WARSAW, Ind., March 04, 2020 (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, 2019.
Fourth Quarter / Full Year 2019 & Recent Highlights
- Increased total revenue to $19.0 million for fourth quarter 2019, up 30.1% from $14.6 million in fourth quarter 2018, driving consecutive year of annual record setting revenue of $72.6 million for full year 2019, up from $57.6 million or 26.0% year-over-year
- Generated Adjusted EBITDA of ($1.1) million for full year 2019, up from ($3.5) million in full year 2018
- Increased the domestic sales organization to 167 consultants, up 27.5% from fourth quarter 2018
- Deployed $18.2 million of consignment sets for full year 2019, up 51.7% compared to $12.0 million in the same period prior year
- Launched PediFoot Deformity Correction System and QuickPack™ bone graft substitute in fourth quarter 2019 and expanded product portfolio offering to 33 surgical systems in 2019, up 27% from 26 in the fourth quarter 2018
- Strengthened cash position with $60 million in net proceeds from follow-on offering in December 2019
- Divested assets related to the adult product offering of our subsidiary, Vilex in Tennessee, Inc., in December 2019 and fully repaid debt facility used to finance the original acquisition
- Provided full year 2020 revenue guidance of growth in the range of 22%-24% and investment in consignment sets to be in a range of $19-$21 million
Mark Throdahl, President and Chief Executive Officer of OrthoPediatrics, commented, “We are excited to report another record year of outperformance with 26% annual revenue growth that reflects systematic execution of all our growth initiatives. During the fourth quarter, we continued to see strength across our entire business with Trauma and Deformity growing 34%, Scoliosis growing 21%, and Sports Medicine/Other growing 18%. We are pleased with our initial integration of Orthex and recent product launches, including PediFoot and QuickPack™ during the fourth quarter, and look forward to deeper penetration of the external fixation market and increased utilization of our product portfolio. We remain optimistic about the long-term contributions from the synergies unique to our product offering and will continue acquiring new technologies and introducing new systems to enhance our leadership position.”
Mr. Throdahl continued, “As we look ahead to 2020, we are confident in our ability to continue to execute on our growth initiatives that will support full year 2020 revenue guidance of 22% to 24%. We believe investing $19-$21 million in consigned sets for 2020 will allow us to focus on deploying capital-efficient systems and begin realizing the revenue impact from the full roll-out of our recent product launches. We appreciate the support of our shareholders that helped us close a $60 million capital raise that provides the Company financial flexibility to support our growth initiatives. We are pleased our commitment to pediatric-specific surgical solutions has allowed us to change the lives of over 165 thousand children since our inception, and we remain dedicated to driving increased value for all our stakeholders.”
Fourth Quarter and Full Year 2019 Financial Results
Total revenue for the fourth quarter of 2019 was $19.0 million, a 30.1% increase compared to $14.6 million for the same period last year. U.S. revenue for the fourth quarter of 2019 was $14.2 million, a 29.5% increase compared to $10.9 million for the same period last year, representing 74.7% of total revenue. International revenue for the fourth quarter of 2019 was $4.8 million, a 31.8% increase compared to $3.6 million for the same period last year, representing 25.3% of total revenue.
Total revenue for 2019 was $72.6 million, a 26.0% increase compared to $57.6 million for 2018. Our U.S. revenue for 2019 was $55.1 million, a 26.7% increase compared to $43.5 million for 2018, representing 75.9% of total revenue. Our international revenue for 2019 was $17.5 million, a 24.1% increase compared to $14.1 million for 2018, representing 24.1% of total revenue.
Trauma and Deformity revenue for the fourth quarter of 2019 was $13.6 million, a 34.3% increase compared to $10.2 million for the same period last year. Scoliosis revenue was $4.9 million, a 20.7% increase compared to $4.1 million for the fourth quarter of 2018. Sports Medicine/other revenue for the fourth quarter of 2019 was $430 thousand, a 17.8% increase compared to $365 thousand for the same period last year.
Trauma and Deformity revenue for 2019 was $49.4 million, a 24.4% increase compared to $39.7 million for 2018. Scoliosis revenue for 2019 was $21.5 million, a 28.9% increase compared to $16.7 million for 2018. Sports medicine/other revenue for 2019 was $1.7 million, a 41.1% increase compared to $1.2 million in 2018.
Gross profit for the fourth quarter of 2019 was $14.5 million, a 37.4% increase compared to $10.5 million for the same period last year, and $54.6 million for 2019, a 28.0% increase compared to $42.7 million for 2018. Gross profit margin for the fourth quarter of 2019 improved to 76.2%, compared to 72.2% for the same period last year, and was 75.3% for 2019, compared to 74.2% for 2018. The increase is due to increased sales and a decrease in cost of goods sold related to the addition of sales agents in our international markets.
