margin. agencies, countries us full which hospital to we the gross to enables sales directly converted prices We pleased continue to growth to have distributors with end stocking where customers

total countries one XXXX, bringing expanded we in serviced US, of to stocking eight sales this outside Furthermore, at us distributor and we a the stocking XX time. agencies as to distributors added XX international

to new Netherlands. entity first director, implemented established senior European relationships, headquartered in logistics accounting year, pan-European we transferred the managing created as introduced systems capabilities. European our During legal We banking trusted a and the a executive serve

or Also new MDSAP, Requirements, a Medical Device challenge as EU related to Single the Medical addressed by requirements unbudgeted challenge significant Device well our European regulatory MDR. new required we Program, as full-time a of increase operations, Union consulting This the professionals posed affairs major and by Audit international fees. in or

somewhat is personnel should base, expense cost now the our consulting part of G&A expenses moderate in XXXX. While

growth that investment are time the are international We capabilities will support this European our sold aggressive a once at when hundreds and confident regulatory of in their products many dropping in companies quality Union.

the building increased XXX XX%. to the In international personnel, we selling size domestic our infrastructure, increase addition to an XXX from of organization muscle sales of

on US company's organizations the for in partners keep growing pace line. distributor product scaling to our with their with strategies the work to continue We appropriately

At we the end partners. of XXXX, domestic sales had XX

performance achieves actively these We that sales every to are partnerships a territory among businesses. our managing ensure balanced

management established now a Deformity, to on increasing of three while new regional on six. from sales We structure, focused sales the domestic our focused Trauma are and four exclusively six specialists are Three Scoliosis. executives exclusively

fundamental field of pediatric and approximately next of remains revenues allocate the education we entering generation business of orthopedics. training X% to dynamic Clinical to surgeons our our the

than This the more children field investment to cutting have helps and the the of orthopedics, It appropriate surgical and edge advances simply influencing advocates clinical us access enables world to of potential of on our pediatric users around care. better represents developments, stay products.

Spine the the of a of Society, only Palsy The Society. gold the Academy gold level Pediatric remains sponsor sponsor level the company the of a Diamond Medicine, International diamond International Scoliosis sponsor American Symposium, of sponsor Techniques, platinum European Meeting Pediatric Orthopedic and of Cerebral of Double Developmental a Orthopedic and Advanced the sponsor level on the Research

third increased Limb Spine courses. In Orthopedic the Course. the the Children's Surgical fourth Pediatric conducted our and Akron sponsorship Baltimore Techniques resident the XXXX, annual we WEST Annual Deformity of PediOrtho We International prestigious course review and significantly Symposium,

full-year and surgical young also for leading provided funded scholarships pediatric at academic multiple promising We meetings to attend important to and we some surgeons fellowships fellows residents XX centers.

Clinical on clinical sales a of hired developing Sales novel we focus June, will past innovative Education. Training technologies. This This programs, some new and role VP utilizing training and

the of utilizing DocMatter now questions in and nearly orthopedic world. platform the surgeon Surgeons Our XX/X. has post X,XXX surgeons pose cases half community approximately followers, representing this can pediatric

technical experience. a year, meet frequent customer staff OP the initiated During to our number programs product of surgeon Warsaw include review the our visits enhance development initiatives. to to These programs with to we

initiatives. X.X sales of and also conducted several improvement responsiveness, triggered produced education surgeon of our on satisfaction products, continuous We first survey clinical an support programs, out and X.XX average which grade

remains asset, culture in when our suffered through at company's at M&A a success have our our the many orthopedic repeated and prospects. future the particularly foundation valuable Finally, of is companies time of activity. past our most wake Culture restructurings

and being are fourth companies Few less Indiana In which companies work in entails pulling companies this is of do, employees of to Indiana process XXX designated evident places one honor. this of emphasize culture best as year. we recognized for for than the a in as Chamber the at the by Commerce, thousands selection

recognize We'd employees partners success helped multiple performance. like and our that achieve XXXX us of in to dimensions in

With review me our over now call that, to let to turn the Fred? financial results. Fred

