UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
______________________
Date of Report (Date of earliest event reported): March 16, 2018
OrthoPediatrics Corp. |
(Exact name of registrant as specified in its charter) |
Delaware |
(State or other jurisdiction of incorporation) |
001-38242 | 26-1761833 |
(Commission File Number) | (I.R.S. Employer Identification Number) |
2850 Frontier Drive Warsaw, Indiana | 46582 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (574) 268-6379
Not Applicable |
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
Emerging growth company [X]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [X]
Item 7.01. Regulation FD Disclosure.
The executive officers of OrthoPediatrics Corp. have several upcoming presentations to representatives of investors and analysts. The officers intend to use the material filed as Exhibit 99.1 herewith, in whole or in part, as part of those presentations.
The information in this Item 7.01, including the information incorporated by reference herein from Exhibit 99.1, is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits | |
Exhibit No. | Description | |
* * * * * *
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
OrthoPediatrics Corp. | ||
Date: March 16, 2018 | By: | /s/ Daniel J. Gerritzen |
Daniel J. Gerritzen, General Counsel and Secretary | ||
OrthoPediatrics Corp.
March 2018
Mark Throdahl, CEO
Fred Hite, CFO
Disclaimer
Forward-Looking Statements
This presentation 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’ most recent Annual Report on Form 10-K. 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. Certain information in this presentation is based upon management forecasts and reflects prevailing conditions and management’s views as of this date, all of which
are subject to change.
Before you invest, you should read the most recently filed Annual Report on Form 10-K and other documents the Company has filed and will file with the SEC for more complete
information about the Company. You may obtain these documents for free by visiting EDGAR on the SEC website at http://www.sec.gov.
The Company owns or has rights to use a number of registered and common law trademarks, service marks and trade names in connection with its business in the United States and
in certain foreign jurisdictions, including the OrthoPediatrics name and logo. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation
may be without the ® and ™ symbols, but such references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its
rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This presentation contains additional trademarks, service marks and trade names
of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this presentation are, to the Company’s knowledge, the
property of their respective owners.
Use of Non-GAAP Financial Measures
This presentation 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 presentation 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.
2
Highlights
3
Orthopedic company focused exclusively on pediatric orthopedics
Protected market opportunity: $1.1 billion U.S., $2.5 billion globally in 2016
High U.S. procedure concentration: <300 hospitals and ~1,200 surgeons
Focused call point: generalists who use our entire product portfolio
Broadest product offering: 24 systems specifically designed for children
Sustainable competitive advantage:
- Comprehensive product offering
- Clinical education programs
- Surgeon relationships
- Experienced sales organization
FY17 revenue of $45.6 million, up 22%. Consecutive year of 20+% growth since 2011.
Recent IPO will, among other things, fund consigned sets and accelerate proven strategy
Large Market Proprietary Technology Scalable Business
OP Today
Treated 20,000 patients in 2017
24 surgical systems; 3,000 SKUs; strong pipeline
69 direct employees; 75 focused FTE sales reps
Global sales organization focused on pediatric
orthopedic surgeons in 37 countries
25 issued patents; 25 pending patents
Only non-founding Chief Medical Officer in the
industry who is a fellow surgeon
Average FDA approval time: < ½ industry average
History of stable reimbursement
One of the 100 Best Places to Work in Indiana
Improving the lives of children
with orthopedic conditions
Company Snapshot Cause
4
A Company Built on a CAUSE
Gideon with CMO Peter Armstrong, M.D., c. 1995.
Gideon’s drawing of his girlfriend, 2016.
