KIDS - Earnings call transcript Q1 2021

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Operator

Welcome to the Q1 2021 OrthoPediatrics Corp Earnings Conference Call. My name is John. I'll be your operator for today's call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. the being note Please Instructions] conference recorded. is [Operator the to Christine I will over turn now And Petraglia. call

Christine Petraglia

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

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

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

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

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

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

Mark Throdahl

today XXXX I'd for fellow you by hard Good morning their quarter recognizing us and conference thank call. joining for associates our and on first tenacity OrthoPediatrics everyone work. like to my begin earnings

the and with resilient to a Our business and continuing testament we together fiscal quarter improve the where note today. margins our exceeding EBITDA steadily. quarterly is be adjusted up growth I prouder gross which committed team pre-pandemic We're out in is XX%, on an levels built to our and XXXX performance strong revenue OrthoPediatrics to is starting back with excellent of and couldn't

overnight. year. Of didn't momentum course, this we achieve for more We'd a been building than

pleased As to COVID-XX. date, report it we than are said mid-March when entered would today very stronger in elective reflect we initiatives that last surgery the outset year of our OP it deferrals progress positioned of we pandemic in beginning than stronger we emerge have the at to We have we put start the we on at so. was done that from and place the

plan. through I'd walk comment quarter, I results our succession Before to our like this on

May upcoming become will last and announced following chairman as and Annual of President the June executive the Dave we our of CEO I will recall, you'll Dave appointment board. As appointed be Meeting, formally Xnd Bailey

this established timed. toward on advance we've As we team. foundation pandemic a strong well continue as transition to recovery is the and believe build the from I

to condition sales our remaining of years come. will was thing was one company, being of we company abundance still seeing million. important opportunity for meaningful this The that company change our CEO in and We an had were I look accomplish tenuous. restructured as this leadership our XXXX, different the moment a involved team chairman annual addition is is milestone. just we OrthoPediatrics Despite us for $X only opportunity. have to actively and was forward abundance in named executive to very the this an When going In had personal in all today, opportunity and and the that I financial

which begin success we'll discuss XXXX. call to driven that is us by on with procedure will financial questions. the progress domestic our success recovery growth, then let's and overview achieved with comment business abroad. product lead and an we the a call strong financial on review said, Fred during by setting of including will and us results the results your rates Overall, thoughts open quarter States up of the United today's So also balance our core for the in detailed both international. was additional in line, up then in first that I following

partners Our sets our well acquisitions in Orthex, as and ApiFix continued Telos our of additional catalyst as served to as investment growth.

from continue we ahead confident As long-term creation. path I'm look pandemic, the and the to sustainable is down well value positioned recovery to drive OP that

to XXXX. XX% grew to QX improvement domestic sales period $XX.X marked year. three across XXXX a in million All showed businesses international the same markets last and million compared quarter $XX.X over First

XXXX levels our two billing seen days levels otherwise impacted and in would QX domestic QX in COVID-XX. out of quarter impact sharp QX which had that XX% versus with experienced accelerating sales growth the XXXX slow strong delivered and rate been in we I'd XX% following like in QX to COVID the first regional and XXXX of and fewer and the in point a returned that QX Despite and XXXX, there growing decline QX to but States, slow we XXXX. have into the for continued QX the previously again in growth pre-pandemic growth. spikes a turnaround sales February continuing sales a that Our throughout to XXXX. growth were or January more, quarter significant we United as represents in XXXX the QX of start This result

continued by distributors. result agency segments and factor well our in of to growth of performed a international However, QX XXXX. million the QX impressive business of $XX.X purchasing a achieved demonstrating and We decisive quarter growth dramatically grew that and XX% our dock of the an model QX growth XXXX. XX% strong the countries. is This and grew All surgical the sales QX XXXX. the indication stimulated Domestic We're sales markets in conversions, an agency grew of XXX% growth growth revenues $X.X stocking return XX in where maintaining which XX backlogs expanded XXXX to in their we growth in strong as new the January have include in in again XX% recovery Austria, decline many was performance XXXX were international sales extraordinary was plan Orthex inventories or XXXX. positions dock stocking QX distributors product from agency technologies QX QX in sales and began as pleased ApiFix. in International us growth. in with We countries. International portfolio as and Agency revenue both XX% million beyond. and see XX% experienced conversions we rate XXXX well generated to to in in Germany, our XX% procedure agency these addition agencies such Switzerland, versus of by the to sales grew as continue conversions to double-digit for broadening continued agency and pleased depleted

as by our XX.X% to and particularly we Trauma deformity business deformity cannulated worldwide are new our the the In product to contributions growth offering, which children negatively as of screws, expanding grew those million. to this new of markets. trauma revenue surgeries. be of from the bolstered consignment our XXXX, PNP|FEMUR, lives we inventory segment improve by of strong in business, existing strong deferral such continues As launches, was build impacted ability encouraged elective Orthex and to $XX.X well product and of out the accounts. as and We're deformity by the

in European surgical Institute cases Orthex at Medicover Europe first and performed in Paley XXXX. January the and were Additionally, Hospital February the