Fred Hite

Total in million XXXX $XX.X same for the compared to of million, in was quarter revenue fourth up Mark. XX% Thanks, the Great. XXXX. period $XX.X when

same last revenue. the XXXX $XX.X of US $XX.X increased revenue XX% XX% fourth the total of when million to compared in representing year, to million in period quarter

million, fourth last International XX% year, the XX% revenue to compared the million revenue. a $X.X same period in of representing increase, was $X.X in XXXX of total quarter

setting compared XX% in XXXX million, was revenue Total $XX.X a for to $XX.X million XXXX. record a increase

US a in XXXX revenue to $XX.X our compared XXXX, was representing million of XX% $XX.X revenue. XX% total increase, for million,

million, increase to XX% XX% for compared total a $XX.X International XXXX, XXXX was revenue. in representing revenue million of $XX.X

full-year increase Deformity deformity $XX.X XXXX, million, XXXX and $XX.X a in by was revenue deployed XXXX, quarter quarter introductions, $XX.X year increase Orthex compared to sets. category million by in product fourth and same compared in as $XX.X million and correction a particularly addition and Trauma the system, fourth our breakdown increase XXXX period Our XX% in in the last follows. was of million the new XX% hexapod the driven to revenue

increase same and $XX.X XXXX, combined of product continued $XX.X last adoption, sets. by compared the XX% to a fourth XXXX in in the with quarter period increase XX% to million million, million in revenue deployed Scoliosis customer $X.X in was compared our million acceptance, year, XXXX, increase $X.X driven in

representing $XXX,XXX sets. Medicine/Other XX% revenue Lastly, in XXXX, increase a XX% Medicine/Other same increase product was in an quarter to continued compared year. an last of fourth increase Sports acceptance deployed the in to same and was million, the Sports XXXX by XXXX in period driven $XXX,XXX, the compared revenue in million period $X.X $X.X

by all increased Nearly continued revenue of our driven volume. to unit be

the million million, last gross down to Moving in the income $XX.X the same period XX% for fourth quarter XXXX compared year. statement, $XX.X a profit was increase

XX% fourth an the XXXX. of Gross in margin was to of agency gross sales increased attributable to quarter as compared strong margin the in The fourth increase was XXXX XX% domestic quarter sales. margin, in increasing at as well international

$XX.X to was XXXX. XXXX an XX% increase to in margin XX% in profit of in XXXX compared was XX% Gross million million, $XX.X compared Gross in XXXX.

XX% full-year million additional expenses the and marketing million increase agency This increased sold fourth last $X.X $X.X XXXX. to $XX.X US, in driven in in markets in million and compared marketing to volumes the and million expenses. quarter Sales sales the in XXXX And commissions compared same year. to increased the marketing transitioned international associated model the XXXX that period increase have an $XX.X to the when being was to commissions XX% ongoing expenses we in and by unit paid when

expenses, General and and depreciation there in $X.X the expense, of of higher the in an and quarter expenses This administrative higher expenses XXXX. XX% quarter by million, the to driven XXXX quality of fourth $X.X and increase Orthex were million regulatory fourth was in not compared amortization the addition XXXX. increase

to external (sic) personnel, $XX.X primarily increase Full-year the to support resulting XXXX, our consultants, and $XX.X compared regulatory was industry, an an as addition placed were of acquisition. deployed prior G&A million of [XXXX] to resources, increase testing requirements in in increase the well depreciation as year. the XXXX and as million, XXXX XX% increase expenses the The aggressive well amortization, on in in sets as increased and and from the quality recent due

and addition period the support $X.X expenses quarter development $X.X development was to to to compared XX% launches, The XXXX million product to the in and fourth million of due and to the product XX% in million XXXX. last compared pipeline. in Research same of $X.X increased validation year, to increase future of in when $X.X our million increased

the Total when XX% XX% an operating an XXXX million, $XX.X the operating when expenses fourth Total million, in increase $XX.X compared were to expenses in $XX.X increase quarter million were XXXX in fourth to quarter of of compared $XX.X of million XXXX. in XXXX.

