KIDS - Earnings call transcript Q2 2024

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Operator

Good morning, and thank you for standing by. Welcome to the Second Quarter 2024 OrthoPediatrics Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to Trip Taylor from Gilmartin Group for a few introductory comments. ahead. go Please

Philip Taylor

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

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

discussion For X, filed March to report with most risk on a the annual on SEC XXXX. of you factors, I recent was the review encourage Form which XX-K, company's

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

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

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

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

David Bailey

call record XXXX the on XX% reporting for that increase another helped our everyone, high XX,XXX Good and OrthoPediatrics. of Trip. Second extremely over We're we've XXXX, second to proud Quarter Call. and morning, Thanks, begin quarter for kids a joining Conference in by you us thank our

Our of XX% is continue impact worldwide that successfully day. rooted the lives true And cause to increase impact make to the reminder are we desire and year-over-year a children positively every many cost possible. as on delivering is in an the as that

second record OrthoPediatrics million, with continued XXXX surpassing time the the into $XX.X strong reaching XXXX. mark increase for first line a This EBITDA. top our margins adjusted of $XX by in achievement revenues quarter effective fueled XX% in healthy a positive and produced from revenue the same history the performance execution strategy million our was the period representing and and help growth, business of deliver our

pleased XXXX. generating drive forward We momentum the are second are with we and half the to in of look to we results continuing

a the deeper diving point, I'm Before and increased, surgical staffing in macro the trends. disruptions, has touch we this normalized briefly are overall believe working we've results, going operating Hospital seen to summer environment. schedule. in surgery efficiencies into improved, the quarterly have on in infinity we At room minimal

respiratory expect we from any forward, barring illnesses. future disruptions more Going [indiscernible] major of

Trauma of more revenue in their segment experienced delayed to In Scoliosis, a variability the start basis, on season. month-to-month the Deformity and our particularly showed a surgical and quarter, which peak

once into However, extending the the is balance rapidly it quarter the into season. and summer season the close the of started, of accelerated

we in and Case schedules time. most some are robust, are the stable environment quite experiencing

that products orthopedic growth. large and drive multiple share of comprised a segments is and differentiated across continue market to business pediatric take highly Our portfolio of our

expanding newly businesses contributed goal the Domestic or quarter, to specialty and growth. and all OPSB the bracing Scoliosis rapidly Deformity, strong formed and During Trauma of our

with of second revenue MDO, quarter. the businesses and produced the as strong a coupled to growth substantial DFX, products oral as T&D levity the such increased The XX% outside scoliosis second clinics, year-over-year and quarter growth very in Rhino. the both acquisition, Boston growth scoliosis O&P sales global T&D XX% contributed result with OPSB year-over-year in Boston was O&P and

stage, the the of better convinced pleased with business opportunities understand between Boston more and together we the we the At we and this are couldn't more with our early be large we the implant OPSB. the acquisition. opportunity, team more expansion and the synergies The work

expansion multiple health. we several specialty Our several levers transformational additional business rapidly expanding has projects, and continued can product from regulatory legacy bracing including with drive value, OPSB in R&D approvals, launches, new a products, into which our digital growth business international

our ROI. driving of enhancing they may these we essential more need revenue and company's in efforts some believe rapid of improving investment time, While the future profitability growth are for

we've With while the continue line in cash improving to growth positioned anticipated We way produce project our profitability to we to XXXX. EBITDA the adjusted breakeven. XXXX have investments, and of upcoming flow successful to milliong $X the top $X on for growing drivers combination step-up a million outlined with large and in business assume

convertible capital will of the term to our have have in we us recapitalize aggressive Refinancing multitude invest allow from and flexibility front taken to of improved us, our Braidwell, in higher and the maintain steps loan new business recently to an and facility clinics. the outlook we trajectory. Given profitability opportunities opportunities that credit offering with our bullish OPSB term growth provides and cost like of

cash to reach flow our Leveraging liquidity XXXX. goal continue enable these discount funding in us opportunities and and breakeven will

XXXX to expect Thus operating a cash XXXX. offset expect set our we major in for adjusted to in Next levels investment usage positive we step towards growth. working that limiting deployments year, to as EBITDA completely capital take goal

