Good morning and welcome to OrthoPediatrics Corporation's Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Trip Taylor from the Gilmartin Group for a few introductory comments. Please go ahead.

Thank you for joining today's call. With me from the company are David Bailey, President and Chief Executive Officer; and Fred Hite, Chief Operating and Financial Officer. Before we begin today, let me remind you that the company's remarks include forward-looking statements within the meaning of federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous risks and uncertainties and the company's actual results may differ materially. For a discussion of risk factors, I encourage you to review the company's most recent annual report on Form 10-K which was filed with the SEC on March 8, 2024. During the call today, management will also discuss certain non-GAAP financial measures, which are supplemental measures of performance. The company believes these measures provide useful information for investors in evaluating its operations period-over-period. For each non-GAAP financial measure referenced on this call, the company has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in its earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for OrthoPediatrics financial results prepared in accordance with GAAP. In addition, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today November 7, 2024. Except as required by law, the company undertakes no obligation to revise or update any statements to reflect events or circumstances taking place after the date of this call. With that I would like to turn the call over to David Bailey, President and Chief Executive Officer.

Thanks, Trip. Good morning, everyone, and thank you for joining us on our third quarter 2024 conference call. As always, we are extremely proud to open our call by reporting that we helped over 33,000 kids in the third quarter of 2024, a 50% increase year-over-year and another record high for OrthoPediatrics. Having helped over 100,000 children so far this year and over one million since our inception, we continue to deliver on our costs while expanding our reach and positively impacting the lives of more and more children worldwide. This has and will always be our foundation and remains the best measure of our success. At our recent Investor Day held early in September, we provided a deeper look into our business, dedicating time to each business segment and how we plan to deliver value and support our cause now and in the future. We clearly articulated our three-year plan to deliver topline revenue growth in the high teens and greater than 20% for OPSB, produce substantial EBITDA, while improving EBITDA margin and become cash flow breakeven in 2026. Our strong Q3 performance represents yet another successful step forward in our plan, as we continue to execute and further enhance OrthoPediatrics' unique and differentiated profile. To that end, OrthoPediatrics' strong performance continued in the third quarter of 2024, as we delivered record revenue of $54.6 million, representing global growth of 37% from the same period in 2023. As has been our long history, we continue to take share across the entire business and saw strong performances from both T&D and scoliosis with growth bolstered in both businesses by OPSB. Looking at the overall macro environment, we believe we are finally in a normalized surgical environment with only the possible transient impacts of seasonal viruses such as COVID RSV or…

Thanks, Dave. Before giving you more details on our financial results, I want to iterate that through continued execution, we've established OrthoPediatrics as a high-quality and differentiated asset with the ability to scale growth and increase operating leverage, which provides a clear path to cash flow positivity, supported by a very strong balance sheet. With that said, our third quarter 2024 worldwide revenue of $54.6 million, increased 37% compared to the third quarter of 2023. Growth in the quarter was driven primarily by strong performance across global, trauma and deformity, scoliosis and OPSB. US revenue was $42.7 million, a 46% increase from the third quarter of 2023. Growth in the quarter was primarily driven by additional market share gains across trauma and deformity, scoliosis and OPSB as well as the addition of Boston O&P revenue. We generated total international revenue of $11.9 million, representing growth of 12% compared to the third quarter of 2023. Growth in the quarter was primarily led by scoliosis revenue. In the third quarter of 2024 Trauma and Deformity global revenue of $37.6 million, increased 31% compared to the prior year period. Growth was primarily driven by strong growth across numerous product lines as well as the addition of Boston O&P revenue. In the third quarter of 2024, scoliosis global revenue of $15.6 million increased 52% compared to the prior year period. Growth was primarily driven by increased international scoliosis revenue, new users of our spine system, RESPONSE 5.5, 6.0 as well as 7D. Finally Sports Medicine other revenue in the third quarter of 2024 was $1.3 million, compared to $0.9 million in the prior year period. Turning to set deployment. $5.3 million of sets were deployed in the third quarter of 2024 compared to $3.9 million in the third quarter of 2023. Year-to-date, we have…

Thanks Fred. As we're now through three quarters of the year, we remain very bullish about our opportunity and the position we've established. We believe that over the course of the next three to five years, we will be able to build a very dominant share position and have a defined plan to achieve this. We are extremely proud that we've continued delivering strong performances, especially within this MedTech market, quarter-over-quarter and year-over-year as we further differentiate ourselves from our peers. We look to carry our strong third quarter momentum through the rest of the year and into 2025 as we continue to help more children than ever and capture share across the entire business as we break revenue records, maintain healthy margins, and leverage disciplined spending to yield double our adjusted EBITDA over the prior year and capitalize on roughly $5 million less cash used in set deployment. Operator, let's open the call for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from Matt O'Brien with Piper Sandler. Please go ahead.

Good morning. Thanks for taking the question. Just for starters, I don't know, Fred or Dave if you guys talked about the Boston O&P performance in the quarter specifically, but was that in line with your expectations? And did you see any demonstrable shift between T&D and Scoli in terms of where you're generating that revenue?

Yes. I think we see Boston performing as we expected. Obviously, because of the addition of a sales channel, we're starting to already see the early positive return as we called out of patient flow into some of those clinics. So we talked about a 15% share, we think in our nine territories at the Analyst Day and our aspiration here over the next several years, is to get that to 50%. I think we can confidently say that the impact that the selling organization is having in driving patients and notifying our customers that we have these services in our territories is working. I wouldn't say that it's driving huge amounts of that growth. But certainly, it's heading in the right direction. We expect that to continue. So, really positive there. I think the mix is basically the same as it's been all year. So we didn't see any more scoliosis. I think you may be getting at that 52% scoliosis growth rate obviously really, really big. It was definitely not driven by an overperformance on the Boston O&P side, at least on the scoliosis.

