Earnings call transcript Q4 2022

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Operator

Good morning and welcome to OrthoPediatrics Corporation Fourth Quarter and Full-Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Trip Taylor from the Gilmartin Group for a few introductory comments.

Philip Taylor

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

actual Before Private federal statements numerous securities that may including the These remind results forward-looking we forward-looking provisions are within Reform laws, let risks of Act Harbor and remarks XXXX. the statements of to company's the Litigation materially. and include you meaning the Safe begin today, Securities subject company's the differ uncertainties, me of

discussion of the time. and to reports a XX-K report risk For SEC you factors, time updated to company's on I review supplemented as annual other from encourage by our most recent filed Form

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

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

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

Executive Bailey, turn to President the would and I to that, With David call like Officer. Chief over

David Bailey

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

XXXX. nearly have our Medical, all start thing full-year over the children top priority. now in XX,XXX inception, XXX,XXX helped children. additions of and quarter XX,XXX children highlighting As right Pega and we Doing to Orthopaedics we MD remains for the I'd and by the approximately Since the with earnings fourth like that begin we calls, helped for

X, of quarterly XXXX. the revenue Consistent our million, fourth pre-announcement growth on January compared with representing we to quarter of XX% generated $XX

For to the of we growth million, generated $XXX.X XXXX, representing compared XXXX. full XX% year of

COVID that again negative the ongoing XXXX. of the record and in produced and founding, excluding XXXX, revenue from back excess impacts the and staff of has in half high since ongoing record QX shortages, Despite year of flu our been rates of once we hospital growth a ridden the year, trend XX%, in pandemic RSV

line headwinds EBITDA. adjusted revenue QX our we to of experienced excess addition expenses, growing year profitability. which to XX%, we top in continue of grow reduced our in in the In faster The than first resulted potential

we in adjusted are pleased generated our of positive XXXX. However, first EBITDA year to full have

orthopedic strong bottom the and sales of gains our increasing line top train our to and strategies, resulting by commitment products, driven from acquisitions, successful new account pediatric Our a from result product surging ongoing generation surgeons. continued share increasing executing was deployment, growth next two launching adoption of set our synergies conversion as

improve XXXX, million is strongest to expect we drivers, of total proud continuing continued of its year believe profitability. just strategic deliver Overall, full and also are revenue extremely while growth we from our momentum for OrthoPediatrics performance over our those position $XXX time. With all $XXX million the to in to

years. next we our have August breakeven to strengthened sight raise that capital Additionally, of XXXX, solid the believe a five in cash in following sheet with balance a flow we line

Medical. period. combined growth $X.X to This of Orthopaedics In and for to quarter revenue million revenue the of compared global $XX.X Moving we of total MD Deformity approximately generated XXXX, prior-year our the included Trauma Pega of representing fourth categories. & million, XX% revenue

compared X% Deformity | Femur, period the legacy growth system. our addition PNP market & Trauma with same of system, of in gains the to cannulated in external to representing growth and by was prior implant $XX.X share quarter Organic revenue driven Organic screws was revenue growth year. Orthex million, fixation

sales Pega benefited both achieved Deformity acquisitions, XXXX the portfolio. of were has We with & MD expanded which Orthopaedics Medical, synergies Trauma our also from our meaningfully and

to July XXXX, As iron and strategic and to non-surgical And Pega report Iowa-based rationale a to franchises. Fassier-Duval telescopic of impact gold we leader reminder, bone treatment both I to diseases. trajectories execute, we further in Medical nailing validated. MD treat rare used April our Orthopaedics, is continues clubfoot, growth the their a acquired in positively standard that the pleased acquired in new am system OP we as of continue

MDO, to specialty in with association clubfoot sales European bracing and reorders, portfolio the the initial as improved we visibility of XXXX, with new OrthoPediatrics. strong from Turning market existing in a brand products expansion achieved result distributor its strong of US

Going contributor to forward, will our rate forward. we believe the a ensures be material momentum growth our generating we non-surgical it are going in franchise

