KIDS - Earnings call 4 2023 | OrthoPediatrics Corp.

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Operator

Good morning, and welcome to OrthoPediatrics Corporation's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] 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

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

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

filed in on For company's most the near a to Form which you XX-K, review discussion SEC of encourage risk with will future. be annual the factors, report the I recent

to During the in or measures these the will Each measures period-over-period. note Please in management most has company in analytical company of tools today, financial not the earnings investors measures, results also reconciliation operations financial GAAP call, and these non-GAAP call have performance. as accordance directly substitute non-GAAP that its included in a prepared with discuss financial financial limitations isolation which financial provide GAAP. believes measures should non-GAAP as considered for the a its measures for release. certain useful measure information OrthoPediatrics are of referenced non-GAAP supplemental measures evaluating this financial comparable The on be

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

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

David Bailey

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

by we I'd kids all like over As OrthoPediatrics. new a to call, XX,XXX we record highlighting for earnings that begin in XXXX, helped start

quarter for This and we each and most we success early kids impact quarterly strive XXX,XXX with metric important compared over growth X of In OrthoPediatrics fourth kids. XXXX. preannouncement revenue our of of million and XX% of organizations quarter year, XXXX, more benefit kids. more our representing helped combined line our Boston including fourth generated to of million, the we've to inception, be continues from increase have the for helped January, O&P, $XX.X than Since the to

For are we the in EBITDA original full year expectations of G&A, record portion of of outperformed disciplined expense healthy XXXX. growth driven the of by million, compared representing the of excited million strong we favorable full in EBITDA generated revenue to leverage XXXX, management, XXXX, $XXX.X revenue we of XX% year report $X adjusted margins adjusted record a our that and growth, to cash producing

In and addition, performing prior are and robust profitability. top our revenue integrated to fully thrilled acquisitions line contributions with see well we

of experience closer final during weeks normalized quickly volumes After more in to January, surgery early RSV and RSV. strong rates the into surgical Looking throughout, except X scheduling when at started to rapidly levels. returned the due end lighter volumes of we extended at revenue the to was December quarter, and December, uptick rose an

we were OPSB quarter. strong, until scoliosis. domestic business the in business lessening, to benefit and of mitigating tracking diverse headwind scoliosis this is are we continued feel better and impact Altogether, to encouraged be in global continued will trauma nature see and running modest spikes the volumes still the The further season month. we while over staffing by of our environment full recovery to expectations improvement. month lower the very growth normalization. offset case appear and Hospitals on in their tilt, And respiratory sequential for is we and international Overall, remain cautious not managing schedules. The improve deformity, our OrthoPediatrics

Tibia, products, despite was the few global by PNP XX% aggressively growth at and led growth the Pega quarter growth within back very at fourth weeks revenue U.S. bounced of of in sales December. PNP Scoliosis end with T&D XX%, of a franchise. with slow OPSB sales very strong quarter Femur, Fourth early the

response across continue and product ApiFix users increase the lines. scoliosis New to significantly

muted American Overall, of a scoliosis our in growth sales slower-than-expected slightly in global continuation growth. impacting OUS Latin XX% resulting overall and business by and in negatively ordering was scoliosis reduction a South

ApiFix in of We bracing normalization legacy tailwind QX. digital as including expect to longer-term year specialty publication, rapidly organic product an formed early product and new markets, scoliosis OPSB, care. to a international growth, launches, health opportunities, start newly the as OUS as a several data rebound Pega multiple continuing sales expanding early expansion, positive in business, and act XXXX With key for beginning and

We in prospects XXXX for growth our are confident and beyond.

are in million, representing O&P remain the full to year revenue XX% confident and enables historical we of overall our Boston strategy our million secure that without us XX%. reiterating equity extremely capital. for we sheet revenue balance an of our Therefore, to position $XXX execute additional $XX financial million growth guidance are to including long-term of $XXX current Importantly, XXXX

note. EBITDA. year revenue as We deployments closed to of are expectation $X children on full on profitability improving usage. focus of we achieved and set reducing number our also continue record issuing our XXXX adjusted and than million, cash record guidance helped, less record and to million extremely of $X We We for an generated EBITDA $XX a high million

profitability continue our XXXX. growth with We into to carry a expect on line we breakeven top to improved balance revenue cash sooner, to trend way flow

period. growth ever quarter. the XX% U.S. with We and more Pega from believe and OPSB to growth deeply led full and fourth And of our $XX.X the international continue in Trauma representing our product Strong sales, performance beyond. to of portfolio revenue saw the Pega Sales XXXX, quarter compared in as of strong to the to total in growth In products, revenue U.S. segments. with substantial will U.S. generated be of growth performances and outside expected. prior of Pega eX-Fix, XX% be XX% penetrate and Pega continued very record XXXX Moving we we continued globally of better than ramp million, we product Pega we accounts Deformity Trauma, revenue the the year

share we across Elsewhere trend position within hospitals our to strategy years. T&D, and maintain plan set children's T&D development take expect for continue T&D market-dominant deployment, execute portfolio, the in several share U.S. leading we the we and in a to with new a franchise We product service. superior our enjoy entire to to continue

and FDA have we beta R&D the Initial cases side, Tibia gone the we than launched and On QX expected more in in received surgeries system QX. well. PNP performed extremely approval

the market than half has in far, surgeon Tibia So rate we for launch bodes to which first start PNP XXXX. scheduled usage of higher been of well the forecasted, our the full