Okay. And that kind of dovetails into the next question too, and I'm not trying to have a got you moment here. But when I kind of pull out, I think what you did in specialty bracing and T&D, it looks like things slowed down there somewhat. I don't know if that was hurricane related. I don't know if it was, because all the sets weren't out there. Is there something you can point to in terms of the T&D performance, that's a little bit lighter here in Q3 versus kind of some of the trend line that we've been seeing over the last eight to 10 quarters? Thanks.

Yeah. Might not have been obvious, but I think Dave talked about that, in his opening comments. So last year, we opened, South America in a big way with a stocking -- multiple stocking distributor orders on the Pega side. And that opens the market for us, for future growth, but it was a one-time very large order that did not repeat in the third quarter of this year. So that's probably the single biggest delta year-over-year in that business.

Okay. Fred, I don't mean to push anymore, but just if you look at even the two-year stacks though Q1 of this year and Q2 of this year, Q3 even if you adjust for that it's still a deceleration. So is there anything else to call out there? Again, I don't know if there was something on the CP side, where cases got canceled or anything along those lines.

No, Matt. I mean, we had a good quarter. From our perspective domestic trauma especially was extremely strong. I guess, domestic deformity was in line wasn't as strong I guess as there are some quarters in the past, but I think domestic trauma was about as strong as we have seen it. And I think when we look at the agency sales outside of the United States for our trauma products, it was in line with what our expectations were. I think the biggest issue for us is just both in LatAm as well as markets in Europe when we had big conversions of Pega distributors that fall into the deformity section of our deformity and trauma business. Those are big numbers for us last year and not as big this year obviously. But there's nothing within that business that we're at all concerned about at this stage.

Okay. Got it. Thanks so much.

Thank you.

Thanks Matt.

Your next question comes from Mike Matson with Needham & Company. Please go ahead.

Hey guys. It's Joseph, on for Mike. I guess maybe to start off could you maybe give us what organic growth -- organic revenue growth was in the quarter? And then, just looking at guidance saw the raise, but just kind of curious what's your outlook for flu and RSV. I know you guys had talked about in the past that you really have it kind of more under control moving forward. So wondering about that and just children's hospital staffing is that kind of still in good shape?

Yeah. So first question organic revenue. I think we gave guidance or comments earlier this year the Boston acquisition, Boston O&P acquisition was about $25 million that was added in. Of that, approximately 25% of that showed up in the second quarter 25% of that showed up in the third quarter historically. And then, if you split that 70% of that is on the trauma and Deformity side and 30% of it is on the Scoliosis side. And so that would give you the ability to do the math as you wish on the organic side. The second question was related to -- sorry the second question...

Yeah. Flu and RSV season -- guidance and then Children's hospital staffing.

Yeah. So on the RSV side, if you look at the data out there that's published CDC typically it starts to pick up a little bit in October and then it spikes in November and December. And if you look at the data just in the month of October, compared to October of last year it is lower than it was in October of last year. I think November, December and January are really the months that have the impact. But if you'll recall in the fourth quarter of last year, the hospitals did a better job of handling the influx. So two years ago it caught the hospitals by surprise. Last year the trend was -- it was still the second largest we've ever seen, but it was down 25% compared to the previous year and the hospitals did a better job of handling it. And so right now what's in our guidance is we're assuming the same type of reported cases that we saw in the fall of last year and that the hospitals will be able to handle it in the same manner. Related to staffing, yes, we think that we are now kind of behind that and that we have more normalized. And we see that normalized staffing continuing in the hospitals particularly in the U.S.

Okay. Great. And then maybe just one on 7D, you guys talked about multiple placements at larger institutions in the quarter. So just kind of wondering if there's anything more you can talk about any more color on surgeon feedback or interest there and maybe what the installed base is at this point if you're willing to disclose that?

Yeah. So surgeon feedback has always been extremely positive on 7D. I think, as we told you guys when we started this it was, -- we were probably a little naive in that we hadn't been involved in a lot of capital placements capital equipment sales at the company. And I would just say at this stage, we've learned a lot. And because of the resources that we have now applied on the enabling technology team with people who really know how to do this and know how to do this well I think it's safe to say we have a very large funnel of 7D opportunities. And our expectation is that we get into a cadence where quarter-to-quarter place --we're placing 7D units and we're getting sales of 7D units as well on certain locations. I think the installed base off the top of my head is probably around 20. So we're still early, I would say in that process. And when we think about these placements, I mean, its part of how we think about the growth particularly in the out years. So once these units are placed we're certainly seeing an increase in revenue for our scoliosis fusion business particularly when they get placed and we're going through the trial. But once we get the PO we get the installment, we have a pretty good line of sight into how that's going to impact scoliosis fusion with our RESPONSE system for the next three to five years. And so it's very encouraging this quarter to see some placements particularly in some accounts that I would say, a year ago, we were kind of nowhere in at least in terms of our Scoliosis fusion business. And now to know that we will have a pretty substantial claim to the Fusion business in those accounts in 2025 and over the next three to five years it's encouraging for us in our forecasting of the RESPONSE business and our Scoliosis business in general.

Okay. Perfect. No question then. Congrats on a record quarter.

Thanks.

Thanks.

[Operator Instructions] There are no more questions. I will now turn the conference back over to David Bailey for closing remarks.

Thank you. Well, once again, thank you all for joining us on our call. We have several upcoming meetings where we look forward to meeting all of you, and talking further about the business and our execution of our strategy. So thank you for your time today. And we look forward to seeing you soon. Take care.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.