Pega the us of the an forefront into pediatric Medical acquisition positive have system. our sales has US two Medical telescopic the rare positions This In we means quarters, integrated portfolio immediate iron product fully integration of by channel. market disease revenue uplift. Pega nailing The produced bone Fassier-Duval at of the

and we acquisitions expanding extremely for. thus in of their And positions our is we pleased what the Both product integration market. the categories, business performance total Our bolster are customer our each synergies exactly leading very of cultural market the far. obvious, with addressable surgeons the feedback is respective hoped had positive, are while

deformity. of are implant multiple screw are and of opportunities a core we cannulated legacy | trauma PNP our growth. deployments by the Orthex, ahead, Femur, excited sets expand position component leadership further to new our and pediatric Looking within Further

for Medical growth products, position dramatically for meet sales be MDO this deploying opportunities contributor to growth Pega rate of key more outpace organic fully These a improve Pega several to launching in to global there years. With increasing business to products. the instrument to access are sets key both corporate and Medical expect our XXXX. demand, Pega, training our we to surgeon growth, and representatives our Additionally, plans levers new including multiple

new customers the products several Ponseti as XXXX. in technique, we specialty to and throughout bracing train non-surgical MDO, we With open international new expect accelerate markets new introduce growth

which we'll the business. $X of additional key Now quarter, growth generated In representing revenue growth accelerating the factor the RESPONSE XD with such prior our XX% was ApiFix, as organic we placements. Scoliosis of to period. compared share to of move million, revenue with products primarily and fourth Scoliosis a T&D, to taking is market year Similar

share that in growth quarter, market the accounts and During added lead we XXXX. to surgeon will material in prominent gained customers new

added We also sites. onboarded additional several new ApiFix and commercial users

through adopted. being ApiFix and/or XD where is RESPONSE see to in continue pull accounts We

We data fusion as two-year OP expect years placement surgeons significant to we for business we come growth XD our RESPONSE to our additional a of Scoliosis units more outcomes for the expand complete report customers. adopt system, be and ApiFix clinical to the driver base as for our user many

international. the Moving addition of new our $X.X period, sales international the MDO of XXXX, prior-year $X primarily Pega stocking million international and the to quarter driven of on to In by revenue. quarterly well million as fourth compared we generated as revenue set distributors, to

the across international our globe. the announced reflects largest we marks direct in which one organization Europe. first GmbH orthopedic of in organization Germany, helping the January, expanding and our sales In of our direct is children OrthoPediatrics commitment formation markets to

able community German organization, this to establish With service lead sales we orthopedic of pediatric with to provide level believe a be deeper will direct that connections will the better patient and we outcomes. ultimately new deeper

set key XXXX. growth sales in additional markets, new us that This, the within strong our international from product purchases in expansion stocking along in confidence launches willingness franchise, to international business European is positioned with for products distributors, agencies, our integration international the our MDO of well increasing Pega market generate gives and

Altogether, new product XXXX, Drive we XX to this with and support, products, new Pega development, MDO and product product to XD-Side in brings Turning total our systems. several the launched offering bone along Rail, including portfolio.

pleased with be growth initial are and recent source of in a launches We contributions XXXX. product to expect our the

late these our more MDO business progressing business. development advanced projects R&D incrementally This projects from attractive. entire also have across and includes made We that Pega the stage

number Scoliosis, we track our instrumentation, on screws remain upgrades. cannulated In RESPONSE RESPONSE set and launch of new derotation a to RESPONSE instrument

of when that system we in forward and both the finalized placing this pedicle launching XXXX. second quarter set and we system our look surgeons development power RESPONSE assist the to will screws, Additionally, of

advance we in XXXX. development such In organic DFX we initiatives pre-planning to continue Orthex initial several of XXX(k) which PNP Tibia, approval, launch the Trauma [ph], just received software, & each expect an Deformity, as and the FDA and

we correction with products, Within least continue in limb several the two launch for the Medical deformity slated product family, of to development in Pega at XXXX. invest

robust where cadence introducing several new on products working in building XXXX. starting continue product we we're new introductions a of through Lastly, MDO non-surgical

the while with profitability, next competitive to pleased of of introduction revenue generation towards on remaining are XXXX improved products and advantage. beyond is path our orthopedic pediatric we In all, new we another of development of constant the growth solutions source advance believe and the ability in and

Moving on to and training surgeon education.

generation responsibility contribution pediatric the our orthopedic And As advance greater to field pediatric a is the orthopedics. leader next surgeons. pediatric believe no we to train help we of it entire in orthopedics, commitment help of than see our

[indiscernible] education were clinical XXXX, continue training major Again, XXX and surgical with more than societies In that pleased With the education do. XXX the prolific year our leadership training. and we pediatric everything specialists. product events EPOS, of IPOS. sponsoring and we we than to Clinical XXXX, we said, healthcare in at training extremely more POSNA, is are of another such for as professionals covering conduct core in orthopedic proud

