Q4 2023 OrthoPediatrics Corp Earnings Call

March 7, 2024

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Okay.

Operator: Good morning, and welcome to Orthopediatrics Corporation's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode.

Good morning, and welcome to Arthur Pediatrics Corporation's fourth quarter and full year 2023 earnings conference call.

At this time all participants are in listen only mode. We.

Operator: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Tripp Taylor from the Gilmartin Group for a few introductory comments. Thank you for joining us today. With me from the company are David Bailey, President and Chief Executive Officer, and Fred Hite, Chief Operating and Financial Officer. Before we begin today, let me remind you that the company's 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.

We will be facilitating a question and answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to trip Taylor from the Gilmartin group for a few introductory comments.

Thank you for joining today's call with me from the company are David Bailey, President and Chief Executive Officer, and Fred Hite, Chief operating and financial Officer before we begin today, let me remind you that the Companys remarks include forward looking statements within the meeting of Federal Securities laws.

The safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

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 I encourage you to review the company's most recent annual report on Form 10-K, which will be filed with the SEC in the near future during.

Operator: For a discussion of risk factors, I encourage you to review the company's most recent annual report on Form 10-K, which will be filed with the SEC in the near future. During the call today, management 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 measure 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.

During the call today management 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.

Each non-GAAP financial measure 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 these non-GAAP financial measures have limitations as analytical tools and should not be.

Philip Taylor: Please note that these non-GAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for orthopediatrics financial results prepared in accordance with GAP. In addition, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, March 7th, 2020. Except as required by law, the company undertakes no obligation to revise or update any statements to reflect events or circumstances taking place after the date of this call.

In isolation or as a substitute for what the pediatrics 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 today March seven 2024.

Sept as required by law the company undertakes no obligation to revise or update any statements to reflect events or circumstances, taking place. After the date of this call.

David R. Bailey: With that, I'd like to turn the call over to David Bailey, President and Chief Executive Officer. Thanks, Tripp. Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2023 conference call. As we start all earnings calls, I'd like to begin by highlighting that we helped over 82,000 kids in 2023, a new record for orthopediatrics. Since inception, we've helped over 710,000 kids, and including Boston O&P, our combined organizations have helped more than one million kids.

With that I'd like to turn the call over to David Bailey, President and Chief Executive Officer.

Thanks, Chris Good morning, everyone and thank you for joining us on our fourth quarter and full year 2023 conference call as we start all earnings call I'd like to begin by highlighting that we helped over 82000 kids in 2023, a new record for orthopedic metrics.

Since inception, we've helped over 710000 kids and.

And including Boston LNP, our combined organizations have helped more than 1 million kits.

David R. Bailey: This continues to be the most important metric of success for orthopediatrics, and each year, we strive to increase our impact and benefit more kids. In line with our pre-announcement from early January, for the fourth quarter of 2023, we generated quarterly revenue of $37.6 million, representing growth of 21% compared to the fourth quarter of 2022. For the full year of 2023, we generated record revenue of $148.7 million, representing growth of 22% compared to the full year of 2022. Driven by favorable leverage in the cash portion of G&A, disciplined expense management, strong margins, and healthy revenue growth, we are excited to report that we outperformed our original adjusted EBITDA expectations, producing a record adjusted EBITDA of $5 million in 2023. In addition, we're thrilled to see our prior acquisitions fully integrated and performing well with robust top-line revenue contributions and profitability. Looking closer at the quarter, revenue and surgery scheduling was strong throughout, except during the final two weeks of December, when we started to experience lighter surgical volumes due to an uptick in RSD. After RSV rates rose rapidly at the end of December and extended into early January, volumes quickly returned to more normalized levels.

This continues to be the most important metric of success for ortho pediatrics and each year, we strive to increase our impact and benefit more kids.

In line with our pre announcement from early January for the fourth quarter of 2023, we generated quarterly revenue of $37 $6 million representing growth of 21% compared to the fourth quarter of 2022.

For the full year of 2023, we generated record revenue of $148 $7 million representing growth of 22% compared to the full year of 2022.

Driven by favorable leverage and the cash portion of G&A disciplined expense management.

<unk> margins and healthy revenue growth. We are excited to report that we outperformed our original adjusted EBITDA expectations, producing a record adjusted EBITDA of $5 million in 2023.

In addition, we are thrilled to see our prior acquisitions fully integrated and performing well with robust topline revenue contributions and profitability.

