Orthopediatrics Corp. · NASDAQ:KIDS
Orthopediatrics — Investor Presentation (November 2017)
32 slides from Orthopediatrics's investor presentation, Nov 13, 2017
Slide 1: OrthoPediatrics Corp. November 2017
43 164 216 242 24 81 0 165 99 0 112 192 OrthoPediatrics Corp. November 2017 Mark Throdahl, CEO Fred Hite, CFO
Slide 2: Disclaimer
43 164 216 242 24 81 0 165 99 0 112 192 Disclaimer This presentation contains and related discussion may contain “forward-looking statements” within the meaning of U.S. federal securities laws. All statements contained in this presentation and related discussion other than statements of historical f
Slide 3: Highlights
43 164 216 242 24 81 0 165 99 0 112 192 Highlights 3 Only diversified orthopedic company focused 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: generalis
Slide 4: OP Today: Company Snapshot
43 164 216 242 24 81 0 165 99 0 112 192 OP Today Treated 16,000 patients in 2016 22 surgical systems; 2,700 SKUs; strong pipeline 62 direct employees; 69 focused FTE sales reps Global sales organization focused on pediatric orthopedic surgeons in 36 countries International: 31 stocking distributors;
Slide 5: Our Key Idea
43 164 216 242 24 81 0 165 99 0 112 192 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 ortho
Slide 6: Children Are Not Small Adults
43 164 216 242 24 81 0 165 99 0 112 192 Children Are Not Small Adults Limitations of Conventional Orthopedic Products Anatomical Differences 6 Dangers of Using Adult Implants Growth plates must be protected; ligament repair must avoid growth plates Smaller and more curved bones Implants are often re
Slide 7: Large and Focused Market
43 164 216 242 24 81 0 165 99 0 112 192 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
Slide 8: Product Line Diversification
43 164 216 242 24 81 0 165 99 0 112 192 Product Line Diversification 2016 Revenue Growth % by Product Family $37 million sales in 2016 20% revenue growth in 2016 No dependency on one product family Consistent growth across all products Comparable gross margins on all products 2016 Revenue by Segment
Slide 9: A Proven Strategy Since 2011
43 164 216 242 24 81 0 165 99 0 112 192 A Proven Strategy Since 2011 9 Deploy Instrument Sets Sales Focus On Teaching Institutions and High Volume Hospitals Expand Addressable Procedures Expand Clinical Training Programs Goals Accelerate sales growth (requires consigned sets) Develop novel technolog
Slide 10: Trauma & Deformity Example
43 164 216 242 24 81 0 165 99 0 112 192 10 16 Trauma & Deformity Systems; 1,200 Implants Distal Femoral Osteotomy System CP flexion contractures, varus-valgus deformities Instrumentation enables precise wedge osteotomies Plates in 3.5 and 4.5mm sizes, 4 and 6-hole lengths, with and without offsets Q
Slide 11: Complex Spine Example
43 164 216 242 24 81 0 165 99 0 112 192 Complex Spine Example Pre-contoured rods in CoCr and Ti 5.5mm and 6.0mm diameters, 3 lengths RESPONSE Rod Reduction & De-rotation Instruments One-handed, snap-fit instrument with segment de-rotation and flag attachments to reduce surgery time Proprietary Tulip
Slide 12: Sports Medicine Example
43 164 216 242 24 81 0 165 99 0 112 192 Sports Medicine Example Medial Patella Femoral Ligament Reconstruction System Full range of instruments accommodate any technique Bioabsorbable interference screws Complements ACL Reconstruction System 12 3 New Systems in Q3 2017
Slide 13: New Systems in Q3 2017
43 164 216 242 24 81 0 165 99 0 112 192 3 New Systems in Q3 2017 13 OP has exclusive distribution rights in U.S. pediatric hospitals Unique, patient-specific custom guide for screw placement Provides a 3D printed, patient-specific guide for each vertebral level Improves screw placement accuracy with
Slide 14: Strong Pipeline Expanding Our Addressable Market
43 164 216 242 24 81 0 165 99 0 112 192 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
Slide 15: Culture of Continuous Improvement
43 164 216 242 24 81 0 165 99 0 112 192 Culture of Continuous Improvement 15 PediFlex PediLoc Femur/Tibia Screws PediPlates PediNail LCB & LPF PediFrag RESPONSE ACL T I M E B R E A D T H 2008 DFOS OI Nail BandLoc Novel introducer and Extractor; new unique shape PediNail Gen II adds adolescent nails
Slide 16: Surgeon Testimonials
43 164 216 242 24 81 0 165 99 0 112 192 Surgeon Testimonials 16 “How in the world have you been able to develop a better system than anything on the market in so short a period of time – when other companies have been out there for so long?” - Dr. Eric Wall, M.D. (Cincinnati Children’s Hospital) “Or
Slide 17: Training the Next Generation of Pediatric Orthopedic Surgeons
43 164 216 242 24 81 0 165 99 0 112 192 17 OP’s Bio-Skills Education Program: 16 modules for Residents and Fellows These programs touched 2,000 medical personnel in 2016 We extensively train 200 young surgeons annually: (1) Annual Pediatric Spine Symposium; (2) Annual Pediatric Orthopedic Surgical T
Slide 18: Global Sales Coverage
43 164 216 242 24 81 0 165 99 0 112 192 Global Sales Coverage United States 77% of 2016 Revenue 33 Sales Agencies, most of which are exclusive International 23% of 2016 Revenue 2 Sales Agencies + 31 Stocking Distributors Sales in 35 countries + the United States Current customers in every major chil
Slide 19: Sales Management Structure
43 164 216 242 24 81 0 165 99 0 112 192 1 SVP U.S. Sales 5 Regional Sales VPs 3 Product Sales Specialists 33 Sales Agencies 110+ Reps Focused on Pediatrics 69 FTE OP Reps 1 SVP International Sales 2 Regional Sales VPs – EMEA 1 Regional Sales VP – Latin America 1 Regional Sales VP – Asia/Pacific 2 Sa
Slide 20: Unique Sales Model
43 164 216 242 24 81 0 165 99 0 112 192 Unique Sales Model Attracting U.S. and international distributors alienated by industry consolidations Long-standing partnerships: Many agents are former OP direct reps “Boys in the Boat” quarterly meetings with largest sales agencies Limited sources for produ
Slide 21: New Competitors Would Face Formidable Obstacles
43 164 216 242 24 81 0 165 99 0 112 192 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.” Barrie
Slide 22: What Does Category Leadership Mean?