Tibia full for our We expect Pega driver to and of years PNP of conversion several account execution expect to used. seen growth of by the strategy, in increase be quantity product GIRO products continued an XXXX in make next new Driven positive of the the we and release have a impact customers key an well. and important number as the the

next capture we deliver Now to acquisition, the execute and over high-technology a strategy our with products to years greater to our as Pega strengthened is more robust market, positioned coming share. was business several growth pipeline by T&D XX% the sustainable market long-term than that the

platform, the development franchise. of will the pediatric process within projects and the R&D on We're opportunities prominent entirely in expect of share-taking several spawn have our be new which also our side surgical PX plating the we within further for business. T&D plating making We project us world-class progress great

in Further, expect We to the trajectory continue impactful. EU the the are we of also eX-Fix that our new launching growth be year making numerous devices external franchise. MDR strides products EU fixation on solid approved in that coming be market will we'll new

business, and website capital-friendly I'd today along to that new a outlining franchise that product OPSB, Bracing to We portfolio, or we this MDO as well of new full acquisition significant the the more of a a here. recently incorporates large believe Boston source Specialty time the clubfoot growth. new continues represents little OPSB Our extremely products, O&P. official several OrthoPediatrics nonsurgical well. specialty brand, as with bracing revenue And OPSB, the have featuring Rhino We spend or OrthoPediatric announced like perform opportunity

It's address $XXX better we're the now surgery. U.S. of estimated is that We opportunity the market estimate the after children's of to And $XXX and and total in to segment. excited top million bracing be orthopedic in at minimum hospitals. XX% important care specialty before happens this million nonsurgical positioned XXX pediatric extremely conservatively

use pediatric their custom orthopedic the customers these thrilled always surgeon braces treat day. fit to the the the our all consigned capital every aspiration It children. sets. provide to investment in Importantly, do we're upfront instrument with not needed inventory products with this patients surround And of to about opportunity surgeon been to treat more they products our they require has or

Children's lower children movement Children's bracing, concentrated the medical O&P the treat pediatric of XX and partnering including to name conditions, company Hospital is pediatric management, focus orthosis care lives primarily portfolio maintains Philadelphia, custom orthotic technology and Boston orthotic few. Prosthetics scoliosis, for with in impacted band some the and various just Hospital Hospital, prosthetic only Northeast. Children's plagiocephaly, leading offering clinics and for bracing Boston pediatric-specific as world-class for Ohio braces the a available orthosis Boston Orthotics been treatment DMO neuromuscular limb orthopedic advanced Boston scoliosis, to and Their facilities, well Phoenix Nationwide the exclusive Hospital, have dynamic most in whose an as of Children's custom includes Columbus, disorders. of with individualized of plagiocephaly on sizable by nonoperative Boston patient

revenue Boston historical approximately O&P's million. annual $XX is

aggressively children's innovation very These competition, training. lack OPSB OPSB many of the we general and years. ago. OP call, previous We and TAM, include large to the build XX to on support opportunities the a several of we the opportunity characteristics $XXX provide a same and service in level a of As rapidly U.S. million million mentioned continue our U.S. very and clinical in execute of see XXX anticipate strategy ongoing that coming when in which hospitals, the witnessed elite started to successfully customer education a $XXX years it top we we in grow is limited

profits also capital-friendly for strong margins, healthy to a very an manner. the build and potential business We large in see a opportunity

to building customers of specialty Beyond they our products treat providing of with to makes not business market, we all and orthopedic to brand another is and we are This do in rapidly all aggressive very We This until need dominance to has market conditions where are historically loyalty portfolio. cut plan the we that and fragmented be plan leader. believe the play, clear pediatric of orthopedic of our scale a market nonsurgical this a of been the current provide Boston able O&P that, that to fits and service importantly, very market. with surface and And to just of channel all customers. children optimal the we segment nonsurgical allows across leverage outcomes us with goal most our way with access partnership to scratch our further our to bracing this patient the surgical entire clear. required achieve the increase acquisition increase

we OPSB franchise the While happen the will the to organically this Boston integration throughout year. of expect of O&P aggressively rest XXXX, grow

integrated, drill years produce strategy will Boston Once to future many our aggressively of growth.

will is and usage, growth. clinics a in the comprehensive strategy profitability. product Our addition OPSB enhance to X and adoption competitive outsized and new expansion These of rooted deliver build the OrthoPediatrics enable sales to to initiatives scale for drive core believe business force include that portfolio, to development we

to way of million the to believe our While coming innings in this we excess be journey, we're growth of business $XXX years. in on early are we growing this in well

of to be sales whole, of specific we have and representatives OPSB anticipation first the agency force the sales recruiting expansion. been will sales acquisition integrated as business Boston the preemptively OPSB initiative support into existing our O&P a that In Turning to network.

to new actively recruit associates. continue train and We

customer the to we are OPSB expect we And are rapid ramp in revenue sales reps see with our so pre-existing With relationships, our each territory organic where pleased far, of partnering are types with surgical new teams. attracting. our we people existing