in loss XXXX loss full-year XXXX. And $X.X Operating the $X.X XXXX. a million the quarter million compared fourth a million was loss million $X.X of fourth of of was XXXX in of compared quarter $X.X a in to loss the to of

was negative million for the the of for fourth $X.X Adjusted EBITDA from $X.X primarily compared The in XXXX negative full associated XXXX. the of million margin. a improvement a was XXXX and Adjusted XXXX. million negative revenue of driven $X.X for a to year million, fourth a $X.X was for quarter of full EBITDA negative year change the by increase an the quarter gross

to in year, expense in off associated the discuss compared we end last interest fourth increase same to paid due in for million expense more XXXX period The million interest for at to will with and support $X.X the detail. $X.X fully the for was was was million quarter which Orthex year I to $X.X financing million XXXX of Interest acquisition, and the XXXX. $X.X of the compared our

year. last per was same $X.XX compared to and including the basic quarter for last Net period the loss or of $X.X basic diluted loss same discontinued to Total loss for quarter a fourth share operations of $X.X $X.X attributable compared million the stockholders in and from $X.X million loss net to XXXX fourth common per continuing million operations the year. $X.XX XXXX for period or was of million a share net diluted

million from to Total basic per compared or was $X.XX XXXX per XXXX. million operations in discontinued net common to and operations in was loss in stockholders of $XX.X million loss $XX.X attributable XXXX. $X.XX $XX.X loss XXXX share including or million continuing compared in to share Net $XX.X a diluted

Turning balance to our sheet.

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

December, approximately As $XX commissions from net expenses. offering a we raised in deducting, and reminder, discounts, after million in public offering underwriting proceeds secondary our

the mentioned, of to all sale Also, end at the related previously completed of product as substantially we adult the XXXX. the Mark of offering of Vilex assets

term by we amount license, As the the Squadron and Orthex Capital billion. $XX Vilex consideration reduced to our for was business adult B the under owed payable adult note

$X term full with repaid all outstanding remaining revolving plus principal funds million of the We credit in our accrued facility. our under interest, the received note, from

As revolving of the the XX, net XXXX, million million, total was include credit which $X.X December debt $XX.X facility. under outstanding does

I technology the This allow to of unearned arrangement sheet the products new exclusive of sell revenue. Orthex the the new line accounts. a also to the to the using highlight of non-pediatric balance license to consists owner wanted on deferred called portion ability Vilex

revenue royalty of This will on deferred agreement, time. be income effectively term across basis revenue a the proportional the recognized and recognizing over

million went of price $XX purchase the total assets the The against million Vilex remaining sold. $XX.X

in the during million deployment same XXXX. last and $XX.X was consigned investment compared This fourth cases was $X.X year product-specific million period to equipment the reflects million of XXXX quarter to of trays. in includes XXXX $XX,XXX net sets, of a negative change the and and The property purchases compared $X.X which instruments for as and in

XXXX. fourth during to million of compared million XXXX quarter fourth quarter $X.X deployed implants, sets the the the $X.X of were Including consigned of during

a of increase mentioned, over annual historical substantial drivers. one this IPO As and key our deployment growth prior is to the our Mark

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

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

think see $X we While it's result launches guidance, increase mentioning set depreciation/amortization acquisition-related our don't XXXX worth in EPS of provide estimated million to in aggressive an a expect do as and we I intangibles.

XXXX. mention increase compensation to the stock $X of third like vesting also our cliff million three-year restricted stock, which will by year I'd in approximately restricted non-cash

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

Mark Throdahl

of summarize, ago. To systematic performance execution initiatives, initiated Fred. growth driven multiple Thanks, which we XXXX of was our by many in years

the And we and promise businesses guidance All strong supports revenue of of future our XX%. our XX% XXXX believe three diversified reported consistent growth. that base of performance to holds revenue

ongoing in products $XX appreciate gives legacy acquisition to both sets We consigned capital us support raise helped support the of and flexibility of $XX million close new further the the and of and that in our to company million growth, technologies. including financial that and XXXX new the development million $XX recent investment shareholders

allowed XXX,XXX our us But most is we highly and of surgeries over our lives unusual the exclusive our relationships deep is focus inception. a for of This with a company and to that are on change offering the size since surgeons. importantly, our has of orthopedic pleased our children pediatric product of volume testament to strength orthopedics pediatric

advancing while We also of we look increasing shareholder continuing forward drive orthopedics, to value. the field pediatric

that, to I'm with up joined do three the we'll answer them. Executive our us President, our Bailey, open And between sure has And Vice call David to this we'll questions. the best morning. us, of

