OrthoPediatrics Corp. Reports Fourth Quarter and Full Year 2023 Financial Results

2024-03-06

并购财报

Record full year 2023 revenue of $148.7 million increased 22% compared to prior year

WARSAW, Ind., March 06, 2024 (GLOBE NEWSWIRE) -- OrthoPediatrics Corp. (“OrthoPediatrics” or the “Company”) (Nasdaq: KIDS), a company focused exclusively on advancing the field of pediatric orthopedics, announced today its financial results for the fourth quarter and full year ended December 31, 2023.

Fourth Quarter and Full Year 2023 & Recent Business Highlights

Helped nearly 20,000 children in the fourth quarter 2023 and approximately 82,000 for full year 2023, bringing the total to over 710,000 since the inception of OrthoPediatrics, including Boston Orthotics & Prosthetics, the combined organizations have helped more than 1.0 million kids

Generated total revenue of $37.6 million for fourth quarter 2023, up 21% from $31.0 million in fourth quarter 2022; domestic revenue increased 24% and international revenue increased 13% in the quarter

Generated record total annual revenue of $148.7 million for full year 2023, up 22% from $122.3 million in 2022; domestic revenue increased 20% and international revenue increased 26% in 2023

Achieved record full year adjusted EBITDA of $5.0 million in 2023, compared to $0.2 million in 2022

Launched 8 new products in 2023 including the RESPONSE™ Power Scoliosis System, GIRO® Growth Modulation System, Pediatric Nailing Platform Tibia System, DF2® Brace, Mitchell Ponseti® Plus Bar (“MP+"), and the Levity Device

Announced acquisition of Boston Orthotics & Prosthetics, expanding OrthoPediatrics Specialty Bracing Division "OPSB" with pediatric orthotics management business offering leading technology and pediatric care through dedicated clinics

Strengthened balance sheet by closing $80 million debt financing to support the Boston Orthotics & Prosthetics acquisition and future business requirements

Reiterated full year 2024 revenue guidance to be in a range of $197.0 million to $200.0 million, representing growth of 32% to 34% compared to 2023

“2023 was another strong year for OrthoPediatrics as we delivered record top-line results and outperformed our adjusted EBITDA expectations. We continue to benefit from an extremely diverse business from which we saw strength across all segments this year. Both our trauma and deformity and scoliosis businesses continue to capture market share and drive growth,” commented David Bailey, President & CEO of OrthoPediatrics. “Looking ahead, we believe we are in an extremely strong position for 2024 and we have the right drivers in place to sustain our strong revenue and profitability growth. We look forward to helping the next million kids with our portfolio of the most advanced pediatric orthopedic solutions."

Fourth Quarter and Full Year 2023 Financial Results

Total revenue for the fourth quarter of 2023 was $37.6 million, a 21% increase compared to $31.0 million for the same period last year. The increase in revenue in the fourth quarter of 2023 was driven primarily by growth across Global Trauma and Deformity, Domestic Scoliosis, and OPSB, offset by lower growth in International Scoliosis. U.S. revenue for the fourth quarter of 2023 was $28.3 million, a 24% increase compared to $22.7 million for the same period last year, representing 75% of total revenue. The increase in revenue in the fourth quarter of 2023 was driven primarily by growth across Trauma and Deformity, Scoliosis, and OPSB. International revenue for the fourth quarter of 2023 was $9.4 million, a 13% increase compared to $8.3 million for the same period last year, representing 25% of total revenue. Growth in the quarter was primarily driven by Trauma and Deformity, offset by lower Scoliosis sales to stocking distributors in South America.

Total revenue for the full year 2023 was $148.7 million, a 22% increase compared to $122.3 million in 2022. Full year U.S. revenue was $111.0 million, a 20% increase compared to $92.4 million in 2022, representing 75% of total revenue. International revenue for the full year 2023 was $37.7 million, a 26% increase compared to $29.9 million in 2022, representing 25% of total revenue.