XXXX, $XX.X the representing to the Now XX% second compared of Trauma of moving growth million, generated prior Deformity year period. and we total of revenue on revenue to our In segment. quarter

robust Pega, make complemented sales market newly gains share to the products, product PNP savings. showing OPSB of from O&P, with We quarter this substantial revenue by continue included and Tibia, Boston Trauma T&D particularly eX-Fix

benefits quarter. business, investments prior areas allocation we this in Across to this the starting have the like excited progress Within of to see are feel I'd portfolio, and T&D our our products important set a from payoff in really strategy. highlight we the are few to realize that made

more to continued we've XX% Pega be This expected, sales is again. than particularly over -- true once growing globally with continue better as ever

forward deeply we we continue rest expect we and international OP the distributors now OUS. XXXX our few a as to a have sales agencies penetrate we more beyond, this to more product growth years least converted and at Moving of portfolio, U.S. for and of Pega for our accounts full with ran that

products. part strategy, portfolio progress our critical we a continue with several this Growing area of and in of remains the advancement to our

we excited in quarters, PNP we Sets to way of a we Tibia will continue remain release launched quarter to for the of our Tibia. are will and another catalyst report key XX And our the As ride each XXXX, several next PNP sets. we several years. next the well with second U.S. market on that last are quarter, discussed the of full in accounts

tandem, In customers are also product release endorsed with full been great reviews. of the this we high, for market and executing DFX. our Demand has have a extremely product

is While growth several small. is projections, this is years. for technologies these to next promising revenue devices. stage us training of rapid at these ramp surgeon DFX update poised our in The surpassing for the

After great both quarter in new -- our strong second account and that eX-Fix high. the like customer and a of quarter, we continued very followed customers up quarter, conversion was strong quarter first second addition, terms I'd to momentum In a during revenue was and the note with conversions.

to Plating On and franchise, with projects ever PNP make first pediatric on year. PX system, next launch orthopedics. series new plating plating Plating Anatomic will progress quality the Tibia a most our of in PX, combined IMA the FEMUR and our seen continue the front, are first sophisticated our we Platform with of R&D to of providing and and T&D the half we solid ensure | or market-leading Pediatric the highest Systems customers expect

pediatric strategy As areas support our space, continue into part to larger areas expand underserved to the and with our footprint of transformational we orthopedic all overall opportunities. within

source that Specialty OrthoPediatrics our of is more Business, new opportunity us surround OPSB to a only substantial friendly to capital but The their allows with children, customers Bracing solutions not represents growth. nonsurgical an or

have and a to it presents. that growth fully business scaling long be and our and fully are the breadth synergies the of to we the OPSB now the contribute integrated the in with will profitability. improved This opportunity term business realize implant can We assets, starting our

seeing sales Since The of franchises is strategy of sales are force early that [indiscernible] from force materially, an R&D OPSB-specific we investment returns expand inception, grown the already its products our strategy. the range expansion, sales expansion has X-point by driven force. our and clinic in the and

to projects and continue progress, X each year rapidly launch X products Additionally, to to we expect as a result. new R&D

new expansion we formalizing operation Notably, in embedded in and our a impact to stages Hospital we while numerous of half Lastly, in final Virginia, the opportunities clinic applying clinic first clinic Nationwide begin have our have running second XXXX, next new year. identified expect up for Children's of in the the to and of small we in the be through plan. most expect are to our

of OPSB an our day. our have the regarding for will Investor prospects clinic is details we be More it view assume the safe growth Day, is more, expansion more by strategy learned upcoming positive growing at shared but to as

increase growth to in Moving we This second million, of the revenues. was $XX.X to the implants, of O&P compared representing the especially XXXX, growth XX% In new users by revenue year. of the a spinal RESPONSE Boston scoliosis led of generated addition Scoliosis global strong and business. quarter of our prior

by Boston strong. somewhat a the the sales was product negative by international increased in and quarter Second growth by domestic quarter XX%, O&P start overall the scoliosis June. Boston of Brace in slower-than-expected Scoliosis addition revenue from portfolio. was revenue Domestic muted But the led

record significant revenue with bullish in surgeons uptick offerings about globally. customer continued adopting ended summer growth our XXXX base of new and had indicate Scoliosis a Hinting weeks beyond. recent and Nevertheless, a post an gains, expanding promising we're

constantly and unaddressed our aspects enhancing is team to cater our exploring while needs portfolio. expand children of product ways impact of to Our

response that X the we're innovation advancements we've different past is phases and OrthoPediatrics, are the with we RESPONSE in fall. the encouraging. focused inflects on over EOS Rib the which quite products, in surgery development pioneered system made After category Pelvic the we been decade. Scoliosis, At has this first and Currently, are of onset pleased technical the XXXX, quarter which of early launching a had

distinct This care facilities and that in novel pediatric convention in of the has a Scoliosis footprint addresses the in deformity is a developing most was previously some gap reinforced represents unmet one. meet significant where and right utilized our that technology our needs now is that complex strategy system surgery being our of products This known.

