OrthoPediatrics Corp. Reports Fourth Quarter and Full Year 2017 Financial Results
Fourth Quarter / Full Year 2017 and Recent Highlights
- Total revenue of
$11.7 million for fourth quarter 2017 and$45.6 million for full year 2017, up from$9.4 million or 24.0% and$37.3 million or 22.3% year-over-year, respectively, and in-line with preliminary results provided onJanuary 5, 2018 - Improved profitability with gross margin of 75.6% for fourth quarter 2017 and 75.5% for full year 2017, compared to 68.0% for the fourth quarter 2016 and 70.7% for full year 2016
- Reported adjusted EBITDA of
$(0.1) million for full year 2017, up 94.1% from$(1.0) million for full year 2016. See below for additional information and a reconciliation of non-GAAP financial information. - Launched a record of five new systems over the past 12 months, expanding product portfolio offering to 24 surgical systems
- Provided financial guidance of 22.0% revenue growth for 2018
Fourth Quarter and Full Year 2017 Financial Results
Total revenue for the fourth quarter of 2017 was
Total revenue for 2017 was
Trauma and deformity revenue for the fourth quarter of 2017 was
Trauma and deformity revenue for 2017 was
Gross profit for the fourth quarter of 2017 was
Total operating expenses for the fourth quarter of 2017 were
Interest expense for the fourth quarter of 2017 was
Net loss for the fourth quarter of 2017 was
Net loss for 2017 was
The weighted average number of diluted shares outstanding as of
Purchases of property and equipment during the fourth quarter of 2017 were
As of
Capitalization Update
On
In
2018 Financial Guidance
The Company estimates 2018 revenue growth of 22.0%. We expect the annual investment in consigned sets to increase to
Conference Call
A replay of the webcast will remain available online at OrthoPediatrics’ investor relations website, ir.orthopediatrics.com, until
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, uncertainties and factors set forth under "Risk Factors" in OrthoPediatrics’ Registration Statement on Form S-1/A filed with the
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measure of Adjusted EBITDA, which differs from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA in this release represents net loss, plus interest expense (income), net plus other expense (income), depreciation and amortization, stock-based compensation expense, accelerated vesting of restricted stock upon our IPO, public company costs and initial public offering costs. Adjusted EBITDA is presented because the Company believes it is a useful indicator of its operating performance. Management uses the measure as a measure of the Company’s operating performance and for planning purposes, including financial projections. The Company believes this measure is useful to investors as supplemental information because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company believes Adjusted EBITDA is useful to its management and investors as a measure of comparative operating performance from period to period. 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 Adjusted EBITDA, 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 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 Adjusted EBITDA on a supplemental basis. The Company’s definition of this measure is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation. The schedules below contain a reconciliation of Adjusted EBITDA to Net Income.
About
Founded in 2006,
Investor Contacts
Tram Bui /
(646) 536-7035 / 7024
tbui@theruthgroup.com / epoalillo@theruthgroup.com
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
As of December 31, | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash | $ | 42,582 | $ | 1,609 | |||
Accounts receivable - trade, less allowance for doubtful accounts of $143 and $152, respectively | 5,603 | 4,098 | |||||
Inventories, net | 19,498 | 13,962 | |||||
Inventories held by international distributors, net | 1,047 | 924 | |||||
Prepaid expenses and other current assets | 831 | 233 | |||||
Total current assets | 69,561 | 20,826 | |||||
Property and equipment, net | 10,391 | 8,592 | |||||
Other assets: | |||||||
Amortizable intangible assets, net | 2,089 | 998 | |||||
Other intangible assets | 260 | 260 | |||||
Total other assets | 2,349 | 1,258 | |||||
Total assets | $ | 82,301 | $ | 30,676 | |||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
Current liabilities: | |||||||
Accounts payable - trade | $ | 5,495 | $ | 3,543 | |||
Accrued compensation and benefits | 2,905 | 2,219 | |||||
Current portion of long-term debt with affiliate | 113 | 107 | |||||
Other current liabilities | 954 | 1,382 | |||||
Total current liabilities | 9,467 | 7,251 | |||||
Long-term liabilities: | |||||||
Long-term debt with affiliate, net of current portion | 21,418 | 12,931 | |||||
Revolving credit facility with affiliate | 3,921 | 4,500 | |||||
Total long-term liabilities | 25,339 | 17,431 | |||||
Total liabilities | 34,806 | 24,682 | |||||
Commitments and contingencies (Note 16) | |||||||
Redeemable convertible preferred stock: | |||||||
Series A preferred stock, $0.00025 par value; $0 cumulative preferred dividends, December 31, 2017 and $7,439 December 31, 2016; 0 and 1,000,000 shares authorized, issued and outstanding as of December 31, 2017 and 2016, respectively | - | 23,439 | |||||