OPSB within our such Levity to products XXXX. the Bar, headquarters in for O&P in Cruiser deliver launch set to in as product Lite, and OPSB aspiration are XXXX, and in the MP+, the X Boston, in Boston every initiative, the we at nicely This Move strong Ora launch the year the now team staffed to Iowa, the along our now the team Medical cadence, X Rhino team the with of new Warsaw Regarding development MDO device us DFX, MP beginning up growth. several products second

space and in product several years. this the partnerships, can will be quarters, in there thesis and scale business Beyond these that our more build coming a launches coming in the months we supporting

initiative. Looking at the third

have with to we as we years, several for response but completed never have Boston to largely favorable last care. multiple when successfully such England. seen amazing our the acquisitions and in the and grow, a Boston provided of XX clinics, testament continue Over announced products all in early customers through partnership we is a our have true and patient January. O&P grown which the of will This we partnerships, our O&P customers their New upper The has legacy service,

to Our customers' of their feedback their a support treatment unmet validates their partner in clear the true have nonsurgical patients need desire large makes and of the in the patients. nonsurgical

that feel It this support of scale open U.S. our XXX important growth for us Boston hospitals around the take our will company. In opportunity time, international children's an in to addition, step it rest the will O&P signifies of larger little first strategy our is customer a certain we and markets. a to but our

us our Importantly, O&P's for and a million contribution capital and mainly Boston working for Generally of to to growing expect the between with build-out costs capacity to future once as ramp clinic expect revenue, outlay, large have will have clinics OrthoPediatrics. opportunity. favorable early consisting office fully we expect will operational. $X we of this are XXXX. but growth and scale the Consistent it build economics clinics with and generate a some the each produce operating leased rapidly new speaking, integrate revenue funnel already take to million each modest is staffing revenue with $X orthotist limited material existing the space, to O&P Again, opportunity the we Boston us for a and strategy, limited time and in as of setup of historical initial profit

growth Scoliosis growth we by to representing the global the of quarter $X.X Moving to compared declined prior the This by of by generated extremely December strong In was revenue few global a XX% a of business. sales the of an XXXX, in year. rates internationally. million, back weeks quarter led due domestic performance to slower Fourth XX% and and growth RSV quarter muted America Latin slower international we of were from in XX% see international stocking continued we these growth opportunities ordering difficult due few distributors expect we ordering and to large comparables, improves we international as new Scoliosis this, Europe. across and Latin a business, and international America. improved South to in and in Scoliosis scoliosis and XXXX revenue choppy lap a patterns as started the South lighter rebound Despite launch and materialize fourth

of and of proud very business for business. a of have has year. and continued into U.S. scoliosis quarter from success We're saw rebound this a launches strong growth coming rebounding business, outpaced of the international which clear new XX%, users ApiFix U.S. execution more fourth highlight the in line is sight the the our The A way improvement driven this of the in of successful response year. quarter

more from ramped surgeons transitioned to new X now are up to normalized business settled have of report locations practice growth is starting in in to perform more U.S. levels. the the largest In and to have for and opportunity pleased the representative scoliosis that and we returning of to addition, This the significant who future. speed strength the both we're this sites cases

cannulated products new the growth XXXX, ApiFix, are with pipeline the and we've outlook. strengthening and of with ApiFix international EOS We of customers, users never screws extremely approval growing XXXX recently an FDA Response specifically in patients scoliosis, an placements the for and as a area products. expect for had verticalized first launch exit scoliosis pipeline with XXXX XXXX such R&D as power; that is XX% several total announced onset novel more and our We needs our FDA XXXX. response in launched improving have approved system XD bullish data, and on pelvic we spine major early Further, of that solve robust technologies on beta Response historically unmet rib rich were product, new to Response

Fusion in support currently we'll new in system instrumentation Response reduction system XXXX that, launch our development. our that and both new Beyond spine rod the will

on in the the a U.S. at launch but of we years. Lastly, progress although more surgery for few trends growing continued strengthened QX a continued and few Notably, our rod, year. its be late QX, end into will electromechanical the scheduling development weeks of

continue XXXX strength this expect We to into market the as normalizes. elective

to on fourth XXXX. the XX% growth XXXX, Moving international. million, revenue we growth top on of delivering quarter of In fourth of quarter XX% of generated the international in $X.X

growth Fourth offset and expect of led in the International German both growth in fourth Scoliosis. should sales see Trauma our quarter distributors throughout in continuation to to market pleased business strong, quarter the and stocking scoliosis continue solid sales in our T&D model XXXX. was be America. by track our by in a direct Agency continues international and performance South it to extremely continue XXXX Progress Deformity to We're slow rebound particularly good with to XXXX. and sales in favorably produce products

new the several increasing We look in market. forward we and have users, penetration onboarded to German

We to performing and XXXX in and from likely new we first with Despite progress experienced We're America, deploy inventory and we Europe. expect launching we're scoliosis our new train surgeries sales strong sales in markets South scoliosis and making the continue great product XXXX surgeon Latin softness into customers. Pega as channel.

cases growing and in agency Additionally, long-standing we're Zealand our in launch. and cases following and approvals Canada and leadership we as of support making starting added have entering Australia good headway recent partner, New in had we're

QX, we Pediatric believe and as XXXX brings setup improvement early education. training hosted we've to great our In takes place in the Akron That Review XX Resident QX. which X,XXX will a really business, Orlando Society health nice for Meeting, beginning Among us and show IPOS, experiences International professionals. December. as Overall, unique these got premier for of our every events, that and the Annual international we Course surgeon care Orthopedic training sponsorship over

the a North In POSNA Orthopedic new XXXX, ever for the Society level first of America, as unveiled IPOS we Emerald level Pediatric sponsorship and sponsor.