hope we impact be are Vertiglide electromechanical eLLi ] of we have development to [ device our in The hopeful launches pediatric which high rod, the ahead, half waiting to upcoming pass a growing in the market FDA with coming process, XXXX. FDA in are review, additional or expectations eLLi the it critical and Vertiglide of and and particularly for the Currently, will offerings, to X received Looking [ available continues EOS XX breakthrough designation ]. the approval months. second milestones the is the XX in by

suite expect strengthen several of we which growth and Beyond our of next in years our next our the in the in delivering year. further development system to of coming EOS stages wave our portfolio over of Scoliosis the transform late this implant innovative the products the we're to suite of will launch implants products, Collectively, position, next-generation Scoliosis come. Fusion

of performance international was including $XX.X growth. Deformity legacy devices. Overall, was by strong, Trauma several international. in to million over and revenue XX% and driven year-over-year Growth Pega, delivering generating growth, product eX-Fix on primarily XX% Moving

a entire soft strong portfolio this across was the offset quarter. international T&D by but was demand General Scoliosis partially

stabilize several We Bothe as America. grow the the businesses expect rate positioned on France begin Canadian continue year for our South and recurring accounts in well Ireland, EU and U.K., are very rapid, and and accounts the major growth future ordering EU from new the for Germany, in Canadian the Canada. to partners as full larger agency in we're small stocking to international open we patterns basis Scoliosis and a strong a businesses

large and will pediatric headwind. increase Given our launches of the eagerly upcoming opportunity last lack more Europe for make developments over years, footprint ability We environment our distinct and X product to await very internationally that business. to in the the operating only international a X we orthopedic see

thereafter. expect waiting to are [ ] set in This Braidwell note the XXXX we shortly launch or the we to MDR in to finalize early will EU our complete XXXX. Specifically, enable of half of which the several by products Europe be new potential second

we and believe up Overall, the the is very that international second improved contribute set will an business toward nicely, half XXXX.

training pediatric community. industry to opportunities education. OrthoPediatrics to brings continues the and enhanced lead and within That educational offer efforts search us to orthopedic

we you from pediatric-specific our to reinforce As At sponsorship top delighted know their event. we solutions to live being we were level highlighted the last where sponsored and sessions. from call, commitment were positive, through our the meeting, growing POSNA EPOS, our portfolio of annual of

as highlight advancements and pediatric to industry grateful for the such space made where We're on orthopedic the we opportunities will mission. in our the focus aligns that can this continue

Before we Investor for where look a Day our the growth OPSB. initiatives Specialty plan like will call in I'd specifically turning to to we the into and that to in business September, Bracing Fred, an plans to our deeper or host more take announce dive

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

Fred Hite

Thanks, Dave.

of Our in Trauma was XX% the O&P worldwide our the second revenue million OPSB of across by the compared and XXXX. XXXX driven Growth Scoliosis quarter domestic strong to global, of revenue. as Boston and increased quarter Deformity, $XX.X as addition quarter well performances primarily second

as Growth Trauma and second revenue the increase OPSB quarter quarter of XXXX. product line, driven U.S. as our from million, of revenue. $XX.X was in O&P Deformity a primarily Scoliosis was addition by the XX% Boston the and well

of driven million, international the generated the and by second XX% quarter quarter to Trauma Deformity quarter In of $XX.X second Growth partially We by and primarily the driven international of OPSB, lines, growth XXXX, revenue global $XX.X revenue. Deformity representing revenue was total soft product year of offset scoliosis XXXX. O&P XX% the in compared addition million strong was increased across the as numerous OPSB, compared well of eX-Fix Tibia, systems, primarily prior as period. to Growth Pega Boston by and growth Trauma specifically revenue. PNP and

revenue period. offset by XX% of of scoliosis Scoliosis year systems to million the RESPONSE X.X/X.X new Growth increased compared Spine primarily growth and negative the international was In the in second users our XXXX, quarter prior driven increased $XX.X of revenue. by

revenue million $X.X Sports Finally, $X.X was period. compared XXXX second the prior in of the in to Medicine/Other year quarter million

the quarter a year. deployment. we consigned the million million million Year-to-date, Turning deployed Touching time sets briefly sets in were to million compared to $XX.X of XXXX in second $XX.X to key of of at $X.X have metrics. $X.X compared of set last few on quarter second XXXX. this

XX% increase well profit by with was in For the margin second quarter lower of international second was primarily the favorable XXXX, quarter gross margin as gross sales The of to higher XX% profit purchase price XXXX. compared for as variance. combined driven domestic set growth

of operating $XX.X O&P increased as driven of of incremental second in the Total the The to XXXX. addition personnel ongoing to increased required million was expenses quarter million primarily expense the XX% $XX.X company. Boston well commission by increase support and as the or growth

expense, in primarily sales marketing with the commission coupled million to $XX.X OPSB million and business. increased the to was Sales second expenses increased driven XX% increase of employees or support quarter by XXXX. The $X.X additional

quarter increased amortization or by $X.X of in XXXX. the million General XX% support the $XX.X the expansion as personnel addition driven and to and second and was to depreciation increase continued resources The primarily of million of expenses business. well O&P the Boston administrative acquisition, as increased

includes As XXXX expenses. quarter the R&D marketing the as on addition earnings of O&P well as first and sales Boston lighter discussed call,