Orthex meetings year. Additionally, and group around seven training user the XX we held courses ApiFix throughout

meeting and attendance hands-on In were attended of day the the Orlando, several saw and of our and lead specialty IPOS the fourth at strong quarter, workshops. supporter the we in

to on initiatives. I our call ESG substantial and Finally, want our progress efforts out

lives organizations key released whom day, change early ethics. As our effecting our In meaningful cause February we in employee and XXXX, are business ESG representation strong to report and accomplishments the several engage. a in highlighting environmental every diverse we lasting our company committed we including that and XXXX, with

respectful, everyone behind proud inclusive are stand community. of to that compassionate, an environment our dedication We in to and our fostering is

the financial to on With Fred? that, results. to call detail turn provide Fred our I'll over more

Fred Hite

Dave. Thanks,

million Our quarter by $X.X in the of fourth quarter quarter Growth Medical $XX.X fourth of to contributed XXXX and XX% combined MDO of driven million XXXX. revenue Pega revenue. adoption. the compared increased continued surgeon was worldwide primarily

our primarily increasing full key of year compared to deployments, worldwide driven XX% in and surgeon XXXX. products two of the year sales when from acquisitions. by million $XXX.X our Growth revenue new XXXX, the new of increased For set adoption was synergies

quarter of revenue was of quarter increase US a fourth XXXX, In XXXX. $XX.X the the XX% fourth from million,

and Deformity US the in the by of and products primarily Growth we and compared Pega XXXX. deploy year increase growth revenue of the full in Trauma and as XXXX, For & $XX.X driven the quarter to was surgeon as sets of Scoliosis Medical. our XX% more addition increased million year as to well MDO adoption, continue organic

of million, In XXXX, total quarter we growth of the generated period. XX% representing the of revenue prior-year $X.X compared international to fourth

year quarter addition of and full to volumes, our million sales and MDO XXXX, increased Pega. distributors, Medical. XX% the the set increased primarily year revenue XXXX. the international For as increased by well of procedure compared in stocking to driven international the Growth our $XX.X was as

the revenue compared million & period. of XX% In quarter, prior-year fourth the Trauma to Deformity increased $XX.X

as | Medical. For million increased growth growth Growth the Femur, was XXXX. from year PNP revenue and as Pega & systems, and $XX.X to cannulated Trauma screws, the in the XXXX, MDO by compared full quarter from Orthex organic year the primarily of non-organic the driven of well Deformity XX%

fourth the Scoliosis' million of organic prior-year to XX% revenue quarter increased period. XXXX, In the $X.X of compared

sales international XXXX. by revenue and driven full to as well was sales, organic through they For stocking as Scoliosis our the distributors $XX.X backlog. compared system, XXXX, increased primarily of our as Growth increased RESPONSE non-fusion and respond set increased system, increased fusion of pull million to sales year to ApiFix look of XD XX% to

to fourth prior-year quarter revenue Finally, which XXXX was period. Sports Medicine/Other of decreased in the compared the XX% $X.X million,

Sports X% to XXXX, $X.X of million the of Medicine/Other year XXXX. decreased For full revenue compared

consigned were of quarter XXXX in XXXX. $X.X set the to fourth fourth compared quarter deployment. of million in $X.X the million sets Turning of to

For XXXX, the deployed $XX.X of XX% full to compared XXXX. million, year we up

expect would We continue deployments sets see XXXX. in strong to demand more increased and experience from and more to

briefly few Touching a metrics. on key

gross For in in driven fourth was as of well set sales quarter FIREFLY XXXX, margin of purchase sold at cost to to licensing The the distributors, our stocking which minimum international obligation higher quarter on the the XX.X% decrease a respiratory compared primarily from gross in quarter. agreement, profit resulted unfavorable fourth the XXXX. as illnesses was by XX.X% margin of fee impacts

margin profit quarter decrease the gross XXXX, fourth driven performance. of XXXX. XX.X% year primarily was compared slight in full The the For to by XX.X% was

XXXX in fourth XX% million $XX.X XXXX well million $X.X expenses as quarter operating expenses $XX.X from fourth XX% in growth million XXXX. in The million support million by as XXXX. company. incremental Total quarter operating increased $XX.X Pega increased of the required Total ongoing increase the was $XX.X the of in of to or million the Medical of or the MDO from addition $XXX.X to driven and personnel to

marketing $X.X Sales to and the $XX.X XXXX. fourth expenses XX% quarter or increased million of million in

million. For marketing driven our sales year with increase the addition the and was expenses million to acquisitions. full or primarily coupled of The by XXXX, $XX.X sales $X.X commission increased recent increased XX% expense,