XXXX continued launch expect positive the across and markets. last lines market deferred well $X.X also anticipate future have fusion will been grew gain Worldwide and in which launches We our years million. strong product surgeries on across further year Orthex all by XX.X% had that business. growth Orthex to international as had as to additional a share impacted We EMEA scoliosis, impact

end, state-of-the-art $X.X two pleased is access Telos to non-fusion acquisition. and scoliosis their by the XX And As dynamic customers to product the a addition with and in and and of in between million failing. advisory consulting and by tech the med in in non-fusion where other market, patients we on very repeat Worldwide future. companies, is overall a curve incremental a To results clinical set of of business. tethering, their trial curves the with report the partners to management, regulatory set we improve in sales recently positive our revenue we're is of acquired regulatory other portfolio. on investment medicine, March are shift Telos that particularly our than demand represents to sports XX but as Telos paradigm complex degrees, of anticipate ApiFix addresses revenue bracing of which a XXX.X% grew dollar that inventory to trends XXXX big results, expertise is dollar in reminder, it. put It ApiFix seeing how spinal expertise an add is much one learning to Telos high per comes that partners, contracts environment. one driven extremely clinical continues We light And to surgery consigned and benefiting treated. approved technologies from can positive user simpler

of note like QX to the XXXX, returning markets other the elective seeing surgeries of while down the is normal proud we're markets. UK continued and are to we elective impact schedules, and COVID our in Colombia continue negative in spiking performance European some that we surgery Latin While due of must to important cases American see and pandemic Brazil we shut

that caution and on Therefore, regional We abroad, lumpy the further conversions, in will remain and deployment vaccination abroad. continued for time. but product country some elective and will development, training, this rates continue education, our we'd focus will continued strategy to clinical are new in inventory of performance this we confident surgery stabilize surgeon programs sales of set that country

of with have X-year-old preparation we alleged Xst the infringement considerable addition, surgeon April coupled reached financial the settlements patented incurring on expense us as by a from the we which property all of and exposure, KXM both had and intellectual XXXX. stopped derotation have inventor beyond cases trial In the company in spending year Stryker. preserve agreements and These legal proceeding this procedure

process surgeon pedicle in itself. fully rod on children cases, XXXX. this the development. The RESPONSE we II been products EOS in the fusion. COVID products XXXX ApiFix more create approval. Turning now These placing screws. the conversions, through RESPONSE in to United approvals, there Exemption to onset early palsy, for Neuromuscular This believe by offering the highlights, States, a gives IRB second some This and now required include children registry fusion, IRB broadest complex SHILLA cases ApiFix XX with patient-specific OP site portfolio been XX a in scoliosis of approval manual accompany for QX two To the growing for registry the surgery. this for for building and for April, been of one approved EOS, have portfolio to bracing for XX more are delays. approved Device We cerebral the or or requires track on with share the cases and related means now Through gains. second XX patients that significant XX and the impacted as failed surgeries Humanitarian focused such pediatric is four FIREFLY across scoliosis of for accurately during of that to spectrum from by the sites to walk OP market for conditions verge physicians new five had as condition, the scheduled complete on guides has including long-term XXX registry with

We XX QX We to acquired our to surgeons international XXXX. in continue system, XXXX. convert new six in which surgeons we domestic converted Orthex and users

Australia further a impact this Kingdom we markets, are of XXXX, Orthex Germany. markets results recently, of more both More seeing rapid conversions in we especially elective United Additionally, Orthex the a international in the like long awaited surgeries launch expected recovery, to and Canada. in as in we're resume in we And Europe large and adoption the normal technology. to our announced level. beginning of XXXX introduced and see In agency made now

adolescent about launched new this we and Moving support to to the to on case, in website completed. identify game to ApiFix, flew apifix.com training on family surgery. progressive In have the perform their focuses spinal are for educating sales of Dayton, treatment offer clinical patient February, providers a education, from we idiopathic scoliosis. who a alternative enable online patients correction the Through to for families, also deformity, healthcare resource viable and one we the procedure this approved site, changing patients, technology. Ohio to and surgeons ApiFix dedicated This Hawaii

also the patient share dock We matter platform. outcomes. OrthoPediatrics steady as well our sub-site and surgical U.S. the to of subside experience website data, ApiFix stock commitment and part launched are techniques and This introducing an success clinicians on to ApiFix ApiFix.com allows to The smart as market. matter

for We reps surgeons. launched technical OP future the case Portal surgeons. valuable which be to in data, Portal, and our PD guides instant OrthoPediatrics to the and also planning app even an consultative called technique resource sales for for allows more access their sales provides PD reps,