expenses. G&A heavier However,

of decreased $X.X timing million and expenses to second development expenses. to and XX% external Research in XXXX, million $X.X the development quarter or of due

quarter expense did the $X.X year. increased million the loan. of of quarter adjustment considerations as in million interest $X.X Total XXXX income contingent same of to XXXX, the from other favorable the In $XX we as million of period EBITDA compared Adjusted this our well XXXX, was $X.X recognized repeat million and $X.X XXXX of quarter XXXX. of second mid-cap quarter second expense other the second to that a was $X.X for last to million quarter for in for million second compares not the second

slightly million quarter the $XX ended volume the to investments quarter $X.X did restricted million of than and and to short-term Total payment. final cash. Concepts MedTech a higher and payment cash as a due of second in which in commitments. payments approximately million include $X.X expected payment XXXX was with anniversary to cash, We million, usage was $XX.X ApiFix supplier acquisition $X.X million second

that have at to not currently strategic our burn second to invest the expect reduced set receivables in year. June we of as the support due seen the significantly be half cash quarter We quarters increased subsequent addition, and higher but business then second initiatives burn seasonality In the be we in higher in inventories cash and level continuing as the in well a anticipate future will deployments. our repeated in volume of the of will

With more to the new needs with that growth. will fire have said, facility we better deliver grow flexibility, business steps and to us to power our our continue capital closing support of taken that a enable and the recently OrthoPediatrics offer increase

whom partnered financing Braidwell, relationship capital. private of and have of our loan placement to consisting term we had will up have a options, million $XXX financing a and evaluating we have provide a with notes a convertible After with of long-term that signed

access million initial financing term loan of the convertible a of consists million draw term an a $XX term additional loan notes. $XX Terms term for loan an The to of $XX loan of facility a and million both and million. delayed include $XX

operate for allowing the transaction and connection repurchases of tremendous pediatrics capital the proceeds to general $XX financing, program debt to of and outstanding potential in with also to In approximately approved stock. position a outstanding connection repurchase of with stock financing, fees common to continue of needs, we million stock will from strength. used working The repay million, incurred have up purposes the $X a former be

Turning to guidance.

XXXX million for year reaffirming our We XX%. Representing to year-over-year million. full range of expectations revenue to are of $XXX growth $XXX XX%

million expect business we We XXXX. to in $XX XXXX. million on And between continue cash additionally, breakeven continued the to focus our represents continue generate to adjusted to million of and $X in driving set EBITDA less deployment by This than new $X of expect flow XXXX.

now turn call closing remarks. to Dave back the for I'll

David Bailey

Thanks, Fred.

see at stand the end today. of reached where to it's year, we encouraging As the we

looking continual further We catalysts have have solid are to been for way a upcoming that and for the pave room several established base forward expansion.

half our ever, back revenue than children carry maintained margins confident that capture of entire continue EBITDA year we our share business, into the shadow healthy help We and as will more across to it are momentum on expectations. beyond records, and the execute the

are from positioned digital opportunities making well and MDR We compliance EOS, investments leverage to improved health. while transformational all including meaningful well drive operating product as development, substantial in OPSB the EU as

continued annual in million breakeven. adjusted execution million a will an $X year. $X EBITDA an produce consistent next appointment, this level Our EBITDA flow to cash step towards major equal And to taking year adjusted expected

OP like surgeon I'd we're providing an thank our September health looking our of additional and pediatric closing, the to investors care together In Investor in for to forward during our innovators help kids, and to partners, all standing associates, my Day. update in

open Q&A. let's for the call Operator,

Operator

our come first Rick And with Instructions] Stifel. from [Operator Wise question will

Frederick Wise

the guidance trying sort second think me ask and altogether start through outlook Let and off half, to it bit. of I'll little the a for the

what the outlook the given just raise, can excellence I'm and you why the us as all that, keep And why organic answering positive had did numbers to for maybe about this small half was understand help quarter? the of the on second multiple You both commentary? same no have understand growth trying You a part fronts. beat.

David Bailey

Yes.

morning. to this I consistent think our remaining of Hey, think terms I Yes, fairly -- very in from have Nice conservative policy to guide. of we you Rick. a talk

high expect think I growth teens think you or acquisition. that or can the XX% I around you Boston so out O&P if in organic subtract

something And we're XX% always so something pretty to XX% with that again. consistent that's with range, see pleased in larger, about of really we've what targeting kind growth high-teens but talked to

of through of of QX, a see have July, the Obviously, very things a the things periods. conservative said, good are lot of I will year. And multitude think positive in the August, half that of you And you yes, until full our business. two us get the fairly largest measure we within back happening remaining happened despite we like

a And really what seeing summer really, so is far, robust season. we're

Frederick Wise

Yes.