XX% $XX.X or million General fourth $X.X of XXXX. quarter the in and expenses administrative to increased million

$XX.X and primarily to million. addition MDO well in of as expenses general with increase increased XXXX, resources For and million Pega our to XX% the administrative by the and increase of the expenses the support year ongoing or Medical, recent business expansion driven legal as personnel acquisitions. an The and $XX.X was full of associated

Research $X.X XXXX. of or XX% increased fourth million in and the expenses to quarter million $X.X development

million XXXX, year recent development, research increased development associated by primarily million. expenses increase was The to full of $X.X our with the XX% driven development product and or For incremental and research acquisitions. including $X.X

the for was and XXXX quarter for fourth million compared other for $XX.X for $X.X period million Total the last compared X.X $X.X million same to income XXXX million with year, XXXX. to of

to we value a benefit million of XXXX, million XXXX. the fair a adjustment of $X.X for benefit compared quarter quarter fourth $X.X fourth the In realized

was XXXX, consideration fair $X.X benefit a of a For XXXX. compared to benefit in adjustment of $XX.X contingent value million million

XXXX XXXX. quarter loss of adjusted of a fourth $X.X We reported loss an of to EBITDA quarter million of the $X.X for the compared million in fourth

XXXX. generated negative adjusted $X.X full a million $X.X compared to For year of in XXXX, a the we positive EBITDA million

and fourth cash, on a strong of available maintain credit. quarter $XXX our line term cash million $XX with ended We investments and in position the We cash. short restricted million

In the flow sight current to on adjusted sheet, line positive execute business strategy. breakeven current to balance of economic environment, favorably strong our and EBITDA positions us our cash

along rates. we constraints, range year-over-year operating to $XXX to revenue staffing $XXX and growth For with million, capacity expect with similar hospital illness and million XX%. to outside in XXXX, the between XXXX XXXX, an representing between annual is In the over be environment expected respiratory just XX%

become from The guidance assumes roughly before Medical on MDO $X million of organic and their anniversaries. Pega revenue acquisitions the contribution

organic expect XX% to growth We of XX%.

XX%. $XX to a Lastly, growth XXXX, we representing plan deploy in around of million of new annual sets year-over-year

Additionally, to between of XXXX. moving we expect down $X the P&L, million generate to adjusted EBITDA $X in now million

I'll point, for the Dave this call comments. back closing turn At to

David Bailey

growth Thanks, products major or Fred. rely few Unlike on a or doesn't initiatives. our businesses two our size, many key one

amazing unmet amazing changing We are cause, an culture, healthcare. the by a an supported meeting dedicated world with by in pediatric company to needs

of opportunities clinical our to help the with specialization and and us. surround improved differentiated focus most has expands outcomes. to comprehensive products enables surgeons pediatric kids ability of truly Our orthopedic The solutions portfolio surgeons

capacity about think our kids we greater. has more and we beyond, help to XXXX As been even never believe

key segments, as deployments as non-fusion We non-surgical across further leading franchise, and in drivers new continued of such markets with gains have outsize gains Medical sales our in conversion, growth products several the share international the growth such account in bracing and ApiFix place as Scoliosis fusion in our set PNP for Pega opportunity business, growth Femur, continued T&D specialty accelerating business, | share growth the and the stabilize.

make strength. positively of gains, families. are and continue. profitability, our can to us be These opportunities And story believe and in revenue confident that is lives of will we share Clearly, the we a improve continue grow I most reason tremendous impact every their OrthoPediatrics importantly, give to growth children position confident and

to I'd With that open over like turn questions. to said, the operator Thank back you. line the call for the and

Operator

Instructions]. [Operator

question first Stifel. Our Rick from comes Wise from

Rick Wise

for all year ahead. you the Thank excellent on perspective the

tap. on year terrific another like Sounds

I if guidance. I start think it's with best the

me reiterated simple $X MDO XX%, and I much for maybe your to to to break thank million calling think a guy, XX% say is just can't not just range, XX%, the million RSV I'm since or maybe the understand $XXX and appreciating Germany, Pega. Help sales inception, like CEO or we organic XX% is it million direct they've getting XX%. And even you little Help If stronger synergies, it the You $XXX docs incredibly factors. the your related the myself, think better organic grown further. a and to launched, an other I basically said. out products perspectives down why I expect going better setup, some on more think performance I'm this me in from about the but particularly when more seems conservative portfolio, trained, the

[Technical Difficulty]

Operator

want you Mr. Wise, your to may repeat question.