Looking closer at the quarter revenue in surgery scheduling was strong throughout except during the final two weeks of December when we started to experience lighter surgical volumes due to an uptick in RFP.

After RSV rates rose rapidly at the end of December and extended into early January volumes quickly returned to more normalized levels.

David R. Bailey: Hospitals appear to be managing their spikes of the respiratory season better and mitigating the impact on case schedules. All together, volumes and staffing continue to improve month over month, and while still not running full tilt, we are encouraged that recovery in the environment is tracking our expectations for modest sequential improvement. Overall, we feel this headwind is lessening, and we will remain cautious until we see further normalization. The diverse nature of our business continued to benefit orthopediatrics in the quarter. The global trauma and deformity, domestic scoliosis, and OPSB business were very strong, offset by lower growth in international scoliosis. In the fourth quarter, global TND was very strong at 23%, with growth led by sales of PEGA products, PMP Femur, early sales of PMP Tibia, and growth within the OPSB franchise. U.S. scoliosis revenue bounced back aggressively in the fourth quarter with 35% growth, despite a very slow few weeks at the end of December. New scoliosis users continue to increase significantly across the response and apathics product lines.

Hospitals appear to be managing their spikes of the respiratory season, better and mitigating the impact on case schedules altogether volumes and staffing continued to improve month over month, and while still not running full tilt, we're encouraged recovery and the environment is tracking our expectations for modest sequential improvement overall.

We feel this headwind is lessening and we will remain cautious until we see further normalization.

The diverse nature of our business continued to benefit orthopedic metrics in the quarter, the global trauma and deformity domestic scoliosis and <unk> business were very strong.

Offset by lower growth in international Scoliosis fourth quarter Global T&D was very strong at 23% with growth led by sales of <unk> products Pnp femur.

Early sales of <unk> and growth within the <unk> franchise.

U S scoliosis revenue bounce back aggressively in the fourth quarter with 35% growth. Despite a very slow a few weeks at the end of December <unk>.

<unk> users continue to increase significantly across the response and App a fixed product lines overall global scoliosis growth was slightly muted by a continuation of slower than expected ordering and our Latin and South American business, resulting in a 31% reduction in O U S scoliosis sales and negatively impacting <unk>.

David R. Bailey: Overall, global scoliosis growth was slightly muted by a continuation of slower-than-expected ordering in our Latin and South American businesses, resulting in a 31% reduction in OUS scoliosis sales and negatively impacting overall growth. We expect OUS scoliosis growth to rebound in 2024 and to act as a tailwind for the year beginning as early as Q1, with multiple opportunities, including continuing legacy product growth PegaSales Expansion, Normalization of International Markets, Positive Longer-Term Affix Data Publication, a newly formed and rapidly expanding specialty bracing business, OPSB, and an early start in digital health care, we are confident in our growth prospects for 2024 and beyond. Importantly, we remain in an extremely secure financial position and are confident that our current balance sheet enables us to execute our long-term strategy without additional equity capital.

Overall growth.

We expect <unk> scoliosis to rebound in 2024 and to act as a tailwind for the for the year beginning as early as Q1.

With multiple opportunities, including continuing legacy product growth several key new organic product launches.

<unk> sales expansion normalization of international markets positive longer term at a fixed data publication, a newly formed and rapidly expanding specialty bracing business or PSP.

And an early start in digital health care, we are confident in our growth prospects for 2024 and beyond.

Importantly, we remain in an extremely secure financial position and are confident that our current balance sheet enables us to execute our long term strategy without additional equity capital.

Therefore, we are reiterating our revenue guidance for the full year 2024 of $197 million to $200 million.

Including Boston LNP historical revenue of $25 million.

Representing overall growth of 32% to 34%.

We are also issuing our full year EBITDA guidance of $8 million to $9 million.

And our expectation for set deployments of less than $20 million as we continue to focus on improving profitability and reducing cash usage.

We closed 2023 on an extremely high note we achieved a record number of children helped record revenue and generated record adjusted EBITDA. We continue to balance top line revenue growth with improved profitability on our way to cash flow breakeven sooner trend, we expect to carry into 2024.

