kids-20240630

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 June 30, 2024

☐ 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 August 2, 2024, the registrant had 24,214,426 outstanding shares of common stock, $0.00025 par value per share.

OrthoPediatrics Corp.

Form 10-Q

For the Quarterly Period Ended June 30, 2024

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 - June 3 0 , 2024 and December 31, 2023	4
	Condensed Consolidated Statements of Operations - Three and Six Months Ended June 3 0 , 2024 and 2023	5
	Condensed Consolidated Statements of Comprehensive Loss - Three and Six Months Ended June 3 0 , 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders' Equity - Three and Six Months Ended June 3 0 , 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 3 0 , 2024 and 2023	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	34

PART II. OTHER INFORMATION
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	37
Item 5	Other Information	37
Item 6	Exhibits	37
Exhibit Index		38
Signatures		40

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 8, 2024 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)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	28,927	$	31,055
Restricted cash	1,963		1,972
Short-term investments	—		49,251
Accounts receivable - trade, net of allowances of $1,026 and $1,373, respectively	42,028		34,617
Inventories, net	116,366		105,851


Prepaid expenses and other current assets	4,499		3,750

Total current assets	193,783		226,496
Property and equipment, net	53,482		41,048
Other assets:
Amortizable intangible assets, net	67,848		69,275
Goodwill	90,512		83,699
Other intangible assets	18,669		15,287
Other non-current assets	6,467		2,940
Total other assets	183,496		171,201

Total assets	$	430,761	$	438,745

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade	$	17,002	$	12,649
Accrued compensation and benefits	12,616		11,325

Current portion of long-term debt with affiliate	156		152
Current portion of acquisition installment payable	1,304		10,149



Other current liabilities	8,491		7,391
Total current liabilities	39,569		41,666
Long-term liabilities:
Long-term debt, net of current portion	9,250		9,297
Long-term debt with affiliate, net of current portion	532		611
Acquisition installment payable, net of current portion	2,371		3,551
Deferred income taxes	4,739		5,483
Other long-term liabilities	3,007		1,112
Total long-term liabilities	19,899		20,054

Total liabilities	59,468		61,720








Stockholders' equity:
Common stock, $0.00025 par value; 50,000,000 shares authorized; 24,216,738 shares and 23,378,408 shares issued as of June 30, 2024 and December 31, 2023, respectively	6		6
Additional paid-in capital	593,087		580,287

Accumulated deficit	(211,576)		(197,742)
Accumulated other comprehensive loss	(10,224)		(5,526)
Total stockholders' equity	371,293		377,025
Total liabilities and stockholders' equity	$	430,761	$	438,745

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenue	$	52,802	$	39,559	$	97,487	$	71,147
Cost of revenue	12,003		9,534		24,514		17,561
Gross profit	40,799		30,025		72,973		53,586
Operating expenses:
Sales and marketing	16,593		13,533		30,762		26,082
General and administrative	27,329		19,112		52,059		36,269

Research and development	2,543		2,966		5,541		5,412
Total operating expenses	46,465		35,611		88,362		67,763
Operating loss	(5,666)		(5,586)		(15,389)		(14,177)
Other expense (income):
Interest expense, net	261		294		898		84
Fair value adjustment of contingent consideration	—		(2,304)		—		(2,974)
Other expense (income), net	120		(289)		96		(620)
Total other expense (income), net	381		(2,299)		994		(3,510)
Loss before income taxes	$	(6,047)	$	(3,287)	$	(16,383)	$	(10,667)
Provision for income taxes (benefit)	(18)		(401)		(2,549)		(975)


Net loss	$	(6,029)	$	(2,886)	$	(13,834)	$	(9,692)
Weighted average shares outstanding
Basic and diluted	23,145,064		22,704,723		22,982,921		22,587,022

Net loss per share
Basic and diluted	$	(0.26)	$	(0.13)	$	(0.60)	$	(0.43)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited) (In Thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net loss	$	(6,029)	$	(2,886)	$	(13,834)	$	(9,692)
Other comprehensive loss:
Foreign currency translation adjustment	(3,263)		(1,858)		(4,689)		(2,820)
Unrealized gain (loss) on short-term investments	—		(7)		109		610
Adjustment for realized gain on securities	—		—		(118)		(301)
Other comprehensive loss, net of tax	(3,263)		(1,865)		(4,698)		(2,511)
Comprehensive loss	$	(9,292)	$	(4,751)	$	(18,532)	$	(12,203)

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)


		Three and Six Months Ended June 30, 2024
							Accumulated
					Additional		Other		Total
	Common Stock		Paid-in		Accumulated	Comprehensive	Stockholders'
		Shares	Value				Capital		Deficit		Loss		Equity
Balance at January 1, 2024		23,378,408	$	6			$	580,287	$	(197,742)	$	(5,526)	$	377,025
Net loss		—	—				—		(7,805)		—		(7,805)
Other comprehensive loss		—	—				—		—		(1,435)		(1,435)

Restricted stock		162,003	—				2,799		—		—		2,799


Balance at March 31, 2024		23,540,411	$	6			$	583,086	$	(205,547)	$	(6,961)	$	370,584
Net loss		—	—				—		(6,029)		—		(6,029)
Other comprehensive loss		—	—				—		—		(3,263)		(3,263)
Stock portion of MedTech anniversary payment		4,288	—				133		—		—		133
Stock portion of ApiFix anniversary installment		245,812	—				6,929		—		—		6,929

Restricted stock		426,227	—				2,939		—		—		2,939
Balance at June 30, 2024		24,216,738	$	6			$	593,087	$	(211,576)	$	(10,224)	$	371,293

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In Thousands, Except Share Data)


	Three and Six Months Ended June 30, 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
Net loss	—	—			—		(2,886)		—		(2,886)
Other comprehensive loss	—	—			—		—		(1,865)		(1,865)

Restricted stock	14,591	—			3,456		—		—		3,456
Consideration for MedTech acquisition	43,751	—			2,274		—		—		2,274
Stock portion of ApiFix anniversary installment	140,003	—			6,178		—		—		6,178
Balance at June 30, 2023	23,340,463	$	6		$	574,677	$	(186,460)	$	(7,911)	$	380,312

See notes to condensed consolidated financial statements.

ORTHOPEDIATRICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In Thousands)


	Six Months Ended June 30,
	2024		2023
OPERATING ACTIVITIES
Net loss	$	(13,834)	$	(9,692)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization	9,807		7,928
Stock-based compensation	5,738		5,415
Fair value adjustment of contingent consideration	—		(2,974)
Accretion of acquisition installment payable	537		812
Deferred income taxes	(2,955)		(975)

Changes in certain operating assets and liabilities:
Accounts receivable - trade	(4,583)		(8,964)
Inventories, net	(10,420)		(11,860)

Prepaid expenses and other current assets	(403)		72
Accounts payable - trade	4,150		9,724

Accrued expenses and other liabilities	959		1,325

SEC Form 10-Q filed by OrthoPediatrics Corp.