consigned aggressively quarter $X.X in deploying QX lower $X.X the sets. in years We somewhat anticipate million XXXX. were greater of of continue the we sets $XX ApiFix of sets. million Orthex to of instrument to compared XXXX, significantly of quarter, XXXX, strategy ROI and to of number first because $XX a million execute set recent in from our This deployments million

reps domestic their grew by of domestic business. as of count new confidence of to Further of XXX now reps XXX sales underway hired sales many efforts also in the with recruitment sales XXXX quarter first We are to recovery underscoring first compared partners, XXXX. quarter during the head our our the organization six

coming expect XXXX, temporarily innovative strategy cut in market gears of other the development, step, to in Switching has pediatric be opportunity surgical and it education number position to product in an societies. of consistent clinical selected remained in sales leader to not non-commercial financial important contrast balances At As aggressive requires in sales to the financial that is to the our a the orthopedics. leading over surgeons. that a long-term acquisition sponsors. our to added U.S. we excellent support commitment strengthen pediatric our increased rooted Moreover, stark advantage, technologies, built every growth last market investment of did multidimensional societies orthopedic and pandemic complementary execution proved to leader challenges our is field normalize, growth leading to factors reduced very will but value of the year. responsibility, the continues surgery the to associates competitive Being not enhancing OP, support seriously. to an improvements we to At industry profitability. with only steady take while Despite we of contribute whole. We committed patients supporting be company believe industry our the as surgical it pediatric deliver stakeholders, in to this role the as orthopedic our market to advancing our a it

down tracked plan have don't to objectives to soon. anytime thus corporate and slow far, Our we intend

the business lessons look including that pandemic test, the face we over reaffirmed accomplishments of to a by every at fresh of Among only to culture carries today conclude And turn many let also more the our required we perspective, pandemic, but more that things from how I are leadership and to uncertainty aspect in more the than team. anything financial operate. is take our the learned culture. a a put company stronger else are company's It belief. this Before from a forward. resilient, agile Not Fred, me COVID saying we us our

to the selected XXXX, only as are In A company. continue of and remained the employer QX with many demonstrations remotely at past virtually chamber recognition high thousands the working although of we come we coordinated time. And over again despite ability see This receive and is work morale of choice companies of honored a to the together great we validation best of were year, worked few places in the productivity. surveyed continue initiative accorded March We all to And one fifth commerce. a recognition our the degree industry. in we of named been selflessness levels XXXX, for the to closely to the leadership of out since we've to Indiana have of is by again. have Indiana

we partner company This of most with QX exceptional and surpassed XXX,XXX of an is milestone a estimated number medical of our size during importantly, children over surgical Finally, and pediatric let trusted conditions. orthopedic technology the the a call highlights With turn to outlook. for role treating Fred XXXX, me surgeries orthopedic our financial Fred? that, review within as the our community. now to results and

Fred Hite

improvements. compared was increase first quarter of a of a ended million, XX.X% $X.X to to a increase last the million a last million, compared the seen ended revenue for March year. last the surgeries. Mark. sales XXXwas million Thanks signs in $X.X continue same XXXX total first recovery trauma the which the $XX.X million XXXX three-month of year. impacts for XXXX quarter experiencing compared normalization representing revenue the the encouraged the revenue mentioned, to for during Strong growth markets, to domestic March Total growth encouraging of first of U.S. increase as first $XX.X increase the Outside year, $XX.X period sales XX, last for in representing this during during year, With period revenue to momentum. same as very COVID-XX. compared same Mark breakdown XX.X% million, follows: by compared same total period increase U.S. XXXX that increase of both $XX.X last a first International continue for the deformity build of million same $XX.X was deformity XX, year. months we quarter of period was XX.X% XX.X% and period U.S. XX.X% the to quarter revenue the was On to we're $X.X on for $X.X was Scoliosis category revenue quarter of international the and first in million in million, XX.X% XX.X% trauma had with has in elective domestic three reflects $XX.X accelerating The shown million, can XXXX in the the revenue. quarter drive revenue. marked begun

scoliosis the elective Our plus signs of business revenue. surgeries, of given as ApiFix improvement, addition of shown the backlog

the medicine $X.X representing year. of over the XXX% $X.X in revenue same last period million XXXX quarter was in sports increase the Finally, first other million,

reflected Telos our excel, As strong performance Mark and small impact the repeat Telos business. of contracts new business, advisory represents to continued a of the partners mentioned, although consulting percentage

