Orthopediatrics Corp. · NASDAQ:KIDS
Orthopediatrics — Investor Presentation (June 2019)
28 slides from Orthopediatrics's investor presentation, Jun 5, 2019
Slide 1: OrthoPediatrics Corp. June 2019
OrthoPediatrics Corp. June, 2019 Mark Throdahl , CEO Fred Hite, CFO
Slide 2: Disclaimer
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
Slide 3: Highlights
Highlights Diversified medical device company focused exclusively on pediatric orthopedics Protected market opportunity: $1.2 billion U.S., $2.7 billion globally in 2016 High U.S. procedure concentration: <300 hospitals and ~1,400 surgeons Focused call point: pediatric orthopedic surgeons are genera
Slide 4: OP Today: Company Snapshot
OP Today Treated >150,000 patients since inception 26 surgical systems; 7,500+ SKUs; strong pipeline* + 6 additional systems from Vilex acquisition 80 direct employees; 138 focused sales reps* Global sales organization focused on pediatric orthopedic surgeons in 42 countries* 26 issued patents; 35 p
Slide 5: Our Key Idea
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
Slide 6: Large and Focused Market
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 $519M OP’S $2.7 Billion Current Addressable Global Market $1.2 Billion U.S. Addressable Market Procedures (%) H
Slide 7: Product Line Diversification
Product Line Diversification $57.6 million sales in 2018, increasing 26% Well diversified sources of growth All major product families supported FY 2018 26% revenue growth Firefly, PNP|Femur , and PediFrag were key growth drivers All products have comparable gross margins 2018 Revenue by Segment 7 2
Slide 8: A Proven Strategy Since 2011
A Proven Strategy Since 2011 8 Deploy Instrument Sets Sales Focus on Teaching Institutions and High Volume Hospitals Expand Addressable Procedures Expand Clinical Education Programs Goals Accelerate sales growth Develop novel technologies
Slide 9: New Systems & Product Launches (2017-2018)
9 New Systems & Product Launches (2017 - 2018) 2017 Launches FIREFLY® Pedicle Screw Navigation Guides (Complementary to RESPONSE Spine System) Trauma & Deformity Scoliosis 2017 Launches Titanium PediPlates ® System (Expands physeal tethering offering) Clavicle Plate System (First pediatric specific
Slide 10: Upcoming New Systems & Product Launches
10 Upcoming New Systems & Product Launches 2019 Expected Product Launches Osteogenesis Imperfecta Nail System BandLoc DUO System Trauma & Deformity Scoliosis 2019 Product Launches PediFoot (First pediatric system) Launched Feb’19 Development Complete Submitted 510(k) to FDA PNP | Tibia Neuromuscular
Slide 11: Strong Pipeline Expanding Our Addressable Market
Knee (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 11 Growing R
Slide 12: Leading Edge Systems in Development
Leading Edge Systems in Development 12 Emerging procedure with off - label use of adult lumbar fixation product Allows intervention in patients as young as 10 Reversible, non - fusion procedure Acquired IP; now enhancing portfolio Formed task force of leading tethering surgeons Evaluating and refini
Slide 13: Global Sales Coverage
Global Sales Coverage United States 75% of 2018 Revenue 33 Sales Agencies, most of which are exclusive* International 25% of 2018 Revenue 7 Sales Agencies + 35 Stocking Distributors* Currently selling to major children’s hospitals in the U.S. and 41 additional countries Converting to agency model in
Slide 14: Vilex Acquisition
Vilex Acquisition Transaction • On June 4 OP purchased Vilex , including its Orthex Hexapod e xternal fixation system and proprietary CORA - based x - ray planning software • Will separate Vilex’s adult business and pursue potential divestiture Consideration • $50 million cash + $10 million shares =
Slide 15: OP Owns Orthex
OP Owns Orthex • Hexapod deformity correction external fixation system plus point and click X - ray planning proprietary software • 50%+ annual revenue growth since FDA - clearance in mid - 2016 • Generated $3.1 million of 2018 revenue Potential Sale of Vilex’s Adult Systems • $8.7 million of 2018 r
Slide 16: Orthex Advantages
Orthex Advantages • Disruptive Technology • Construct allows for 90 Σ angulation • Unique calibrated struts & HA - coated pins • Patented point and click software • Significantly simplifies surgery planning and subsequent alignments • Dror Paley, MD – Pediatric orthopedic KOL • Introduced Ilizarov m
Slide 17: Foundational Foot & Ankle Products
• PediFoot Deformity Correction System • Launch second half of 2019 • Focuses on 4 of the 12 common foot deformity surgeries • Vilex provides products for 4 additional indications, allowing OP system to address 8 of the 12 common procedures • Staple expands PediPlate franchise • OP’s largest T&D pro
Slide 18: New Competitors Would Face Formidable Obstacles
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.” Competitive Landscape 18
Slide 19: What Does Category Leadership Mean?