Operator

Instructions]. you. [Operator Thank

is Our ahead, Stifel. from Wise first please. question Rick of Go

Rick Wise

question. morning for the fantastic Thank to you Good both. you

start Remind all for have help me about And how the through the it outlook and that. supply issues your results with about the high-level brilliant ahead, on that you be sorry just procedures? outstanding your year might Let separately, are exposure. and us starting would manufacturing, thoughts on the any coronavirus the – situation there? I the on Italy, Again, if on potential just concerns could you but situation, start COVID-XX to China off, after there, think – us or for Asia-Pac push apologize on hear chain, to thinking into direct good the

Mark Throdahl

Absolutely, Rick.

Let at a stab this. me take

not first guess, we any sell China. do all, of I products in So,

we're today revenue this of $XX transaction. transaction. from maybe And do I on. So, $X of Obviously, without Japan. that would or we million the the completed that's We with X% Italy and Italy just less comes statement. that the say that million than excited or going our first very would about

which remaining related delayed. be surgeries, obviously is and and would not of majority is coming from million be this the is The very volume, deformity trauma think can correction dollars deferrable. I small really

been we have probably very, around chain, on That and If get comes were as products our they now from we less has again. the last do products look small They supplier X% that we are completed China. week, SKUs shutdown. of two-week than one very of shipping It's from supply China. a

that to a on minimal us. have zero will So, impact think we

are one eye it pointing about we to an related The changed thing weeks. while by currency they be eight keeping in this, The currency is on Brazil possibility. not are fluctuations. the might all to last XX% has And this as one

that. And we would delays so, very see I eye small an – Europe, in we're our overall but see revenue. say keeping on we haven't other portion Italy may we in in it's And but some maybe a yet, very, of may and then, places surgeries

I day It's now. don't by as in think of several early the it's developing as today, happens impacted obviously the We right business it's next days at we'll of all day. months. see feel So, what but

Rick Wise

the answer. thorough for Thanks

a level guidance, growth years. in yet few XXXX the XX%. very impressive and growth reflect stepping outlook growth XX%, step just help base maybe of the and fact on high past outlook that you're sort to XX% the revenue to keeps XX% revenue to at larger, getting But XXXX the first, again, us, to Turning versus up up your the

step people, as about I new extra sort So, that business the Mark in guidance. you the potentially you wonderful confidence or And products, or at factors/elements XXXX? Clearly, of you we but of give you growth? what your Fred, can the record end high gives think outperformance, more contemplate track heard that could given confidence be what your clearly, talk factors consistent that better up do than

Mark Throdahl

we have success when of on look look is here forward. the we and a not tremendous the that is when so that fact company strings in last growth we infrastructure, time as at and Orthex going as And potential that the growth theoretical well headwinds late products begun of sales faces which any Well, regulatory Rick, at when in infrastructure finally, I in it we dropping think companies were really concerns many the capabilities that to take might year, new any seven the that of I we a year those that many both even internationally, company internally, introduced at guess as think when businesses face. surgical whole, my the are – contribute. look systems rate at trump would are quality far, have outstripping But

Fred Hite

Orthex the Yeah, then, a obviously, I first on be year. sorry, And agree. all particularly Absolutely couple the going it product incremental revenue. the add add, two the it's me just just – because comments in the Rick, side two let to particularly of last And side. quarters, anniversary quarters would second important is on Orthex in we'll having

we've I So, made XXXX, XX%. investment confidence sets, force domestic I us in investments international people, a feel think, also just And in to factor. the sets those significant that's we've gives not our growing XX% that the significant like but us increase done, the combined, and in the think, that to in we've done enable sales agencies in XXXX and XXXX,

Rick Wise

meaningful not total isn't. was forward? language out of something In line last pediatric Orthex from about we getting one your and fact, of should quick products. how march a call this statement. impact you. if Mark, Is accounts pediatric think we how question. reframe and you, the know just heard accounts existing and primary And accounts paying Obviously, Thank be all attention because that's And what don't it's to products. on product are – your primary time about source Please of It's But do Thanks. it all the that and me. I all you? one tracking of the I've the be you're asking many if from the specifically to? new from right source your a attention first

Mark Throdahl

them. two can few in of I where moment. or more one from that encouraging is there seeing in to think this the is being us What will at our are Yeah, in source. of the with collect discussions and pediatric significant engaged very remain revenues more grow. the me, to are we centers very States equity only the image, And primary largest and United accounts this as our about a in brand several position however, of continues that mass rolling ball we're now increase

I need that account about hesitate – you where would would sort gets think start know. we we Fred we of by of we because, more blanch course, penguins would you than said into us if telling are revealing account to that

Rick Wise

enough. thanks. Never But

Rick Wise

Thanks, Wonderful as questions Rick. always.

