Q2 2021 OrthoPediatrics Corp Earnings Call
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Okay.
Yeah.
Good morning, and welcome to the Ortho Pediatrics corporations second quarter 2021 conference call. At this time all participants are in a listen only mode. We will be facilitating the question and answer session towards the end of today's call. As a reminder of this call's being recorded for replay purposes.
I would now like to turn the call over to Matt Pascoe from Gilmartin group for a few introductory remarks.
Thank you for joining today's call with me from the company of David Bailey, President and Chief Executive Officer, and Fred Hite, Chief operating and financial Officer before we begin today, let me.
Mind, you that the Companys remarks include forward looking statements within the meaning of federal securities laws, including the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995. These forward looking statements are subject to numerous risks and uncertainties and the company's actual results may differ materially.
For a discussion of risk factors, including among others. The risks related to COVID-19, the impacts of this pandemic may have on the demand of the company's products and the company's ability to respond to the related challenges.
Courage you to review the company's most recent quarterly report on form 10-Q, which will be filed with the S. E C suite.
During the call today, we will also discuss certain non-GAAP financial measures, which are supplemental measures of performance. The company believes these measures provide useful information for investors in evaluating its operations period over period for each non-GAAP financial measures referenced on this call. The company has included a reconciliation of the non-GAAP financial.
Measures to the most directly comparable GAAP financial measures in its earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for orthopedic Patrick's financial results prepared in accordance with GAAP. In addition, the content of this conference call contains time.
Sensitive information that is accurate only as of the date of this live broadcast August 5th 2021, except as required by law. The company undertakes no obligation to revise or update any statements to reflect events or conferences or circumstances, taking place. After the date of this call with that I would like to turn the call over to David Bailey, President and Chief.
<unk> Executive officer.
Thanks, Matt Good morning, everyone and thank you for joining US we hope you are safe and well.
Before providing a business update and reviewing the financials I'd like to take a moment to say how honored I am to have the opportunity to lead ortho pediatrics forward.
I joined <unk> more than 14 years ago, just after its founding and I did so because I felt it was the calling on my life to help children as I take on this new responsibility I am humbled by all we've accomplished to improve the lives of children.
As you know orthopedic Patrick's was founded on the cause of improving the lives of children of orthopedic conditions over the years, we have partnered with key opinion leaders in the field of pediatric orthopedic surgery from around the world.
Who share in our dedication to this call. While we are proud of our accomplishments. Thus far there are there is so much more we can do to ensure that children have access to the best health care. We are still very early in our growth story and Fred and I are excited to build on our past successes.
I'd also like to take this time to thank and congratulate Mark throttle, our new executive chairman for his commitment to our cause and his service to orthopedic metrics over the last 10 years Mark has been instrumental in building, who we are as the company and what we represent on a personal note Mark has been an incredible mentor and friend. Thank you Mark for your lead.
Your ship guidance and for your continued service.
It's also true that there is no 1 who can match mark polished delivery of our prepared remarks on our quarterly earnings call the Fred and I will do our best.
With that said, let me turn to our quarterly results.
We are proud to report that we helped a record 10500 children in the second quarter of 2021.
The total number to more than 215000 since the inception of ortho pediatrics. Our team is very proud of this number which is unusually large for a company of our size and so we intend to lead off every quarterly call with the statistics, which represent the ultimate measure of our success as the business built on that cost.
We are also pleased to report that ortho pediatrics posted record quarterly revenue as our associates continue to execute in this extremely demanding operating environment in.
In the second quarter, we generated quarterly results of $26.7 million representing growth of 96 per cent compared to the second quarter of 2020 as a reminder of the prior quarter prior year quarter was significantly impacted by COVID-19.
This robust growth was driven by all 3 businesses strength in the domestic market and improved trends in interim Ash International markets. Achieving this milestone is a testament to the fundamental strength of our business and the resiliency of our team.
In the second quarter of 2021 U S revenue was $21.7 million of 79% increase from the second quarter of 2020, we believes the pediatric orthopedic clinic visits and surgery volumes in the U S of largely normalized of pre COVID-19 levels and surgeons appear to have worked through much of the backlog.