share in first for legal and increased income XX.X% to and first million, to of million XXXX year. XX.X% loss the quarter fixed the quarter continue resources from million ApiFix was fair and to and compared of on business the XXXX same $X.X to expenses and last period payments. ongoing last $XX.X each acquisitions, per in $X.X million net expected year. an and acquisitions. Net of $X.X personnel quarter negatively loss Net was expense to expense Sales loss was will were prior was This the XXXX first and loss first increase was percentage quarter domestic the expense associated first increase compared services by the of period combined Gross compared Telos statement, Depreciation is same first in profit was a The XXXX. a were loss The with the from expense XXXX as the increase increase share $XX.X driven Other the non-cash the year. X.XX and $X.X by containment, last quarter same the compared compared associated remained in XXXX the in of was and other due in the increase in X.X XX% expansion the first additional first gross same for the the professional XXXX. accretion expenses the for diluted unit expense purchase was to flat quarter million to in well strategic The amortization adjusted expenses and improvement of per administrative of of in operations achieved basic our This property. million the quarter of $XX.X support of $X.X Interest acquired adjustment continued is compared intellectual of with contingent for share XX.X% the to imputed assets drive margin of with $X.X $XX.X value and from gross associated cost quarter This the General million in the increased of revenue million. in associated of for down through operating XXXX intangible year, litigation due Telos resulting the XXXX to in and million of ApiFix Band-Lok to commissions the last $X.X the last in ApiFix for the with acquisition of international by the of margin in same strength period interest of $X.X expenses $X.X the to quarter $XX.X acquisitions basic from growth million development considerations. first and our primarily of an continuing year primarily million G&A. expense XXXX. and with for first $X.X over increase agency $XX.X as or acquisition quarter quarter period a year. $X.X year-over-year quarter Total an a of Orthex was first of Moving EBITDA profit investments, million diluted markets $X.X agencies. quarter XXXX impacted first year. same ApiFix, XX% the of XXXX million, in to the quarter million and from million first first growth. larger $X.X million, from sales. the marketing due per have OUS to a was to Research compared compared million the XXXX. we of quarter million Operating driven increase compared last period the XXXX. XXXX U.S. where was the volumes period sold as of the in negative was which primarily million million of future over and in to of $X.X The first in million expense negative for and first which effective amortization quarter quarter $X.X the XXXX XXXX despite in of was XX%

and XXXX First to We're on one dependency last $X cash the lessening quarter diluted positive quarter raise to XXXX negative per a X.XX EBITDA, company adjusted continued the a versus a compared diluted very a loss of progress Free improvements. in million to $XX.X our future earnings is thus share capital share million X.XX adjusted shows $X.X non-GAAP per consignments. negative fund pleased negative per capital million by set period markets share negative the year. same to bringing flow

four-year exposure. As year de-rotation proceeding Xst The the XXXX. reached of these with considerable the by added beyond, Mark patented trial IP had and spending legal of procedure of have financial preserve in an $XXX,XXX old us XXXX mentioned, alleged quarter we agreement with cases a additional of KXM in couple quarter April A million company surgeon and which all the of stopped provision expenses $X.X was we These XXXX. from the fourth incurring for one and settlements cases in as prep have this accrued infringement both on inventor Stryker.

sheet XX, no of million to $XX.X we December cash as cash, March of XXXX obligations. $XX.X and compared restricted XX, to balance million have our our term-loan XXXX. Turning outstanding as Currently

the during expires of XXXX in million million quarter a previously us of at consigned the and of have As XXXX. $X.X to in was with the we of the Including last includes million equipment disclosed revolving The same sets, available during quarter of property to implants, $X.X which deployment investment and credit instruments cases this consigned January full quarter were $X.X million time. facility, sets specific the XXXX $XX compared first $XX first change during compared year. $X.X XXXX, to trays. which and the This of million deployed period the first reflects million from

quarter of the zero XXXX, a XXXX. quarter compared first as $X.X license million During we the to purchased of first worth in

the the growth the strong to guidance, of start to million $XX.X XX% or Given XXXX. million to $XX increasing million low in XX% the we our $XX versus year, the end are

this and conversions of including our addition, Austria, markets. in guidance backlog in achieving In Switzerland. our the and tailwinds, confidence procedures, many has procedures in that direct The Orthex Germany, the surgical both to ApiFix Europe continue international because of will here grown sales the of and of number accelerate

of the model give and will our on future confidence ways, in unexpected COVID in balance environment sheet, continued our potentially continue to all evolve execution, While pandemic and business consistent strong containment proven to strong business. the focused the cost us combined

Now, for back let me turn the call over to Mark some closing comments.

Mark Throdahl

and reminded are to call to proud we're we us serve healthcare providers Excellent Fred our how surgeons the has This past year customers. fortunate thanks.

their their unbounded the line put We as improve the lives have sacrifices lives they of on for children. admiration to

the to as their hand earnings sincerely the purpose As is associates, grateful the support. our my call advance leadership with thank this the and XXXX. generation that I like lives corporate world. and children associates treat transform our the start, will investors, I to shared for for I CEO, operator to XXX,XXX stakeholders to call their other on last over at line: throughout continued am team's the I of everyone would before the on throughout am new market Q&A, OrthoPediatrics allowed a more its since position under confident us of leading I build the its management, world personal children that particularly than has and to our for our execution

to over the your turn now call please. Let's questions,

Operator

first is Piper Thank Sandler. from you. question O'Brien [Operator from Instructions] Our Matthew