43 164 216 242 24 81 0 165 99 0 112 192 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
Slide 23: Financial Review
43 164 216 242 24 81 0 165 99 0 112 192 Financial Review
Slide 24: Scalable Business Model
43 164 216 242 24 81 0 165 99 0 112 192 Scalable Business Model 21% of procedures in 62 children’s hospitals 62% of U.S. Trauma & Deformity and Complex Spine procedures in 268 hospitals Attractive Market Dynamics More of the Same Plus International Expansion Distribution optimization New Customers N
Slide 25: OP Sales Model
43 164 216 242 24 81 0 165 99 0 112 192 OP Sales Model Gross Margin Less Selling Commissions Comparable 2017 Transitioned UK/IRE/AUS/NZ Markets to Sales Agency Model Instrument / Implant Sets Replenishment Selling Commission Consign to sales agencies Zero sales and margin on instruments Sell to stoc
Slide 26: History of Strong Revenue Growth
43 164 216 242 24 81 0 165 99 0 112 192 $9.3 $13.3 $15.8 $18.4 $24.9 $28.8 $0.9 $2.8 $3.9 $5.3 $6.1 $8.5 $10.2 $16.1 $19.6 $23.7 $31.0 $37.3 $0 $5 $10 $15 $20 $25 $30 $35 $40 2011 2012 2013 2014 2015 2016 R ev enu e ( $ in Mi lli on s) U.S. International History of Strong Revenue Growth 26
Slide 27: Category Revenue Summary
43 164 216 242 24 81 0 165 99 0 112 192 $19.3 $22.5 $26.8 $3.6 $7.4 $9.4 $0.8 $1.1 $1.1 $0 $5 $10 $15 $20 $25 $30 $35 $40 2014 2015 2016 R ev enu e ( $ in Mi lli on s) Trauma & Deformity Complex Spine ACL Reconstruction / Other $20.2 $24.3 $6.9 $8.7 $0.8 $0.9 9M' 2016 9M' 2017 Category Revenue Summa
Slide 28: Revenue Seasonality
43 164 216 242 24 81 0 165 99 0 112 192 Revenue Seasonality 2015 2016 20% 25% 28% 27% 0% 5% 10% 15% 20% 25% 30% Q1 Q2 Q3 Q4 R ev e n u e as % of To ta l Y ea r Seasonality Drives Stronger Performance in Summer Months and Holiday Periods 28 22% 26% 27% 25% 0% 5% 10% 15% 20% 25% 30% Q1 Q2 Q3 Q4 R ev e
Slide 29: Income Statement Summary
43 164 216 242 24 81 0 165 99 0 112 192 Income Statement Summary 29 ($ in Millions) Year Ended December 31; Nine Months Ended September 30 2014 2015 2016 9M’16 9M’17 Revenue $23.7 $31.0 $37.3 $27.9 $33.9 Growth % 21% 31% 20% NA 22% Gross Profit $16.6 $21.6 $26.4 $20.0 $25.6 Margin % 70% 70% 71% 72%
Slide 30: Balance Sheet
43 164 216 242 24 81 0 165 99 0 112 192 Balance Sheet 30 Assets Liabilities Cash $2.2 Accounts Payable $5.1 Accounts Receivable 5.7 Debt 27.5 Inventory 18.4 Accrued Expenses 2.3 PP&E (net) 9.7 All Other Liabilities 3.0 Intangibles 2.2 Paid In Capital 85.2 All Other 0.3 Accumulated Deficit (82.2) Tot
Slide 31: Use of Proceeds
43 164 216 242 24 81 0 165 99 0 112 192 Working Capital and General Corporate Purposes Expand Sales and Marketing Use of Proceeds R&D Pay Series B Preferred Stock Dividends $ Invest in Consigned Implants and Instrument Sets 31
Slide 32: Debt Refinancing
43 164 216 242 24 81 0 165 99 0 112 192 Debt Refinancing November 8, 2017 – signed a non-binding Letter of Intent to amend current debt agreement with Squadron Capital to modify and extend the terms of its existing term notes and revolving credit facility Consolidates a majority of the term note amo
Orthopediatrics — Investor Presentation (November 2017) on 6ix