We generated international revenues of $5 million up 243% as compared to the second quarter of 2020, while we are pleased with our performance in the quarter. Unlike the U S market International continued to be negatively impacted by COVID-19, leading to increased variability quarter to quarter. Additionally, while we believe U S. Surgeons have worked.
Through their backlog of cases, it is our belief that most international markets will take at least 12 months to work through their backlog.
Lastly, a leading indicator for US has always been set deployment by international stocking distributors in aggregate, they're set purchases still remain below 2019 level.
I'll now provide an update on our strategic initiatives.
Since becoming a public company nearly 4 years ago, we of methodical and strengthen our ability to deliver durable long term double digit revenue growth, which is consistent with our track record over the past decade, moving forward, our corporate strategy will not change our focus will remain on 5 pillars of growth which include.
Number 1 focusing on high volume children's hospitals and academic centers around the world the treat the majority of pediatric patients.
Number 2 surrounding pediatric orthopedic surgeons with a broad product portfolio uniquely designed to treat children.
3 deploying instrument set and sales personnel to meet the strong market demand.
Number 4 expanding the addressable market of meeting unmet needs through aggressive investment in R&D and select M&A opportunities and finally number 5 expanding our already robust clinical education program to train and support the next generation of pediatric orthopedic surgeons.
Our strategy is simple improving and it will allow us to continue to execute in a disciplined manner.
Going forward, we see no reason to deviate from the Formula that has produced consistent annual growth in excess of 20% since our founding.
With respect to our continued product portfolio expansion in May we announced the launch of the response neuromuscular or response in EM scoliosis system.
This represents the 36th surgical system orthopedic <unk> launched since its inception and is the latest addition to the response scoliosis platform.
This new system is dedicated the treatment of neuromuscular scoliosis and was developed in conjunction with pediatric orthopedic surgeons to address the unique challenges treating this challenging patient population bill.
Building on the base of response of the sponsor response spine system response neuromuscular features the complete set of implants and instruments that help simplify these extremely complex spinal procedures.
Response neuromuscular provides specific options to address extreme hybrid lordosis and sacral pelvic fixation.
The product was also designed with specific instrumentation to improve the speed of these procedures provide greater deformity correction and stability and thus optimize outcomes while still early in its commercial launch the reception from our key customers has been very positive.
Additionally, in mid June we announced the full commercial release of our Skippy cumulated screw system.
This system was designed in collaboration with pediatric orthopedic surgeons as a solution for treating traumatic slipped capital femoral epiphysis.
Specifically the system offers flexibility to treat skippy injuries with fully threaded and partially threaded screws.
Unlike the other systems on the market are fully threat of Skippy screws are available on 2 millimeter increments, providing the surgeon with more options to properly treat a wide range of pediatric patients instead of simply making do with what's available the.
<unk> also incorporate unique features that help surgeons removed the implant more effectively we now offer cumulated screws ranging from sizes 2.5 millimeters to 7.3 millimeters with various thread links to service virtually all of the needs of the pediatric orthopedic surgeon.
Within our trauma and deformity business, we continue to rollout our <unk> external fixation system in the EMEA region, leading to our first cases in the major markets of Germany and the UK.
We continue to expect that the Orthodox EMEA launch to have a positive impact on 2021, similar to what we'd seen in Canada, Australia and Brazil.
Additionally, <unk> was recognized as <unk> in its first clinical publication from British Columbia Children's Hospital in Vancouver, Canada.
This paper highlighted the ability of <unk> to significantly reduce infection rates, leading to improved patient outcomes at a lower cost.
Lastly, we finalized the settlement agreement with KLM, Stryker, which has been an issue outstanding for the past 4 years. This settlement saves us from our current considerable legal expenses and being exposed to risk in the future.
Transitioning to our game changing apathy ex technology in the second quarter, we continued to initiate clinical sites participating participating in the post approval study or <unk> registry and subsequently added new apathy ex users.
