Globe Newswire05.06.20
First-quarter revenue at OrthoPediatrics Corp., a company focused exclusively on advancing the field of pediatric orthopedics, rose a robust 11.6 percent in the three months ended March 31. But the company still felt the effects of COVID-19, as its net loss grew by $1.9 million and scoliosis sales fell nearly 13 percent.
First Quarter 2020 and Recent Business Highlights
Trauma and Deformity revenue for the first quarter of 2020 was $12.2 million, a 21.9 percent increase compared to $10 million for the same period last year. Scoliosis revenue was $3.7 million, a 12.8 percent decrease compared to $4.3 million for the first quarter of 2019. Sports Medicine/other revenue for the first quarter of 2020 was $435,000, a 14.2 percent increase compared to $381,000 for the same period last year. Scoliosis sales were impacted by COVID-19 more quickly as elective surgeries were deferred.
Gross profit for the first quarter of 2020 was $12.2 million, a 14.6 percent increase compared to $10.7 million for Q1 2019. Gross profit margin for the first quarter of 2020 improved to 74.7 percent, compared to 72.7 percent for the same period last year due to an increase in domestic sales.
Total operating expenses for the first quarter of 2020 were $16.7 million, a 25 percent increase compared to $13.4 million for the same period in 2019. The increase in operating expenses was driven by a 40.4 percent increase in general and administration expense primarily as a result of increased non-cash stock compensation as well as depreciation, a 15.5 percent increase in sales and marketing, and a 4.3 percent increase in research and development. Operating loss for the first quarter of 2020 was ($4.5) million compared to ($2.7) million for Q1 2019.
Net interest expense for the first quarter of 2020 was $0.4 million, compared to $0.3 million for the same period last year.
Net loss attributable to common stockholders for the first quarter of 2020 was ($4.9) million, compared to ($3) million for the same period last year. Net loss attributable to common stockholders for the period was ($0.30) per basic and diluted share, compared to ($0.21) per basic and diluted share for the same period last year. Adjusted EBITDA for the first quarter of 2020 was ($2.1) million as compared to ($1.4) million for the first quarter of 2019. The weighted average number of diluted shares outstanding for the three-month period ended March 31 was 16,423,853 shares.
In the first quarter of 2020, we had 167 sales representatives, up 21 percent compared to 138 in the same period of 2019.
The change in property and equipment during the first quarter of 2020 was $4 million, which compared to $5 million for the same period last year. This investment reflects the deployment of consigned sets, which includes product specific instruments and cases and trays. Including the implants, $3.3 million of consigned sets were deployed during the first quarter of 2020, compared to $2.7 million during the first quarter of 2019.
As of March 31, cash and restricted cash were $54.9 million after paying back the $5 million revolving credit facility, compared to $72 million as of Dec. 31, 2019, and the company had approximately $21.2 million in total outstanding indebtedness, with the full amount of its $15 million revolving credit facility currently available.
Due to the rapidly evolving environment and continued uncertainties surrounding the duration and impact of COVID-19, OrthoPediatrics maintains suspension of its revenue growth and set consignment guidance for the full year 2020.
Mark Throdahl, president and CEO of OrthoPediatrics, said, “First, we would like to thank our colleagues and the entire healthcare community for their dedication addressing the global COVID-19 pandemic. The extraordinary effort displayed by our team at this time as we continue to execute against our strategic initiatives is a testament to our company’s culture, which is the foundation of all our success. We saw a strong start to the year with 30 percent domestic revenue growth for the quarter, and we are pleased to sustain our momentum on corporate initiatives that will allow us to emerge from the COVID-19 crisis stronger than when we entered it. With our industry position and business model, we were able to complete the acquisition of ApiFix and its MID-C system on April 1 that is one of only two FDA-approved technologies that potentially allows patients to avoid fusion surgery altogether. Combined with the launch of our Large Fragment Cannulated Screw system and the recent FDA approval of expanded indications for our RESPONSE Scoliosis System as well as Orthex and other important new products, we look forward to offering an expanded portfolio as elective surgeries resume. We remain committed to our mission to provide children access to pediatric-specific solutions worldwide and are prepared to serve our customers, whatever the size of the surge in demand later this year.”
The company appointed David Bailey as president and Fred Hite as chief operating officer and chief financial officer (CFO), effective June 3. Currently, Bailey is executive vice president and Hite is CFO. These promotions commence an orderly process of senior executive succession in anticipation of Bailey being named CEO and Throdahl becoming executive chairman from president and CEO at the appropriate future time. Following that transition, Throdahl will continue working from the company’s Warsaw, Ind., headquarters and maintaining direct involvement in investor relations, strategy development, and operational travel in the field.
Terry Schlotterback, OrthoPediatrics’ board chairman, said, “After the successful IPO of the company, Mark approached the board indicating that it was appropriate to begin planning the CEO succession following his 70th birthday in 2021. We are fortunate to have two leaders of exceptional quality in both Dave Bailey and Fred Hite. Together, they will maintain the strategic progress, financial track record, and engaging culture that have distinguished OrthoPediatrics during Mark’s tenure as CEO. The board looks forward to welcoming Mark into the future executive chairman role and remaining a full-time officer of the company.”