quarter, sounds the the that's continue Following through last up back year. really, talked international fundamentally, that, to And to on it you going expecting again, on about everything really positive. momentum

the It Or if in confidence sounds numbers gives more that falling you place can being you you're Am show that scoli that in to what extra I'm like pieces too the I that hearing confident half. now? are second better ever optimistic? us it really happen than

David Bailey

Yes.

the experiencing patterns shop several distribution at we're on What and the last and mid is of in least think. quarters side, been terms entirely ordering the America. South revenue OUS I isolated in in has to stocking for

primarily Scoliosis States as pediatric and you think where also United and And do where have I Europe, Canada our surgery. markets only we a countries, it's has America been in business historically and large in don't And Australia outside pediatric in spine orthopedic like know, primarily surgeons pediatric doing of of surgeons South who in are the surgery, spine a footprint. pediatric as few spine

very but describe it in only where -- strong it From and this this the quarter, what small see very think was is choppy. business, year was we to in I we're strong. demand, South Australia of a our way continued markets to -- perspective, terms the America

quarter, you quarter. can be back the fairly fairly And orders so that next that, in generally low when particular a confident speaking, comes have we in

as smooth next rapidly, we're most it our business growing likely that revenue stage, quarters, they're business our and what because but the more in it we're overall several less. stable These EU. at component business And that international. of And through partners. They're much all very agency markets Canada the not are and the small so in scoliosis my over that is like stocking commentary will grows seeing that are markets seeing out they're this our much is growth on

the our South terms year, for America, half usage in But very in strong of patterns of just surgeons we're that there. based of second are be terms profile in us bullish of ordering what seeing will even on we the the the quite

Fred Hite

would you're just America track Latin we Rick, seeing when that continue procedures we to open to in that grow. is with there. sell we that sets and managing our I The stocking down us America data. because Yes. to the our add, know Latin receivables lumpiness decide partners

keep And so to we current need get paying those and too of on far for ourselves. not them ahead sets

procedures the So are the our there. of demand is timing happening, some The positions. cash of this is us managing

Operator

And BTIG. comes our next question from Zimmerman Ryan with

Ryan Zimmerman

I When about them, I ask track Boston want were do O&P. for you did on year, deal $XX recall. with to they to the about million the if

prevailing make Just the first basis? want Boston assumption the still that O&P contribution an sure annual that, for on to is

at the like second the it financing, happening know that's of me if does I'm more maybe you're and just Boston as But like you're we'll think private move I that a kind sounds but and clinic that's in September. about with XXXX? details And into again, it accelerating O&P, rapid wrong feel case, around more And kind get the is to pace. thing accelerating here, we if how your correct of strategy

David Bailey

Yes.

We'll $XX solid a is number, that. stick think with million I Ryan. the

as to I product portfolio, well as that the devices. these the specific always OPSB side Rhino, the selling out is Boston really Medical O&P MDO products to -- point rest franchise Medical to or Ora unrelated Ora think business that that's some the the of of the I of Boston again, wholesale the specific

And very so component we rapidly. OPSB growing see that of are

along also in that side, which after a our just you acquisition some I of but greenfield time said, the be what think setup lot clinic on expansion think into both speed you acquisition opportunity acquisitions September. assume us of will facility could to about it some the more or assumption locations, would get to like heading what of But could process. our capacity maybe to the is we'll you O&P, take that we and allow small in for do set Boston and there talk would us licensing capacity to that our terms that open up, assume

acquisition. so post And

so lot just You've side. about a of things opportunity I how heard at very us talk coming far. clinic expansion acquisition, we have would bullish the us have on gone clinic say

here capacity certainly, accelerating I would But of connected the that assume back we be can don't if of our that say of -- impact is its you scale through LPS so would capital this of opportunity we I I us are at what scale raise think our the grow that, and was half in our -- And sense, that that Does know terms least in have expansion. of franchise in clinic to front terms we the the of to opportunity think in Ryan? make year.

Ryan Zimmerman

market, curious, some in very competitors. then I changes No, know color weeks. no. of ownership bit. changes of appreciated few the Very we'll to been some more much -- I'm get in a there's in and And maybe turning your Scoliosis a for

spine of going one about the your I equity into think buyer. from competitors business private a

capitalize and that Scoliosis I'm on any, in disruption? domestically market curious has if impact in whether the can what, resulted that some you of

David Bailey

Yes.