We now have 17 U S clinical locations with both required IRB approvals, enabling those locations to enroll patients in the registry.
We expect the remaining 3 registry side David.
Their final approvals in the next few months, putting us at full strength to date 75 of the target of 200 registry cases have been completed with an additional 20 cases approved for scheduled for surgery. While it is still early days the clinical sites are delighted by the outcomes. We've seen so far with our first U S patient passed our 1 year follow up this per.
<unk> June and more than 25 patients at least 6 months past the surgery days, we've had zero reported device related complications and no re operations or revision.
It's important to note that we have continued to experience COVID-19 related delays to IRB approvals at our 20 sites, which have impacted the pace of scheduling. Furthermore, as 1 might expect with the game changing technology. Many of the registry sites have also taken a very conservative approach to patient selection and scheduling.
Given these 2 dynamics, we expect to meet our 200 registration target early next year.
Due to <unk> as early clinical success as well of patient family and surgeon demand of parallel commercial release of the App of ex system is being initiated prior to the actual completion of the first 200 planned cases for the <unk> registry.
We intend to start Onboarding. The next 10 to 20 commercial sites in the second half of 2021 of which 6 already have the single IRB approval required by the humanitarian device exemption and are in the process of training patient selection and scheduling of cases. These new commercial sites will not have to contend with the second IRB approval.
And the burden of the Pis registry requirements.
Now turning to set deployment and sales force development in the second quarter, we continued to execute our strategy of set deployment specifically for millions of sets for consigned in Q2 of 2021 compared to $5.8 million in the second quarter of 2020 year to date 2021, we have deployed $9.4 million compared.
To $9.1 million in the first half of 2020.
We anticipate 13 million to $15 million of set deployments in 2021, a somewhat lower number from recent years because of the significant lower cost and greater return on investment of appetites and north ex instrumentation sets.
In the second quarter, we grew our domestic sales organization head count to 182 sales reps compared to 164 in the second quarter 2020, with 5 new reps hired during the second quarter of 2021.
Further recruitment of our efforts are now underway by many of our domestic sales partners underscoring their confidence in the recovery of our business.
The U S market continues to normalize we expect an increased number of sales associates will be added over the coming year outside of the United States. We are selling our products in 45 countries through 42 stocking distributors in 33 countries and in 2014 agencies in 13 countries.
After the major conversion of Germany, Austria, and Switzerland announced earlier. This year, we continue to work on several smaller agency conversions, which may be announced before the end of the year.
On the M&A front, we also continue to work on several interesting projects, but we are very pleased to announce recently the important extension of our distribution agreement with <unk> medical which secures our Firefly patient specific 3 D printed pedicle screw Frank guide franchise in the future while also enabling us to.
To evaluate navigation technologies from other sources.
Lastly, turning to clinical education and sales initiatives.
We remain focused on investing resources to train and support our surgeon partners in.
In May we attended the pediatric Orthopedic Society of North America are positive meeting annual meeting in Dallas.
As the double Diamond sponsor, we provided ongoing support of our sub specialty day symposia and awarded 8 scholarships for residents and fellows to attend the meeting we are proud of our ongoing partnership with Posner and supporting pediatric orthopedic surgical societies.
Another highlight in the quarter was our returned of live clinical education events hosting and educate and external fixation education seminar. This past June in Dallas.
Our expert surgeon faculty hosted attendees from around the United States and lectures discussions and hands on sessions, highlighting external fixation in the <unk> system.
Feedback from the surgeon attendees was overwhelmingly positive and 100% survey respondents stated that they were likely or very likely to recommend this course of their colleagues.
Additionally, in the second quarter, our field sales force conducted more than 75 clinical and product education sessions with residents Fellows attending and hospital staff members the.
The sessions are critical for the efficient and effective use of ortho pediatrics products in the operating room.
As the market leader, we believe it is integral to our mission to partner with pediatric orthopedic surgeons and advancing the entire field of pediatric orthopedics, not just selling more of our product our commitment to clinical education initiatives fosters collaboration of stronger partnerships with surgeons. Thus furthering this mutual objective.