Philip Taylor

coming We were reason for muted, some the sound not we lost but through.

at will this Dave, answer So, time. the question

Sorry about that.

David Bailey

it's I a think Rick, good question.

didn't We have, the internally planning to off move here not you And we do I that have XX%. to can historically opportunity that. grow aspiration. think obviously, imagine organically And we're than that greater

what that But have that's I and the months, but very the think XXXX. thought enough have our staffing, we respiratory again here guide so basically That we illness, guided. recently, XXXX XX terms future occur the those pandemic, that COVID, last guided disruption don't holds conservative, way necessarily be know we the seen Fred since and course to the on things but of saw expectation the fact maybe I with may in in was that in we've that the even based of XX certainly over to more

XX% continue in internally, our organic. have the certainly we of slightly XX%. that aspiration long think basis But of string isn't would guide growth excess to a the again, is the case, than so, of but we that think, I I that hope lower And be that

Rick Wise

it's assumptions? first the Obviously, not RSV same, just on What's help through We're like to quarter? side? maybe is it quarter. the us lessening, that fourth worse, getting of exactly the of headwinds way two-thirds some ask, hard Is just the on going the

David Bailey

Yeah, flu, the has never some of with probably I cycle seeing, think down had the that this, certainly we're quarter, slowed seen. impacted we seen and RSV, the news fourth like respect to in things you've us

we obviously, a and right see was what And Numbers that I that is January. I the of were that to early impacted, high. still And think year. so, continue this through But hopefully, still hopefully, the very balance to in here we're trend see seeing the through think we general continue summer. the in direction,

Rick Wise

I'm in to sneak going understand more, gross the each margins higher you On Would set on sales, to gross licensing and apologies. one margin, the – I would of relative Fred, gross if FIREFLY Can help especially have highlighted quarter? you that, imagine the fourth RSV RSV. you think impact exclude XX%? all would your we exclude it, help us been the about quarter the don't relative that. would we how first know margins side. But And us

Fred Hite

gross volume depending the than quarter, fourth the first less fourth little expected margin so softest. much fluctuate quarter. does in quarter a the the volume, the Our was typically, so in lower. and RSV, between lower and second And Because of third was highest in quarter, down then on quarters quarter, the in volume is our we

higher fourth lower minimum the year was at set bring FIREFLY volume our had that compared did versus evenly well even sale down as probably in But that to decline last So as as year, well, cost, agreement, in commitment. quarter, split between quarter. which you pretty last fourth license this the margins if the

margin the similar we going expect, quarters, that in excluding So it's fourth of even. I probably the the probably to XXXX. We across would XXXX XXXX think, quarter softness saw pretty is forward,

Operator

from Ryan with Our Zimmerman next comes BTIG. question

Ryan Zimmerman

me. in one, in I questions for wanted disruption few some squeeze Number the there's market. spine to been a

what NuVasive of the And guys franchises new of franchises. those or you a it's in Globus subsequent what distributors kind OrthoPediatrics, to As I'm your business changes or [Technical and thoughts as could wondering those Each whatnot? any those there. of disruption expectations Difficulty]. market have whether are know, do for rod growing and Appreciate your result

Fred Hite

able at that you early scoliosis. see other obviously, side, NuVasive onset there. product the have rod that a into think on next particularly necessarily lot to on for magic for obviously And I think, probably used side some on we disruption, the organization our being in the don't would again, next – our not some factored the We it's of see potentially the our I companies sure technology. major growing people, of companies. several just it's available that as of sales in us, I us growth drive But they're generally market But year. benefits something particularly growth year. be contemplated least we've think the spinal yet. It's benefits that for Nuva But, attract there's different not think that disruption that add one probably something the drivers I'm strong. we've I drilling areas where don't to to selling

David Bailey

what working I just is it's as would that as in about it own launched future lot. But a we're add excited It that be highlight growing are Yeah, in on be XXXX our well. still don't not being we pretty but to the could going developed, we rod technology.

Ryan Zimmerman

Ortho and can a MD then comment result help integrating they acquisitions, good I grow They're us sales force. OrthoPediatrics average, you growing, of the of be lift you you understand rate. but at growth and into as made should will guess, before Pega, the kind For a above, kind that corporate the already I expect small, your and think, those that after of they relatively the so

contrast just kind those of what maybe, kind and having of you're result and those I'd businesses so, a And acquisitions? impact as your from compare of appreciate two

David Bailey

Neither were when businesses them. we those effectively of acquired growing

pretty they're static. So

investments made focus, those a had products. there lot primarily a speaking, lot fact demand of businesses of the them, of lack sales it's both behind for despite was generally think of force lack hadn't that those inventory, a capital just I of

somebody help already with, in they very products. difficult now on knew, very them aside, had our spent those the time adopt have through operating have keen selling for to Pega that when the So some as surgeons able organization work to we were first quarters, the they to I products, we call think particularly be two

growth seen line. – US – we've So the the that product sales adopted we adopted we minute accelerate well, saw almost particular growth from force

And think and as Pega international get we offer organization, so, expect product of and get those products excess both new MDO years. as to grow for as hands in inventory I both of the selling this lines, those well we for product, US two XX% can the next we that and in our businesses several those

Fred Hite

I would or to it's question just side, to I we have the grow think add, deploy – that get past, in in sets. And gotten inventory have those the to particularly investor fast this from we've we going Pega XX% have set. we can this XX%. get because to grow And not

sets So, second on orders we a start lot sets, We've will our now half of XXXX. it. place. bought we second up showing Those of round obviously, ordered put the when in first of

the And growth as overall well to the Pega five advance business roll we and next continue the so, years. we'll out of have in for growth more aside, more sets on

David Bailey

FD on aside, Last the is point aggressively I'd their of products been on make only that the product was commercialized had the Pega seven rod. Ryan that

already the so, rod are more in an to of uptick And indications in seeing FD trauma. that related we're use

the new our that both in to that those they're and design our customers. customers, few used around gains see US part, a the have helped to KOLs And build But for new products, most and FD have part of maybe products six are we world. the the additional rod. a entirely for have that also, them And they share but most the so, you

our like products. that we've six how launching over product new to we And pace those XX to next that so, are really out got we're them really course in we'll They positive those feel the sales product I credibly thinking different products educate products or deliver the just far be force development gotten the months haven't feedback new like so and of bag we've customers think to of access had so launch, going and kind about or here on. about and on

look what as rod. about products could like that to pretty beyond So we start the bullish out roll FD

Operator

Sandler. Our O'Brien next Matthew question comes with Piper from

Matthew O'Brien

which trained are as is with especially Dave, on as to slow clinicians, I down but a far interactions of Deformity you had conservative, for as lot RSV, somewhat et because cetera. what it But tapering far sure year I'm the in did you & as year, do things the share sounds it guide last momentum And as the as like great. know off. Trauma is goes, far taking you market your to folks

what you to So kind momentum that facing in of XXXX? about are going getting year back as think headwind you T&D this

David Bailey

I blunted momentum. it don't know that

I the new in think you've pretty to And with customers. having the and we for we the conversations a lot QX of that definitely were for from deployment year obviously, seen getting QX field. were aggressive, sets and

consignment, pure inside it's by the some administrative process some have been the just bit, just but in little down that of that possible, a some that the that that then disruption Matt, on those very slowed excited, this hospitals just of surgeons from then on of it's get the little So slowed marketplace. of moving and sets momentum time administrative a and get possible to through the seen get the a have XD would children's deploy ultimately right take bit We've side standpoint. of where some challenges of

But we front our about US motivated I've in we in just half either to what contracts, the contracts, say, normally not two places look year. where look positively are vendor back that we this sales came Miami. of think I future. know at and that of out when account our don't excited got key we've force us more single win vendor of I starting in conversions, we but the sales let's at – And when meeting trended pretty seen in

hopefully, start That as hopefully, into kind here, getting to that hard is we products, think XXXX, of here we'll don't deployed makes just XXXX. the the harvest sense, products. of of I throughout of in what new of the new inventory, product we've more all new so, launch, the we've legwork in kind so using Matt? stabilizes with some done customers And market put reap benefits work far of the And seen

Matthew O'Brien

that. Totally. I appreciate really

company for a On but the product. of address doubling from said know to you've that. when the revenues a a think sure that we bit in I ApiFix have think to hasn't ApiFix am. important expecting sales it's that about the is bigger people about been think for product. an I want not from I Dave, I know doubling or that about we lot I investors, little on a easy, should certainly for changed I this make opportunity inflection year inflection maybe that any of of think side, should very the bullish it. a when more expectation contribution way perspective, you're