I opportunistic. we've to be tried think

has all pediatric been been portfolios. well surgery spine scoliosis of to in some adult small the say occurred received there opportunity have has would companies the As M&A that by customer I exclusive very and pediatric companies pediatric products to that the with pediatric orthopedics commitment you well least base. reaffirm that's know, our for at us our

in that by EOS unmet We're product by think dabble development going I orthopedics pediatric needs and have underserved up XXX% the then followed I pediatric focusing mean pediatric we've been that the anywhere. And our adult changing we're been to extremely We're focus. companies scoliosis. that's right? dedicated not complex done, spine We're orthopedics. not on these

combined center develop pediatric are table, in develop here most they products focus of pushing into of I where been disruption that so the the adult the think combination loss a of are of maybe that bit you're telling and the basically the with a we spine maybe that spine on to chips seeing customers, our in products some there's us few complex. had the And our market of

with day, day In unmet scoliosis I the continuing our think quarter customers. most And think franchise. resonating building in it -- of that's is I needs, by quarter, by largest the our credibility the

there of Pelvic And call that in the now very response some need States. product RESPONSE surgery. you fairly children's large in strong is a That premier those where heard were in And some had otherwise with scoliosis at presence, the locations, the used least a for unmet and being product pediatric locations example, system. United for no our in fusion we Rib of on us. small but hospitals

is not months in just And the scolio going us combine surgeon you scoliosis with entire portfolio just combine the to very in of the physicians a some hey, next And to the be unique ApiFix, really when those toll delivering entirely conversions that, the us this allowing our foothold that a we're driving X the tell think systems. facilities, balance and And to new an a or portfolio U.S. XX is When story then that giving you very, it's by system, in you of with X way, so those it story. what's if that's to so, fusion XD, exposing of state-of-the-art. I compelling

Operator

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

Matthew O'Brien

in Specialty still I are as commentary. business? Can mean, it's capturing maybe know Maybe of it kind that terms the new see you a you're that seeing I just of in Bracing talk successes to bit integrating, you seeing you're of to came just early. terms kind integrating great about little what stick of in what line with was business?

can be to terms centers new annual And much, kind of we have business? because And think on contribution of do that? just the two as greenfield I they're should about then these basis than then Or similar an follow-up. much a bigger they being in those two revenue

David Bailey

scale on a I the probably just so the two, in the largest of Children's one States. of Yes, both the children's of Nationwide them those hospitals United obviously the size, think are although similar

in have would but having us. would so giving a to think individual for not plan embedded guidance And you be pretty that Nationwide here, that, facility substantial

is Virginia for a just We're patients you XXXX, be getting It's little growth to bit. is that certainly think But there seeing not one. started. the going yet. about drivers as

a there. we're think patients I seeing few

not account with. have we it really strong But business supports there bracing had historically an that

So back more, certainly and you a growth in probably how attach you from of we a and XXXX story. the when see impact a be you a that And significant but the big the would can our had that numbers expect would expect not half this of growth of few year, those part in we that portion beyond. growth

from things this think -- it to I well an It's have -- integration meant extremely seems I was here. thing be. gone mean perspective. like

MDO the have products. same Our terms -- they at had integrated. -- organizations implants do it's how do with Boston feel we're almost have was nonsurgical our company friends they of we that like and very in It we culturally yes, with similar a well

OPSB The balance the been integrating portfolio. of integration primarily efforts the have

Rhino, the MDO, I other Boston So done. stage, into these products this business. essentially think that at And is

here small in we're in working R&D. think brands really Boston had on, I Iowa. as Warsaw footprint. R&D both that an as and footprint R&D Things a still We well didn't have

live And of hopper so in we're customers. get start projects and our a lot have some to to going of those to projects we the

something, I that are we So working think, that's on.

go what then of Ryan to to echo business, I'll even talking franchise. we places we're we're surgeons about talking guess franchise about and T&D our scoliosis And that I or volume The talked our or just comments my the here. out made

Children's extremely local that Boston is physicians obvious, places is clinics, in Matt, that Boston in about bullish major the of extremely as States. some guess we are just hospitals sought children's have And the volume balance the us that's that. patient hospitals asking on I why Children's hospital of going in and been O&P for what focus the in well is their Again, United XXX% like Boston Hospital bracing that, take The does to care it so it's about that time. high. to either after embedded Philadelphia, with the to as opportunities or centers by And our scale

what response about stage how we're customer so a given that And more positive our at the been think I credibility. related by it's surprised our is But surprised I'm to business base this acquisition. this probably more bit whole maybe frankly, incredibly has

the companies difficult surgeons, been some That about willing the that to surgical the viewed a again, of that's been company. do care pediatric patient would as operating and for willing are things actually we've do, we haven't historically we when to then orthopedic more other outside room

exclusively activity about, of Just and to about population, that entire that not dedicated company [ exclusively are to patient we reinforces care a that care position that to which taking customers our here the getting high a care this kids are [indiscernible] back kids fully not level actually stay, then and overall. we screws. PediLoc implants, the we things is is pediatric They orthopedics ] care about

but And -- our The we by be, truth surprised, I'm really just has shouldn't well guess, is well that that behind I entire to how story. surprised customer. been received see think that I