Matthew O'Brien

many your the really Good Thanks Mark the the really you into over Chairman stewardship the the step question Dave, transition last role. you years thanks into And for or for and CEO as you taking all role. several, for morning. wishes and company best for excited as

Mark Throdahl

Matt. Thanks

Matthew O'Brien

course. of Yes,

conservative is So know I start with, to guidance. I typically guess, OP pretty with Fred

our beat by think some model I you've million there's but raised in you bucks of midpoint. here, couple of that the a

you the You million. up $X end by of and about midpoint million basically by about raised then low the $X.X the now took range

be of the wanted out And I So little typical the more that bit of about. it's worried if if know more. incrementally beat midpoint in kind just that and come know your a to midpoint how I don't doesn't bit the but to wanted come tick of range. to the talk don't again, COVID anything to little that the about specifically range there's up equate to Delta it's, hear something call you're up I if just conservativism, the you a

Fred Hite

think outside is I environment the of thing Yes, U.S. the biggest COVID the

obviously market had to since unknown that many we So it's earlier, to when that the a down. now some more than open but complete that going Brazil open spiking started us time of lockdown they've other the we they're time was I are COVID up causes bit example, see international just sometime place. think, we that just that's hoping and gone procedures are countries, have one and issued into otherwise. we And we issued that be guidance Since that that taking up to guidance conservative, soon, cases shutting to starting here would

Matthew O'Brien

Okay.

domestic to fair maybe stronger the the guidance OUS outlook we but probably in the given a outlook it the than little say had is is diminished, So just then is overall anticipated? increase

Fred Hite

or international good domestic bit. has months several three feel a today ago in than summary. we that's months We a think deteriorated more ago the recovery, confident did I but Yes, the

Matthew O'Brien

Understood.

the again, you're kind we're of more I of and we're, follow-up, perspective. side. conversion. but just again the even the the specifically, the the groundswell the ApiFix there's it if into was interest as I complex as then really talk the through of physician if QX, a in know just talk us just I you about of but XXXX, into we eye-popping number. complex or interest unique it's that from help interest on looked can remainder you're here some seeing understand what come postseason about seeing And know just seeing driving but of all buying comps level, little know and portfolio, a rest that's bit interest don't Okay. that physician an

David Bailey

its Matt, Sure. Dave.

strategy with fusion halo is question screws And So at think and new some used to was the and IRB we're we're use start up our no who of overall, Apixaban customers, business But And our for the names think from month conversion excited screws a we're of hadn't our and over bit month. we IRB and continue the names we're of seeing executing faces for on newer look and this a I fusion; on the calendar, I very to names, business the again calendar calendar when our surgeons and grow. we there continues new sites. quarter. sites. effect of about previously consistent our response to account The Apixaban see getting fusion

strategy it's think I a so point. procedures successfully of to account an this at conversion execute function And just related able a us fusion being of to

Matthew O'Brien

Got it. Thanks so much.

Operator

Our next from question Rick Stifel. is Wise from

Rick Wise

eight many number at half I second half, many stronger obviously we're far moving gentlemen. that its think margin. exceeded stronger gross conversions. Maybe margins as about, of get the the XXXX, congratulations since course than we pieces And morning, or but we first the Gross the we how the eloquently mean, half and can you lower about could do use, for a on look that's for to so volume half? year? expectations. second on my we implications bit. that first back said. margin level not with gosh, XXXX correct, guessing do for should Good start gross or in if all let's it's little much start Maybe given the elaborate start, mix my And the for I'm far second I thinking sides, so reasons,

Fred Hite

Rick. Nice try,

when which very the sales half a was were stocking it amount in XX% but anticipate said our it sets continue. our drag XXXX adding included no year through agency So, the bit. stocking primarily that With at strong to some a primarily additional right up very yet which business is little sales, do little anticipate last are of sets. distributors we We had were And still margin, of set the is this that being the start conversions, those and stocking quarter orders going or encouraging, definitely is in we little domestically, that is and to the from positive year-over-year, year that to buying replenishment margin. second at which growth there. will margin DACA, go first In the the seeing through revenue now of we're down the answer go zero

sets So a on a depending when be last total, in be I sales those better think than come it'll little year will lumpy in. year overall, we would expect that but this little

Rick Wise

of it just imagine, as on that do this Fred, mean, follow I any up And through the, number? color we think important or do better, model as sort an out, sequentially have we Okay. steadily we that, flow such how a about

Fred Hite

our third better and Yes. fourth and quarter, weaker typically volume the gross volume is the higher Sure. is in brings when lower first and traditionally. the second quarter It margins

think we of then the would quarter second basis, lower sales the start percentage quarter higher And and so and would some be fourth year. quarter in potentially more the third fourth this be on if could set I year-over-year, see a to

Rick Wise

Alright.