David R. Bailey: We achieved a record number of children, helped record revenue, and generated record adjusted EBITDA. We continue to balance top line revenue growth with improved profitability on our way to cash flow break even sooner. A trend we expect to carry into 2024. Moving to our revenue segment. In the fourth quarter of 2023, we generated total trauma and deformity revenue of $27.1 million, representing growth of 23% compared to the prior year period. Strong performances from PEGA products, Trauma, X6, and OPSB led revenue growth in the quarter. We saw continued record PEGA product performance with substantial growth of 59% in the U.S. and 32% outside of the U.S. Sales of Pega continue to be better than we ever expected. And as we more deeply penetrate our U.S. accounts with the full Pega product portfolio and ramp international sales, we believe Pega growth will continue to be very strong globally in 2024 and beyond. Elsewhere in T&D, we continue to take share across our entire T&D portfolio, a trend we expect to maintain for several years.

Yes.

Moving to our revenue segments.

In the fourth quarter of 2023, we generated total trauma and deformity revenue of $27 1 million representing growth of 23% compared to the prior year period.

Strong performances from Peg a products trauma ex fix and <unk> led revenue growth in the quarter.

We saw continued record peg a product performance with substantial growth of 59% in the U S and 32% outside of the U S.

Sales of Peg has continued to be better than we ever expected and as we more deeply penetrate our U S accounts with a full peg a product portfolio and ramp international sales. We believe peg a growth will continue to be very strong globally in 2024 and beyond.

Elsewhere in T&D, we continue to take share across our entire T&D portfolio a trend we expect to maintain for several years.

We enjoy a leading share position and then T&D franchise within the U S children's hospitals, and we plan to continue to execute our market dominant strategy was set deployment and new product development and superior service.

On the R&D side, we received FDA approval in beta launched the <unk> system in Q3.

And perform more cases than we expected in Q4 <unk>.

David R. Bailey: We enjoy a leading share position in the T&D franchise within the U.S. Children's Hospitals, and we plan to continue to execute our market-dominant strategy with set deployment, new product development, and superior service. On the R&D side, we received FDA approval and beta-launched the PMP tibia system in Q3 and performed more cases than we expected in Q4. Initial surgeries have gone extremely well.

Initial surgeries have gone extremely well.

So far the surgeon usage rate has been higher than we forecasted which bodes well for our full market launch of the <unk> scheduled to start in the first half of 2024.

We expect <unk> to be an important growth driver in 2024 and for the next several years and expect the full release of the new Peg a gyro product to make a positive impact as well.

Driven by continued execution of our key account convergent strategy, we have seen an increase in the number of customers and the quantity of products used.

Now with more high technology products coming to the market and a robust pipeline that was strengthened by the peg acquisition. Our T&D business is positioned to deliver sustainable growth over the next several years as we execute our long term strategy to capture greater than 50% market share.

David R. Bailey: So far, the surge in usage rate has been higher than we forecasted, which bodes well for our full market launch of the PMP tibia scheduled to start in the first half of 2024. We expect the PMP tibia to be an important growth driver in 2024 and for the next several years and expect the full release of the new PEGA gyro product to make a positive impact as well. Driven by continued execution of our key account conversion strategy, we have seen an increase in the number of customers and the quantity of products used. Now, with more high-tech products coming to the market and a robust pipeline that was strengthened by the PEGA acquisition, our T&E business is positioned to deliver sustainable growth over the next several years as we execute our long-term strategy to capture greater than 50% market share. We also have several prominent R&D projects in the process within the surgical side of the T&D business. We're making great progress on the development of our entirely new pediatric plating platform, the P3 project, which we expect will be world class and spawn further sharetaking opportunities for us within our plating franchise.

We also have several prominent R&D projects and process within the surgical side of the T&D business, we're making great progress on the development of our entirely new pediatric planning platform.

<unk> three project, which we expect will be world class and spawned further share taking opportunities for us within our <unk> franchise.

We're also making solid strides on new external fixation devices that will continue the growth trajectory of our <unk> franchise.

Further we expect numerous new EU, India, our approved products that we'll be launching in the EU market in the coming year to be impactful.

Our ortho pediatrics non surgical specialty bracing business are all PSB continues to perform extremely well.

And I'd like to spend a little more time today outlining in this significant opportunity that we have here.

We recently announced the official ortho pediatric specialty bracing brand our <unk> feature.

<unk>, a new website that incorporates the full MTO clubfoot and Rhino product portfolio, along with several new products as well as the acquisition of Boston LNP.

We believe the <unk> franchise represents a large new source of capital friendly revenue growth. It's.

