Michael Barbella, Managing Editor05.07.21
OrthoPediatrics Corp. is back in the black.
The company reported $21.5 million in first-quarter revenue, a 31.2 percent increase compared with Q1 2020. Domestic and international revenue growth also posted double-digit gains in the quarter ended March 31.
“The company’s first quarter results reflect the resilience of our business, steady execution of our strategy and the unwavering dedication of our team," CEO Mark Throdahl said. "With revenue growth exceeding 30 percent year-over-year, adjusted EBITDA and gross margins continuing to improve, and meaningful progress across all product categories, OrthoPediatrics is well positioned for sustained growth as we advance toward recovery from the COVID-19 pandemic. We are particularly encouraged by the 19 percent growth in Trauma and Deformity and 60 percent growth in Scoliosis, both of which are seeing increased momentum after having been impacted by the deferral of elective surgeries in 2020. In addition to achieving 26 percent domestic sales growth, International sales grew 56 percent, with sales agencies growing 122 percent and, most critically, stocking distributors growing 15 percent in the quarter.”
First Quarter 2021 and Business Highlights
Total U.S. revenue for the first quarter of 2021 was $16.8 million, a 25.8 percent increase compared to $13.4 million for the same period last year, representing 78.5 percent of total revenue. International revenue for the first quarter of 2021 was $4.6 million, a 55.6 percent increase compared to $3 million for the same period last year, representing 21.5 percent of total revenue. The significant increase reflects the normalization in both the U.S. and international markets compared to Q1 2020 when the impacts of the COVID-19 pandemic had begun.
Trauma and Deformity revenue was $14.6 million, a 19.2 percent increase compared to $12.2 million for the same period last year. Scoliosis revenue was $6 million, a 60.4 percent increase compared to $3.7 million for the first quarter of 2020. Sports Medicine/other revenue for the first quarter of 2021 was $959,000, a 120.5 percent increase compared to $435 thousand for the same period last year. Increased sales of the RESPONSE 5.5/6.0 system and the ApiFix System were the primary drivers for Scoliosis revenue.
“I’m proud to report that the proactive steps the company took at the beginning of the pandemic have helped ensure a smooth path to recovery and position OrthoPediatrics as stronger today than it was before the outset of COVID-19. In addition, our success has been aided by the strategic acquisitions of Orthex, ApiFix, and Telos Partners as well as our continued investment in sets," Throdahl said. "Looking ahead, we remain intently focused on capturing the significant opportunity in the pediatric orthopedic market and driving long-term value for our stockholders.”
Gross profit for the first quarter of 2021 was $16.3 million, a 33.7 percent increase compared to $12.2 million for the same period last year. Gross profit margin for the first quarter of 2021 improved to 76.1 percent, compared to 74.7 percent for the same period last year due to an increase in agency sales.
Total operating expenses for the first quarter of 2021 were $22.3 million, a 33.4 percent increase compared to $16.7 million for the same period last year. The increase in operating expenses was driven by a 52.8 percent increase in general and administrative expense primarily due to additional costs associated with the ApiFix and Telos acquisitions, increased legal and professional services as well as increased depreciation and amortization, a 18.3 percent increase in sales and marketing, and a 3.4 percent increase in research and development. Operating loss for the first quarter of 2021 was ($6) million compared to ($4.5) million for the same period last year.
Adjusted EBITDA for the first quarter of 2021 was ($1.4) million as compared to ($2.1) million for the first quarter of 2020. This improvement compared to prior year was driven by revenue growth combined with effective cost containment of cash related expenses.
Net interest expense for the first quarter of 2021 was $700,000, compared to $400,000 for the same period last year, primarily driven by the Apifix acquisition accretion on installment payments. The Apifix acquisition fair value adjustment of contingent consideration was $4.2 million in the first quarter 2021 compared to $0 the first quarter 2020.
Net loss for the first quarter of 2021 was $10.4 million, compared to $4.9 million for the same period last year. Net loss attributable to common stockholders for the period was $0.54 per basic and diluted share, compared to $0.30 per basic and diluted share for the same period last year. Adjusted earnings (loss) per diluted share of ($0.25) compares to ($0.30) for the same period last year.
The weighted average number of diluted shares outstanding for the three-month period ended March 31 was 19,200,231 shares.
In the first quarter of 2021, the company had 177 sales representatives, up 6 percent compared to 167 in the same period of 2020.
Purchases of property and equipment during the first quarter of 2021 was $2.7 million, which compared to $4 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, $5.3 million of consigned sets were deployed during the first quarter of 2021, compared to $3.3 million during the first quarter of 2020.
As of March 31, cash, cash equivalents, short-term investments and restricted cash were $78 million compared to $85.3 million as of Dec. 31, 2020. The company had no outstanding term loan obligations.
For full year 2021, OrthoPediatrics is increasing the low end of its revenue guidance to 32-38 percent growth over full year 2020 or $94-$98 million. Furthermore, the company's confidence in achieving this guidance has grown because of a number of tailwinds, including ApiFix, direct sales in Germany, Austria, and Switzerland, and continued Orthex and Scoliosis conversions.
The company reported $21.5 million in first-quarter revenue, a 31.2 percent increase compared with Q1 2020. Domestic and international revenue growth also posted double-digit gains in the quarter ended March 31.