meetings sessions, of specialty year and our hands-on at X orthopedic fractures. with well saw professionals. including femur DFX surgical European in we record moments surgeons The societies, presence several Orthopedic advanced the hundred numbers XXXX for other Society, Pediatric special U.K. the full bracing multiple by with year Globally, kids as health pediatric for multiple hosting one our and workshops, new marked for and scoliosis IPOS featuring Our allied partnership this was including surgeons. European the business educational Germany, each brace as

We conducted our a generation customers, our surgeons, advancing ongoing total of pediatric the and training of world. experiences our subspecialty surgeon for orthopedic XXX leading innovation in learning the next around commitment thus to

Lastly, continued recently that places as advantage, to announced critical important why of is it's of our eighth so Indiana. in state of a best for the part is people the OrthoPediatrics on work which focus was we time our named the one competitive

that committed world. fostering all to associates to positive, more to This us culture allows With Fred are important and help the culture results. turn to financial a mission kids to our detail We engaging over Fred? provide further do that, on work. successfully the and like our their is our over best more to allows call I'd

Fred Hite

Dave. Thanks,

Growth million, the U.S. in Deformity from was OPSB. Scoliosis quarter lines, XXXX. XX% by revenue increase worldwide our XX% Trauma Growth compared quarter Scoliosis XXXX million strong in Deformity, revenue quarter a and across driven quarter performance and fourth domestic OPSB. primarily primarily Trauma global Our of $XX.X and increased the was by $XX.X the fourth driven of of the the quarter product to and of XXXX. fourth the

$X.X across international primarily sales the Trauma quarter growth by Growth We portfolio Growth products, fourth scoliosis and the share trauma and period. Pega quarter quarter the XXXX, in OPSB. grew stocking fourth gain by million $XX.X trauma, to of by million, global entire was South which from was quarter In our offset lower revenue generated of and XX% strong driven XX%. representing of with revenue primarily in distributors eX-Fix, contributions Deformity XX% in year compared XXXX, driven the to deformity, increased the prior America. of to of total by compared

orders Scoliosis million to cases from was the In by late partially growth America. increased the U.S. of of RSV $X.X December year of XX%, revenue XX% fourth offset and Growth compared period. South driven canceled prior Latin in quarter lower-than-expected XXXX, increased primarily and by in

XXXX Finally, the year fourth in was revenue $X.X million million Sports to medicine/other in compared the period. $X.X of prior quarter

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

full few deployments, increase deployed XXXX, XX significant the new development briefly For Pega we of significant Touching key by driven consigned million well $XX.X compared product $XX.X as deployments, on was as to The million metrics. in XXXX. year a multiple units.

profit profit operating of increased XXXX. the For for increase fourth the to international quarter The XXXX, lower quarter of by gross slight quarter to distributors. driven in XX.X% the fourth sales expenses margin margin set compared of in was to XXXX. $X.X was XX% million Total stocking fourth XX.X% primarily $XX.X or gross million

the to The resources The and addition volume-related support $X.X sales increase personnel mainly million increase of depreciation XX% was million of continued to commissions and driven increase in administrative to by of commission XXXX. expenses increase to Sales expenses and or million increased in fourth by or in well quarter expansion increased and increased driven $XX.X required was incremental as the amortization personnel driven of company. the fourth the The expenses. an by was expense. XX% the business quarter increased growth XXXX. in marketing primarily the General the $X.X primarily and $XX.X support million as

with million increase quarter contingent Net income in $X of other and was the for expenses the year period was quarter quarter to EBITDA This a the for compares favorable million Adjusted $XX.X revenue organization. full in income XXXX $X.X of net million XXXX increased of year. $X.X value million or loss controls in XX% combined by quarter the for million a $X.X for fourth This driven the Fair Total compared to XXXX. XXXX, of year year. additional a loss adjustment as third-party to same fourth incremental resources cost development XXXX payments was million XXXX. to compared the last $X.X million fourth $X.X to was $X.X well of to was providers. compared fourth driven XXXX. $X.X increased million consideration as by Research total million of in the across of last of $XX a the favorable million

Adjusted full EBITDA of was to investments million $X.X the XXXX for fourth $X.X $XX.X ended year cash. the for of the We quarter year with compared XXXX. short-term and full million restricted million in cash,

As Midcap. we of Boston our million. facility, cash closing, with With had to to December January on strategy. cash million been on our $XX.X XX, term balance drawn restricted our cash are debt new O&P well execute our XXXX, as capitalized was position well our as the in approximately continue new Post of current $XX loan and acquisition XXXX,

strong in position our flow we acquisitions, our cash balance breakeven Given sheet, strength. are tremendous our positive line a and adjusted of sight EBITDA, recent to of

guidance. to Turning

XX%. We to our in full range are million year-over-year representing of of reiterating revenue the $XXX XXXX to expectation XX% million, be to growth for year $XXX

adjusted to Additionally, to XXXX. we in generate between $X.X million million now expect $X.X of EBITDA

focus sooner later. than in representing rather XXXX, breakeven driving on of our We million deployed set cash to business expect the new less $XX flow continued than