Total operating expenses for the fourth quarter of 2019 were $17.5 million, a 41.2% increase compared to $12.4 million for the same period last year. Full year operating expenses were $63.7 million for 2019, a 21.9% increase compared to $52.2 million for 2018. The increase in operating expenses for full year 2019 was driven by a 27.3% increase in general and administration, a 17.8% increase in sales and marketing, and a 21.5% increase in research and development. Operating loss for the fourth quarter of 2019 was ($3.0) million compared to ($1.9) million for the same period last year. Operating loss for 2019 was ($9.1) million compared to ($9.6) million for 2018.
Net interest expense for the fourth quarter of 2019 was $1.3 million, compared to $0.5 million for the same period last year, and was $3.5 million for 2019 compared to $2.3 million for 2018.
Net loss from continuing operations for the fourth quarter of 2019 was ($4.3) million, compared to ($2.5) million for the same period last year. Total net loss including discontinued operations for the fourth quarter of 2019 was ($5.4) million, or ($0.36) per basic and diluted share attributable to common stockholders, compared to ($2.5) million, or ($0.19) per basic and diluted share for the same period last year. Adjusted EBITDA for the fourth quarter of 2019 and 2018 was ($0.9) million.
Net loss from continuing operations for 2019 was ($12.7) million, compared to ($12.0) million for 2018. Total net loss including discontinued operations for the full year 2019 was ($13.7) million, or ($0.94) per basic and diluted share attributable to common stockholders for 2019, compared to ($12.0) million, or ($0.96) per basic and diluted share for 2018. Adjusted EBITDA for the full year 2019 was ($1.1) million from ($3.5) million for the full year 2018. See below for additional information and a reconciliation of non-GAAP financial information.
The weighted average number of diluted shares outstanding for the three-month period ended December 31, 2019 was 15,031,256 shares.
In the fourth quarter of 2019, we had 167 sales representatives, including representatives selling our Orthex products, up 27.5% compared to 131 in the same period of 2018.
The change in property and equipment during the fourth quarter of 2019 was $1.3 million, which compared to a reduction of $58 thousand for the same period last year, and $11.8 million for 2019, compared to $5.3 million for 2018. This investment reflects the deployment of consigned sets, which includes product specific instruments and cases and trays. Including the implants, $4.5 million of consigned sets were deployed during the fourth quarter of 2019, compared to $1.3 million during the fourth quarter of 2018.
As of December 31, 2019, cash, cash equivalents and restricted cash were $72.0 million, compared to $19.7 million as of September 30, 2019, and the Company had approximately $26.2 million in total outstanding indebtedness, which includes $5.0 million outstanding under its revolving credit facility.
Capitalization Update
On December 11, 2019, the Company completed a public offering selling 1,755,500 shares at a price of $36.50 per share, including 235,500 shares sold to the underwriters upon exercise of the option to purchase additional shares. The public offering generated net proceeds of $60 million, after deducting underwriting commissions and offering expenses payable by OrthoPediatrics.
On December 31, 2019, the Company completed the sale of substantially all of the assets related to the adult product offering of Vilex in Tennessee, Inc (“Vilex Adult Business”), as well as a license to sell the Orthex hexapod into the adult foot and ankle marketplace to Vilex LLC, an affiliate of Squadron Capital LLC (“Squadron Capital”). As consideration for the Vilex Adult Business and the Orthex license, the amount owed by OrthoPediatrics under its Term Note B payable to Squadron Capital was reduced by $25.0 million. The Company repaid in full the remaining $5.0 million of principal outstanding under the Term Note B, plus all accrued interest, on December 31, 2019, with funds received from its revolving credit facility with Squadron Capital.
Full Year 2020 Financial Guidance
OrthoPediatrics is providing financial guidance for the full year 2020, as follows:
- Revenue growth in a range of 22% to 24% year-over-year
- Consigned set investments in a range of $19.0 million to $21.0 million
Conference Call
OrthoPediatrics will host a conference call on Thursday, March 5, 2020, at 8:00 a.m. ET to discuss the results. The dial-in numbers are (855) 289-4603 for domestic callers and (614) 999-9389 for international callers. The conference ID number is 7662677. A live webcast of the conference call will be available online from the investor relations page of the OrthoPediatrics’ corporate website at www.orthopediatrics.com.
A replay of the webcast will remain available on OrthoPediatrics’ website, www.orthopediatrics.com, until the Company releases its first quarter 2020 financial results. In addition, a telephonic replay of the call will be available until March 12, 2020. The replay dial-in numbers are (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. Please use the replay conference ID number 7662677.