As we look ahead I am proud of how much of our team has achieved since I joined ortho pediatrics, we have built a strong business that delivers growth from innovative differentiated products that improve children's lives.
We are pleased with our track record of sustained double digit revenue growth, but we are still in the very early innings of penetrating this large underserved market.
As we continue to execute our proven growth strategy, we remain confident in our ability to deliver and in fact accelerate growth and help the lives of more kids worldwide with that I'll turn the call over to Fred to provide more detail on our financial results Fred.
Thanks, David.
Our second quarter 2021 worldwide revenue of $26.7 million increased 96% when compared to the second quarter of 2020.
On a sequential basis, we experienced growth of 24% and our worldwide revenue from the first quarter of 2021.
The sequential increase is driven by strength across our business in the U S.
Improving trends internationally and growing sales from Abbvie fix <unk>.
As a reminder, we acquired <unk> in April of 2020, and <unk> in June of 2019.
In the second quarter of 2021 U S revenue was $21.7 million, a 79% increase from the second quarter of 2020.
Due to the improvement in underlying procedure volumes, we realized double digit revenue growth in each of our U S businesses.
On a sequential basis domestic revenue increased 29% compared to the first quarter of 2021.
International revenue was $501 billion and increased 243% as compared to the second quarter of 2020.
On a sequential basis international revenues increased 7% compared to the first quarter of 2021.
In the second quarter of 2021 trauma and deformity revenues of $17.9 million increase.
Increased 95% compared to the prior year period, and 23% compared to the first quarter of 2021.
Growth in the quarter was driven by strong sales of Pnp calculated screws and <unk>.
Although virtually all of our product lines grew dramatically.
In the second quarter of 2021, scoliosis revenue of $7.7 million increased 100% compared to the prior year period, and 29% compared to the first quarter of 2021.
Quarterly performance reflected increased patient volume and growth in response, and Firefly procedures as well as an initial contribution from Abbvie fix.
As we emerge from the pandemic, we believe clinical and orthopedic surgery volumes in the U S have largely normalized to pre COVID-19 levels and surgeons appear to have worked through much of their backlog of thus.
Thus, we believe second quarter performance was primarily driven by organic growth and market share gains and less by recapturing backlog procedures.
Finally in the U S Sports medicine other revenue in the second quarter of 2021 was $1.1 million.
Representing a 106% growth over zero of $5 million in the same period last year.
The growth in the quarter was driven by Telos partners consulting contracts and repeat advisory business as.
As a reminder, we acquired <unk> in March of 2020.
Touching briefly on a few key metrics for the second quarter of 2021 gross profit margin was 76, 6% compared to 74.0% in the same quarter of 2020. This improvement was driven by higher percentage of domestic and international agency sales.
Total operating expenses increased $6.2 million or 36% from $17.1 million in the second quarter of 2020 to $23.3 million in the second quarter of 2021 the.
The change resulted mainly from increased commission expense.
And increased depreciation and amortization costs.
We reported adjusted EBITDA of positive $1.2 million compared to an adjusted EBITDA loss of $2.3 million for the second quarter of 2020.
While operating expenses increased year over year, the improvement to the bottom line results show revenue growth outpaced our investments.
We ended the second quarter with $67.2 million of cash and restricted cash.
And finally, turning to our outlook for 2021, we are increasing our full year revenue guidance from $97 million to $101 million.
Up from $94 million to $98 million previously.
The representing new growth of 36% to 42%.
As Dave mentioned, we saw strong momentum in the U S. During the second quarter. However, we continue to take a measured approach forecasting the return to normal seasonality trends and potential headwinds, resulting from the Delta COVID-19 variant.
Turning to international while we are encouraged by the improved growth rate, we do expect regional variability to persist as hospitals continue to work through backlogs and countries faced challenges with the Covid surges.
At this point I'll now turn the call back to Dave for closing comments.