Our Key Idea
Address orthopedic industry’s lack of focus
on product development, clinical education,
and sales presence
Implants and instruments avoid complications
of re-purposed adult products
Product development in collaboration with
leading pediatric orthopedic surgeons
Dedicated sales support attending surgeries
Clinical education programs that build
brand loyalty
OP’s Market Impact
5
Screws Through
Growth Plate
Screws Parallel To
Growth Plate
Superior Clinical Outcomes
Children Are Not Small Adults
Re-Purposed Adult Plate OP’s Solution
38%
62%
Large and Focused Market
Current products target three of the largest categories in Pediatric Orthopedics
Pipeline products underway to expand addressable market
Trauma &
Deformity
$401M
OP’S $2.5 Billion Current Addressable Global Market
$1.1 Billion U.S. Addressable Market
Procedures
(%)
High Concentration of Pediatric
Trauma & Deformity and Scoliosis Procedures
Smart
Implants
$299M
Scoliosis
$285M
Sports
Medicine
$116M
268 U.S.
Hospitals
3,157 U.S.
Hospitals
6
Product Line Diversification
$46 million sales in 2017
22% revenue growth in 2017
No dependency on one product family
Growth across all products
Comparable gross margins on all products
2017 Revenue by Segment
7
2017 Revenue by Product Family
72%
3%
25%
Sports
Medicine/
Other
Trauma &
Deformity
Scoliosis
24% 25%
22%
7%
20%
28%
14%
35%
22%
34%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2017 Revenue Growth % by Product Family
A Proven Strategy Since 2011
8
Deploy
Instrument
Sets
Sales Focus
On Teaching
Institutions and
High Volume
Hospitals
Expand
Addressable
Procedures
Expand Clinical
Training
Programs
Goals
Accelerate sales growth
Develop novel technologies
9
5 New Systems in 2017
2017 Product Launches
FIREFLY® Pedicle Screw
Navigation Guides
(complementary to RESPONSE Spine
System)
Trauma & Deformity
Scoliosis
RESPONSE 5.5mm and 5.5/6.0
Systems
2017 Product Launches
Titanium
PediPlates® System
(expands physeal
tethering offering)
Clavicle Plate System
(first pediatric specific
system)
Wrist Fusion Plate
System
(first pediatric specific
system)
Sports Medicine 2017 Product Launches
ACL Reconstruction System
Medial Patella Femoral
Ligament Reconstruction System
(complementary to ACL
Reconstruction System)
PediPlate Physeal Tethering
System
10
From 24 to 29 Surgical Systems in 2018
2018 Product Launches
PediPlate PediNail Intramedullary
Nail System
Osteogenesis
Imperfecta
Nail System
PediNail Intramedullary
Nail System
(expands into adolescent
cases)
BandLoc 4.5/4.75/5.0mm
System
BandLoc 5.5/6.0mm Sublaminar Banding
System
Trauma & Deformity
Scoliosis
RESPONSE 5.5mm and 5.5/6.0 Systems
2018 Product Launches
PediFoot
(first pediatric
system)
RESPONSE
4.5/4.75/5.0mm System
(Maximizes intraoperative
flexibility)
New Systems in Development
11
Signed LOI on pediatric implant
Formed task force of leading tethering surgeons
Emerging procedure with adult lumbar fixation
product
Allows intervention in patients as young as 10
Reversible, non-fusion procedure
Signed LOI on working prototype active
intramedullary nail
System does not use magnets
OP will offer significant improvements on
current technology
Embodiments in IM nailing and scoliosis
Smart Implants Spinal Tethering
Sports
Medicine
Strong Pipeline
Expanding Our Addressable Market
Spine
Foot & Ankle
Hip & Long
Bone
CMF
Proximal
Humerus
Elbow
Hand &
Wrist
Pelvis
Clavicle
Rib
OP Today OP Tomorrow
Now Under Development
Demonstrated ability to
expand portfolio to full
array of pediatric surgeries
12
Growing Rods
Global Sales Coverage
United States
77% of 2017
Revenue
33 Sales Agencies,
most of which are
exclusive
International
23% of 2017
Revenue
2 Sales Agencies
+ 31 Stocking
Distributors
Sales in 37 countries + the United States
Current customers in every major children’s hospital in the United States
Internationally, surgeons pull us into their markets and introduce us to well-respected distributors
Direct in UK, IRE, AUS, NZ
13
Product breadth
Surgeon relationships
Sales and distribution network
Clinical education programs
Pediatric brand equity
Reputation with pediatric
orthopedic societies
Dynamic culture
New Competitors Would Face Formidable Obstacles
“The ship has sailed.”