Operator

next of Piper Matt is Jaffray. you. question The Thank from O'Brien

question, Your please.

Drew Stafford

over the Matt. the I question. of morning. to Drew for of business. what of significantly volume Good Are guess history? of then, the guys. it's type dabblers And wanted talk kind on couple Hi, you in pretty new you taking changed or start for early these out, attracting? progression company's high guess days years. to are Thank This surgeons grown from that spine has is I last I Obviously, the the just about users?

Mark Throdahl

answer Why to don't question? that Dave we ask

David Bailey

great a Dave that's question. It's Bailey. Drew,

scoli scoliosis, I those major unmet And our starting it's such for of credibility seeing business scoliosis XX those expansion procedures by obviously, I development the customers to as of very centers increasing commitment say, do, as technologies well also of a in customers. in but these think those seriously unique true taken growing that, to scoliosis some needs onset of States. driving those just what The novel, than scoliosis. our year, customers user we the believe less is our technologies be and spine early as United and we're spine number the as both our base perpetual business let's a with and much across think an of of grows, dabblers, who the a our more

those think of I are with across factors our the spectrum and our usage. customers image credibility So, improving

Drew Stafford

then, on And This beat is the you the I year again. every year, outlook bucks your $XX guidance at pretty a for being you. you're set and midpoint. million expect once guiding the thank to it, you're with target conservative there out put Got deployment and

yet? constraining to you. you are are of growth that getting a where the business So, question in the feel I the Thank in sets way field to long any guess point not the you're still Or from that way? you the is, starting point is

Mark Throdahl

that emphasize money There Orthex that than much we of capital trying point. of the now tremendous will is from is this plates, in we're most to which still beginning we're legacy to our demand are the a think more sets exception tremendous deployment sets efficient sets. more The still than and I remains way for long back sets. message But earner, even a what capital are Pedi be capital of efficient QuickPack possible efficient with more Orthex.

answer to And investment Fred question. we million as to traction get can $XX grosso it a stretch able and more a so, be that enormous might though, provide, modo precise from the result.

Fred Hite

that's yes, demand Mark. XX% trying we're to In we costs set in sets and Mark's surgery think, there right, I XXXX. and deployment like sets tremendous measured, point, And $XX,XXX those is in tremendous XXXX, XX% and the set $XX,XXX at there increased XXXX revenue XXXX, more Yeah, by that our a we're midpoint. be is I think to exactly efficient more In over it. for that example, for Orthex increase $XX,XXX. projecting an on we'll a get we dollars about we to feel for out get

$XX,XXX $XXX,XXX. and get our per costs set business, Scoliosis surgery Our we about

very capital very, that we're also pleased system. Orthex, that of with not the technology, but So, product only efficiency

Drew Stafford

Very helpful. you. Thank

Fred Hite

you, Thank Drew.

Operator

right. All

Go Zimmerman please. of question BTIG. is from next Ryan Our ahead

Ryan Zimmerman

progress, Thank follow-up with questions some some Congrats earlier. you. earlier, on great the his of to taking Thanks Rick's questions. questions Want guys. all for your on guidance, start of

for Just and that you Orthex, the of we the have on inorganic the seasonality have going in some of typically the seasonality a the couple pediatric you cadence summer. dynamics guidance see on contribution patients of between, with year, certainly,

comment growth and for out. how kind maybe you playing the kind of you on just year see so, cadence the that of can of And

Mark Throdahl

is the being said, we third growth earlier going trying probably first the quarter point With quarter, was that is I we is the in think as in last quarter. the two quarters to to largest we'll pattern followed make the by see the that's higher we see that fourth the feel far the growth Yeah, the the that we the quarter slightly quarter pattern and and Absolutely. in be years same being as have than XXXX. the still five seen then the the first, and then our fourth in in business third second