Trauma and Deformity revenue for the fourth quarter of 2023 was $27.1 million, a 23% increase compared to $22.1 million for the same period last year. Revenue was driven by growth from Pega products, Trauma, Ex-Fix, and OPSB. Scoliosis revenue was $9.7 million, a 20% increase compared to $8.0 million for the fourth quarter of 2022. Scoliosis growth was driven primarily by increased U.S. growth across the Response and ApiFix non-fusion system, partially offset by cancelled cases from late December RSV infections and lower than expected orders in Latin and South America. Sports Medicine/Other revenue for the fourth quarter of 2023 was $0.9 million, compared to $0.9 million for the same period last year.

Trauma and Deformity revenue for the full year 2023 was $106.8 million, a 26% increase compared to $85.1 million in 2022. Scoliosis revenue for the full year 2023 was $37.9 million, a 13% increase compared to $33.4 million in 2022. Sports Medicine/Other revenue for the full year 2023 was $4.0 million, a 6% increase compared to $3.8 million in 2022.

Gross profit for the fourth quarter of 2023 was $26.7 million, a $5.5 million increase compared to $21.2 million for the same period last year. Gross profit margin for the fourth quarter of 2023 was 71.0%, compared to 68.5% for the same period last year. For the full year 2023, gross profit margin was 74.8%, compared to 74.1% in 2022. The slight increase in gross profit margin was driven primarily by lower set sales to international stocking distributors.

Total operating expenses for the fourth quarter of 2023 were $34.8 million, a $5.2 million increase compared to $29.5 million for the same period last year. Full year operating expenses were $138.0 million, a 19% increase compared to $116.1 million in 2022. The increase was mainly driven by volume of units sold, increased volume related commission, as well as incremental personnel required to support the growth of the company.

Sales and marketing expenses increased $1.5 million, or 14%, to $12.4 million in the fourth quarter of 2023. For the full year 2023, sales and marketing expense increased $6.3 million, or 14%, to $51.4 million. The increase was primarily driven by increased sales commission expenses.

General and administrative expenses increased $3.0 million, or 18%, to $19.6 million in the fourth quarter of 2023. For the full year 2023, general and administrative expense increased $16.0 million, or 27%, to $75.4 million. The fourth quarter and full year increases were driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization.

Total other income was $1.2 million for the fourth quarter of 2023, compared to $0.4 million for the same period last year, and was $5.4 million for 2023 compared to $21.7 million for 2022. In the fourth quarter of 2023, we realized an immaterial fair value adjustment benefit compared to a $0.5 million benefit for the fourth quarter of 2022. For 2023, fair value adjustment of contingent consideration was a benefit of $3.0 million compared to a $25.9 million benefit for 2022.

Net loss for the fourth quarter of 2023 was $6.7 million, compared to $7.8 million for the same period last year. Net loss per share for the period was $0.29 per basic share and diluted share, compared to $0.35 per basic and diluted share for the same period last year. Adjusted EBITDA for the fourth quarter of 2023 was $1.3 million as compared to a loss of $2.2 million for the fourth quarter of 2022.

Net loss for the full year 2023 was $21.0 million, compared to a net income of $1.3 million last year. Fair value adjustment of contingent consideration for total year 2023 was a favorable $3.0 million compared to a favorable $25.9 million in 2022. Net loss per share for the period was $0.92 per basic and diluted share, compared to net income of $0.06 per basic and diluted share for the same period last year. Adjusted EBITDA for the full year 2023 was $5.0 million compared to $0.2 million for the full year 2022. See below for additional information and a reconciliation of non-GAAP financial information.

Weighted average diluted shares outstanding for the three months ended December 31, 2023 was 22,762,689 shares.

As of December 31, 2023, cash and cash equivalents, short-term investments and restricted cash were $82.3 million compared to $84.0 million and $119.8 million as of September 30, 2023 and December 31, 2022, respectively. As of December 31, 2023, $10.0 million had been drawn on the new line of credit with MidCap. Post closing the Boston Orthotics & Prosthetics acquisition OrthoPediatrics cash and restricted cash balance was approximately $60 million.

Full Year 2024 Financial Guidance

For full year 2024, the Company expects its revenue to be in the range of $197.0 million to $200.0 million, representing growth of 32% to 34% over 2023 revenue. The Company also expects its annual set deployment to be less than $20.0 million and expects to generate $8.0 million to $9.0 million of adjusted EBITDA for full year 2024.