In fully corporate establish in likely shelf keeping in Lastly, XXXX our sold XXXX. up will housekeeping, in S-X shelf we good filed another XXXX. with was registration universal

believe back with closing I'll shelf or capital practices. remarks. Dave for consistent near the to need no raise to over we corporate good plans is As but now in we turn previously, maintaining have the term, call discussed

David Bailey

Fred. Thanks,

of success As the growth we drivers XXXX, have look we and back we're for we've all in in right that are place proud on confident continued achieved that XXXX.

the robust to anticipated. business including revenue and line we positive growth continued expect breakeven top move continue, as trends flow profitability than earlier growth cash in We to our

system, Response in growth new Nailing Tibia Levity Pediatric XXXX, launched products, the we including GIRO the DFX Bar addition, power Device. system, scoliosis, and Ponseti modulation Brace, Mitchell X platform, Plus the In

products heavy deployments and of from as our legacy XXXX strong to We investment result continue our set expect in a XXXX. performance in

This, launches, However, recent growth a our with and drive Drive ApiFix require recent DFX maintain Femur and anticipated. flow to to we acquisitions, drive growth breakeven deployment, thus launch combined capital for due high franchise much sooner less less such cash Orthex of of our cash invested product the PNP OPSB capital. most our earlier along and and while Tibia, and can ensuring using we on as Rail the growth with return than the faster the deployment ensure organic rate inventory

All of position debt. growth OP our with I'm including supported I've strong sheet, our to plans, now, XX not years by nearly been excited. are profitability I've for and access long-term robust been and cash balance sure ever more

the are an our in tools in something all happening think before. place ever the future children just is the more a extremely I The position with children. We we is special getting than started. profound lives same of our customers strong our customers OrthoPediatrics, feel bright And and help on to way. Together, impact building OP and our shareholders are for that associates, are and

OP Q&A. pediatric to to help standing like thank in the innovators Operator, the open I'd all closing, care together let's call for investors my In associates, partners, our and health for surgeon kids. our

Operator

[Operator Sandler. question O'Brien Our first Instructions] with Matthew comes Piper from

Matthew O'Brien

Excellent. Yes. Good.

starting maybe Boston with just So obviously commentary. the O&P

it's to split First Fred. be of a all, that I'm sorry, Is separately, going out going be multiparter. to

this funding U.S. of going you that adding of these going morning, And this forward then saying off that have do expensive? we clearly, growth build to new you base because model that they're think today plenty I to because You're this facilities don't as need additional you're have how capital for across you're the out not clinics

Fred Hite

Yes.

bracing, and approximately braces deformity custom is other good correction. scoliosis XX% So the XX% Boston question. is

is show going a season different summer will our up that's seasonality do our business. don't sales fourth of in points, They year. way the selling we have how And forward. so The has those segments the big business than typical in the roughly quarter scoliosis X The points a few than quarters business. a quarter few first deformity a percentage points percentage quarters. and middle higher correction other the lower. few Their the is are typically, XX% their And

The time growth specialists several does still get looking But introduced, the, this new working find this open overall that the That would the for than faster trained to of much to to to XXXX, some are and for becomes years. to faster sales the are is obviously, but expect approve get we hospital overall products business, we grow next business that the this as effective, space. to obviously, starting I would take business going in overall, as the segment the pediatric the we're it, clinics year. next to than on force new grow say facility

David Bailey

Yes, Matt, side, that. I here the as already done as and we're through we we've add we question, kind think signal reps, what is expect the to I trying walk no of X-point strategy, sales clinic

expect expect products to what sales since MD and is obviously, the DFX inclusive, of then that to XX%. started kind this we to that. year, MDO ever and what business of stuff we're which continue acquired in we of we well adding -- That's done would products grow OPSB still launch and and the it's the year, excess and new Orthopedics that launched Ora organic Rhino We franchise going to we last of

time But the here of for is saying that business, of again, on the side, ramp. bit in that to expecting last business we've I years. the it's the side take obviously, little a definitely couple what as of get we're clinic Boston going think of seen growth we're rest to

Matthew O'Brien

you ask comment my just bit upfront the And a little side, then on here. question just second cost just there? I'll And can Okay.

a ApiFix the that contributor? year. going for to kind Just be Or Is to more expectations is XX this it of event? bigger still start

David Bailey

expect stronger, ApiFix to question. as continue data on into this stronger. view go the we to data no right. is gets our to continues the think get There's up I Yes, And the

business, Fusion outpace data. it be that XXXX. that growing, lot -- of of some this every kind position the the watershed think growth is answering super think I of entire generally, off where that's there's still it's It's right continue to where But interesting. we're that modeling of kind ApiFix generally and there's spine as quarter treatment. still embryonic. questions we're specific the those come We how we've with to is or question segment pediatric we're of no for nonfusion It's And we agrees our going the to expect moment a moment some surgeon this questions.