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 Attractive growth and margin profile Consistent growth since inception
Slide 20: Financial Review
Financial Review
Slide 21: Consistent 20+% Revenue Growth Since Inception
$6.7 $9.3 $13.3 $15.8 $18.4 $24.9 $28.8 $34.9 $43.5 $0.4 $0.9 $2.8 $3.9 $5.3 $6.1 $8.5 $10.7 $14.1 $0.6 $3.0 $7.1 $10.2 $16.1 $19.6 $31.0 $37.3 $45.6 $57.6 $69.7 - $70.8 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70 $75 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 FY19E Revenue
Slide 22: Category Revenue Summary
$19.3 $22.5 $26.8 $32.8 $39.7 $3.6 $7.4 $9.4 $11.6 $16.7 $0.8 $1.1 $1.1 $1.2 $1.2 $0 $10 $20 $30 $40 $50 $60 $70 2014 2015 2016 2017 2018 Revenue ($ in Millions) Trauma & Deformity Scoliosis Sports Medicine/Other Category Revenue Summary 22 $9.1 $10.0 $2.7 $4.3 $0.3 $0.4 1Q 2018 1Q 2019
Slide 23: Revenue Seasonality
Revenue Seasonality Seasonality Drives Stronger Performance in Summer Months and Holiday Periods 23 22% 26% 27% 25% 21% 26% 27% 26% 21% 26% 27% 25% 0% 5% 10% 15% 20% 25% 30% 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 Revenue as % of Total Year
Slide 24: Income Statement Summary
Income Statement Summary 24 ($ in Millions) FY 2016 FY 2017 FY 2018 1Q 2018 1Q 2019 Revenue $37.3 $45.6 $57.6 $12.1 $14.7 Growth % 20% 22% 26% 24% 21% Gross Profit $26.4 $34.5 $42.7 $8.9 $10.7 Margin % 71% 76% 74% 74% 73% Operating Expenses $32.5 $40.9 $52.2 $13.3 $13.4 Operating Loss ($6.1) ($6.5)
Slide 25: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation 25 Three Months Ended March 31, 2018 2019 Net Loss ($5.0) ($3.0) Interest expense, net 0.5 0.3 Other expense 0.1 - Depreciation and amortization 0.7 0.8 Stock - based compensation 0.4 0.5 Accelerated vesting of restricted stock upon IPO 1.8 - Adjusted EBITDA ($1.5) ($1
Slide 26: Balance Sheet
Balance Sheet 26 Assets Liabilities Cash $52.8 Accounts Payable $6.3 Accounts Receivable 10.3 Debt 21.3 Inventory 28.1 Accrued Expenses 2.7 Other Current Assets 2.0 All Other Liabilities 1.7 PP&E (net) 16.8 Paid In Capital 198.5 Intangibles 2.1 Accumulated Deficit (net) (118.4) Total Assets $112.0 T
Slide 27: Vilex Acquisition Financial Impact
Vilex Acquisition Financial Impact $20M cash usage + $30M term loan B + $10M KIDS Stock = $60M Using 1Q19 ending balance this leaves ~$33M of available cash Vilex $11.8M total year 2018 revenue ~$3.1M Orthex Hexapod … integrate into OP ~$8.7M Vilex Foot and Ankle revenue, most of which is adult … re
Slide 28: Summary
Summary Surgeon relationships and clinical education Attractive growth and margin profile Robust organic growth opportunities Broadest, most innovative product offering 28