Just two me them others from both. ask I'll and

IP front. great It see the to On resolved. that is [indiscernible]

you this at curiosity, we be out we the Thank idea you in a and year? kind the taking should and from of this now, the are and as of product other beyond opportunities should And of that you digest important or the some pause quarterly the exciting sensitive What maybe M&A on key much expense that front? as that we and to be through what on maybe Apixaban litigation miles key you will open are talk basis higher for to about saving garner or and wonderful, year, that invest Just the there are level, us launches think a you a thinking so something happen no, about most might are how Apixaban Orthex Orthex.

Mark Throdahl

take $XXX,XXX. few anticipate was of professional of expenses". and first $XXX,XXX first There an legal it about services in settlement "onetime go We quarter unusual, the did then away maybe In don't the one, will repeating. a G&A of another quite was the additional There and bucket probably in second going that $XXX,XXX have that the XXXX. expenses then Thanks, forward, we can Rick. talk quarter one. call first about the Dave I’ll

So in of time. total expenses one other were that

the there first about So not G&A in would quarter repeat forward. was million expect would total, going that expenses we X.X in of

start savings should to that see topics we legal So adjusted and of year. for in some EBIT other the help rest should the that area the related to

David Bailey

again, encouraged our some of more products, XX old double whom of years Yes, once see growth are we're by than all really standpoint, Rick, growing from a almost that to digits.

So of excited time. said, That has indication pretty good that in a recently. launch we're the we've internationally Orthex the that just products with share, we're taking markets the particularly even of that number a a for long had EMEA about started

so as get us. a the big that's to to company's internationally of you endeavor be balance people but it can the And year expect internationally, we take for launch trained imagine, get sets there largest to That'll history. the our in and

And so is. that's our focus where

there, issued new working for that's year. have XXX(k) And this different of expect on slightly a launch this we're do but to we We deformity full year. about to launch been not least, approvals an trauma a have system. then building system Orthex, And indication. to we a product. force that in marketplace. would developed some Skippy And launching a again; training press that external having a that out expect never some we've to excited of sales and has and approval planning believe of that portfolio neuromuscular launched The the fixation kind product system that. ever version round product response talked and we for specifically last but bit. we limb that And And be that's first a also their the will device and XXX(k) we've its the No inventory companion side about the launch we've one

So see growth or this But a we what's kind year. the are with new Certainly good excited and of bunch of then going the that there, there. being follow on in going launched going we're products to pipeline all what's Apixaban have the of up and that on products that to organic we generating Orthex portfolio. about in have the

Fred Hite

talk if M&A around was question last you want about to the And that.

David Bailey

Yes.

certain say smaller do there. and potentially scoliosis to business partnerships from an told have in the the be add We've business interested biologic to the at to perspective, of number solutions. transactions trauma We're we licensing. this, that could We navigation quite technology a always in things So we some remain segment past that support our to of limb or continue portfolio, M&A may are maybe scale looking Apixaban. anything and potentially certainly the don't keen let's some we with the you of some deformity to

but we've of, point kind this navigation don't stage, could interoperative been I will at imminent. we've side potential looking so in and And the always to partnerships think anything continue, we at we

Rick Wise

much. so you Thank

Fred Hite

Thanks, Rick.

David Bailey

Rick. Thanks,

Operator

is Our Kaila next from question Krum Securities. Truist from

Kaila Krum

best guys. sentiments and going wishes miss voice call, role. But but at Thanks for we're also echo and Hi, our from your the Great. the the to Mark, others. insights on I'll taking questions in your the new

Mark Throdahl

Thank you, Kaila.

Kaila Krum

good will Dave in with Of and know I be hands though Fred. things course,

Mark Throdahl

They well. sure

Kaila Krum

of XX% off actually I it there. fully which drivers to wanted the grew trauma start on understand just I sequentially. business, like looks deformity just the about want So to and by

in And the quarter. I You growth the mentioned parse XX% that guess, then stocking year-over-year you was out, to how quarter? million million can I posted a quarterly rate how, big just take XX want dollar at it down in distributors on Can in inventory? some or if understand time sort to continue XX of will T&D you that run this work to basis

Fred Hite

were pleased the performance. No, I with obviously very think we

also and correction. March. to both many, activity the in Orthex this the throughout had mentioned earlier into trauma increased continued that mentioned dramatically And slower companies business, the Those as COVID here that encouraged were what of have different it serve the quarter. was is deformity correction improved other really surgeries, And in with think, piece clinics the really deformity quarters As but I perform and what February as has in was the include does differentiator first several by January ago. business April which time continued in from dramatically the

David Bailey

maybe business the procedure our for terms can and component a know be of to that trauma. elective correction that is our than important certainly, deformity procedures of deformity limb scoliosis in of that is more most delayed what's all think I emergent probably

business and big there. mentioned, some back of sided to start also surgeons year, that last in hopefully rates conversions to converted year. see continues, think we pretty XX is obviously really, part limb come quarter, Fred we So And continued converted it as we correction, a gratifying Orthex was last here that But of first see that the I the usage surgeon to and deformity really surgeons to aggressively. see that

So continue point strong volume, continue a surgeons more the share, PMP up, last The is products. would we I launched The to those cannulated the into have recently thing really usage rates to screws femur success to to go is of normal encouraging. see get that continues share. surgeons to those take really with take most

overall, business encouraged very I and think seeing the trauma So deformity with that we're what we're continues. on hope

Kaila Krum

of hum time to sounds It there. sort sense. business Great, like the it's in really okay. anything nature That continuing make core one versus

Mark Throdahl

Yes, that's right.

Kaila Krum

that and point, Perfect, how million how this least size think Thanks if double XX little mean, to XX this great. ApiFix first XXXX. do then much that that we're XXXX? months? be break modeling can for the is in over in $X it questions. a contributed the But product at product would At over you the next ApiFix, you disappointed in wasn't And possible to out I ramp just on quarter

Fred Hite

XXXX I a of number. this executing during XXX on quarter that your equate absolutely million We of person the the year, assumption. assumption in think registry to Yes, $X on is fourth very would which good plan

As far we'll aggressive this how next uptick throughout go and year as is. we year, the as see

registries the starting soon from within do what already that demand not we're we get from And how surgeons think XXX as are about the registry and significant really by other to Now sites. started completed. encouraged are patients as them the is we're

that with the product of that avenues of happier progress couldn't all the be and from getting the So business. demand we're

Kaila Krum

you. thank Great,

Fred Hite

Thank you.

Operator

Our next BTIG. question from is from Ryan Zimmerman

Ryan Zimmerman

for in but for and Shilla X some think little time it? for a on you've Dave, technology? you maybe sentiment, time, of mentioned questions you've The you before, but scoliosis, to it everyone's rod and that growing time know heard this first on you at with would working anything want been to just I on said that share us Great. else I've potentially bit you for Thank echo could a taking timelines the I and market, the solution a is coming that elaborate

Fred Hite

so Yes, good a question, Ryan.

think we to So, I a solve not think, believe the single EOS that's a have strategy the this going that there's that to indication. is in around about don't that's way product EOS We singular nature. related all

in distraction to This grow, that's for so allow that product, nature. a straight. a worked of trolley. a scoliosis aligned on but the is mechanical worked that's have growing And on more screws We've device scoliosis years, also we a the keep keep spine open Shilla-like procedures, the

any reasonably early-onset the of another will bring of series still but to also as That be more for in which response popular we system three the well early-onset pathology And technique, to orthopedics. few and straight support we'll distraction we working of a which have difficult to to the product a market, fast scoliosis. solutions address our system. that in We're hold to products We product would on in market, next types those of all be that's EOS. it's not the manual a fixation products as believe of small stature continue internally years, a solutions we allows what pediatric fixation when to would of or spine And scoliosis. a extremely mechanized, needs to least a company that pelvic those And to to companion the more two, to rib-based forward that of over for is so years, think able be continue body at to passive we most grow. three child device few it's believe be

Ryan Zimmerman

that. Thank follow And then up Kaila's for question. you to the

already quarter, of the the You there we scheduled, say in surgeries course scheduled in or what the some of might that those over the The of sense for for XXXX? expect and terms bolus course you'd kind this. XX those ApiFix second mentioned Just are next over quarter? of the the are of that have that's timing

Fred Hite

ongoing We’re scheduled. of surgeries scheduling kind

weekly patients yes, or, that scheduled months, XX add and we're have number. and that's for that would patients few to continuing we I next So approved the are then XX either to say

ApiFix if certainly exactly Ryan, accelerating bolus. in So queue those head, we I patients that an volume of call terms it done. to of the but I my of out, schedules don't in come are last off a have that the surgery can't where are I indication, know the would the one top of remember

Ryan Zimmerman

the other from And obviously Germany, pool? we international distributors and you could understood. distributor year major Austria, converted Understood, Switzerland, lastly from just this what see me, stock converted

Fred Hite

probably some DACA smaller, impactful I year, less location There's potentially outside markets But say, that much, of on. much that be in could for the first the in is of the are would far would nothing smaller at we working to the markets U.S. the later say some convert. are by other, other working largest half year, we region there us I but any

and in pace continue other really region that we as to new the deploy inventory and very come, I so to And seen introduce years DACA is both We're this this the more think in the start for importantly, location, location accelerate in consigned growth to it's drive more countries. pleased expected this that'll that the big get there as we've year, but done. with the that products the the accomplishment

Ryan Zimmerman

questions Got for it. taking All right, guys. thanks my

Fred Hite

Ryan. Thank you,

Operator

Matson from & Our Needham is next Company. Mike question from

Mike Matson

much taking for came growth to possible from the those guys it Fred things and thanks questions. margin gross quantify the Is that the my improvement. wanted you international of to about conversion Hi, ask I agency DACA how did?