Fred Hite

And specifically cost. on the

XX all has today, Boston leased So They're facilities. clinics.

facility So out and It's were minimal hiring building space, the and really then is the volume open we clinicians actual a as the upfront. hiring clinicians just to training cost, if new more ramps. the

surgeons say the pretty So at open open to we're in commitments because the unless they're would to I clinic. the one one coming and to using quick know, hospital I from these, max that revenue be not don't maybe million, less, then starts we going obviously, the have going of $X

Operator

comes next Stifel. Our question from Rick with Wise

Frederick Wise

Sorry, there a was glitch, hear. couldn't I

of you it on off question. to hearing last year you've way like going sounds a front, headwinds a front, gone or staffing picture variety so start the things. on over of experienced If that are resolved I'm the away, on Just correctly, of the on the or big lot the sort RSV either

very encouraging. sounds that Dave? so I Am mean correctly, I hearing And you

David Bailey

improvement. we I are into here that seeing think as well. improvement this QX we're think that another I in quarter And

have what months just think the August, behind a by -- we we're said is that cautious on June, probably surgical recognize here July, for obviously, us, that's little our I yes, our so while these something think a are midyear side. that because this say, we -- let's we And is big

encouraging certainly the further also that bracing that we the seeing saw we declare that as don't see side. lot the we see specialty the July this setting, OR don't August, that I of the and June, side on we're to in that business bracing until that specialty going a know diversifies encouraging headwinds It's come victory, but on we're So it's through.

over it overall risks that bigger, be abnormalities And the business of kind becomes as those years. few with encouraging us to enables few us business should also the last environmental the last think of that mitigate that some the years. environmental that's associated the affected we I so saw over experienced we've And -- of by types less risk that

Frederick Wise

set to I through first you is mix for we But flow in thought Got And it thank start better place years." thought wasn't how first quarterly for it should pediatric flow quarterly quarter? of for back quarters. not in to And specific thinking guidance right terms now, the the revenues level you about product there XX the you. us the overall. quickly. that their Boston and gave maybe overall. about the especially setup help -- O&P sequentially the overall went I given about one you Fred, about of you new think "the sure the But at point quarter were talking if think a relative us the help year, I maybe orphan

David Bailey

Yes, absolutely.

the unusual. pre-COVID in traditionally, have several last the been So years because particular, so

or typically fourth the X% is X% first quarter. The lower quarter than around

so in legacy about And the quarter the would business factors, come you down. revenue if first think those

actually revenue of that than $XX addition generate that going a fourth And range. quarter to Boston with that's it's quarter. that However, or $XX.X bet higher I the in number would probably would I is assume the million million, first

increase the over -- fourth So definitely $XX.X quarter quarter a third over the million. nice at

Frederick Wise

Right.

overall of you've past, company the broken in quarters the sales. somehow percentage And as a

to to million terms, would -- range, you're you of flow us the rough as you in frame million how of So a contemplate percentage guiding XXXX? the $XXX that quarters sales as $XXX the

Fred Hite

I $XX out million right, Boston of is mean, million. still Yes. $XXX

overall going a it's changing impact on have the So first metrics. dramatic to year not

and would by third So quarter quarter, and smallest the the far we followed largest and first obviously quarter, anticipate the fourth as the be still second then quarter by the number. the

to a historical it's with think with change much. honestly, similar, pretty Boston, going not but be So to I slight

Frederick Wise

a Boston mind. recovery, to hearing going about us mix clearly we little thinking as of fourth and the business, 'XX the, slow understand the seasonally -- other in of things. gross Help that don't correctly, you performance is Got if to that one don't should above in guide variety always, gross new going Also, be average. given be products to quarter I'm more you you. margins. know a I'm But again, I launching, relative put the more, perspective you've you've typically. And squeeze to if how cadence got margins got you and in

Fred Hite

Yes, absolutely.

quarter gross previously. year-over-year quarter, quarter. improvement fourth versus than always XXXX of the gross saw is XX.X% we XX% highest So our the XX%, obviously the margin margin and quarter was an at The the third revenue highest lower fourth in which

gross sales. the to XXXX, in I would follow margin the expect continue so And would

third So come a quarter, it's down going a the in first lower second quarter to be little again in and little quarter, the in fourth quarter. the highest softer the in

was overall, margin we Boston to type XXXX, is think XX.X%, see business between XX% result XX%. good. of expect gross XXXX. The under would business in the a I for similar and

It's X about and so margin they a products we businesses If retail the it's X. manufacturing really business, it, you manufacturing And a business think in it's their from the get manufacture. clinics. in

with pricing and the associated retail margins getting that. the we're So

historically, you And so commissions, gross overall, to But business. if strong sales little margins they've very our overall very similar had will.

contribution even our force the the business margin very higher better still margin adding is for some line into to obviously, that contribution very revenue. from very strong, sales So that is which business that in grow than legacy and us. attractive, strong business, The bottom was to

Operator

comes question next from Our Ryan with BTIG. Zimmerman

Ryan Zimmerman

the already A questions me. Boston on been O&P of One for couple lot asked side. follow-up. A

of the few potentially weeks about those as that a first of impact quarter some first, December, there through Dave, think Just last of to any cases? and quantification the result and flow the

David Bailey

Good question. Yes.

were X last well the for of and would So halt X weeks quarter, These weeks. us. I of school. weeks we a really of are doing say in weeks kids out screeching really, Last we are are the a what of X is that kind traditionally when guess saw entirety largest I the throughout the

so kind having And and early all steep pretty into it and of was extend the a a of did January. part of drop sudden, it

it's we quarter that, points and starting obviously, revenue though systems about put probably like it. in side do top we surgical done. for bit is this that hospital see that What the But get scheduled seems nice the like couple of seems better, Ryan, QX. in much and handling quarter total and rebound unfortunate. after lot was a maybe, is really can the are particularly get So were on of line growth a on a us, electric did cases it now not back hit, were It seen to a

way the commentary handling hear down it And affected are and RSV bullish you forward. fairly went quarter, up, so that's about back hospitals I first us be seems and to how normal things think really the in the situation, why the here going came rapidly