It's estimated that 80% of the pediatric orthopedic care happens before and after surgery and we're extremely excited to now be better positioned to address this important segment.

David R. Bailey: We are also making solid strides on new external fixation devices that will continue the growth trajectory of our XFIX franchise. Further, we expect numerous new EU MDR-approved products that we'll be launching in the EU market in the coming year to be impactful. Our Orthopediatrics Non-Surgical Specialty Bracing Business, or OPSB, continues to perform extremely well, and I'd like to spend a little more time today outlining this significant opportunity that we have here. We recently announced the official orthopediatric specialty bracing brand, or OPSB, featuring a new website that incorporates the full MDO Clubfoot and Rhino product portfolio, along with several new products, as well as the acquisition of Boston O&P.

We estimate the U S. Non surgical specialty bracing market is at minimum $775 million in total and conservatively $500 million of opportunity in the top 300 children's hospitals.

Fortunately these customers at prices do not require the upfront capital investment in consigned inventory our instrument sets.

It has always been our aspiration to surround the pediatric orthopedic surgeon with all the products they need to treat children.

And we're thrilled about this opportunity to provide our surgeon customers with more of the products they use to treat their patients everyday.

Boston Orthotics and prosthetics is the only sizable company with an exclusive focus on pediatric orthotic management, offering leading custom pricing orthotic and prosthetic technology for the non operative treatment of children, whose lives have been impacted by scoliosis play.

David R. Bailey: We believe the OPSB franchise represents a large, new source of capital-friendly revenue growth. It's estimated that 80% of pediatric orthopedic care happens before and after surgery, and we're extremely excited to now be in a better position to address this important segment. We estimate the U.S. non-surgical specialty bracing market is at minimum $775 million in total and conservatively $500 million of opportunity in the top 300 children's hospitals. Importantly, these custom braces do not require the upfront capital investment in consigned inventory or instruments.

Plagiocephaly and various neuromuscular disorders.

Their portfolio of some of the most advanced individualized <unk> available to treat pediatric orthopedic conditions includes custom pediatric specific Boston embracing for scoliosis.

Lower limb orthosis, and dynamic movement orthosis, TMO as well as the Boston band for Plagiocephaly.

Partnering with World class medical facilities, including Boston Children's Hospital Children's Hospital of Philadelphia.

Nationwide children's hospital in Columbus, Ohio, and Phoenix Children's Hospital, just to name a few.

Boston LNP maintains 26 patient care clinics, primarily concentrated in the northeast.

David R. Bailey: It has always been our aspiration to surround the pediatric orthopedic surgeon with all the products they need to treat children, and we're thrilled about this opportunity to provide our surgeon customers with more of the products they use to treat their patients every day. Boston Orthotics and Prosthetics is the only sizable company with an exclusive focus on pediatric orthotic management, offering leading custom bracing, orthotic, and prosthetic technology for the non-operative treatment of children whose lives have been impacted by scoliosis. Plagiocephaly, and various neuromuscular disorders.

Boston <unk> annual historical revenue is approximately $25 million.

As we mentioned on our previous call. We continue to successfully execute a build aggressively strategy in <unk> and anticipate it to grow very rapidly in the coming several years we've.

We see many of the same characteristics and the <unk> opportunity that we witnessed when we started <unk> 17 years ago.

These include a large $775 million U S Tam $500 million of which is in the top 300 U S children's hospitals.

The very limited competition, a general lack of ongoing innovation and the opportunity to provide elite level of customer service and support clinical education and training.

David R. Bailey: Their portfolio of some of the most advanced individualized braces available to treat pediatric orthopedic conditions includes custom pediatric-specific Boston bracing for scoliosis, Lower Limb Orthosis and Dynamic Movement Orthosis, DMO, as well as the Boston Band for Plagiocephaly. Boston collaborates with world-class medical facilities, including Boston Children's Hospital, Children's Hospital of Philadelphia, Nationwide Children's Hospital in Columbus, Ohio, Boston O&P maintains 26 patient care clinics, primarily concentrated in the Northeast. Boston O&P's annual historical revenue is approximately $25 million. As we mentioned on previous calls, we continue to successfully execute a build aggressively strategy in OPSB and anticipate it to grow very rapidly in the coming years. We see many of the same characteristics in the OPSB opportunity that we witnessed when we started OP 17 years ago. These include a large $775 million U.S. TAM, $500 million of which is allocated to the top 300 U.S. children's hospitals.