Ryan Zimmerman

but if a maybe me certainly of I maybe where not terms you but indulge disclosing in are And specifically, like training And on seeing force, we helpful. Okay, the ability we the you're and of know for the minute seen yet Orthex you impact of are a it's where on your Orthex growth its bit of over out then, the at to kind in terms the feel of commented to Orthex, in still here, XXXX little from on field. sales maybe you really sales train and it contribution? seen legacy we you [indiscernible] could or that's a once haven't force position there the do sales force that's balance get on Orthex do be the and are

Mark Throdahl

are new with impact seeing accounts of we Orthex, new Actually, users. the

while legacy actually. steady supporting been business the it has not is this so, there, And growth, is but the very

rep So, this user, a story. sales product selling new kind of is the new

Fred Hite

bought new. that handful it a add also It business it, adult maybe a didn't they were ankle brand on market. and have and they of had is users I'd channel three the this When years product we foot maybe really because, market. to was again,

to but And early sales this for of for only stages the so, us we not XXXX, thing as really five in exciting in it's the years force. the the very very continue increase we're training next and

David Bailey

new interest of and the think, I with Ryan, with also platform enhancement without this that last external sales and would overall this history technology pleased is One is Dave. is is devices. reps technology really what, driving I'm fixation thing from say seeing I our reps selling

of getting selling selling of more while organization. healthy, organization very fixation procedures our also in of to device And organic external technology through at because least initiatives, additions also hoping own training we're very with very our dimensional our with we're terms devices. we're this growing to much had these the complex much, three complex, competent So, experience expand sales historical our understanding have using that

Ryan Zimmerman

just then, you. I'll one and squeeze any in and a call out last spot is helpful. color. there one Thank And you is for Thank larger or all this as of kind orders? That's Are to quarter. just in goes very she bright orders steady that stock International that there hop back one-time queue. in

Mark Throdahl

stocky very replenishment to a we those in our and of in and than replenishments And agencies fourth a big us less were the regard We're forward it's less get mix steady overall see in to quarter much of and with say dependency the more question. think growth sales a that set sales sales. our reflected gross in we we we dependent agencies pleased would business. I have fourth on step for the on It Great focus margin the have in stock. is between the I of a point took that traditionally. And quarter.

Ryan Zimmerman

Thank you very much.

Mark Throdahl

Ryan. Thanks,

Operator

right. All

from Our Michael question please. is ahead Needham. next Go of Matson

David Saxon

and Yeah. David on Mike. questions. for It's the for Hi, Fred. Mark Thanks taking

sales So, the first on one just the force.

grown You've sales the force significantly. pretty

thinking are is then about how kind of of sort expansion. with also, growth revenue hiring? So, that you round line force of And rate tracking sales of managing in the

little reps that a quicker? and get any place in to you curve have So, newer up productivity of drive initiatives kind

Mark Throdahl

more and It's is people. years the naturally. sales you're Well, spontaneously. it the case has of of particular simply not force or this setting been that the targets quite couple that that last in less and growth We're observing evolving thing revenues has for occurred the right way mirrored

mode I it's a simply some in large to commission leveraging way, because in investment about in on they of think that sales we leverage. remain are not worrying as We It's occurring. not driving for sales not that investment and our the pay our force efficiency P&L. part

think very being then balanced focus Three on focusing employees or three specialize. and sales that even increased and sales of than to thought. States of focused and of I United having partners attempted significant and this from Trauma our had four who the number a six better all key just a actually focusing to in of applied that's in Trauma that pressure only turning that would just among on working rather is terms occurred the than spine thing have on are And is performance in impact the the to I our field only Deformity. on our Deformity managers our Scoliosis own is sales we have and on businesses, them

David Saxon

Great. that this margin, it a mix. was improvement some That's geographic then, of lot and saw helpful. sounds gross it like on strong And the pretty year

the you some to think Going improvement of and in some sales XXXX? Thanks. have international into distributors new agencies. then converting launches How product XXXX, we should

Mark Throdahl

Absolutely, David.

and not it will fourth future, size to going grow We'll probably year. the the that what will but in we're overall say looking range us we've would XX% very that we quarter for dramatically. a to slightly. yes, So, change It's our pleased XXXX. with particularly saw, in transition that the in I in Italy today. be immediate tremendous not help be that

in So, growing we'll time, to range, that looking it over very be XX% keep but slightly.