Ryan Zimmerman

Okay. to build just like helpful. out force. you're OPSB sales going more And then That's of this

the to FTEs of scale agents and size OrthoPediatrics. I relative When that. OPSB. kind wondering sales of and your for about the doing force heads started I'm as distributors kind the existing think up already over of just sales ramp kind kind could You that coming all if and what years are of dedicated that to dedicated kind is of you

David Bailey

Sure. Good question.

in. in some already we've QX. early hiring -- in we and started So factored those of Obviously, some here the heads QX of

associated So guide is with the $X just to expense to be clear, in the for million our captured in EBITDA. that $X million

heavily time or Obviously, might year. us think maybe this focusing exclusively the people up to last orders that the more of you that's XX add over so business. or of from are have on year magnitude for the X OPSB or U.S. expect in side I the

all bullish and the year. But things help all Rhino right? -- MDO take we Ora we cover. the people about us spending that's DFX, force's capacity cover geographies that if with out sales aren't to to So and in why people come you the revenue the we've doesn't pretty want remember, -- products so we're that and within And that many the room, it standing last as the these time operating to drive

reps reps, that OR-based at to course it's tonic we're point. clinical-based sales for combined sales about to committing have, the more we sales XX been over a in real strong larger, with the have we'll existing sales sales field force already We Ryan, the has this a you not grow. but we these great or force the of working so see the in these really also that grows think far with with And out in partner have, our sales XXX-plus years, maybe that our force with of people next combination several And OPSB so and when our team. and of relationships We strong people the really room. receiving force these in great the us obviously, surgeons as existing operating just

Ryan Zimmerman

Yes.

Okay.

one quick question quick, modeling Fred. Just real for

right? scolio any perspective, You on I already make And take Fred. correctly? it's I deformity just between to all care O&P modeling there there want mean, based, and international the of that Boston split is U.S. correction business. we a sure gave from though, the revenue

Fred Hite

Yes.

Sorry, question. great

We to us haven't clarified of enhance may 'XX that. 'XX, but well. opportunity 'XX, as It the in growth business is of an that for XXX% be as that today, domestic

Operator

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

Unknown Analyst

is This Joseph, on for Mike.

seems have -- forward. eX-Fix new its shifted International guess comments Pega, to or I it you lot and has OrthoPediatrics favoring the growth. product moving expansion, today, strategy growth So profitability profitability guys launches. ramping, maybe like a But growth prospects of over

the maybe So could more give in and bit you a good more moving I little of guess you thoughts maybe forward? the why that's your strategy shift color, little just a bit on

David Bailey

with recognizing heads Yes, the growth environment. a with the probably down on that or more course, but strategy get as focus rational prudent focusing Joseph, particularly in over current I don't I think a characterize financial cash would our also is flow We're aspiration profit growth. of to profitability balancing breakeven growth, to

not -- thing for I don't a this as new is this a so new view I us. And guess,

I excited think about the over and the the years that more all the we're generate been usage the aspiration come cash in all the deployed more for legacy profitable -- continue on for years, think to to do years, to also kind our is on it. last really product think is over the to that is be of growth, top which OPSB side with nice lower, years, but we've growth, get to positioned why we and side of was we be over growth to has the Just the of associated think last X to what X of growth launches are the that to the steps and and and were been course I several well focus reasons we've revenue one heavily last going going trying all going those the that going next the we line business X

as that line in top strategy is this aggressive now its see bit So aggressive we that. line own right the question unique just that's going growth unique and about an pretty this think profitable also generate to still that's We no an it's and growth marketplace. I And be top think that a There's cash. strategy.

Unknown Analyst

mid-teens expectation XX% Yes, super get X touch of think plus little for think bit estimate Okay. that or maybe is organic last a the your We back Or a be for just in to the on can so But you the that's helpful. Maybe more. more you do growth realistic years. organic to do forward? growth you number? mid-teens moving

David Bailey

Yes.

-- excess think, the guide here. And we're But we we internally OPSB the I guide, obviously, line growth setup, implies ahead everything as model, I mid-teens. of of doing the we as not driving and think we're So revenue and towards ourselves mid-teens. us pointing legacy particularly to top here going get launch on the in product is

in the rest so can you assured with in that's a obviously, XXXX. our what for see excess XX%. excess it's And And guide. XX team of growth aligned you is But acquisition, the around in rate that that's of

place. we're So the putting in drivers

get OPSB to side, we you're business aspiration It's future to not that at us. big place a achieving on for upper competitive again, see we we're trying hopefully that to share, And we in as have or this XXs. we're than that, XX%. consistently we're think, driver and reaching low a the that's good teens to been stage. put TAM growing And our when catalyst the that's I but higher continue do we in when here really and a really opportunities real just a back really XX%, the were that a to where larger to maybe going much over feat in have now guide And to the

Operator

Our next JMP. Turkaly question comes with Citizens from Dave

David Turkaly

$XX said payments Or upfront. that was curious if I think comment just might announced on or when Is additional price? come? I is there targets. Dave, [BOP] any to the milestones you all-in it the you sales-related deal, million

