ORTHOPEDIATRICS CORP Q3 FY2024 earnings call

• Performance: Record Q3 2024 revenue of $54.6 million, 37% y-o-y growth. Helped over 33,000 kids in Q3, over 100,000 this year.
• Strategy: Three-year plan for topline revenue growth, EBITDA, and cash flow breakeven in 2026. Raised full-year 2024 revenue guidance to $202M-$204M (36-37% y-o-y growth).
• Product Launches: Launched more sets of PNP Tibia, progressing on pediatric plating platform P3 (hip system launch H1 2025). OPSB R&D to launch 4-5 new products/year.
• Operational Impacts: Impact from hurricanes in late Sep and early Oct, but marginal effect on Q3. October trends favorable.

In the third quarter of 2024, OrthoPediatrics generated total revenue of $54.6 million, a 37% growth from Q3 2023.

• Trauma and Deformity (T&D): Generated $37.6 million, 31% growth y-o-y. Driven by market share gains, Boston O&P revenue, and products like PNP Tibia, DF2, cannulated screws. Revenue contribution from T&D was significant.
• Scoliosis: Generated $15.6 million, 52% growth y-o-y. Driven by strong case scheduling, share gain, new key accounts, international growth, and Boston O&P synergy.
• OPSB: Strategy includes growing market share (15-20% in 9 US target markets), R&D with 4-5 new products/year, and territory expansion (acquired a clinic in Florida).
• International: $11.9 million revenue, 12% growth y-o-y. Driven by scoliosis growth, but T&D and OPSB growth muted by prior year comps. EU MDR approval expected mid-2025.
• Sports Medicine: $1.3 million in Q3 2024 vs $0.9 million in Q3 2023.

• Raised full-year 2024 revenue to $202M-$204M (36-37% y-o-y growth).
• Expect full-year gross margin 74%-75%, adjusted EBITDA $8M-$9M.
• Less than $20M in new set deployment in 2024, aiming for cash flow breakeven by 2026.

• Impact of seasonal viruses (RSV, flu) on surgical volumes.
• Prior year comps affecting international growth (large Pega distributor orders in LatAm in 2023 not repeating).
• Delays in EU MDR approval timeline could affect product launches in Europe.

Q: Good morning. Thanks for taking the question. Just for starters, I don't know, Fred or Dave if you guys talked about the Boston O&P performance in the quarter specifically, but was that in line with your expectations? And did you see any demonstrable shift between T&D and Scoli in terms of where you're generating that revenue?

A: Yes. I think we see Boston performing as we expected. Obviously, because of the addition of a sales channel, we're starting to already see the early positive return as we called out of patient flow into some of those clinics. So we talked about a 15% share, we think in our nine territories at the Analyst Day and our aspiration here over the next several years, is to get that to 50%. I think we can confidently say that the impact that the selling organization is having in driving patients and notifying our customers that we have these services in our territories is working. I wouldn't say that it's driving huge amounts of that growth. But certainly, it's heading in the right direction. We expect that to continue. So, really positive there. I think the mix is basically the same as it's been all year. So we didn't see any more scoliosis. I think you may be getting at that 52% scoliosis growth rate obviously really, really big. It was definitely not driven by an overperformance on the Boston O&P side, at least on the scoliosis.

Q: Hey guys. It's Joseph, on for Mike. I guess maybe to start off could you maybe give us what organic growth -- organic revenue growth was in the quarter? And then, just looking at guidance saw the raise, but just kind of curious what's your outlook for flu and RSV. I know you guys had talked about in the past that you really have it kind of more under control moving forward. So wondering about that and just children's hospital staffing is that kind of still in good shape?

A: Yeah. So first question organic revenue. I think we gave guidance or comments earlier this year the Boston acquisition, Boston O&P acquisition was about $25 million that was added in. Of that, approximately 25% of that showed up in the second quarter 25% of that showed up in the third quarter historically. And then, if you split that 70% of that is on the trauma and Deformity side and 30% of it is on the Scoliosis side. And so that would give you the ability to do the math as you wish on the organic side. The second question was related to -- sorry the second question... Yeah. So on the RSV side, if you look at the data out there that's published CDC typically it starts to pick up a little bit in October and then it spikes in November and December. And if you look at the data just in the month of October, compared to October of last year it is lower than it was in October of last year. I think November, December and January are really the months that have the impact. But if you'll recall in the fourth quarter of last year, the hospitals did a better job of handling the influx. So two years ago it caught the hospitals by surprise. Last year the trend was -- it was still the second largest we've ever seen, but it was down 25% compared to the previous year and the hospitals did a better job of handling it. And so right now what's in our guidance is we're assuming the same type of reported cases that we saw in the fall of last year and that the hospitals will be able to handle it in the same manner. Related to staffing, yes, we think that we are now kind of behind that and that we have more normalized. And we see that normalized staffing continuing in the hospitals particularly in the U.S.

Q: Okay. Great. And then maybe just one on 7D, you guys talked about multiple placements at larger institutions in the quarter. So just kind of wondering if there's anything more you can talk about any more color on surgeon feedback or interest there and maybe what the installed base is at this point if you're willing to disclose that?

A: Yeah. So surgeon feedback has always been extremely positive on 7D. I think, as we told you guys when we started this it was, -- we were probably a little naive in that we hadn't been involved in a lot of capital placements capital equipment sales at the company. And I would just say at this stage, we've learned a lot. And because of the resources that we have now applied on the enabling technology team with people who really know how to do this and know how to do this well I think it's safe to say we have a very large funnel of 7D opportunities. And our expectation is that we get into a cadence where quarter-to-quarter place --we're placing 7D units and we're getting sales of 7D units as well on certain locations. I think the installed base off the top of my head is probably around 20. So we're still early, I would say in that process. And when we think about these placements, I mean, its part of how we think about the growth particularly in the out years. So once these units are placed we're certainly seeing an increase in revenue for our scoliosis fusion business particularly when they get placed and we're going through the trial. But once we get the PO we get the installment, we have a pretty good line of sight into how that's going to impact scoliosis fusion with our RESPONSE system for the next three to five years. And so it's very encouraging this quarter to see some placements particularly in some accounts that I would say, a year ago, we were kind of nowhere in at least in terms of our Scoliosis fusion business. And now to know that we will have a pretty substantial claim to the Fusion business in those accounts in 2025 and over the next three to five years it's encouraging for us in our forecasting of the RESPONSE business and our Scoliosis business in general.