Fred I'd like to close by recognizing health care workers throughout the world for their selfless dedication, helping us all through the COVID-19 pandemic I would also like to thank our surgeon customers my colleagues at ortho pediatrics and our sales associates around the world for the commitment to our cause.
I am proud and grateful to be working alongside view improving the lives of kids with that I'd like to turn the call back over to the operator to open the line for any questions.
Thank you.
If you would like to ask a question press. The Star then the 1 key on your Touchtone telephone.
To remove yourself from the queue press the pound key.
Our first question comes from Matt O'brien with Piper Sandler Your line is open.
Hi, guys. Good morning. This is actually drew on for Matt and congrats on the nice quarter here.
I just wanted to start off a little bit on guidance here. I know you guys are typically fairly conservative, but it looks like youre carrying through most of the beats.
And numbers for the second half of our saying most of the same.
The other med tech companies of discuss some atypical summer seasonality this year.
So just wondering what youre seeing so far.
Looking into Q3 here.
And just any reason to expect anything different than what typically 1 of your stronger quarters in Q3 here.
Yes, I'll, let <unk> speak to the guidance, but I think we saw really strong momentum and I think we said this in the end of the in our last call that we saw momentum heading into Q2, we saw that momentum really build throughout Q2, and we closed the quarter very strong in June there is no question that I think.
A lot of the med tech as well as the ortho pediatrics are seeing some.
Slightly different trends may be related to vacation maybe related to the surgeon time offer family time off but we think this is pretty short lived those cases.
Happen most likely within this quarter certainly within this year and I think.
This is all really baked into our guidance and baked into our array of Fred do you have other comments, yes. That's of Great summary, I mean, we effectively took the full year guidance up by the beat in the second quarter, which is $2.5 million Bucks and then added an additional half of million dollars to the second half of the year.
<unk> versus our previous guidance.
And clearly that reflects what we saw in July and what we anticipate seeing in the second half of the year and I think you are correct that we still remain very confident in the guidance that we provide.
Very helpful. Thank you.
On an after 6.
Appreciate the update on how far you are along with the registry, maybe you could just expand a little bit more of what the primary gating factor is whether that be COVID-19 or something else in them.
Just wondering if the slight push changes how youre thinking about the the contribution from that product next year or is the new proactive site Onboarding that you spoke about likely to make up the difference.
Yes, great question.
So I think we are extremely pleased with the kind of results. We've seen with <unk>. I mean, this is a new technology to the U S market a year ago No..1 had done the surgery. So to of 75 cases under our belt and have no adverse events whatsoever, no reported complications of.
If you had told us that a year ago I think we would have taken it and been extremely pleased so since very early but with 25 patients out 6 months and seeing the results. We're getting we're very very enthused I think we probably underestimated COVID-19 impact in the IRB process. The first IRB is relatively easy to get the second 1.
Related to the registry has taken on some additional time and and so we're a little behind in terms of having all 20 of our sites onboard it. Additionally.
Additionally, these are very prestigious locations and we have asked that they'd be very conservative in terms of their patient selection and so we.
We're pretty pleased with where we are in terms of the 75 patients in the registry and nearly half of the way through that process and are very excited that the patient demand surge in demand.
The FDA has allowed us to really kick off this first round of 10% to 20 clinical sites, which I think really helps us stay in line with our expectations for revenue from this product in 2022.
Thank you.
Yes.
Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.
Hey, good morning.
So it's great to see.
Such a superb quarter.
<unk>.
Just again, reflecting in the second half I appreciate the.
The understandable.
Board is caution, but just sort of temporary approach given COVID-19.
But.
Maybe help us think through more specifically 2 aspects of that.
International.
I'm struck by the comment about backlog of the 1 hand.
I feel like.
That's wind at your back as we had the second half of them into next year.
But maybe talk about international trends, what youre, assuming in the second half do we imagine.
The dollars can continue to grow.
Third over second for Ofer, <unk> help us think through the.
International product range.
Yes, it's a great question and we've spent a lot of time on our side discussing that is coming into this call.