Fred Hite

start much I of almost products the launched see break portion individually it of each same, think from now, U.K., other And you from them nice country. agencies, country new Australia, our I would is are country to now to But is an has came so the up long to that contributing, year-over-year other Mark a expect our as would UK which through a there that we’re how DACA. is the the enormous back normal, going aside sequential starting growth in in if lot many say, operating built-up right how may to of to tremendous not clearly, No, normalized but that's last. just and a we that except and some backlog and growth it's would. countries that delivered for, we've free working bit and driving And XXX% growth, almost out is been encouraging mentioned, recently

Mike Matson

Okay, into thanks. Well, that's a my good lead next question.

several mentioned Just you've the backlog the on times call.

at So all and kind XX% how in year XXXX it year. were to flat versus XX% the should think last Is a possible almost normalized quantify typical about your we over backlog sales of growth to that?

So reasonable not that a to reasonable? I is mean, quantify it way that or is

Fred Hite

countries to catch in in did and I our one pays I minds, they think it. weekends not way take backlog believe, working like how these is the countries of in U.S. going many that is quantify Yes, for government healthcare for on question XX, it release? XX to get they’re to that to They’re be working it up months is overtime. long not The this, to backlog So where cleared. could many in

minds the ability going – it’s not now additional shown OUS, an to it to particularly I or right UK And so, time. that has resources how backlog take work market question add over the in a our is on long we’re clear to in

there for a be could long it unfortunately. So time,

Mike Matson

it. Okay, thanks. I helpful. That’s appreciate

Operator

from Dave Securities. is JMP Turkaly next from question Our

Dave Turkaly

maybe or might we’re G&A side, about directionally stand at that thinking break Great, given to you you, was the knowing even some you what year. legal. thoughts this good what one start seeing could Fred, year. very revenue margin for wondering on all I in any losing imagine where be we as we're loss the guys. just but from you EBITDA morning have of in with this given soon, just adjusted comment look you I at line side, we're if bottom the net expenses about today, sort

Fred Hite

the call, XXXX. we're to Yes, we to the year EBITDA from said, last absolutely positive committed think of getting adjusted have full for as I

softer the first and negative and fourth always is cause generate EBITDA going very quarter the sales EBITDA some to quarter, we're same in are second and third the are strong with softer about The quarter. excited having but sales

that a and the the third generated COVID, obviously As given quarter looking expecting be adjusted we to year, last EBITDA positive $X.X in of at. reminder, despite on of volume improve in would increase this we we're year million that

it's coming ApiFix to continue up accretion line, will, if of this acquisition going the income because many those net the that On over still to are payments the years. noisy, be from next you on

the the cash down main net is adjusted the drag but to really you business continue will EBITDA that the is know true or focus is income the as operations. for line, So generating business positive that getting from using which

Dave Turkaly

it, for going I mentioned Got was for that have the value you for the you're thanks that. I think $X see adjustment think rest of contingent million And ApiFix, the fair but to you year. said

good to payment can the milestones you're those bring that actual us that milestones, think a I but means would are of remind $XX thing just like when might north is be you and triggered? imagine what So hitting which total I million, probably the

Fred Hite

this revenue. acquisition, year for the which Yes, multiple that LTM tied particular our is a line of is four payments to

And we've so that time. at acquisition it times revenue payments less up true and already takes a the payments made, that the calculation multiplier, of the LTM we

money. absolutely You that by impacted the correct, number of are time is value

accreted, now. confidence is seeing has what gain increases, closer, be get forecast, as you're to our it of right as we which number some So in we that but also

Dave Turkaly

was him then release And morning remiss this is I to I'd and in press I if went it. if got language could. Okay, Obviously that out the stocking it's you. the important didn't I a was for and is know be distributors Mark, mix. him knowing most critical. just small referring that to most exactly to critically I Thank when was the percentage it why explain wanted in hear OUS

Fred Hite

growth… XX%

Mark Throdahl

way because was Dave that and strikes we QX, growth way, Achilles was stocking it in the XX% growth down. QX thing heel me of the gosh, reported XX% business Well, last the agency distributor but agency that is year, in

that So vote fact is levels, the it's back at freedom. I a think for mid-teens growing

Fred Hite

With COVID businesses. still impacting the international

Mark Throdahl

yes. Yes,

Dave Turkaly

you. thank it, Got

Mark Throdahl

Thanks, Dave.

Fred Hite

Dave. Thanks,

Operator

And no time. further questions at this

Mark Throdahl

forward-looking by our to future world. much just in the of throughout me So thanking you the helping interest progress. updating We're their and everyone our conclude for your support in cause the on meeting company very for children let

good a have everyone day. So

Operator

for now disconnect. Thank that Thank you. concludes you conference. today's participating you Ladies and gentlemen, and

OrthoPediatrics (KIDS) 9 May 212021 Q1 Earnings call transcript