We also see an opportunity for strong margins healthy profits and the potential to build a large business in a very capital friendly manner.

Beyond all of that non surgical specialty pricing fits with our goal of providing our customers with all of the products they need to treat children with orthopedic conditions.

And building further brand loyalty across our entire surgical and non surgical portfolio.

Yes.

We do not plan to just scratched the surface of this segment of the pediatric orthopedic market and we believe the Boston LNP acquisition makes that very clear.

This is another market dominance play, where we plan to be very aggressive and to scale. This business rapidly until we are the clear cut market leader.

This has been a historically fragmented market and we were able to leverage our current channel to increase access and most importantly provide service required to achieve optimal patient outcomes in a way that allows us to increase the partnership with all of our customers.

While the integration of Boston OMB will happen throughout 2024, we expect the rest of the <unk> franchise to organically grow aggressively this year once integrated our strategy to aggressively grow Boston will produce many years of future growth.

Our strategy for the <unk> business is rooted in three core initiatives that we believe will enable ortho pediatrics to deliver outsized growth. These include sales force expansion to drive adoption and scale usage.

Product development to build a competitive and comprehensive portfolio.

And the addition of new clinics to enhance profitability.

David R. Bailey: Very limited competition, a general lack of ongoing innovation, and the opportunity to provide an elite level of customer service and support clinical education and training. We also see an opportunity for strong margins, healthy profits, and the potential to build a large business in a very capital-friendly manner. Beyond all of that, non-surgical specialty bracing fits with our goal of providing our customers with all of the products they need to treat children with orthopedic conditions and building further brand loyalty across our entire surgical and non-surgical portfolio.

We're in the early innings of this growth journey. We believe we are well on our way to growing this business to be in excess of $100 million in the coming years.

Turning to the first initiatives of sales force expansion.

In anticipation of the Boston <unk> acquisition and to support the <unk> business as a whole we have been preemptively recruiting <unk> specific sales representatives that will be integrated into our existing agency sales network.

We continue to actively recruit and train new associates and so far we are pleased with the types of people we are attracting.

With our preexisting customer relationships, we expect to see rapid organic revenue ramp in each territory, where our new <unk> reps are partnering with our existing surgical sales teams.

David R. Bailey: We do not plan to just scratch the surface of this segment of the pediatric orthopedic market, and we believe the Boston O&P acquisition makes that very clear. This is another market dominance play where we plan to be very aggressive and to scale this business rapidly until we are the clear-cut market leader. This has been a historically fragmented market, and we're able to leverage our current channel to increase access and, most importantly, provide the service required to achieve optimal patient outcomes in a way that allows us to increase our partnership with all of our customers. While the integration of Boston O&P will happen throughout 2024, we expect the rest of the OPSB franchise to organically grow aggressively this year. Once integrated, our strategy to aggressively grow Boston will produce many years of future growth. Our strategy for the OPSB business is rooted in three core initiatives that we believe will enable orthopediatrics to deliver outsized growth. These include Salesforce expansion to drive adoption and scale usage.

Regarding the second initiatives product development within the MTO team in Iowa, the <unk> team in Warsaw, and now the Boston LNP team at our <unk> headquarters in Boston, We are now staffed to deliver our aspiration to launch four to five new products every year beginning in 2020 for.

This cadence along with the launch of several products in 2023, such as the MP light MP plus the move bar DS two the Rhino cruiser and the aura medical levity device set us up nicely for strong growth.

Beyond these product launches and partnerships there will be several more in the coming months and quarters supporting our thesis that we can build a scale business in this space in the coming years.

Looking at the third initiative over.

Over the last several years, we have completed multiple acquisitions and partnerships all of which we have successfully grown and will continue to grow.

But never have we seen such a favorable response for our customers is when we announced our partnership with Boston LNP in early January.

This is a true testament to the legacy of Amazing service products and patient care that Boston <unk> has provided our customers through their 26 clinics largely in the upper upper New England.

David R. Bailey: Product Development to Build a Competitive and Comprehensive Portfolio and the addition of new clinics to enhance profitability. While we're in the early innings of this growth journey, we believe we are well on our way to growing this business to be in excess of $100 million in the coming years. Now, we turn to the first initiative of Salesforce expansion. In anticipation of the Boston O&P acquisition and to support the OPSB business as a whole, we have been preemptively recruiting OPSB-specific sales representatives that will be integrated into our existing agency sales network.

