kids-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-38242

OrthoPediatrics Corp.

(Exact name of registrant as specified in its charter)


Delaware			26-1761833
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)


2850 Frontier Drive Warsaw, IN 46582			(574) 268-6379
(Address of principal executive offices, including zip code)			(Registrant’s telephone number, including area code)

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00025 par value per share

KIDS

Nasdaq Global Market

________________________________________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 1, 2023, the registrant had 23,327,203 outstanding shares of common stock, $0.00025 par value per share.

OrthoPediatrics Corp.

Form 10-Q

For the Quarterly Period Ended March 31, 2023

TABLE OF CONTENTS


		Page No.
Note Regarding Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets - March 31, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Comprehensive Loss - Three Months Ended March 31, 2023 and 2022	6
	Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 2023 and 2022	7
	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2023 and 2022	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	31

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	33
Item 4	Mine Safety Disclosures	33
Item 5	Other Information	33
Item 6	Exhibits	34
Exhibit Index		35
Signatures		37

NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical facts, contained in this quarterly report, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. You can often identify forward-looking statements by words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "target," "ongoing," "plan," "potential," "predict," "project," "should," "will" or "would," or the negative of these terms or other terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors, such as the impact of widespread health emergencies, such as COVID-19 and respiratory syncytial virus, that may cause our results, activity levels, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements. Forward-looking statements may include, among other things, statements relating to:

•our ability to achieve or sustain profitability in the future;

•our ability to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations;

•our ability to commercialize our products in development and to develop and commercialize additional products through our research and development efforts, and if we fail to do so we may be unable to compete effectively;

•our ability to generate sufficient revenue from the commercialization of our products to achieve and sustain profitability;

•our ability to comply with extensive government regulation and oversight both in the United States and abroad;

•our ability to maintain and expand our network of third-party independent sales agencies and distributors to market and distribute our products; and

•our ability to protect our intellectual property rights or if we are accused of infringing on the intellectual property rights of others;

We cannot assure you that forward-looking statements will prove to be accurate, and you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations expressed or implied by the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this quarterly report, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 1, 2023 and in other reports filed with the SEC that discuss the risks and factors that may affect our business. Other than as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this quarterly report.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Share Data)


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	34,656	$	8,991
Restricted cash	1,481		1,471
Short-term investments	73,074		109,299
Accounts receivable - trade, net of allowances of $942 and $1,056, respectively	26,838		24,800
Inventories, net	84,922		78,192


Prepaid expenses and other current assets	4,005		3,966

Total current assets	224,976		226,719
Property and equipment, net	36,916		34,286
Other assets:
Amortizable intangible assets, net	64,642		64,980
Goodwill	84,127		86,821

Other intangible assets	15,629		14,921
Total other assets	164,398		166,722

Total assets	$	426,290	$	427,727

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	16,692	$	11,150
Accrued compensation and benefits	6,242		6,744

Current portion of long-term debt with affiliate	146		144
Current portion of acquisition installment payable	8,000		7,815



Other current liabilities	4,138		5,018
Total current liabilities	35,218		30,871
Long-term liabilities:
Long-term debt with affiliate, net of current portion	725		763
Acquisition installment payable, net of current portion	8,215		8,019
Contingent consideration	2,310		2,980
Deferred income taxes	6,022		5,954
Other long-term liabilities	645		492
Total long-term liabilities	17,917		18,208

Total liabilities	53,135		49,079








Stockholders' equity:
Common stock, $0.00025 par value; 50,000,000 shares authorized; 23,142,118 shares and 22,877,962 shares issued as of March 31, 2023 and December 31, 2022, respectively	6		6
Additional paid-in capital	562,769		560,810

Accumulated deficit	(183,574)		(176,768)
Accumulated other comprehensive loss	(6,046)		(5,400)
Total stockholders' equity	373,155		378,648
Total liabilities and stockholders' equity	$	426,290	$	427,727

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In Thousands, Except Share and Per Share Data)


	Three Months Ended March 31,
	2023		2022
Net revenue	$	31,588	$	23,417
Cost of revenue	8,027		4,851
Gross profit	23,561		18,566
Operating expenses:
Sales and marketing	12,216		9,758
General and administrative	17,666		13,167

Research and development	2,270		2,027
Total operating expenses	32,152		24,952
Operating loss	(8,591)		(6,386)
Other (income) expenses:
Interest (income) expense, net	(210)		566
Fair value adjustment of contingent consideration	(670)		2,570
Other income	(331)		(105)
Total other (income) expenses	(1,211)		3,031
Loss before income taxes	$	(7,380)	$	(9,417)
Provision for income taxes (benefit)	(574)		(317)


Net loss	$	(6,806)	$	(9,100)

Weighted average common stock - basic and diluted	22,506,024		19,366,911
Net loss per share - basic and diluted	$	(0.30)	$	(0.47)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In Thousands)


	Three Months Ended March 31,
	2023		2022
Net loss	$	(6,806)	$	(9,100)
Other comprehensive income (loss):
Foreign currency translation adjustment	(962)		(2,198)
Unrealized gain (loss) on short-term investments	617		(553)
Adjustment for realized (gain) loss on securities	(301)		—
Other comprehensive loss, net of tax	(646)		(2,751)
Comprehensive loss	$	(7,452)	$	(11,851)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)


		Three Months Ended March 31, 2023
							Accumulated
					Additional		Other		Total
	Common Stock		Paid-in		Accumulated	Comprehensive	Stockholders'
		Shares	Value				Capital		Deficit		Loss		Equity
Balance at January 1, 2023		22,877,962	$	6			$	560,810	$	(176,768)	$	(5,400)	$	378,648
Net loss		—	—				—		(6,806)		—		(6,806)
Other comprehensive loss		—	—				—		—		(646)		(646)

Restricted stock		264,156	—				1,959		—		—		1,959


Balance at March 31, 2023		23,142,118	$	6			$	562,769	$	(183,574)	$	(6,046)	$	373,155

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)


	Three Months Ended March 31, 2022
									Accumulated
					Additional				Other		Total
	Common Stock			Paid-in	Accumulated		Comprehensive		Stockholders'
	Shares	Value			Capital		Deficit		Income		Equity
Balance at January 1, 2022	19,677,214	$	5		$	394,899	$	(178,026)	$	8,491	$	225,369
Net loss	—	—			—		(9,100)		—		(9,100)
Other comprehensive loss	—	—			—		—		(2,751)		(2,751)

Restricted stock	144,084	—			1,526		—		—		1,526


Balance at March 31, 2022	19,821,298	$	5		$	396,425	$	(187,126)	$	5,740	$	215,044

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)


	Three Months Ended March 31,
	2023		2022
OPERATING ACTIVITIES
Net loss	$	(6,806)	$	(9,100)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization	3,848		2,961
Stock-based compensation	2,113		1,526
Fair value adjustment of contingent consideration	(670)		2,570
Accretion of acquisition installment payable	381		453
Deferred income taxes	(574)		(317)

Changes in certain current assets and liabilities:
Accounts receivable - trade	(2,002)		2
Inventories	(5,979)		(6,750)

Prepaid expenses and other current assets	(33)		112
Accounts payable - trade	5,541		5,258

Accrued expenses and other liabilities	(1,571)		(690)
Other	(709)		(222)


Net cash used in operating activities	(6,461)		(4,197)

INVESTING ACTIVITIES

SEC Form 10-Q filed by OrthoPediatrics Corp.