Conference Call

OrthoPediatrics will host a conference call on Thursday, March 7, 2024, at 8:00 a.m. ET to discuss the results. Investors interested in listening to the conference call may do so by accessing a live and archived webcast of the event at www.orthopediatrics.com, on the Investors page in the Events & Presentations section. The webcast will be available for replay for at least 90 days after the event.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of U.S. federal securities laws. You can identify forward-looking statements by the use of words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "could," "believe," "estimate," "project," "target," "predict," "intend," "future," "goals," "potential,” "objective," "would" and other similar expressions. Forward-looking statements involve risks and uncertainties, many of which are beyond OrthoPediatrics’ control. Important factors could cause actual results to differ materially from those in the forward-looking statements, including, among others: the risks related to COVID-19, the impact such pandemic may have on the demand for our products, and our ability to respond to the related challenges; and the risks, uncertainties and factors set forth under "Risk Factors" in OrthoPediatrics’ Annual Report on Form 10-K filed with the SEC on March 1, 2023, as updated and supplemented by our other SEC reports filed from time to time. Forward-looking statements speak only as of the date they are made. OrthoPediatrics assumes no obligation to update forward-looking statements to reflect actual results, subsequent events, or circumstances or other changes affecting such statements except to the extent required by applicable securities laws.

Use of Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures such as adjusted diluted (loss) earnings per share and Adjusted EBITDA, which differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted loss per share in this press release represents diluted (loss) earnings per share on a GAAP basis, plus the accreted interest attributable to acquisition installment payables, the fair value adjustment of contingent consideration, trademark impairment, acquisition related costs, non-recurring Pega conversion fees, and minimum purchase commitment costs. The fair value adjustment of contingent consideration is associated with our estimates of the value of earn-outs in connection with certain acquisitions. We believe that providing the non-GAAP diluted (loss) earnings per share excluding these expenses, as well as the GAAP measures, assists our investors because such expenses are not reflective of our ongoing operating results. Adjusted EBITDA in this release represents net loss (income), plus interest expense, net plus other expense, provision for income taxes (benefit), depreciation and amortization, trademark impairment, stock-based compensation expense, fair value adjustment of contingent consideration, acquisition related costs, nonrecurring Pega conversion fees, and the cost of minimum purchase commitments. The Company believes the non-GAAP measures provided in this earnings release enable it to further and more consistently analyze the period-to-period financial performance of its core business operating performance. Management uses these metrics as a measure of the Company’s operating performance and for planning purposes, including financial projections. The Company believes these measures are useful to investors as supplemental information because they are frequently used by analysts, investors and other interested parties to evaluate companies in its industry. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to, or superior to, net income or loss as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and it should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, the measure is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as debt service requirements, capital expenditures and other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and other potential cash requirements. In evaluating these non-GAAP measures, you should be aware that in the future the Company may incur expenses that are the same or similar to some of the adjustments in this presentation. The Company’s presentation of non-GAAP diluted (loss) earnings per share or Adjusted EBITDA should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using these adjusted measures on a supplemental basis. The Company’s definition of these measures is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation. The schedules below contain reconciliations of reported GAAP diluted (loss) earnings per share to non-GAAP diluted (loss) earnings and net (loss) income to non-GAAP Adjusted EBITDA.

About OrthoPediatrics Corp.

Founded in 2006, OrthoPediatrics is an orthopedic company focused exclusively on advancing the field of pediatric orthopedics. As such it has developed the most comprehensive product offering to the pediatric orthopedic market to improve the lives of children with orthopedic conditions. OrthoPediatrics currently markets 71 surgical systems that serve three of the largest categories within the pediatric orthopedic market. This product offering spans trauma and deformity, scoliosis, and sports medicine/other procedures. OrthoPediatrics’ global sales organization is focused exclusively on pediatric orthopedics and distributes its products in the United States and over 70 countries outside the United States. For more information, please visit www.orthopediatrics.com.

Investor Contact

Philip Taylor

Gilmartin Group

philip@gilmartinir.com

415-937-5406

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Share Data) December 31, 2023 December 31, 2022 ASSETSCurrent assets: Cash$31,055 $8,991 Restricted cash 1,972 1,471 Short term investments 49,251 109,299 Accounts receivable - trade, net of allowances of $1,373 and $1,056, respectively 34,617 24,800 Inventories, net 105,851 78,192 Prepaid expenses and other current assets 3,750 3,966 Total current assets 226,496 226,719 Property and equipment, net 41,048 34,286 Other assets: Amortizable intangible assets, net 69,275 64,980 Goodwill 83,699 86,821 Other intangible assets 15,287 14,921 Other non-current assets 2,940 — Total other assets 171,201 166,722 Total assets$438,745 $427,727 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable - trade 12,649 11,150 Accrued compensation and benefits 11,325 6,744 Current portion of long-term debt with affiliate 152 144 Current portion of acquisition installment payable 10,149 7,815 Other current liabilities 7,391 5,018 Total current liabilities 41,666 30,871 Long-term liabilities: Long-term debt, net of current portion 9,297 — Long-term debt with affiliate, net of current portion 611 763 Acquisition installment payment, net of current portion 3,551 8,019 Contingent consideration — 2,980 Deferred income taxes 5,483 5,954 Other long-term liabilities 1,112 492 Total long-term liabilities 20,054 18,208 Total liabilities 61,720 49,079 Stockholders' equity: Common stock, $0.00025 par value; 50,000,000 shares authorized; 23,378,408 shares and 22,877,962 shares issued as of December 31, 2023 and December 31, 2022, respectively 6 6 Additional paid-in capital 580,287 560,810 Accumulated deficit (197,742) (176,768)Accumulated other comprehensive loss (5,526) (5,400)Total stockholders' equity 377,025 378,648 Total liabilities and stockholders' equity$438,745 $427,727

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In Thousands, Except Share and Per Share Data) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022Net revenue$37,613 $30,994 $148,732 $122,289 Cost of revenue 10,899 9,770 37,479 31,629 Gross profit 26,714 21,224 111,253 90,660 Operating expenses: Sales and marketing 12,439 10,945 51,402 45,053 General and administrative 19,594 16,554 75,421 59,383 Trademark impairment — — 985 3,609 Research and development 2,747 2,034 10,196 8,014 Total operating expenses 34,780 29,533 138,004 116,059 Operating loss (8,066) (8,309) (26,751) (25,399) Other (income) expenses: Interest (income) expense, net (303) (61) (198) 2,424 Fair value adjustment of contingent consideration (6) (480) (2,980) (25,930)Other (income) expense, net (854) 129 (2,261) 1,796 Total other income (1,163) (412) (5,439) (21,710) Loss before income taxes$(6,903) $(7,897) (21,312) (3,689)Provision for income taxes (benefit) (212) (48) (338) (4,947)Net (loss) income$(6,691) $(7,849) $(20,974) $1,258 Weighted average shares outstanding Basic 22,762,689 22,473,616 22,675,477 20,704,556 Diluted 22,762,689 22,473,616 22,675,477 20,947,727 Net (loss) income per share Basic$(0.29) $(0.35) $(0.92) $0.06 Diluted$(0.29) $(0.35) $(0.92) $0.06

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)(In Thousands) Twelve Months Ended December 31, 2023 2022OPERATING ACTIVITIES Net (loss) income$(20,974) $1,258 Adjustments to reconcile net loss to net cash used in operating activities: Trademark impairment 985 3,609 Depreciation and amortization 17,385 13,099 Stock-based compensation 10,526 6,679 Fair value adjustment of contingent consideration (2,980) (25,930)Accretion of acquisition installment payable 1,372 2,307 Deferred income taxes (1,163) (5,032)Changes in certain current assets and liabilities: Accounts receivable - trade (9,724) (3,983)Inventories (26,279) (16,938)Prepaid expenses and other current assets 94 (506)Accounts payable - trade 1,491 (209)Accrued expenses and other liabilities 6,852 3,344 Other (4,631) 536 Net cash used in operating activities (27,046) (21,766) INVESTING ACTIVITIES Acquisition of MedTech, net of cash acquired (3,097) — Acquisition of Rhino assets (546) — Acquisition of MDO, net of cash acquired — (8,360)Acquisition of Pega, net of cash acquired — (31,730)Purchases of licenses (2,106) — Sale of short-term marketable securities 112,904 46,872 Purchase of short-term marketable securities (48,600) (110,122)Purchases of property and equipment (16,878) (10,031)Net cash provided by (used in) investing activities 41,677 (113,371) FINANCING ACTIVITIES Payments on debt with affiliate — (31,000)Proceeds from issuance of debt with affiliate — 31,000 Proceeds from issuance of debt 9,424 — Proceeds from issuance of common stock, net of issuance costs — 139,282 Proceeds from exercise of stock options 21 63 Installment payment for ApiFix (2,000) (3,234)Payments on mortgage notes (144) (137)Net cash provided by financing activities 7,301 135,974 Effect of exchange rate changes on cash 633 619 NET INCREASE IN CASH AND RESTRICTED CASH 22,565 1,456 Cash and restricted cash, beginning of period$10,462 $9,006 Cash and restricted cash, end of period$33,027 $10,462 SUPPLEMENTAL DISCLOSURES Cash paid for interest$42 $700 Transfer of instruments between property and equipment and inventory$57 $(234)Issuance of common shares for ApiFix acquisition installment$6,178 $10,410 Issuance of common shares to acquire MedTech$2,274 $— Issuance of common shares to acquire Rhino assets$478 $— Issuance of common shares to acquire MDO$— $9,707 Right-of-use assets obtained in exchange for lease liabilities$706 $213 Debt issuance costs not yet paid$127 $—

ORTHOPEDIATRICS CORP.

NET REVENUE BY GEOGRAPHY AND PRODUCT CATEGORY

(Unaudited)

(In Thousands) Three Months Ended December 31, Twelve Months Ended December 31,Product sales by geographic location:2023 2022 2023 2022U.S.$28,262 $22,732 $111,010 $92,419 International 9,351 8,262 37,722 29,870 Total$37,613 $30,994 $148,732 $122,289 Three Months Ended December 31, Twelve Months Ended December 31,Product sales by category:2023 2022 2023 2022Trauma and deformity$27,066 $22,080 $106,781 $85,055 Scoliosis 9,663 8,044 37,933 33,428 Sports medicine/other 884 870 4,018 3,806 Total$37,613 $30,994 $148,732 $122,289

ORTHOPEDIATRICS CORP.

RECONCILIATION OF NET LOSS (INCOME) TO NON-GAAP ADJUSTED EBITDA

(Unaudited)

(In Thousands) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022Net (loss) income$(6,691) $(7,849) $(20,974) $1,258 Interest (income) expense, net (303) (61) (198) 2,424 Other (income) expense, net (854) 129 (2,261) 1,796 Provision for income taxes (benefit) (212) (48) (338) (4,947)Depreciation and amortization 5,479 3,843 17,385 13,422 Trademark impairment — — 985 3,609 Stock-based compensation 2,516 1,568 10,526 6,677 Fair value adjustment of contingent consideration (6) (480) (2,980) (25,930)Acquisition related costs 451 — 650 818 Nonrecurring Pega conversion fees — — 277 — Minimum purchase commitment cost 915 662 1,968 1,100 Adjusted EBITDA$1,295 $(2,236) $5,040 $227

ORTHOPEDIATRICS CORP.

RECONCILIATION OF DILUTED (LOSS) EARNINGS PER SHARE TO NON-GAAP ADJUSTED DILUTED (LOSS) PER SHARE

(Unaudited) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022(Loss) income per share, diluted (GAAP)$(0.30) $(0.35) $(0.94) $0.06 Accretion of interest attributable to acquisition installment payable 0.01 0.02 0.05 0.11 Fair value adjustment of contingent consideration — (0.02) (0.13) (1.25)Trademark impairment — — 0.04 0.17 Acquisition related costs 0.02 — 0.03 0.04 Nonrecurring Pega conversion fees — — 0.01 — Minimum purchase commitment cost 0.04 0.03 0.09 0.05 Adjusted loss per share, diluted (non-GAAP)$(0.23) $(0.32) $(0.85) $(0.82)