Our customers feedback makes clear their desire to have a true partner in a non surgical treatment of their patients and validates large unmet need and the non surgical support of their patients.

In addition, it signifies our customer support of our growth strategy to scale, Boston LNP to the rest of our 300 children's hospitals around the U S and in certain international markets.

It'll take us a little time, but we feel this is an important first step that will open a larger opportunity for our company.

Importantly.

The operating economics for each of our existing clinics and future clinics, that's favorable for orthopedic metrics generally speaking, we expect modest setup costs with limited initial capital outlay, consisting mainly of leased office space limited build out and staffing orthopedists growing with the scale of the opportunity.

David R. Bailey: We continue to actively recruit and train new associates, and so far, we are pleased with the types of people we are attracting. With our pre-existing customer relationships, we expect to see rapid organic revenue growth in each territory where our new OPSB reps are partnering with our existing surgical sales. Regarding the second initiative, product development within the MDO team in Iowa, the OPSB team in Warsaw, and now the Boston OMP team at our OPSB headquarters in Boston, we are now staffed to deliver our aspiration to launch four to five new products every year beginning in 2024. This cadence, along with the launch of several products in 2023, such as the MP Lite, MP Plus, the Move Bar, DF2, the Rhino Cruiser, and the Aura medical levity device, will set us up nicely for strong growth.

Consistent with Boston <unk> historical revenue, we expect each new clinic, while the capacity to generate between one and $3 million in revenue and produce a profit rapidly once fully operational.

Again, it will take us some time for us to integrate Boston LNP and ramp the strategy, but we are already working to build a large funnel of opportunity and expect this to have a material contribution to revenue growth as early as 2025.

Moving to the scoliosis business.

In the fourth quarter of 2023, we generated revenue of $9 $7 million, representing global growth of 20% compared to the prior year.

This global growth was led by an extremely strong domestic performance of 35% growth and muted by a few slower weeks in the back of December due to RSV rates and a slower quarter internationally.

David R. Bailey: Beyond these product launches and partnerships, there will be several more in the coming months and quarters, supporting our thesis that we can build a scaled business in this space in the coming year. Looking at the third initiative, over the last several years, we have completed multiple acquisitions and partnerships, all of which we have successfully grown and will continue to grow. But never have we seen such a favorable response from our customers as when we announced our partnership with Boston O&P in early January. This is a true testament to the legacy of amazing service, products, and patient care that Boston O&P has provided for our customers through their 26 clinics, largely in Upper New England. Our customers' feedback makes clear their desire to have a true partner in the non-surgical treatment of their patients and validates the large unmet need for non-surgical support of their patients.

Fourth quarter International sales declined by 31% and were lighter due to continued chopping ordering patterns from a few large international stocking distributors in Latin and South America. Despite this we started to see a rebound across the international Scoliosis business and we expect improved international Scoliosis in 2024 as we lap these <unk>.

<unk> comparable.

Latin and South America, and ordering improves and new revenue growth opportunities materialize as we launched scoliosis in Europe.

We're very proud of the way this business is rebound and have a clear line of sight into continued improvement for the coming year.

Ill highlight in the quarter as the success of our U S scoliosis business, which outpaced a rebounding international business. The fourth quarter saw strong U S growth of 35% driven from more users of response <unk> and the successful execution of new launches. This year. In addition, we're pleased to report that the surgeons from.

David R. Bailey: In addition, it signifies our customer support for our growth strategy to scale Boston O&P to the rest of our 300 children's hospitals around the U.S. and in certain international markets. It'll take us a little time, but we feel this is an important first step that will open a larger opportunity for our company. Importantly, the operating economics for each of our existing clinics and future clinics is favorable for orthopedics. Generally speaking, we expect modest startup costs with limited initial capital outlay, consisting mainly of leased office space, limited build-out, and staffing orthotists growing with the scale of the opportunity.

The three largest sites who transitioned to new practice locations are now settled in and have ramped up to speed starting to perform more cases and returning to more normalized levels. This significant growth in U S. Scoliosis as representative about the strength of this business and the opportunity we have for the future.

We are bullish on 2020 for scoliosis growth as we exit 2023 with 25% more total users of response on <unk> seven.

Several new products that were launched in 2023, such as response <unk> and response power.