Series B preferred stock, $0.00025 par value; $0 cumulative preferred dividends, December 31, 2017 and $8,864 December 31, 2016; 0 and 6,000,000 shares authorized as of December 31, 2017 and 2016, respectively; 0 and 4,446,978 shares issued and outstanding as of December 31, 2017 and 2016, respectively | - | 47,864 | |||||
Stockholders' equity (deficit): | |||||||
Common stock, $0.00025 par value; 50,000,000 shares and 12,000,000 shares authorized at December 31, 2017 and 2016, respectively; 12,621,781 shares and 2,421,599 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 2 | 1 | |||||
Additional paid-in capital | 150,424 | 12,824 | |||||
Accumulated deficit | (103,066 | ) | (78,134 | ) | |||
Accumulated other comprehensive income | 135 | - | |||||
Total stockholders' equity (deficit) | 47,495 | (65,309 | ) | ||||
Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) | $ | 82,301 | $ | 30,676 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net revenue | $ | 11,681 | $ | 9,418 | $ | 45,620 | $ | 37,298 | |||||||
Cost of revenue | 2,849 | 3,018 | 11,170 | 10,931 | |||||||||||
Gross profit | 8,832 | 6,400 | 34,450 | 26,367 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 5,405 | 4,260 | 20,527 | 16,661 | |||||||||||
General and administrative | 6,690 | 2,789 | 16,972 | 11,631 | |||||||||||
Initial public offering costs | - | 1,979 | - | 1,979 | |||||||||||
Research and development | 941 | 624 | 3,423 | 2,223 | |||||||||||
Total operating expenses | 13,036 | 9,652 | 40,922 | 32,494 | |||||||||||
Operating loss | (4,204 | ) | (3,252 | ) | (6,472 | ) | (6,127 | ) | |||||||
Other expenses: | |||||||||||||||
Interest expense | 633 | 420 | 2,490 | 1,476 | |||||||||||
Other expense (income) | 8 | (39 | ) | (30 | ) | (1,031 | ) | ||||||||
Total other expenses | 641 | 381 | 2,460 | 445 | |||||||||||
Net loss | $ | (4,845 | ) | $ | (3,633 | ) | $ | (8,932 | ) | $ | (6,572 | ) | |||
Net loss attributable to common stockholders | $ | (21,043 | ) | $ | (5,289 | ) | $ | (29,495 | ) | $ | (12,448 | ) | |||
Weighted average common shares - basic and diluted | 4,831,991 | 1,744,356 | 4,817,079 | 1,744,356 | |||||||||||
Net loss per share attributable to common stockholders - basic and diluted | $ | (4.35 | ) | $ | (3.03 | ) | $ | (6.12 | ) | $ | (7.14 | ) | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
OPERATING ACTIVITIES | |||||||
Net loss | $ | (8,932 | ) | $ | (6,572 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 2,405 | 1,902 | |||||
Stock-based compensation | 3,478 | 1,251 | |||||
Research and development fee obligation | - | (889 | ) | ||||
Changes in certain current assets and liabilities: | |||||||
Accounts receivable - trade | (1,505 | ) | (280 | ) | |||
Inventories | (4,287 | ) | (1,029 | ) | |||
Inventories held by international distributors | (123 | ) | 1,918 | ||||
Prepaid expenses and other current assets | (598 | ) | (11 | ) | |||
Accounts payable - trade | 1,952 | 1,544 | |||||
Accrued expenses and other liabilities | 258 | 1,675 | |||||
Research and development fee obligation | - | (628 | ) | ||||
Other | 135 | - | |||||
Net cash used in operating activities | (7,217 | ) | (1,119 | ) | |||
INVESTING ACTIVITIES | |||||||
Purchases of licenses | (1,337 | ) | (406 | ) | |||
Purchases of property and equipment | (5,207 | ) | (4,348 | ) | |||
Net cash used in investing activities | (6,544 | ) | (4,754 | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from issuance of debt with affiliate | 7,992 | 4,500 | |||||
Proceeds from issuance of common stock, net of issuance costs | 53,775 | - | |||||
Payment of preferred stock dividends | (5,965 | ) | - | ||||
Shares surrendered by employees to pay taxes on restricted stock | (990 | ) | - | ||||
Payments on mortgage notes | (78 | ) | (102 | ) | |||
Payments of deferred offering costs | - | (794 | ) | ||||
Net cash (used in) provided by financing activities | 54,734 | 3,604 | |||||
NET INCREASE (DECREASE) IN CASH | 40,973 | (2,269 | ) | ||||
Cash, beginning of year | 1,609 | 3,878 | |||||
Cash, end of period | $ | 42,582 | $ | 1,609 | |||
SUPPLEMENTAL DISCLOSURES | |||||||
Cash paid for interest | $ | 2,490 | $ | 1,476 | |||
Accretion of redeemable convertible preferred stock | $ | 4,563 | $ | 5,876 | |||
Transfer of instruments from property and equipment to inventory | $ | 1,249 | $ | 1,225 | |||
NET REVENUE BY GEOGRAPHY AND PRODUCT CATEGORY
(Unaudited)
(In Thousands)
Year Ended December 31, | |||||
Product sales by geographic location: | 2017 | 2016 | |||
U.S. | $ | 34,909 | $ | 28,839 | |
International | 10,711 | 8,459 | |||
Total | $ | 45,620 | $ | 37,298 | |
Year Ended December 31, | |||||
Product sales by category: | 2017 | 2016 | |||
Trauma and deformity | $ | 32,801 | $ | 26,844 | |
Scoliosis | 11,585 | 9,349 | |||
Sports medicine/other | 1,234 | 1,105 | |||
Total | $ | 45,620 | $ | 37,298 | |
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA
(Unaudited)
(In Thousands)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (4,845 | ) | $ | (3,633 | ) | $ | (8,932 | ) | $ | (6,572 | ) | |||
Interest expense | 633 | 420 | 2,490 | 1,476 | |||||||||||
Other expense (income) | 8 | (39 | ) | (30 | ) | (1,031 | ) | ||||||||
Depreciation and amortization | 664 | 500 | 2,405 | 1,902 | |||||||||||
Stock-based compensation | 348 | 301 | 1,419 | 1,251 | |||||||||||
Accelerated vesting of restricted stock upon our IPO | 2,049 | - | 2,049 | - | |||||||||||
Public company costs | 531 | - | 531 | - | |||||||||||
Initial public offering costs | - | 1,979 | - | 1,979 | |||||||||||
Adjusted EBITDA | $ | (612 | ) | $ | (473 | ) | $ | (58 | ) | $ | (995 | ) |