“The company’s first quarter results reflect the resilience of our business, steady execution of our strategy and the unwavering dedication of our team," CEO Mark Throdahl said. "With revenue growth exceeding 30 percent year-over-year, adjusted EBITDA and gross margins continuing to improve, and meaningful progress across all product categories, OrthoPediatrics is well positioned for sustained growth as we advance toward recovery from the COVID-19 pandemic. We are particularly encouraged by the 19 percent growth in Trauma and Deformity and 60 percent growth in Scoliosis, both of which are seeing increased momentum after having been impacted by the deferral of elective surgeries in 2020. In addition to achieving 26 percent domestic sales growth, International sales grew 56 percent, with sales agencies growing 122 percent and, most critically, stocking distributors growing 15 percent in the quarter.”
First Quarter 2021 and Business Highlights
- Converted Germany, Austria, and Switzerland to direct sales agency model, expanding international agencies to a total of 14
- Achieved milestone of treating an estimated 200,000 children since starting the business
- Deployed $5.3 million of consignment sets in first quarter 2021, up 61 percent compared to $3.3 million in the same period in the prior year
- Maintained strong balance sheet with approximately $78 million in cash, cash equivalents, short-term investments, and restricted cash as of March 31
- Launched dedicated ApiFix website aimed at informing patients, families, and healthcare providers of a viable new alternative for the treatment of progressive adolescent idiopathic scoliosis (AIS)
Total U.S. revenue for the first quarter of 2021 was $16.8 million, a 25.8 percent increase compared to $13.4 million for the same period last year, representing 78.5 percent of total revenue. International revenue for the first quarter of 2021 was $4.6 million, a 55.6 percent increase compared to $3 million for the same period last year, representing 21.5 percent of total revenue. The significant increase reflects the normalization in both the U.S. and international markets compared to Q1 2020 when the impacts of the COVID-19 pandemic had begun.
Trauma and Deformity revenue was $14.6 million, a 19.2 percent increase compared to $12.2 million for the same period last year. Scoliosis revenue was $6 million, a 60.4 percent increase compared to $3.7 million for the first quarter of 2020. Sports Medicine/other revenue for the first quarter of 2021 was $959,000, a 120.5 percent increase compared to $435 thousand for the same period last year. Increased sales of the RESPONSE 5.5/6.0 system and the ApiFix System were the primary drivers for Scoliosis revenue.
“I’m proud to report that the proactive steps the company took at the beginning of the pandemic have helped ensure a smooth path to recovery and position OrthoPediatrics as stronger today than it was before the outset of COVID-19. In addition, our success has been aided by the strategic acquisitions of Orthex, ApiFix, and Telos Partners as well as our continued investment in sets," Throdahl said. "Looking ahead, we remain intently focused on capturing the significant opportunity in the pediatric orthopedic market and driving long-term value for our stockholders.”
Gross profit for the first quarter of 2021 was $16.3 million, a 33.7 percent increase compared to $12.2 million for the same period last year. Gross profit margin for the first quarter of 2021 improved to 76.1 percent, compared to 74.7 percent for the same period last year due to an increase in agency sales.
Total operating expenses for the first quarter of 2021 were $22.3 million, a 33.4 percent increase compared to $16.7 million for the same period last year. The increase in operating expenses was driven by a 52.8 percent increase in general and administrative expense primarily due to additional costs associated with the ApiFix and Telos acquisitions, increased legal and professional services as well as increased depreciation and amortization, a 18.3 percent increase in sales and marketing, and a 3.4 percent increase in research and development. Operating loss for the first quarter of 2021 was ($6) million compared to ($4.5) million for the same period last year.
Adjusted EBITDA for the first quarter of 2021 was ($1.4) million as compared to ($2.1) million for the first quarter of 2020. This improvement compared to prior year was driven by revenue growth combined with effective cost containment of cash related expenses.
Net interest expense for the first quarter of 2021 was $700,000, compared to $400,000 for the same period last year, primarily driven by the Apifix acquisition accretion on installment payments. The Apifix acquisition fair value adjustment of contingent consideration was $4.2 million in the first quarter 2021 compared to $0 the first quarter 2020.
Net loss for the first quarter of 2021 was $10.4 million, compared to $4.9 million for the same period last year. Net loss attributable to common stockholders for the period was $0.54 per basic and diluted share, compared to $0.30 per basic and diluted share for the same period last year. Adjusted earnings (loss) per diluted share of ($0.25) compares to ($0.30) for the same period last year.
The weighted average number of diluted shares outstanding for the three-month period ended March 31 was 19,200,231 shares.
In the first quarter of 2021, the company had 177 sales representatives, up 6 percent compared to 167 in the same period of 2020.
Purchases of property and equipment during the first quarter of 2021 was $2.7 million, which compared to $4 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, $5.3 million of consigned sets were deployed during the first quarter of 2021, compared to $3.3 million during the first quarter of 2020.
As of March 31, cash, cash equivalents, short-term investments and restricted cash were $78 million compared to $85.3 million as of Dec. 31, 2020. The company had no outstanding term loan obligations.
For full year 2021, OrthoPediatrics is increasing the low end of its revenue guidance to 32-38 percent growth over full year 2020 or $94-$98 million. Furthermore, the company's confidence in achieving this guidance has grown because of a number of tailwinds, including ApiFix, direct sales in Germany, Austria, and Switzerland, and continued Orthex and Scoliosis conversions.