David Bailey

customers and start-stop wait adoption. get have we're the this spine right with rapid the technologies again now think with product kind there a bit cases. – ApiFix, surgeons space with do pediatric that, challenges And but of other And doubling see as those I having. of And willingness you think in more a what from understand of approach the on number the that a the pleased phenomenon US. product side, with most a are and some our we've is of given start our more entered we I line this have few I data, Obviously, times, of lines. had expect of a we some that that said the when new can And that's know commercial in of to is we seeing account more comfortable more standpoint are as

our And cautious. so, customers are being think I

about start start that. really is get you – inflection I by doubling three-year know, then when we with we two have to XXXX. when an should we're two-year XX data, point. really years of we But And end and just that's patients pleased ultimately at see the data, to Obviously, so think

at XX have end we end the now data We And two-year first right by podium XX POSNA for of to the time patients the XX the with with on patients. at – of QX. our patients get expect

XXXX point data aged. numbers. a a richer, more inflection little the out think still is I XXXX, data look would So small a maybe at little bigger we But when is in

Operator

Matson next from Needham Our question comes Mike Company. & with

Michael Matson

the just one, of I market about kind wanted to opportunities. ask

look here, discuss there, don't all surgeons numbers more guess OrthoPediatrics maybe give if the but I just you pediatric customer what but know going on surgeons you're are now the we at this, if those way. of in wondering, So, portion some me I pediatric I'm I'm What it. a focused to – US could on of out

So to products existing of to that's use is growth how taking trying a your getting using majority using get bunch, accounts. already your actually and from not those some them them just coming much any of a products in deepen versus having to and your your products the surgeon penetration just of

David Bailey

then a every hospital surgeon I United more a customer States in have some additional the freestanding community children's that of think ours. there's but setting. pediatric orthopedic is And major children's, aren't in places

so very, those systems. argue our would one about XXXX But or substantiate of that one surgeons XX exactly. So, very our surgeons. don't implant I products, type there's they're can't few association using I have some where at of this of that with of least

growth think with who have we kind a I of and the challenge existing the secret penetration consistent for drumbeat relationship us, here think our XX%, been this people OrthoPediatrics. with has solid and it's deeper getting are of that to I been

our one of customer that to the And five a systems, or generally two XX in XX least think of or where four here. accessing so, our of I moving also that's of them our of at or who's developed in are or markets XX use particularly outside XX system, And strategy United Europe systems systems, our somebody or to of or States, products. our of customers applies using the generally who one so using may

relationship that relationship. expanding we're and just that have We

in of this T&D But, of mid-teens we're the in we think end, We and again, have Scoliosis total. very fairly the probably innings share low share. kind early still Mike, of

And so, next using more be we long we got to think we've get a long of more for years. way products our to go growth runway and got the and there a customers several these more of to able

Michael Matson

us of in remind markets, markets right Is markets opportunity wanted I you just Are in some in any You mentioned you're ask, of like what international doing those markets, you're them? Brazil, not any so to if et of cetera? China, can you the there emerging now? an emerging

David Bailey

nice strong really more markets internationally, We almost so – for all by recovery Brazil. our but of Certainly us in as was COVID, Brazil business and have maybe impacted others, than a opportunity there.

So well we there. do

get approved more and in get Brazil. products we We can that in have a lot

got product. But for think have we as that's markets matter We the that an we like right years, of those into in as push really so, volume our our out growth it's is that that at to enough like surgeons, is do for term There lot front distributors hands opportunities continue long would But in will full lot and with that And a India. of opportunities there. this of from are with I have we growth contemplate to a a potential now, things of right execution in opportunity. us sources the of frankly, inbound that stage, right But both growth. well us front growth about know from markets requests, us aggressive to for carry us. our of been remain China us difficult

Fred Hite

With MDO India. that said, into of do entry And starting I countries. point that I think into an easier think [Multiple Speakers] some these that's is to

So on bracing specialty have China that just nothing in now. side to dabble we right things, in India but starting of

Operator

with Turkaly David from JMP Securities. comes question next Our

David Turkaly

you I like, was think which has, you gross quantify gotten you impact think was, the XX%. amount I wind around that still wondering, XXXX the margin Fred, I up where said would dollar to if XXXX of because expect might

amount, if be So dollar I that then would that helpful. make that's want true. could sure give And you that to

Fred Hite

margin reduction so the probably years in half last which I the from quarter saw set the was the fourth zero two is XXXX, FIREFLY. was that reduced year. comment XX.X% lower hire than the other of rate versus it fourth reduction And that the the fourth is of the we from quarter that is margin gross think – between of half was, and the gross sales in quarter, cost XX.X%, in at

David Turkaly

$XX And million, for? was to adjustment that what the fair value

Fred Hite

quarter to the in was related That third the ApiFix.