Strengthening analytics data a robust pipeline of 70 placements and an improving international outlook.

Further the 2024 R&D pipeline is rich with extremely novel technologies that solve major unmet needs for our customers specifically for patients with early onset scoliosis and naira and historically, we've never had products.

We recently announced the FDA approval and beta launch of our first pass product.

Ribbon pelvic and expect to have the new vertical I'd growing spine system FDA approved in 2020 for.

David R. Bailey: In the fourth quarter of 2023, we generated revenue of $9.7 million, representing global growth of 20% compared to the prior year. This global growth was led by an extremely strong domestic performance of 35% growth and muted by a few slower weeks in the back of December due to RSV rates and a slower quarter internationally. In the fourth quarter, international sales declined by 31% and were lighter due to continued chopping ordering patterns from a few large international stocking distributors in Latin and South America.

Beyond that we will launch our new Rod reduction instrumentation in 'twenty 2024 that will support both the response spine system and our new fusion system currently in development.

Lastly, we continue progress on the development of our electromechanical growing rod although its launch will be a few more years.

Notably U S surgery scheduling trends strengthened late in Q3 and continued into Q4, but for a few weeks at the end of the year. We expect this strength to continue into 2024 as the electric market normalizes.

Moving on to international in the fourth quarter of 2023, we generated international revenue of $9 3 million delivering 13% growth on top of 67% growth in the fourth quarter of 2022.

David R. Bailey: Despite this, we've started to see a rebound across the international scoliosis business, and we expect improved international scoliosis in 2024 as we overcome these difficult comparables, Latin and South American ordering improves, and new revenue growth opportunities materialize as we launch scoliosis in Europe. We're very proud of the way this business has rebounded and have a clear line of sight into continued improvement for the A highlight in the quarter is the success of our U.S. scoliosis business, which outpaced a rebounding international business. The fourth quarter saw strong U.S. growth of 35%, driven by more users of response and appetites and the successful execution of new launches this year.

Fourth quarter of 2023 growth was led by extremely solid performance with our T&D products offset by slow scoliosis sales to stocking distributors in South America.

We're pleased to see a continuation of the rebound in our international business in the fourth quarter and expect it to continue throughout 2024.

International Agency market sales continued to be particularly strong both in trauma and deformity and scoliosis.

Progress in our German direct sales model continues to track favorably and should produce good growth in 2024.

We are onboarding, several new users and we look forward to increasing penetration in the German market.

We expect strong peg a product sales to continue into 2024 and likely 2025, as we deploy inventory and train our sales team.

David R. Bailey: In addition, we're pleased to report that the surgeons from the three largest sites who transitioned to new practice locations are now settled in and have ramped up to speed, starting to perform more cases, and returning to more normalized levels. This significant growth in U.S. scoliosis is representative of both the strength of this business and the opportunity we have for the future. We are bullish on 2024 scoliosis growth as we exit 2023 with 25% more total users of response and appetite, several new products that were launched in 2023, such as response cannulated screws and response power, strengthening AppaFix data, a robust pipeline of 7D placements, and an improving international outlook. Further, the 2024 R&D pipeline is rich with extremely novel technologies that solve major unmet needs for our customers, specifically for patients with early-onset scoliosis, an area where we've never had problems.

Despite the scoliosis softness we experienced from Latin and South America, we're making great progress launching scoliosis in Europe.

We're performing first surgeries in new markets and with new surgeon customers. Additionally, we're making good headway in growing Australia and entering New Zealand as we've had added cases and leadership in support of our long standing agency partner and we're starting cases in Canada. Following our recent approvals and launch.

Overall, we've got a really nice setup for our international business and we believe that 2024 will show great improvement beginning as early as Q1.

That brings us to surgeon training and education in Q4, we hosted 98 unique training experiences for over 2600 health care professionals.

Among these events are.

Our premier sponsorship of the Akron Resident review course, and the annual International Pediatric Orthopedic Society meeting Iqos, which takes place in Orlando every December.

In 2023, we unveiled a new sponsorship level for the pediatric orthopedic Society of North America partner and <unk> is the first ever Emerald level sponsor.

Our presence at <unk>. This year was marked by multiple hands on workshops, featuring five sessions, including one for a new specialty bracing business and the <unk> for kids with femur fractures.

David R. Bailey: We recently announced the FDA approval and beta launch of our first EOS product, