KIDS - Earnings call transcript Q3 2020

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Operator

Welcome to the Quarter Three 2020 OrthoPediatrics Corporation Earnings Conference Call. My name is Holly, and I’ll be your conference operator today. After the speakers’ remarks, we will have a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Jan Medina. begin. may you Jan,

Jan Medina

Financial and from everyone Throdahl, the Hite, and Officer; Holly, Bailey, call. Chief joining With Fred Chief Officer Operating me Company Chief and thank you, David for President. you today’s Executive Officer; Thank are Mark

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

demand of report filed ability encourage related factors, impact most you may the the respond for a among others, Company’s recent and products quarterly the on to XX-Q, with I will pandemic the soon. risk and Form the the to discussion Commission to related Company’s Company’s COVID-XX, to the risks be Exchange challenges, such which the For on Securities review including have

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

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

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

Mark Throdahl

revenue our their third like by has tremendous Good you morning, for everyone, earnings I’d thank pose during particularly The including recognizing EBITDA. in been and record some recent challenges, XXXX quarter, begin continues but our OrthoPediatrics have quarter us to improved overseas pandemic today strong and of able times all during associates our excel effort, which results conference difficulty. unprecedented on the markets, the associates these produced call. to for joining to

and delivered remains then rates improved have will improved continued financial the an environment I margin, open results we’ll operating including comment business. progress adjusted a the decline. morning, on U.S. highly quarter, XX% in which quarter, recovery sales a up our October year-to-date has month growing and guidance May momentum monthly the overview positive we and since and the for accelerated over continued began to over in second Deformity on by geography begin line, domestic and Scoliosis are April’s into While then XX% third, October. with positive accelerating on detailed sales strong, have seen then to Fred We decline since confirm questions. XXXX. with during during domestic and was following quarter upward our we choppy an in U.S. previous and fourth tremendous achieved every line during and by the and improvement over although third accelerate turn the continued product acquisitions, increases growth sales, recent domestic procedure will seen that trajectory. EBITDA. clearly Scoliosis additional the U.S. I’ll -- total increasing The of our the I your recovery, XX% we sharp year-over-year the Moreover, and United seen total accelerate things continued the driving to thinking This a and consistent domestic basis third abroad. in call we review of and our in we discuss and This recent EBITDA the on in to quarter, quarter users for which sales produced States, Trauma and gross providing quarter. and the I’ll uncertain, our growth factors

whether predict another this country. concerned of be are elective we deferral surgeries in nationally COVID-XX and the by recent cases However, there spike cannot in will

solid slightly the growth, overseas As hospitals, final that of to pediatric continued domestic over concerns footing a to XXXX, many will we which continues There general consider performance. of also strong quarter a U.S. QX’s recovery lag be children in abroad remains remain surgery be cancellations, improved which occurs for on hospitals. cases. we COVID due minute the these treat high-degree believe we case The parental which over their of in may last bringing to Most

stocking distributors made to set purchases the procedures, we QX, QX. low our the have given Additionally, in in little expect and no same

Australia. relative and agency in declined while growth APAC performance by agency quarter historically. growth, gross the so profit localized part international part only X%, APAC year-over-year, countries, of sales sales strong This in While accounted XX% sales Despite have EMEA cases compared bright driven grew COVID grew third driven by elective Sales sales in international in X% XX% spots. impact agency for on performance were Overall, EMEA during was QX, surgeries. in helped seen and drive in XX% of recent far, QX. many strong we to half up

geography-by-geography, was are Company’s QX. which region disappointing in also recovery, America, sole U.S. the to notably addition In the more variable overseas lagging Latin in trends

we notwithstanding, our surgical committed region, we programs training challenges and society are to aggressive remain continuing Continued and support. the

growth growth Orthex sales Other & and compared all and in Screws, encouraging strong year. Moving recovery on to contributions total by were Medicine as with and RESPONSE to sales growth, correction Sports well. revenue sales XX%, increased growth with quarter. driven Partners. from by U.S. substantially reflecting elective X% of overall contributed grew deformity third domestic X, in Domestic very by prior for X%, increased Trauma XX% a as business. contribution as trauma driven & to Deformity well PNP Worldwide line Scoliosis signs Telos in sales surgery. FIREFLY users domestic sales the increase year-to-date Cannulated

to Turning acquisitions.

While highly after Company with management. small acquired regulatory March percentage into COVID-XX in remain in our clients. representing revenue won trends the We impact of medical a environment. sales, and expertise the multi-year which we contracts clinical Telos, technology bring sought And expertise is on Telos of to the state-of-the-art this pleased consulting trials with several new

grown force future arm’s clients sales their in of of It We is to supporting Orthex producing launched we extensive U.S. of confidentiality, an strong one which scale now enables systems, supplier XX% to IPO, ApiFix data Acquired benefited has with Australia, booking the internally where in we now recently its to handle gather our of approved increase be sales knowledge that our can is is deliver a agencies approved While credibility performing in another can Sales external new represents with cases the selective April, regulations complex the Mark clinical have seeing. anticipate revolutionary our a we thus the ApiFix European synergy growth fixation two hospitals. launching of Scoliosis on from of since manage how the continue in systems Director surgery. represents manner. Orthex of XX% and so already are hiring non-fusion are Orthex developed cases. line basis, Telos and first, in technology we demand we’re our preparation, XXXX, Europe between increasing first as assured clear is and years. choice and and have the franchise, users Orthex with strong number on actively Telos’ that surgical treated. the the acquisition, sure-footed was surgical pediatric a recently is to annually Orthex to length a in technologies over QX that acquisition CE XX% approach our Scoliosis anticipate OrthoPediatrics past

XX This to expand head-to-head spinal received technology in degrees for skeletally to from degrees other the use patients. the immature reminder, label degrees system approval to tethering, allows curves earlier As we compete non-fusion progressive this XX a with XX approved to XX only year, the previously. to ApiFix degrees FDA or

is ApiFix learning than surgery simpler much a tethering, However, spinal curve. a significant which with comes

on anticipate year. short been this having with a from surgery return high milestones or We XXXX. benefiting now in surgeries the Orthex, these XX of the various be from at sites unqualified are perspective, XX registry to in the case and dollar achieved sites but seven sites significant received and conduct OrthoPediatrics. sales ApiFix of inventory. approved time approved capital of early we its very The Company, been at Of approval occurred have revenue anticipate now IRB with both year-end is by four system date, To phases next set success. have U.S. As fully an we IRB each fully approvals. sites, material for changing anticipate has in contribution per has ApiFix balance that will Nine IRB the not

to very less. Surgeons for ApiFix. short completed Correction to a range sites The patients, hours are the times. be and achieve XX or simpler responding will the hours well times. are which stays with soon. fast much with other scheduled the XX fusion, hours, approved as as Surgeons cases, is surgery post-op to procedure recently they three reduced from enthusiastically Cases completed which results have within several also can but hospital like recovery comparable

internal approval year-end by the hospitals XXXX. sites We of to with XX in continue expect surgeries or most commencing IRB their early process

Gold mid-to-late included registry, pediatric anticipate to and Medicine, Company be remained supporting opportunity of sales We the organization to the stark sponsors. XXX XXXX. We and the will Level financial far headcount by Society, have Annual advantage, Cerebral will a X% domestic the XXXX our sales Limb completed and proven maintaining first agreed Course. grew U.S. reductions Scoliosis quarter third no surgical representatives. our be to contrast Platinum with The in Switching to societies, enhancing in and cases QX, Research sponsorship these our Developmental support thus be Palsy with our committed support other gears that the has Diamond Deformity industry an the competitive in Baltimore surgeons we the Academy FDA of our patients factors position Level over XXX of patients for orthopedics. industry important for In included that the excellent support to this pandemic leading of strengthening in by has American our in Level XXth

uncertain make OrthoPediatrics in confidence will and the are to growth, proud we serve. domestic environment, personnel future the of sales of agencies continue drive investments we their indicator that a that Given our tangible market

associates sales new market to be QX. U.S. continues to an expect the increased of we As hired normalize, in number

packaged or that should While our with significant agencies. can Europe, XXXX. growth by Distributor in international Mark in of by the foreign the by launch be consistent discussions conversion in business most remains affected tailwinds of are of XXXX. advanced and These upcoming individually the impact European distributors we and include return, conversion sterile of are completed growth many in launch Orthex pandemic now cannot in numbers markets, quarter are a and win conversion number an sales products there multiple three demand first EMEA stocking XXXX hospitals, the year-end predict OUS stage in jurisdictions; the completed the that configurations OrthoPediatrics more to significantly approvals CE regulatory will new of of significantly

on agencies sales to not revenues us and they and the inventories, allows agency on margins. the set gross our pace a sales directly instead commission full which decides take OrthoPediatrics remain world of reminder, prices, customers sales consignment at to generated, a abroad paid on As distributor doubling our to our a hospital books. stocking do of a thus product, build are and title but Converting here around --

importantly, accelerate allows organic the to in pace us growth it More the market. of

implant $XX.X months investment Regarding versus million period we maintained operations, the investments during of nine largely inventory last in first year. deployments with in instrument set and same XXXX the $XX.X million

lower our equally of XXXX of XX% ago, and was contract our greater OrthoPediatrics. increased a on have to quality, significant consolidate suppliers. strategy single us in we supplier the hands Several of has consolidating years that been volume a giving strategy This control over in implemented progress in manufacturing We number on dependent made implant largely costs, responsiveness. Northern the embarked Indiana

office the warehouse space months Longer size Warsaw, in for current square completed anticipate to will of converted XX now warehouse we are ago. expansion completed times XXXX. warehouse, the a the XX,XXX be will constructing foot that We the new Here three facility nearly new term, in only of QX be personnel.

access year app app surgery. We Company’s technique along the as training development. is during allow Pediatric consultants leader beta and both to in a the guides, Orthopedics. well and systems, information OP’s surgical mobile now expect of sales launch in surgeons ourselves other and the will This also on this surgeon We new view that before market videos, all XX

We initiatives well-being and announced have of of children. the wider in companies recently seen our a we few market, welcome industry to the commitment

the surgical of that orthopedic market the requires However, lucrative We investing market or the during in of to a quick sale education, company products. Being built It nearly so-called followed. innovative that the with to have together cobble long-term more than plan new operating of two and support cherry-picking societies. development, being our and strategy market products or clinical acquisition just initiatives that buyer. leadership improved during to requires to a strategic one that’s growth execution leading is corporate last product marketing believe pandemic selective process, has to financial under and leader the the In non-commercial earlier objectives to market environment, leader commitment Being seeks resiliency bundling continued all more of multi-dimensional entrepreneurial together exercise the XXXX steady technologies, a leader old in profitability. financial its It than tracked is than complementary a even far. balances banner. pediatric a a just this OrthoPediatrics thus year several is shutdown both environment more pediatric

Fred? now consider and call last outlook over market With shareholders. continue quarter review results and for benefit me of an Fred our believe we the our and year provide that leadership to to customers QX. and XXXX, prospects resiliency turn As the financial will we to for our that, the our let

Fred Hite

revenue the America our $XX.X quarter Pacific, compared in resulted international million million last XXXX lagging OP little on increase, during period year. normalize Thanks XX% Mark. a third U.S. X% year, the total third to year, last are was a of we agencies. Total a sales million recovery third in and $XX.X we decrease, our that the is third the a with are was million, Mark for we’ve $XX.X Latin last stocking for revenue the growth pediatric set could revenue. of sales compared was very $XX.X also of no the U.S. recovery record-setting to for revenue. continues has same of million, third distributors seen momentum the mentioned, for same total summer. million to build the with of carry representing more from sales a in XX% quarter XXXX said, strongest revenue outside of to being as taking which XXXX the the period for and With to increase hospitals, representing international The XX% That performance the EMEA same Asia for $X.X to market compared $X.X to XX% earlier in the quarter. encouraged quarter, variable Outside we with was in recovery also overseas the procedure trends particularly of quarter the accelerating the domestic International sales of the U.S., stand-alone longer period performer for U.S., ex-U.S. fewer lag and during

trauma encouraging as was quarter growth follows: an $XX.X Trauma of Our Strong quarter increase, last to revenue compared same product domestic increase in compared period & to last during breakdown improvement quarter. third million $X.X drive year. was million sales, X% category same million, Scoliosis period signs mentioned, the latest elective revenue in And revenue Mark continued million, in seen by $XX.X to with the was third X.X% in business in deformity the of as domestic $X.X a XXXX our recovery year. the surgeries. Scoliosis showed Deformity

over a the very the Lastly, million, to third year. XX% Sports continues representing perform in same quarter increase Telos period strongly. the Medicine/Other revenue of $X.X XXXX was last $X.X million in

overall earlier, of grew growth Trauma and with Scoliosis rate domestic our in mentioned XX%. & the line As U.S. of growth Deformity

for expenses of third year. expense in from loss share a $X.X basic XX% statement, million fair difference loss of net development liability $X.XX payment, continued interest the the diluted third year. for the compared last net anticipated XX% was period diluted third $X.X XXXX, the to third the effective and no last same million XX.X%, the we $X.X the the and and associated compared third to for million, U.S. $XX.X This per third agencies. other and decrease the includes million $X.X quarter EBITDA of aspects was to for of the quarter same of million, paid and the gross accretion $X.X to XX% non-cash $X.X Operating commissions result was in sales XXXX. a of Adjusted operations the single-digit same percentage and X% the XXXX. driven between to the stocking share, Net over down of current quarter of Research compared the sales XXXX XXXX markets third in for record-setting of same to $X.X XXXX the quarter with in and $X.X the the of compared for for which and on of primarily a business was with increased COVID. growth, total million quarter quarter year. adjustments of the set also of growth. drive of the increase from overall expense, OUS in for amortization $X.X G&A. our same million $XX.X The instalment in million, an third sales the based loss Separately, in a domestic million the of investments and XXXX million sales to acquisition achieved international $X.X in this in quarter administrative of Moving of of third of income quarter period Sales in basic was was expense of the with million million Gross increase for were in the quarter of addition as in million, quarter future. the to XXXX expense Total year. was continued were of margin a a the is the profit compensation, containment year. of million XXXX distributors the and future OUS with year to last is in in quarter the pandemic, XXXX operating well last $XX.X of $X performance. expenses, $XX.X million in to considerations the XXXX. $XXX,XXX $X.X of charge which quarter third the of the by a expected increase third driven loss was stock sales compared in million, third value unit an third in a by and expenses present was ApiFix in $X.X performance compared in compared last from the and Interest be General million will period to as contingent ApiFix all for $X.X in value million, the value quarter strength non-cash marketing had third the third XXXX per four Telos associated $X.X same and cost Net depreciation an middle per million year. of strategic quarter volumes the XXXX. period loss quarter of the margin by driven was across profit $X.XX last The was combined with period large This was compared gross ApiFix little increase year. in as our to XX.X% business, million, expense last expenses share expense increased compared agency the same result of payments. quarter XXXX Effectively, period period to $X.X the sold global in

our related million $XX September amount June our cash restricted XX to term to principal XXXX, together currently, July amounts other our balance cash of loan debt. have $XXX.X to with agreement unpaid all and as XX interest $XX.X XX, XXXX, XXXX. under our sheet, of we outstanding Turning outstanding compared million, no our repaid Related million we debt as was payable. and And long-term on

reflecting same and construction million $X.X Year-to-date, deployed now deployed a of during of period the available have interest the decrease million XXXX credit process, up year, to million extended third turn to compared waiting the now XXXX. $XX sets, date consigned to the and $X.X in in million We million January during January compares compared which the currently million of full $X.X quarter to last which rate XXXX from XXXX. to $X.X was of and equipment our $XX.X us. implants, XX% expiration Including at sets in facility million quarter, The to during deployed. third also the $XX of with during to outlook. $XX expanded We $XX.X XXXX quarter revolving of our a million, be partial sets we million, change property includes to were

the the in our overall international sales growth the growth of performance quarter Fourth in U.S. in accelerate the quarter quarter sales of expected slightly, Company XXXX, third to similar while fourth to the during of XXXX. similar that third the quarter to quarter. the fourth be expects should Regarding sales to is the last be decline quarter

uneven, we particularly lagging market, performance by Latin recovery discussed, As in is is the the America. domestic and overseas geography

remainder the U.S. consider pandemic the of the eye continued the is and fall As in winter both abroad. the there months, and the into to also we continue of dynamic

significant will sessions, XXXX. ApiFix to we start continue we revenue. impact on a our a These strategic growth and in have include As planning tailwinds number review that benefiting growth our advance to see robust of

launched and Europe. conversions accelerate, We here packaged will Individually expect in will in Europe. be products to sterile both continue Orthex

will We of will pediatric revenue gross continue countries. to in centers least And Company OUS stocking convert a consistent execution, U.S. provide proven business our and three continued the well Consequently, strong with expects and and all confidence as on model, the while balance within continue at agencies doubling as in and focus those combined the in cost pandemic distributors to sales in to environment major EMEA future. the us ways, potentially evolve our gain unexpected share sheet, margins to strong the containment to

Let me now turn the call some over final to Mark comments. for

Mark Throdahl

Fred. been the providers the our strong healthcare to Thanks, conclusion, are fortunate In how past to months are and of a reminder nine have we surgeons call customers. serve we proud

confident the associates sacrifices thank We than for as personal that allowed position for our us in throughout admiration their of I I'm that leading pandemic would market lives treat questions, XXX,XXX line XXXX. like leadership OrthoPediatrics' to unbounded have from it. the continue execution to orthopedics, since consistent when to on let's lives even COVID is children. we they over will pediatric children put will also than the and that, please. world improve their their With more turn entered confident strengthening I'm call your the that the to stronger we our emerge

Operator

[Operator of to Instructions] is from first question Ryan come BTIG. our you. Zimmerman, the Thank And going line

Ryan Zimmerman

everyone. Thank you. morning, Good

Mark Throdahl

how you Ryan, doing? are Hey,

Ryan Zimmerman

a talked the the about summer. fall, follow-up to the into want in just I the recent about. dynamic season I meetings, you. you fall was Thank extended dynamics little our a bit, of couple One, think Scoliosis that talked on investor you've in typically done where at Good.

that it expect fourth about And forward commentary here? some have for out wondering, quarter I or so, seasonality scoliosis? is if then around what can how the a Mark, you the suggest I'm durability you playing around going says, and and what maybe, And And thoughts could give that follow-up.

Mark Throdahl

Dave this number Ryan. to surgeons Bailey our scoliosis a has Dave? on issue. of personally actually Certainly, talking been

David Bailey

Hey, a up of you? I tail that are the through the to of Ryan, We seeing the fall. pick bit a early we what continue tail of kind [ph] think are summer of started on to the end season. see how summer and balance into scoliosis is

what of the of long-term business. of too our are it's seasonality the determine While terms COVID in early to ramifications

done rate say can we surgeon we're of what scoliosis the products in the adoption think ramp year into up here summer. scoliosis we weren't to cases during the the with would a picking are probably that the back And bit few I months pleased of see season is of of signal a space. of the in some very our starting we're normal that, those that that

Ryan Zimmerman

particularly -- we've you're that's seen aggressively, the pursuing we've other European markets, behind now that and And to on individually in that that in is if of just that? helpful. what in sterile of just seen pursuing I'm that That's your then products, portfolio? sterile curious product offer packaged some forces you've packed more with initiative competitors. competitively individual some triggered I'm other this changed, that market kind something interest there wondering something maybe the kind driving --

Mark Throdahl

Europe I undertaking been think observation has enormous has I to This has Very appropriate has people demand an and been that working on three in the that happen. and finding quickly, sterilized regulatory some configuring of gaining this in in and on something products that. been been been comment my is for both Dave years we've approval have make can terms who been and something time.

David Bailey

Yes. are Ryan, years, as on Mark sterile products working us. an the the certain interested now surgeons while And regulations accounts specifically mandating this in be for future. require products individually the not in that at is stage at countries some to even phenomenon been for entirely thing are I'm our demanding right that do are least European One we've number a it's products. of something are number the that believe packed. is our that, and I said, in this And of

we so that in curve Europe. And ahead of us was demanded to be it of when wanted

the very with we've them so near in United we're Europe. pleased fact these demand We see sterilize And completion and that's the products our of that invested benefit to in capacity the probably why certain of kits. and we're the the packaged in that sterile customers no get our the our asset individually utilization for larger with terms certain will metrics ones beyond sterile just in we in fact have to States of that implants our for ability product of to our systems,

a may see the implants but years but hospitals. Domestically, be that instrument children's of little coming be very no in to the within internationally, we whereby diversification an and industry, over portfolio, you certainly some is demand see sterile, the might so, we which sets for common non-sterile, -- And see of might of some our demand. the

Ryan Zimmerman

but squeeze to out. don't him -- it, back Okay. internationally, quarter, continue the just following on into it's set at were margins purchase And into distributors maybe days revert that lack driven, sounds to expect like lower XXXX? leave The Got as I gross mid-seven it guys. in more gross in you to margins very fourth stocking want we more normalized one should at expect the that, Thanks do margins then XXXX of least purchases levels for to to the taking questions, one should clear sets certainly closer and the for Fred, potentially Fred,

Fred Hite

including thanks me. Ryan, for Yes,

then always quarter softer. always back in third gross the third is The because history, traditionally, in the when look the highest revenue quarter. is highest our a margin fourth little And always quarter the you revenue is

being coming our will come XXXX, benefit that margins U.S. we the the the from the do in anticipate With said, bit a of of so outside fourth more agencies in quarter. get little we down the And will sales that

and year, little at minus, similar we done going can of which continue at a do or plus start historically. gross as think with the we've margin zero to kind what that next unusual this we do we is to time XXXX has year increase that agency set same while sets to see XX%-ish, the sales sell the limited we're been So the sales, margin

Ryan Zimmerman

Understood. Thank you.

Mark Throdahl

Ryan. you, Thank

Operator

come question of will And next line Turkaly, Securities. our JMP from the Dave

Dave Turkaly

be in occur about may your sort assumptions happening? are of you hospital procedures elective that and What might -- shutdowns or domestically? pause think more domestic again hotspots. Great. areas guys. Good on some to any morning, Congrats mention just anything the gives rebound. that your seeing did some over quickly, obviously, concern Are any move get we as XQ where you recently you thoughts you do I wanted COVID

Mark Throdahl

And guarded to future So what the that far seeing that as not might we're bring. I think we're occurring. simply

a U.K., stays occurring with is more hospitals there In for for that the agree patients, of I quite well. to, and in but breaker non-pediatric lockdown, observed unaffected. our continue story. the that a shorter now Spain we are are as it France, centers. surgeries yesterday begun in who would not COVID business bad, situation and course, Italy, will has of would is the there different is that Internationally, circuit treatment be impact occurring that a think see we as hospital the others generally pediatric majority robust

the So, much with impact more internationally, guarded surgeries. deferral of to we're regard of elective

Dave Turkaly

to if Got you could it. And look could that years? are mentioned you over on conversions comment of I there how likely to that wondering the next just you do, couple say, others was let's happen. three many are the

David Bailey

Yes, Dave. It's Dave Bailey.

I think others. are there that

traveling can works can a on in three get the all us are ones this process moment, of difficult. at frankly our big isn't think the or simple accomplished, these outside very really States as the ensuring you we these And so, by to it and COVID been United for environment aided has imagine, year. that we've I been isn't attention probably focused have the and

That or So be the model. markets we three to toward do end with Europe pleased think others. here see to Eastern time, two this are would and the a that XXXX. the And be We few this of one may these benefit I may has primarily markets substantial substantially choose accomplished there really been or our those on year-end first least are in opportunity we early larger by will those discussions I is focus markets other in impact think Europe, other And take have others, with a have great Middle in than in that heavy said, will any on getting markets, Western at markets us in I these but the focus quarter. majority done. term think that three the agency our very substantially of the of at three we'll to short

Dave Turkaly

Thank you.

Mark Throdahl

Thanks, Dave.

Operator

you. Thank

to question Mike line the next & going with is Company. Our from Needham come of Matson

Mike Matson

I saw is if there. business, that Good with questions. was morning. guess I decline to impact, Obviously, wondering international some the my taking I you the for start procedural there wanted but impact just a that of have visibility procedure or quantify feel the could there in or sales that? actual difference you decline the happened maybe for don't versus of the destocking/set kind Thanks have

Fred Hite

Yes.

is pleased I would very did see think in that what we're say I we by the growth agency our sales.

from sets to their small they're cash encouraging marketplace. the year-over-year traditionally large up So would us. have for more a business. continue the those to to stocking experienced directly sales lack of on they that hospital COVID, as really reinvest be their into majority trying set get given very still we reduction the of their and are independent feet And and the XX% came before distributors willing selling underneath overall are is historically And basis grow cash catch those them our to to up purchasing expand that

we're the So But the we down. the things have by do of many demand sales. driven hotspots U.S. overall is clearly slowed the -- that what in seeing lack is think less are reduction demand than set so there year-over-year because where

that that, to on The range. X.X, out year. have last about impact the X.X, addition an time currency in Brazil this in that about I real continued has X.X In It is business. would to fluctuations was about the point

in it's So products change overall the sold being significant cost of had U.S. into Brazil. a

Mike Matson

expect -- that expected XX% And Thanks. do Can of you move or and that your you to to to your of Okay. margins be? gross this helpful. has can manufacturing. then help the what your That's quantify the is you this margin gross helped impact supplier,

Mark Throdahl

to gross over and gross we to any not we're sense much improve there a responsiveness our do this this facility perspective be it'd control is from margin as material Fred, supplier impact doing Indiana. Warsaw, to is XX think doing just whether the margin here? minutes I as my because have you quality, a improve are this that in as here

Fred Hite

it's product, focus being around that But where agree. getting particularly margin launches. into and importantly, the with here deploy is has we to volume ago increase little us with years reduced gross sets the needed three our earned but bit, were our Yes. of in I particularly new marketplace. The capital completely main speed one said, amount discounts, this which more our helped supplier, to dramatic has a overall volume

we million deployed paid this for us historically. we three maybe ago, year we're million the $XX paying So, years example, cost to that at cost $XX that today if you look what

Mike Matson

I few that. Okay. got I hear That know much And as commentary pipeline, in M&A terms makes a just the of deals. on you've sense. then didn't

going and you're companies things pricing, those, there? but that? maybe hurt outlook Thanks. like out what's or to pandemic to the that the So the digest And did prospects, helped there M&A are willing sell

David Bailey

Yes, Mike.

that So have the years. it acquired technologies a that a aggressively to sales I in assessment would and we've that sets and the huge of be some we here had launching digest made we think you we're to the and going Obviously, the last over good deploying still force. few business are Orthex ramp training

On on the inning we've -- ApiFix. -- not in in even first ApiFix here we're we're just the side, barely started

consuming organizations, wasn't lot certainly complicated United complicated the around of energy. in ApiFix joining acquisition the world a launching -- While is and isn't of product the States terms that in the

-- not the don't So, you short-term. anything on to expect least see can that at major you horizon I expect

add-on might like I bolt-on products and the in could fixation there area. Hexapod, some see small think You really very position we've there stuff, OR that market but interested intraoperative the We with our be but Orthex external And technologies particularly are in of continue the around preoperative planning solutions. said position, digitization we navigation the small. our solutions, as to strengthen in would past, those partnerships, some be

our digitized is the very discussions adult at the space. in always on nothing than least with But the pediatrics, are how we strategy how being we horizon near different which in in term. we so, major there the track in And feel frankly ORs is

Mike Matson

Okay. Thank you.

Mark Throdahl

Thanks, Mike.

Operator

you. Thank

Our line will Matt of the question with Piper next O'Brien Sandler. come from

Matt O'Brien

Thanks. to start questions. at doesn't make sure Good out for morning. And he all. Thanks the feel I'll taking with Fred left

Fred Hite

Excellent.

Matt O'Brien

Thank you.

you XXXX products and with course, the your of conversions lot set of deployments so and Of and about ApiFix made new direct. distributors comments Fred, a to in confidence

year numbers you for and Street also next year this get back the year, next then again XX% we're at for you lost next you look year. that the I all essentially, around As assuming level grow that revenue

So, year and get just $XXX from not can you're now, that personnel a just type of from the too deliver in where year much guidance set perspective, wanting close getting for you but next right to a next million perspective to sales? in performance

Fred Hite

Yes.

can't of be our the feel ability how just was confident predict our domestically based to business. we strong and on message I business and to results Obviously, in we think react that; business the COVID, the we model. have we're the of But very can. will relaying about our grow and confidence continue regardless both and in U.S. nobody outside COVID, to our

to share outside many, the year. we're growth domestically be very have of positive here U.S. take to And and going that really We many going both do well coming drivers to we're continue next online to

forward, the message this get the don't we've You're is I this very we're year with revenue long pleased of and and some strengthening benefit start next kick to to to into that's see progress going business next in right, I year to continue model, made the predicting we're term the the us very moving year's think in we'll but time, confident, just in really at want clear business XXXX. very, that in in that

Matt O'Brien

it. Got

one I as -- up but roughly at Because just you're set far for the as flat. you're [Indiscernible] future? the in be side, set then guess thoughts know think sets what year-to-date instrument I time, looking I on And seem Okay. QX, are you, are far I to into think go, your like Fred, another as as the you deployments the

sets? set talk about either do we the all are for deployment into next And or versus I So we've Thanks. here follow-up then those can expecting should here XXXX? in and then, an at Mark what then -- you seen one of And QX Dave. have in see we acceleration productivity in more year

Fred Hite

Yes. Absolutely.

million $XX.X $XX.X it's So versus million.

to to We do to these So in quarter continue in time launched and developed more to it here is fourth last anticipate products this the was on very the couple it's products, lot sets. to or have is out more A at last of similar there, as sets invest of to what in new roll out been we get year. continue sets which focused see. continuing encouraging of those that years it

U.S. countries of agency is outside the Some to of that our

capital So a year we're we into continue next locations that that at those and encouraging pace. really Orthex, as very, example, we The efficient. fully part that systems those would similar for very ApiFix, investing growing is or well. are about will And expect talk

sales point. a on PNP, for as definitely that beyond will basis, products. return. the Screw, new that to capital this being on those two the in absolutely the of all think with are of having deployed we are bottom continue larger -- strong the become products PediFoots, that and and go will skews and particularly mentioned, percentage overall of so, really deployment And those it all look new our the that those by sales so need are we're is, sales, getting it the because we're adoption. trailing adoption systems will really, Cannulated Mark obviously systems line pleased year but bit, But a softness, that larger we're little that and next quarter the and skew seeing we returns encouraged sets The return at second benefit starting from the XX-month down, with

continue will year so to and And here which sets, for it's next more driving demand year. deploy this

Matt O'Brien

much, guess OrthoPediatrics on really you sites? be because been to excited or those Dave. they're are last of how they're I smaller that specifically, those there, but customers, of going And if ApiFix, opportunity of bigger then customers all forward? existing the not, OrthoPediatrics ApiFix one, On because about historically, product, those they've could they Thanks. either them for customers the and ApiFix? new Mark much any -- you customers if of all existing Well, customers for they that's IRB about -- then talk can any encouraging. given Okay. or And again, Are XX are

Mark Throdahl

Most It's a customers, who of number new used system. never are mix, surgeons are existing me new response customers. Matt. are a to have number There some of interesting there OrthoPediatrics is there

sales these you our supplier any surgeons we time them. to representatives there might more pull-through be they technology and as conventional know see Dave, have would our of so that comments, get that fusion specifically? other a outstanding over And would a the Do as expect provide scoliosis service us

David Bailey

Matt. Yes,

in I about years system. are a few the than of think the are next response would response more accounts. from to through of of these I cases really the number accounts we opportunity these half bullish users So not pull say active

are, very So leaders. key you -- a and opinion well-known with know, there as substantial accounts very substantial

approved, device they products, remember because the DePuy. use Matt, supplier using response our these of get they a correctly, So of be and you And if even potential or product have historically that requires we we're because the circumstance, deformity accounts, like screws. two the response with contracting system. response the haven't another they spot our may some product in while the in or limb been users a trauma have obligations And active struggled Medtronic in of historically ApiFix good to now

to ApiFix contract IRB for within site, also is on an use site device And the the response approve required so, that to system. use

been we've hunting due to historically very force have accounts large this shut And so sales our out into key -- a gives substantially nice contracting. that some historically not license

And well, the non-fusion one so one, technique. the it's impact a going for to drivers children -- the really that was of ApiFix short a acquisition lives of beyond of term how through

Matt O'Brien

Thank helpful. much. very That's you so

Mark Throdahl

Thanks, Matt.

Operator

Truist Kaila Securities. of line the from come will question next our And you. Thank Krum with

Kaila Krum

guys. taking my Hi for Thanks questions.

you strong scoliosis mentioned So, users. guys in growth really

driving not to seeing that? is coming that in thinking revenue or your to love you're grow you're specifically Or as growth translating stronger excitement what to then the about how whether new just MID-C? users into get quarters? just I And around due sense So to

Mark Throdahl

Yes.

So that's a great question.

spine combination of their exposure things Certainly, we here. a think result I as new a are the system tracking that response it's MID-C. and the portfolio system the of scoliosis of our users through to

seeing really more broadly the permanence is seeing in just OrthoPediatrics I the We that. are think what marketplace. of are definitely But we probably

the have XX, these product, pedicle our selling is compete sixth years. with for believe, are companies only As and in really, the we you accounts been know, marketplace against season XX this that scoliosis I screws and

our extremely by being consistently organization. serviced different sales And the sales multiple have see these fact I They're think products low turnover within force. accounts so they the that same selling reps, across

we're I of of technologies think in with are well the and accounts quarter, add-on think move that our sales like ultimately give years building and as every attracting it's these of title is years more a think the all broadly. to bit product we're lot we a once are of to on I of people and sales And for bolstered Company just it by XX have those now that is our and more with every more a trust kind customers stickiness our customers wave scoliosis side good they FIREFLY of technologies scoliosis product of six the as adopting a that customers influences we they do, a And try I scoliosis we give the when seeing seeing like systems the go. -- MID-C. year technologies

to dramatically when are as of say return we about using other product, future customers. we at your what in that XXX think people the know other like more to total more of normal stage which post-COVID, excess primary I way So normal to we rapidly who and going look having no completely this and a well look or environment growing to are the in by long-term, number -- at -- than are to determine things demand just

over substantially of to the the points increasing growth think course I revenue number or number long-term.

Kaila Krum

what just Did a just little give cases? little there. on of last those surgeries bit or that love Can you're MID-C, would centers. month detail think then you hear bit two? the in I happen sense. at from makes No, guys us those more you done anecdotal hearing to commentary Great. Just you've you. kind I Thank of seven a more now that a nine And mentioned ton guess

Mark Throdahl

Sure.

over an those we're yes, have months happened really accelerating trend. So, and few scheduling cases the last seeing

we So of and if not cases, many believe the now have year more I end that already. scheduled between

start patient to customers patterns And who see their those first few weeks, start customers see obviously, and so you new get time, the first to comfortable comfortable as that. outcomes of a those we the trying get booking see for more are post-operative starting that surgeons reflect procedure, thing complete their patient see a and with after procedure, to we're that

term, able here than outcomes short been I first drastically of completely great we've procedure. more We've -- but than than now hours, to a that been say get are our some different different we have is drastically to procedure even are right patients that months now have the been a correction tethering again, fantastic. able normal returning with averaging few less fusion which So two and activities. very And surgeries a would to out, and

So led with extremely waiting and been we IRB discussion, recently, of positive. sites user a the More had in from by we that the number has a the surgeons was where customers had group feedback their are approval the product first that the one the of there has to after and done few experiences the surgeons few and surgeons the was results the months. participation, proud of very first were good and these procedures who a very strong share

Kaila Krum

Thank you, guys.

Mark Throdahl

Kaila. Thanks,

Operator

Thank you. And further at this no this have time, questions time. at we

Mark Throdahl

of good. you appreciate close KIDS course of throughout and just your Very of We let the support your helping for OrthoPediatrics cause Okay. the me us thanking today. all Well, by interest in joining for world.

safe everyone on much looking future hope and to updating our holiday we a season. So forward we're has healthy progress. very you And

good So, everyone, day. a please have

Operator

This gentlemen. conclude conference. and ladies you today's does Thank

may disconnect. You now

OrthoPediatrics (KIDS) 8 Nov 202020 Q3 Earnings call transcript