So sent us we accretion the updated the on a model. And our third changed new model, accretion party firm which ApiFix. valuation

a recall, As April XXXX. you earnout out, in payment on have sales is may system four, sales of payment which based year an we

favorable was So quarter in that of adjustment adjustment XXXX. the third a

David Turkaly

any sort Ortho, million think had of so in I new maybe the this past acquisitions, needed, sets, $XX you'd some maybe versus forecasting the on the ApiFix MDO new newer from compared set done maybe of to year, maybe and or the guess core a and the how you've investment comments you're in Orthex new Lastly, what's acquisitions a component other the I different $XX products or a before are MD color of it said Pega what's that or million that standpoint? how

Fred Hite

is [Technical benefit MDO Absolutely. of Difficulty]. Since the

businesses. business of can that we legacy grow as deploying more bracing So aggressively more and some are without very the capital on specialty

The Pega a to side, although It's I similar similar, on the business. legacy is high being have more would deployed. return their they say, sets

the So, the we XXXX. Pega capital come. that to deploying are We'd do business expect to side on of years for in

second efficiency is some our But in mentioned Orthex, which efficient that standpoint. highest from at from ApiFix capital, well tremendously growing growth, you $XX capital million is probably for as efficiencies definitely no MDO and an product

to $XX bigger probably ApiFix of for XXXX, we So, to built as million become would and that there particularly expect increase, the a continues business. that is the efficiencies part into number

Operator

with next Our Truist. Brodovsky Sam comes question from

Samuel Brodovsky

ones quick start MDO to on Pega. two Just and

of In maybe the those little cadence off growth up and a company expect we start in XXXX terms to pick from look growth, to that? of should follow broader little can businesses a seasonality the or more

similar between the faster, it's businesses, quarter we then or a got two given a little for both Pega? fairly maybe growth headstart grows MDO rates about should on expect And

David Bailey

not the the is different Yeah, I a little some say there, than traditional seasonality a I that seasonality lot. there is our of implant would business business, MDO MDO the business. believe but it's

as business at years, this next not impact that an our grows, the it's Certainly, that bit. overall. big it a to it'll big seasonality grows, start as should seasonality. enough of that have the hopefully, But over So of flatten to flatten stage course that several

see similar flatter selling deformity not because Pega it's a the as of in big a impacted, trauma season. very and the So, product. maybe It's in limb summer we obviously, seasonality, scoliosis is terms what bit little

of potentially do time really products north new to as there at the launch we has product been expect when moments the Pega kind for be increasing XXXX, grow of both again, any think of first some similar well. bit hits inventory revenue Fred the terms shell, last for on, expect as this of drive businesses haven't these businesses their prolific these these in rates, I those but businesses not in as that will medical well rate. predicated we expect In businesses of XX%, of some as And both growth said, this, new to in of because similar to those launches. been

your hope So answers that question.

year, both the get think and throughout growing we that types to indexed and field. products I at rates is of by similar inventory some of the new when

Samuel Brodovsky

On XD, expectations in how Scoliosis plays XXXX. well at bit a little and for much XQ, maybe you all, that in you that had mentioned quantify just business contributed can into that the

David Bailey

over & deployments Deformity for with of least historically and grows deployments faster, contracted organically that those scoliosis deployments a the both course couple ultimately of additional faster had Trauma QX. growth comes franchise as of the the franchise. a our than grows We've QX at source look and We early business. revenue at Scoliosis

and fusion deployments again. kind We leading RESPONSE our with with XD as system, more Scoliosis well more making more share the KOL. expect see of XD, as that technologies are we that more the the that Obviously, of to credible of between to market entire gains portfolio top ApiFix interaction

of being now line placement. we terms think we line enjoy seen them has several So, yard well. positive from XD a result able revenue to surgeons, as of units response right in to and these such and that across have the increases get really their goal of are at performed We've the with response start X-X-X

Operator

to no the over back are There you. closing remarks. Thank at Bailey turn like David this further I'd call time. to questions for

David Bailey

on all joining us call. Great. the for Thank you

our on it Sorry questions, Hopefully, to the Thank too wasn't successful could forward technical the your and you. XXXX. a difficulties answers we hear interest you OrthoPediatrics ongoing for disruptive here. and in but to look reporting appreciate out

Operator

the does This you. program. conclude Thank

day. disconnect. have now may a great Everyone, You

OrthoPediatrics (KIDS) 1 Mar 232022 Q4 Earnings call transcript