First Quarter 2020 and Recent Business Highlights
- Acquired ApiFix and MID-C system on April 1 that expands portfolio of novel technologies to treat scoliosis
- Received U.S. Food and Drug Administration (FDA) 510(k) clearance and expanded neuromuscular indications for RESPONSE Scoliosis System and launched Large Fragment Cannulated Screw System in the United States
- Expanded the domestic sales organization to 167 consultants, up 21 percent from first quarter 2019 of 138 consultants
- Converted Italy to direct sales agency model, expanding international agencies to a total of eight
- Deployed $3.3 million of consignment sets in first quarter 2020, up 22.2 percent compared to $2.7 million in the same period prior year
- Recognized as one of the Best Places to Work in Indiana for a fourth year
- Maintained approximately $54.9 million in cash and restricted cash as of March 31
Trauma and Deformity revenue for the first quarter of 2020 was $12.2 million, a 21.9 percent increase compared to $10 million for the same period last year. Scoliosis revenue was $3.7 million, a 12.8 percent decrease compared to $4.3 million for the first quarter of 2019. Sports Medicine/other revenue for the first quarter of 2020 was $435,000, a 14.2 percent increase compared to $381,000 for the same period last year. Scoliosis sales were impacted by COVID-19 more quickly as elective surgeries were deferred.
Gross profit for the first quarter of 2020 was $12.2 million, a 14.6 percent increase compared to $10.7 million for Q1 2019. Gross profit margin for the first quarter of 2020 improved to 74.7 percent, compared to 72.7 percent for the same period last year due to an increase in domestic sales.
Total operating expenses for the first quarter of 2020 were $16.7 million, a 25 percent increase compared to $13.4 million for the same period in 2019. The increase in operating expenses was driven by a 40.4 percent increase in general and administration expense primarily as a result of increased non-cash stock compensation as well as depreciation, a 15.5 percent increase in sales and marketing, and a 4.3 percent increase in research and development. Operating loss for the first quarter of 2020 was ($4.5) million compared to ($2.7) million for Q1 2019.
Net interest expense for the first quarter of 2020 was $0.4 million, compared to $0.3 million for the same period last year.
Net loss attributable to common stockholders for the first quarter of 2020 was ($4.9) million, compared to ($3) million for the same period last year. Net loss attributable to common stockholders for the period was ($0.30) per basic and diluted share, compared to ($0.21) per basic and diluted share for the same period last year. Adjusted EBITDA for the first quarter of 2020 was ($2.1) million as compared to ($1.4) million for the first quarter of 2019. The weighted average number of diluted shares outstanding for the three-month period ended March 31 was 16,423,853 shares.
In the first quarter of 2020, we had 167 sales representatives, up 21 percent compared to 138 in the same period of 2019.
The change in property and equipment during the first quarter of 2020 was $4 million, which compared to $5 million for the same period last year. This investment reflects the deployment of consigned sets, which includes product specific instruments and cases and trays. Including the implants, $3.3 million of consigned sets were deployed during the first quarter of 2020, compared to $2.7 million during the first quarter of 2019.
As of March 31, cash and restricted cash were $54.9 million after paying back the $5 million revolving credit facility, compared to $72 million as of Dec. 31, 2019, and the company had approximately $21.2 million in total outstanding indebtedness, with the full amount of its $15 million revolving credit facility currently available.
Due to the rapidly evolving environment and continued uncertainties surrounding the duration and impact of COVID-19, OrthoPediatrics maintains suspension of its revenue growth and set consignment guidance for the full year 2020.
Mark Throdahl, president and CEO of OrthoPediatrics, said, “First, we would like to thank our colleagues and the entire healthcare community for their dedication addressing the global COVID-19 pandemic. The extraordinary effort displayed by our team at this time as we continue to execute against our strategic initiatives is a testament to our company’s culture, which is the foundation of all our success. We saw a strong start to the year with 30 percent domestic revenue growth for the quarter, and we are pleased to sustain our momentum on corporate initiatives that will allow us to emerge from the COVID-19 crisis stronger than when we entered it. With our industry position and business model, we were able to complete the acquisition of ApiFix and its MID-C system on April 1 that is one of only two FDA-approved technologies that potentially allows patients to avoid fusion surgery altogether. Combined with the launch of our Large Fragment Cannulated Screw system and the recent FDA approval of expanded indications for our RESPONSE Scoliosis System as well as Orthex and other important new products, we look forward to offering an expanded portfolio as elective surgeries resume. We remain committed to our mission to provide children access to pediatric-specific solutions worldwide and are prepared to serve our customers, whatever the size of the surge in demand later this year.”
The company appointed David Bailey as president and Fred Hite as chief operating officer and chief financial officer (CFO), effective June 3. Currently, Bailey is executive vice president and Hite is CFO. These promotions commence an orderly process of senior executive succession in anticipation of Bailey being named CEO and Throdahl becoming executive chairman from president and CEO at the appropriate future time. Following that transition, Throdahl will continue working from the company’s Warsaw, Ind., headquarters and maintaining direct involvement in investor relations, strategy development, and operational travel in the field.
Terry Schlotterback, OrthoPediatrics’ board chairman, said, “After the successful IPO of the company, Mark approached the board indicating that it was appropriate to begin planning the CEO succession following his 70th birthday in 2021. We are fortunate to have two leaders of exceptional quality in both Dave Bailey and Fred Hite. Together, they will maintain the strategic progress, financial track record, and engaging culture that have distinguished OrthoPediatrics during Mark’s tenure as CEO. The board looks forward to welcoming Mark into the future executive chairman role and remaining a full-time officer of the company.”