David Saxon

much, guys. so Thanks Great.

Mark Throdahl

Thanks, David.

Operator

Our Go ahead JMP is David Securities. next question Turkaly of from please.

Daniel Stauder

Yeah, on good Dan for taking Thanks morning. questions. This the for actually Dave. is

in in than to we came sets, off, first going expected. back Just strongly XQ deployment had consigned

whether be then, looking sets sets? busier new it's summer investment the for curious the how far demand to for product meeting more out as And to just just field to to XXXX you if quarter, of as touch on getting launches? that as during the So, your led opportunistic what means could on or should XXXX, about no cadence a we Should Thanks. it prior the think months? similar just more

Mark Throdahl

Good And on Yeah. be much where in to question, as of pleased was product Danny. fourth The to cadence the you get similar have going the stuff very majority call. your that point, we The launches. out to with. are Great XXXX want is related new field the to that sets, of throughout we those our whatever quarter, period typically, selling of get in that the quarter well. to is the few reserved are time before kind first new And and then, assets a but and quarter fourth third product as second other summer the then. the season, for ahead quarter introductions get of to

Daniel Stauder

wanted to have all shoulder follow-up, sheet sheet, for at as the your areas about an acquisition, point for of changes know feel offering idea adequate heading to capacity then, sell? large but still balance do a some that could balance the there's and that talked you'd room portfolio, just And you Great. gaps you the to how Thanks. any this ask I view your you in to any want tuck-ins how but just into your XXXX, acquisitions. recent Obviously,

Fred Hite

question. great Yeah,

cash we operations, sheet, to December which support more balance do is some have our cash to on more the We're endeavor balance the in on sheet pleased put the very So, with sales. set great.

have As of usage imagine, credit to plenty some interest, million early to that use but million $XX of of cash we this you we still eliminate $X can line year some the save available.

of offerings us As are some definitely there's and We're on there assets fill portfolio. some we look would and internally out working faster gaps at general, filling some as that we help those in in still there those product the at acquisitions look gaps well.

– the only far several don't size, cash the but dramatic, years As was we If require as back have back that I if and enough obviously, go for know acquisition market. us in the would dramatic today next an We, we as the would to may we some here future. was come have be to what sit it the there could to thing be, market it cash. again

we're the particularly of marketplace in where at, some volatility about the now. good right really feel we So,

plenty continue you to have for books of to look we gaps. the cash as said, and on build those assets, product We

Daniel Stauder

Great. Thanks so much, guys.

Operator

is question Kaila from SunTrust. next Our Krum of

please. question Your

Kaila Krum

taking for on much and the progress fourth Thanks our so the in again guys. quarter. Hey, questions congrats

ones it you us. year. segments investments. On be as prior rate some guys quick at But So, color you'll to investing from you're lower growing of business the two what is gave a and than deployment, set in set

with additional Any Orthex areas just helpful. efficiencies behind would you us about to there can the investments business? other your of be relative set remind So, just color capital

David Bailey

of Orthex will launched – But that products is systems, were efficient. products we the love are legacy We example. in great And XXXX. launched new in focused more systems a just XXXX new product, sets on deploying is are be all sets the be of and disciplined to but Sure. the and utilization tremendous. in those technology asset that trying We're that more our

$XXX,XXX costs deployment. to to think – for the set with case maybe out scoliosis our maybe or set $XX,XXX a I I system, at builds $XX,XXX before Orthex compared $XX,XXX a $XX,XXX As $XX,XXX mentioned, and a surgery Orthex a for

a Trauma some utilization product the So, other we our Orthex Deformity have of lot systems. leverage, and of And better a some side the within our that others. lines, get than than we business lot just much even are more on more

period time the was It's to speed to still With metrics metric. confident that dollar that we very delay that at are in targeting feel feel forward. very said IPO, right XX-month deployed good being we about metric. but good for we're said, before revenue a we that metric every and a XX of dollar going running, all still and sets that of We up think the and are the it's about

