Q1 2024 Earnings Summary
- OrthoPediatrics is launching three new products for Early Onset Scoliosis (EOS), addressing a significant unmet need in the market, which could lead to rapid adoption and give the company a distinct competitive advantage.
- The company reported strong organic growth exceeding 20% in Q1 2024, highlighting the strength and momentum of its core business.
- Key product lines such as PNP Tibia, Pega, Orthex, and ApiFix are performing better than expected, driving growth and providing strong momentum into the rest of the year. For example, PNP Tibia sales almost reached annual forecasts through April, indicating strong market acceptance.
- The company increased its full-year revenue guidance but did not raise its adjusted EBITDA guidance, indicating potential margin pressures or higher expenses that could impact profitability.
- The expansion and scaling of the Boston O&P clinics may take longer to contribute significantly to revenue, while the company is incurring additional costs for hiring sales staff and integrating the acquisition.
- Delays in obtaining EU MDR approvals due to notified body backlogs could postpone the launch of new products in Europe, potentially affecting international growth prospects.
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Organic Growth Rate
Q: Is organic growth over 20% without Boston O&P?
A: Management agreed that organic growth was over 20% excluding Boston O&P, confirming strong performance in the core business.
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Revenue Guidance and Summer Uncertainty
Q: You beat guidance; why only raise it by $3 million?
A: They raised full-year revenue guidance by $3 million, but are cautious due to the wildcard of the summer months, which are typically their largest but uncertain in terms of surgery volumes.
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Gross Margin Outlook
Q: How will gross margins progress this year?
A: Gross margins are expected to improve sequentially, increasing in Q2 and Q3, reaching 74–75% for the full year. Volume impacts margins, with higher margins in higher-volume quarters.
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Boston O&P Growth Prospects
Q: Thoughts on expanding Boston O&P clinics?
A: There is significant opportunity to expand Boston O&P clinics nationwide. They are opening a clinic at Nationwide Children's Hospital and expect clinic expansion to have a major impact in 2025.
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Core Business Performance
Q: How is the core business growth and Pega performing?
A: Core business is performing strongly. Pega products continue to show strong growth, with 50% global growth, and PNP Tibia is exceeding expectations.
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European Market Opportunities
Q: What's the status of new product launches in Europe?
A: After securing EU MDR audit approvals, they plan to launch several new products in Europe within 12–15 months, unlocking significant growth opportunities.
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Early Onset Scoliosis Products
Q: Will new EOS products adopt quickly like ApiFix?
A: They expect rapid adoption of new EOS products since surgeons need better technologies. The new products address a significant unmet need and are likely to see strong uptake.
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Building Sales Force
Q: How are you scaling the sales force for Boston O&P?
A: They plan to add about 20 salespeople in 2024 to support Boston O&P expansion, aiming to build a business well in excess of $100 million in coming years.
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