There are some variables that are at play Australia. For example, it really had been open for a year.
Related to Covid, and we were seeing tremendous results as you know Sydney had shut down for a couple of weeks other cities in Australia are shutting down for a short amount of time and that's very unusual. So there are these pockets of select shutdown, which do give us a little bit of pause.
<unk> for the second half of the year not knowing what that is going to do but we think we have that adequately reflected in the guidance that we provided and obviously Australia is just 1 example, that's happening in many many countries just like in the U S. So we feel like we've evaluated those situations and.
We've properly included that risk in our guidance that we've provided and we still are very confident with the the numbers that we put out.
Sure.
And maybe.
Turning to the response system launch.
Just remind us again, the potential opportunity and the impact.
Impact on kids here.
But just remind us are you, replacing something with existing your product line.
Or is this an incremental opportunity of the growth would be incremental.
Great.
The opportunity for you.
Yes, great question right.
This is.
I think an expansion of the product portfolio not necessarily an expansion of the total available market.
The patients who have neuromuscular scoliosis or generally fusion patients theyre just extremely complicated complex fusion patients and historically no company has provided a really good system dedicated to that particular procedure. So we do some neuromuscular scoliosis now with the response system, but I think the <unk>.
And the higher agency sales outside of the U S drive that as well as the overall revenue number and so historically the third quarter as our largest sales quarter. So with increased sales should come increased margins and while the fourth quarter.
Revenue typically comes down a bit strong revenue in that quarter will enable us to have strong margins as well. The real question is how much debt sales do we have internationally in the second half of the year as we've had very little of that to date really in the last 18 months and we see that may pick up.
A little bit, but we don't think it's going to have a tremendously.
Lowering impact on the gross margin rate.
Appreciate it thanks for your book.
Thanks, Rick.
Our next question comes from Ryan Zimmerman with <unk>. Your line is open.
Good morning, and thanks for taking the questions Dave Congrats on the wrong. So the results. So if I could follow up just on the.
And the guidance for a second we've been watching the flu cases, particularly of the pediatric patients go up a bit.
And thirdly is the mass came down in the summer camp picked up there's been this increased incidents of flu in kids and so is that something that we would need to be mindful of in the third quarter combine along with.
Higher incidence of Covid in pediatrics at all and how are you. How are you guys watch a matter of thinking about that right now it sounds like it's not really of headwinds.
As you contemplate guidance, but I'd love to get your thoughts on that.
Yeah. It's a great question and we've spent a lot of time discussing that as well preparing for this call.
We've spent a lot of time, reaching out to the field and having conversations with them and while we do read the same articles you do in some of these children's hospitals, which are unfortunate that they're getting busy with the knock on wood. So far it has not impacted we don't believe the elective procedures in those locations and what.
We're being told is that it is not anticipated to impact elective surgeries. So we're watching it very closely.
But again, we think that within our guidance, we have some of that risk built in and if it were to get worse from here.
It may we still think we'll be okay within our current guidance published.
Appreciate it Fred Thank you.
And then on the sales force.
It continues to get better the productivity metrics, if you will.
Look at it on an annualized basis year over year could you get better so youre hitting I think of 108, 2 in the independent but dedicated.
Sales agents and then the associated field force.
Where can that go over time in your mind, Dave and how big.
Can you can you take this for us.
Yes, I think it will continue to grow.
No question, it's a question Ryan of the.
Grows at the pace of revenue growth when you add high ASP procedures like <unk> and App of fixed I would think that the sales force will continue to grow but probably not be able to keep up pace frankly with the growth that we will likely see from some of those products you think about <unk>.
ASP from a coverage standpoint this is.
It's a 2 hour of surgical procedure as opposed to a much longer fusion of procedure. So.
We're just driving a lot of efficiencies from the sales force I guess, what Fred and I are most excited about is to see that our domestic sales organization really start adding again.
And I think thats the.
A signal of the bullishness of how we're coming out of the pandemic in the United States I think we're going to see a fair amount more of that in Q3.