David Bailey

payments. That additional There all-in is are contingent no price. the

David Turkaly

maybe the -- I business, of the [Indiscernible] RSV, about America. on out, for scolio being all lower-than-expected It's XX% Ryan's South X is points, [Indiscernible], know, at another called follow lower it pretty Latin I guess the when in of stocking look maybe America, maybe trying than that To couple you the the scolio a impact things I on quantify, and a good had mean, question in I'm up couple is I sales and deal thanks kind to was -- grew distributors on business. the detail sales you the South think the don't points. point? more even you of it's to that Or orders you in

David Bailey

scolio This to we've company's because behind right about we us was segment feel now, a that's but in now that the and it's growth being off the being we're Yes. growth quarters last headwind Certainly, good in grows it diversify see, again, overall. Europe, had fairly overall markets small but while the And in a think like disappointing the on it's our in impact. a and Latin on pretty be essentially I pure XXXX it base. to the of had was rest able us for going and all X stage, big unexpected. and business going It that few big to scoliosis Canada to pretty a that situation at one growth America, this grow

good Yes, we I we call points. really of a I sight expect But couple line We of would it continue pretty and us. a think into don't haven't behind have that's it. don't to that. yes, So know. quantified it

we As to tailwind in a business, our we as not headwind. a expect that -- into be this for we're XXXX, head

David Turkaly

if mentioned And you [OPSB], I just margin. The gross one last could. one,

just that higher I stand operating comment guide the any think you as higher that's I'm coming was where said thinking that sort that's X% than than I'm of but the profile scales. acquisition. to of you margin-wise, of X. bottom X% was X on But sort know EBITDA Street I similar, if the contribution the pretty today, from curious, line

Fred Hite

absolutely. Yes,

tremendously flow. fast. very Boston historically hadn't positive been it's So growing to it, similar bought It's income, positive MDO business, net cash profitable. this when positive EBITDA, however, we And, is adjusted

investing business, is forward. of assuming will sales going business And than That force. in yes, But correct that you is more we would overall profitable money obviously, XXXX. are bit little we so that, a continue into And our in correct. was be business expect the that to that

Operator

Brodovsky comes with from question Securities. next Our Samuel Truist

Samuel Brodovsky

one ask on more off. just to I'll Boston start

mentioned a revenue products pretty a revenue being achieved or to should clinics think be per to quickly over without ramp nice to million you'd Is able sort new in? a that implies Or think the that number is about adding integration come we $X as and something time clinics. there going I completed? of ramp new after million XX opportunity that $X to steady is be clinic

David Bailey

Yes, good it's a question.

opportunity the is not for clinics clinics modeled Boston, there. right, as flow we've Northeast, around with the of the the through probably hospitals an kind the using us of drive population used clinics Philadelphia, So centers the upper existing sales it's channel. is such the is patients aggressively that existing primarily that you're think major of opportunity are part Boston's existing do I reason major as it and because definitely well to surrounded well But products. as so of And these clinics are of as efficiency are the around that new. which an products added at that, something it's It's yet kind

those their in maybe catchment. distance are coming And from clinics patients where so a more longer few areas it a because takes of

than a our it through our but would if fewer. volume less is were so maybe those isn't And intent more they are the existing. consolidate, It there some drive clients little of doing to intent to

clinics, course is in this though. our to when the hospitals then got there, the XX XX we to when every I thinking children's they're children's that intent right I really you think XXX active have Boston is a hospital clinics take, this And don't now. and hospitals big active area. So also right, children's math users over a possibility. into you've for But our internationally. about you aren't think major this United several next you that years, other to serving, some jurisdiction the opportunity is the capacity their scale in think think And or scale when about us of States start or those mean, give the about

one that's about should yes, we of -- excited reasons why So the the why we be think opportunity we're obviously pretty here.

Samuel Brodovsky

as of factored you Can switching you to just Great. I guidance. just factored remind in coming of in, 'XX, what's I sort illness know, think us And respiratory season then terms into worst-case acquisition a pretty should coming just Is this about then And pretty revenue. we year? that range, how a given in into scenario. the especially it's thinking be philosophically, it tight

settle of out about the And you do think how the we how range? high should end? and Just low

Fred Hite

Yes.

last similar year, So we environment to in guidance a XXXX XXXX RSV similar we XXXX. saw see fourth will the of that that quarter in assumes

So range. we're that goes, goes we're the worse. it's assuming it's not not it guidance far assuming as And a as tight away,

the a of it kind Boston We line what pretty core this, it guess. good is, have well coming as sight I and into business as on is of

So those in I pretty it confident is, don't tight we're numbers. it's on as have as why any philosophy but

Operator

David turn are to remarks. back further questions. I'd any to over no There closing call Bailey like the for

David Bailey

little all Thanks, operator. call. today appreciate Today's you us longer. call Well, joining the on bit a I

that's the make we on explain acquisition sure that everything opportunity else and with Boston OPSB combined the have going can to on. fully Just wanting we

day. thanks your Have seeing and meetings So for at months. forward in you the we look several a next great today, all time to

Operator

participation. does program. your Thank conclude the This you for

You may now day. Good disconnect.

OrthoPediatrics (KIDS) 7 Mar 242023 Q4 Earnings call transcript