Mark Throdahl

I efficiency. acquisitions, Orthex think any to like to make, have thing investment And we're box the in we also ticked. a will capital fact, concerned capital about the as company very have decisions trying future much efficiency that signal, Kayla, we are

that so, same revenue to treadmill on pace at to growth keep capital needing indefinitely. will deployments I a think to as the oblivion be us increase from And

Kaila Krum

sorry in profitability Just time great I'm we still as you, the then, view in if on think the any to the of color. That's give and should the you. you for and go-forward but your really there on you be quarters? missed puts how quarter. we this, Thank just And And helpful. Thank sort comments takes just EBITDA understand about Should I that nature? one more there? spending? of sort EBITDA want modeling thanks, That's coming guys. for items Fred, can – us sense

Fred Hite

Absolutely.

from quarter the the heavy EBITDA page MDSAP, the fourth of A tremendous. the not quality in called other on were and some validation. things the new along the from with the requirements. But, those see new adjusted requirements The last release are in requirements out regulatory really of really, MDR spending you adjustments. So, of in section lot new EU press here the that are can

heavy some in as we speed complying some make sure made those. in we said, And additional the fees, will expenses hard fourth saw, XXXX. We've tremendous adjusted there to consulting lot work more $X.X brought the quarter. a the And progress a that very million of were so, compared on in year. be XXXX. And the negative had – fees, that but on, got up in very We you loss validation as for additional we to Mark EBITDA staff fourth quarter to additional full some in those we're worked of $XXX,XXX loss to do

amount some continue, quarter. did but tremendous the get We feel of of in very made some we progress. out fourth we those way, a will the So, heavy of like

in increase $X try reach and to As is a to of going is to is continue at we business. challenging cliff in range. in definitely the as $X our in we year G&A sales third restricted mentioned million expense and increase our the the as vesting XXXX have XXXX in leverage more amortization continue the and It stock. XX% in and non-stock in more growing still of same earlier, have marketing XX%, XXXX our we're because, I going R&D side compared – that to going restricted to stock we look statement probably depreciation we to and and probably a million in confident the same range we're business

slower revenue. committed pace at we're said, still those with of that to having being segment grow that and a than the But leveraging business expenses the

Kaila Krum

guys. you, Thank Great.

Operator

Braatz next City Capital. Jon is from of question Our Kansas

please. question Your

Jon Braatz

morning, Good Mark, Fred.

Mark Throdahl

Jon. Hi,

Jon Braatz

to that maybe What pursuing to exclusive exclusive some arrangements that were really exclusive are the some to you're commentary, opportunities orthopedic some hospitals. arrangement? Mark, if of What – mentioned you in does equipment mean? your obtain the you be with provider

Mark Throdahl

several be it incremental revenue. the account million would a of dollars of At millions in large of dollars,

Jon Braatz

it something to would this of that ordinary? out the and hospital Is be do for a be unusual would

Mark Throdahl

No.

of to developed with accounts, were used very use these those pediatric MacGyvering available, systems primary years many by use bring for through ago, systems, In were supplier their the adult because their were ones only few these that procedures default instrument were fact, surgeons specifically. Synthes way as had ever to

are And number this because which quite tipping except fully reaching now all it's have over have point been out companies comparable of contracts developed patients. the a so, we line DePuy years is we for at that pediatric there are systematically product like still with legacy and a chipping Synthes away there

Jon Braatz

How quickly think that could could arrangement do achieved? be you something like an –

Mark Throdahl

world goes the in Everything hospital slowly.

now. or will be that of gradual and I that mentioned. are But we're There very at three two seeing accounts in that significant mind increases a expense it it's immediately to just thing. the encouraging pop revenue there So, the company see into we're beginning

Jon Braatz

All you Okay. Mark. Thank right, much. very

Mark Throdahl

Hey, thank you, Jon.

Operator

call would to ends That like I Q&A now the back to turn presenters. session. our our

Mark Throdahl

look for to forward on continued Well, on and I'd Thanks like to interest company progress. for posted thank you joining our today's again. the all keeping your in update you and us we

Operator

conference you attending. for This Thank call. all today's concludes

You may now disconnect.

OrthoPediatrics (KIDS) 5 Mar 202019 Q4 Earnings call transcript