Got it appreciate the taking the questions. Thanks, so thanks for everything.
Yeah.
Thank you for your next question.
Our next question comes from Mike Matson with Needham Your line is open.
Yeah. Thanks, Thanks for taking my questions. So I know there was the prior question on the optics and the.
This delay in reaching the 200 number but I wanted to understand a little bit more about this parallel of launch that you mentioned so.
It's the potential for that too.
Debt some of the shortfall that you were expecting on the actual registry part of the of.
Volume and then.
Is this something where it's going.
Kind of contribute this year or is that really more for next year.
Yes, I think the.
The setup here is really for 2022.
The shortfalls.
This first 200 patients in 2021, I think we'd have very little.
Very little impact overall, I think primarily because of the pull through that we're seeing in our other products with the frankly with the response.
But I think the the way to think about this is really an aggressive preparation to come out of the gate strong in 2022 with the 10 to 20 sites that will already have the required IRB.
You remind you that's the only 1 IRB required for any sites beyond the 'twenty and so I think this is really preparation to.
To get ready to have a really strong 2022, as we roll the product out in a commercial way could have a small impact in fourth quarter of this year.
But I think we're thinking of that more and more of the 2022 story.
Okay, I understand but just to be clear are you allowed to.
So out of the fix for used outside of the registry for the registry is completed.
Yes, that's a good clarifying question and answers yes, yes. So we are now we already have 6 sites that are on boarded through the first IRB approval and we are allowed to move.
To start selling the apathy ex product outside of the 20 IRB sites does that makes sense.
Yes, yes. It does thank you.
And then I wanted to ask about.
Some of the distributor conversions, so I guess first starting with the large 1 that you did at the end of last year. It's been I guess 6 months plus now since you did that just wanted to get an update and then you mentioned that you might do some more smaller ones. So I know with the large 1 that I just mentioned there was sort of the revenue reversal that occurred.
Because you've had the kind of repurchased some of the inventories that they had so.
Is there any risk that we could see something like that with any of these additional conversions that youll do that youre planning to do in the future.
Yes. So the first part of that is we're very pleased with the success, we've had in Germany, Austria and Switzerland for the first 6 months I would say it has.
Net slash exceeded our expectations.
And very excited about the future in those areas as we are now starting to deliver more sets into the area to enable additional locations and more sales in that location regarding the potential for a couple before year end they are very small.
And I would say it would be of very very small impact on revenue and is absolutely included in any guidance that we would have provided.
Okay got it thank you.
Thank you Michael.
Thank you and we have a question from Sam Brodsky with twist. Your line is open.
Hey, Thanks for thanks for taking the questions just to start off of it sounds like the.
For might be a little bit more aggressive in the.
M&A is a bit more of a normal part of part of business going forward is that is that the right way to think about it.
So kind of you can.
Can you dig into the areas in particular, where are you thinking about M&A at this point.
Yes. Good question, Sam I think we've always been.
A fairly aggressive at least in terms of our thinking of acquisition of technologies generally speaking the.
The acquisitions, we've done have been of technologies not necessarily full operating company and so we continue to.
The search the marketplace for opportunities, where we think we can acquire some technology and some knowhow that we can leverage the.
<unk>, the only global selling organization in the pediatric orthopedics leverage our strong brand and.
And all the other products we have so we continue to look at technologies, certainly that would fit within our trauma and deformity portfolio. The exit of the ex fix portfolio. We also have some interest and I think we've a share that we had acquired.
Very unique non surgical technology, a few years ago, and we've been working internally from an R&D standpoint on that technology and so we continue to look at others that might help.
Help bolster that when we're ready to launch it and then we're always interested in kind of smart and growing implants in drilling technologies and so those are areas, where we continuously look I don't know that we have anything here on the horizon Thats big.
But but.
Yeah, I think the company is going to be aggressive in terms of the technologies that fit within the portfolio and allow us to leverage what we've built over the last several years, yes, I agree with that David and I would just add we're very excited about this extension with Mighty Oak medical the.