Matthew O'Brien

Got EBITDA Okay. clear want I And helpful. for then make question next a to year. on commentary sure Very just on for it. I'm Fred. the

to equivalent deployment. improvement Meaningful set

should about talked deployment. Can meaningful that pretty of assumes just some this leverage year? million-ish about And that level Is some leverage. EBITDA under next of the think a think those talk that I year, you you we about points? $XX about just for then

Fred Hite

absolutely. Yes,

So single the of leveraging the things, not on biggest R&D. is particularly on point, volume, leverage leverage those side G&A the expenses portion continued of obviously, cash down

few, sales we like a points X couple will We up just the call it, of leverage marketing additional the to in and X have years. pick last on of side,

$XX set next us that So than yes, next that drops less year. million. through incremental very with deployment And all for again, of that volume be will year, nicely

for any adjusted to cover to we're of in breakeven And EBITDA cash comment EBITDA working then that cover XXXX, at achieving capital in flow adjusted And planning growing business in to Dave's the the that time. in XXXX. needs and the pay the and point script, investment for

Operator

question Mike next from the with And Matson comes Needham.

Michael Matson

ask to Rod. on eLLi want Growing just one the I

said you there requirement any XXX(k) is any that? expect to that for PMA? have do months. to approval you launching to So Is the kind you for going novo But And XX know what it think you'll get or XX be to you be data pathway De out approved? do of clinical

David Bailey

question. Great Yes.

breakthrough likely be market challenges. clinical but us, Obviously, has that was it step some will in gives the XXX(k). some, So obviously this for device success, pathway designation the device a one and for there is some that confidence obviously, us then huge other strong also pediatric the

FDA And not so can help recognizing change lives, breakthrough is in is that devices kids' think real by designation issued but save I the need lives. the a there device market more that kids for

we good seeing, this FDA which interactions we're that the And likely that the stage a pretty on with their at XX- and XX-month we've is XXX(k) based give that, had behavior based that one. what this that us to horizon so would are on is confident a time confidence

capture device. registry or in you post-market probably our could this or change data better could with believe pediatric know we approved. that data how terms that things on don't from to you we're operating But get it's -- going Again, spine whether clinical the be work though, perspective, FDA clinical to I that to couldn't this large FDA. in the get data with a PSSG Mike, there, require device this one the to of groups approved, at stage assume, large will will some of this of things related

clinical this are clinical making severe the with mean, And want learn. to we severe is challenges that we with that and that the want sure so so devices I the is I associated think we're procedure a that that condition out make to difference. coming

be and think surgery, We've been so I received inside the that think well pediatric And already the well that's will I leaders spine extremely leaders. talked by that's to received. something

it's So right do us to as clinically, it's for I for think well. commercially and rational approach the thing us a

Michael Matson

one Okay. stock repurchase. And on just then the

a a So stock. life is kind little you sort $X the million. of company it at stage cycle back said small, I your it's but know buying and see of unusual to

why So maybe sounded you were comment is what it do doing And that? buybacks considering chosen some you've the maybe like additional just on to well. outlook as

Fred Hite

great it's Mike. question, a Yes,

related So really it's the to convert.

call So from XX up a We convert strike as this the and a up looked price we you at like is effectively to other there looked at associated additional we idea with means something in no cap the place call, that pricing. instruments to cap XX. put get came for with noticed, as

And so directly it that is else. related and to nothing

Operator

question Turkaly JMP. next from Citizens comes the David And with

David Turkaly

Congrats just the recap. you level the cash remind high new economics in at in clinics could just these of sort if us sort on upfront? investing I a of Fred, of wondering of of was terms

positive on you get ROI those And quickly then how investments? or a think you of kind a return

Fred Hite

Yes, absolutely.

the guaranteed. or administration. space going then get do thing it's to to lease we're hospitals. either So we one, have We're from hoping open opening we the to some first surgeons clinic. let's in support very hospital hospital not be would very, going hospital is new the way, We the get have near from say inside a support our to volume then the comes the Obviously,

clinicians. have some build and is out some minimum which lease payments, then So hire we that space, cost

these not that's X, first to the of anticipate we're if in, in you confident X open of we're positive going going kind would business sub probably one or into cost, before all pretty come revenue and unless is months. we starts probably million think within that We Again, will, revenue early. the coming be $X.X cash flow to

pay the size years cash it that it's on positive to or So Obviously, and but that the of aggressively that obviously point kind back on that we in been flow clinic a over grow average depends would X within time. size, think months, starting the X of after new investment. then pretty be

David Turkaly

Sounds lot firepower at got a you to like of that go now.