Barriers to Entry
14
What Does Category Leadership Mean?
Surgeon relationships and
clinical education
Relationships with surgeons who use
entire portfolio
Major provider of clinical education
Leading supporter of surgical societies
Custom instruments business
Attractive growth and
margin profile
Consistent growth since 2011
76% gross margins
History of efficient capital
utilization
Robust organic growth
opportunities
$2.5 billion addressable global market
Limited focused competition
Focused, experienced distribution
Instrument set placements drive growth
Broadest, most innovative
product offering
11-year clinical understanding
New product pipeline
Gateway to pediatric market for
distributed products and joint
product developments
15
Financial Review
$9.3
$13.3 $15.8
$18.4
$24.9
$28.8
$34.9
$0.9
$2.8
$3.9
$5.3
$6.1
$8.5
$10.7
$10.2
$16.1
$19.6
$23.7
$31.0
$37.3
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2011 2012 2013 2014 2015 2016 2017
R
ev
enu
e
(
$
in Mi
lli
on
s)
U.S. International
Consistent 20+% Revenue Growth
17
$45.6
$19.3
$22.5
$26.8
$32.8
$3.6
$7.4
$9.4
$11.6
$0.8
$1.1
$1.1
$1.2
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2014 2015 2016 2017
R
ev
enu
e
(
$
in Mi
lli
on
s)
Trauma & Deformity Scoliosis Sports Medicine/Other
Category Revenue Summary
18
Revenue Seasonality
2016 2017
Seasonality Drives Stronger Performance in Summer Months and Holiday Periods
19
21%
26%
27%
26%
0%
5%
10%
15%
20%
25%
30%
Q1 Q2 Q3 Q4
R
ev
en
u
e
as %
o
f
To
ta
l Y
e
ar
22%
26%
27%
25%
0%
5%
10%
15%
20%
25%
30%
Q1 Q2 Q3 Q4
R
ev
en
u
e
as %
o
f
To
ta
l Y
e
ar
Income Statement Summary
20
($ in Millions)
Year Ended December 31
2014 2015 2016 2017
Revenue $23.7 $31.0 $37.3 $45.6
Growth % 21% 31% 20% 22%
Gross Profit $16.6 $21.6 $26.4 $34.5
Margin % 70% 70% 71% 76%
Operating Expenses $23.7 $28.2 $32.5 $40.9
Operating Loss ($7.1) ($6.6) ($6.1) ($6.5)
Net Loss ($9.5) ($7.9) ($6.6) ($8.9)
Adjusted EBITDA Reconciliation
21
Year Ended
December 31
($ in Millions) 2016 2017
Net Loss ($6.6) ($8.9)
Interest expense 1.5 2.5
Other expense (income) (1.0) (0.0)
Depreciation and amortization 1.9 2.4
Stock-based compensation 1.2 1.4
Accelerated vesting of restricted stock - 2.0
Public company costs - 0.5
Initial public offering costs 2.0 -
Adjusted EBITDA ($1.0) ($0.1)
Balance Sheet
22
Assets Liabilities
Cash $42.6 Accounts Payable $5.5
Accounts Receivable 5.6 Debt 25.5
Inventory 20.5 Accrued Expenses 2.9
PP&E (net) 10.4 All Other Liabilities 1.0
Intangibles 2.3 Paid In Capital 150.4
All Other 0.9 Accumulated Deficit (103.1)
Total Assets $82.3 Total Liabilities / Equity $82.3
($ in Millions)
Year Ended December 31, 2017
Summary
Surgeon relationships and
clinical education
Attractive growth and
margin profile
Robust organic growth
opportunities
Broadest, most innovative
product offering
23