The Firefly technology that we've been selling for many years now as of 3 D. Patient specific guide that really improves the outcome of these severe scoliosis surgeries and that contract was going to expire here in the end of 2022.
And we are very excited about extending that contract through August of 2027 to enable our sales for staff confidence that that product will be available to us and the exclusivity in the children's hospitals in the U S would continue on until that 2027 time frame. So we I think of.
For a very aggressive we'll continue to be very aggressive on the internal R&D front on the acquisition front, where the opportunities arise in technologies, and where necessary striking of distribution agreements that enable us to have access to technologies that are applicable in our channel.
Great that's that's.
Helpful. And then ill give you 1 more on Annapolis ex.
As it regards to patient selection and in particular, how thats going to apply of TD parallel of launch and then how we should think about that potentially being a gating factor in the end of 'twenty 2 if at all thanks for taking the question.
Yes, so we intend to hold the same rigorous standards with respect to adherence to the indications. The 35 to 60 degree curves that are that are flexible and certainly our intent would be the through the first wave of commercial launch to ensure that the patients that were doing apathy ex procedures on our custom.
We are using apathy Exxon.
Adhere to the to the indication so I don't necessarily know that that's a gating factor.
We want to get great outcomes here and we know we can get great outcomes. If our surgeons followed the indications we're spending a lot of time, both within our current the 17 facilities, they're utilizing the product as well as training. The next 10 to 20.
How to best patient how to best select those patients as well as how to have a discussion with the family.
This is a very new technology again, 75 cases done in the U S to date and so you can imagine the discussions that it's requiring pediatric orthopedic surgeons to have with their patients to ensure that patients feel comfortable and I think that's why we've invested our energy here on the surgeon training and and then ensuring that we have.
Stay very rigorous with respect to the to the indications, but I don't think that going forward that'll be a major gating factor I just think it's doing the right thing to ensure that we get the outcomes we want.
Okay.
Thank you. Our next question comes from David <unk> with JMP Securities. Your line is open.
Yes, Hi, this is actually Danny on for Dave. Thanks for taking the question just have 1 quick 1 for you. So following up on the distributor conversions international had another.
Quarter of solid growth, but.
What really has been driving the ramp of these new conversions in the first half year are there any product lines that of particularly stood out to you during the first 2 quarters.
Are you still youre still early days.
EMEA launch, but how much of or conversion of its been a contributor here. Thanks.
Yes, I think that 1 of the biggest drivers here is being able to just get these agencies new sets as Fred mentioned earlier, we've finally gotten the number of sets too.
The Doc region, Germany, Austria, and Switzerland and.
That has had.
A substantial impact here and really the first 2 quarters, where it's been an agency. So we're seeing growth across the entire portfolio in markets, where we have a <unk>.
<unk> the agencies that said, we are launching the earth ex product in the EMEA. It was great to see first cases in the UK and in Germany, We do expect that that will impact us positively in the second half and certainly be a really nice tailwind in 2022, we've also seen in this country.
Really strong growth with our PMT femur system and if you remember that's the system that we launched in the United States and really the United States only a few years ago, and it's fastly, becoming the largest product within our trauma and deformity portfolio and so we've started to do some procedures outside of the United States, both in Germany and the UK.
<unk>.
And we would expect that as we launch that product really through the back half of this year as well as in 2022.
That that will perform well I think the thought here is that these markets are having there's regional fluctuations without question.
Debt and Covid is impacting those markets, but once we get into this cadence of making up some backlog outside of the United States whenever that occurs and you combine that with some of the new product launches, particularly <unk>.
And I think we will set up for some nice tailwind most likely in the early part of 2022.
Great. Thank you guys.
Thanks, David.
Thank you and there's no further questions in the queue I'd like to turn the call back to David Bailey for any closing remarks.
Well great. Thank you.
To conclude our call second quarter earnings call by thanking everyone for their interest in orthopedic matrix and for your support of our cause of helping children throughout the world. We very much look forward to updating you on our future progress and meeting many of you at upcoming Investor conferences have a great day. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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