I a doc registers about update either XD to the call. wondering conversation. about specifically Recently lot So And it with didn't was I that's talk give we any on you'd how the on and FIREFLY, we then good excited who technologies guess, or super was, recalibrates. hear. a XD had enabling how

would those great? two thoughts So on be and parameters those businesses any

David Bailey

a number a was you interview as question, say there related connecting had of the positive had as of executed really that I Paulson we're well Dr. sentiment an from Good time well, comments I surgeons of a Yes. POSNA well well was was echoed really XD and was Dave. to fantastic. that FIREFLY it's following FIREFLY group well connected and the same that got about different we to physicians that that very XD. physicians Dave, that different podcast physicians it there was as by some done are by to was think commentary interesting as robotics the all your conversation, [ ] -- Yes, think It

I received us. sparing radiation mean of of extremely navigation it's And facilities. great up XD well certain one minimal or in need in for radiation has Again, doors us for opens the that pediatrics. been this is for those technologies type

units next the of side we large to some seeing And of well of the we're a we had that co-related course is in in directly very business done the growth our future. hopper the previous. And our on of fusion the have year spells that some growth we response expect placements that to for over XX to of place locations I of months, fusion think XX the which franchise the

few years know, out in as through continue. the with some we the tools growth side as on working very few the navigation, well digital FIREFLY the launching business, years. here right coming months. our as Concepts another very be technologies health care now, have expect think small, in additional of we very working, the well to MedTech promising while whole of both for XD I you acquisition digital when And source on is that also you us So combine health profitable beta a that We're ago,

Fred Hite

that that's just new the certification received. we Dave,

David Bailey

Yes.

now to So ECP. XD fully the capacity do has without surgery spine navigated

registration So they they MRI. navigation base specific their on can specific, MRI do preoperative can the MRI a

XD. I by required. that, just wanting shows And customers But essentially really it all of can of really, of have all And you some the almost bit the think And power technologies radiation innovative huge. CT imagine. we a the that eliminates that's as or

Operator

And the Truist. comes Richard next with Newitter from question

Ravi Misra

Ravi in for Misra is This Rich.

first, turn the The guidance. to with back just you're a So to actually talking environment like back want at I questions. I'd But schedules. turn $XX just in surgery has normalized about question. you for one U.S. Street to and million about two robust QX to

a you conservatism walk challenges might just I'm of seeing little But bit you here. might constraints that that us or be more? And adding maybe appreciate conservatism be be any or that I can aspect the there your changes curious, more through might macro

understand be unchanged? is if us improving, or appears of why help the stable number Just that or healthy what is even to business U.S. kind maybe

Fred Hite

Yes.

Dave of is quarter Most largest in typically we about. growth, seen as conservative. third our very quarter. our think of which a lot that is mentioned, obviously have and July But that we're I good feel

beat And by by so we millions. in the quarter second but some, not

about to And feel the in continue the be good conservative third guidance. we so We quarter.

The fourth thing particularly for And quarter. in last that look us, the RSV is it's like. that is what always the will a X years, wildcard impossible in to predict

assumes RSV can it's year. that to quarter the Our guidance today last impact flu have of similar season, fourth the But an on business.

And year, to until difficult in predict. that point to it's we the get

that what last year, to get like know it's assuming until it's don't to we actually we but we're be So going point. to similar

So we're being the ahead of sure ourselves overall in nothing guidance. not trying more and it's than us getting to that conservative make

Ravi Misra

then maybe one expansion strategy and plans. around long-term And clinic

to about and up Just to But the Deformity we talking clinics Trauma required in XXXX you're of getting trying against pretty stand how onwards. the or EBITDA that significant intensity in kind a understand, ramp capital new reconcile in deeper do and business?

kind that that underlying of revenue help growth I need guys business bracing to is flow be mean of drive of other products of you're to the cash do this kind EBITDA level should point at able an emergence type in portfolio a support generation? that you additions more this kind of or leverage Or expansion? margin and

Fred Hite

the of the the business. organic implant leveraging growth side truly It's of

As on of ROI the business. increased side well clinic the the as

yes, if putting some, costs. be will in you place lease So we will, build-out

deploying the show negatively cost EBITDA. of will as that impact not We -- and the sets those up will depreciation adjusted impact be

leverage a portion few the with the the leveraging sales the Keeping the growing points effectively cash of we're G&A line coming business. R&D So from and then side revenue, marketing and year. of is really each

grow the amortization, But leverage support cash the the of those continue comp, portion, really come will from. where will cost which with probably revenue. to to depreciation, the stock is the So continue things businesses is

the higher the drop bracing side business, the there. of And nice through business. growth actually with overall of business, margins the will rate than profitability contribution side on contribution high implant to in the higher

Operator

And at call the I to Bailey am hand time. would showing David no closing remarks. over now like for to I further questions back this

David Bailey

Thank for and you, endings look on September forward Michelle, of the I day. everybody, in and call. joining us discussing thanks, many updates today our seeing you to

a and day. great thanks So your for have time,

Operator

for call. participating. you Thank This does conclude today's conference

You disconnect. may now

OrthoPediatrics (KIDS) 6 Aug 242024 Q2 Earnings call transcript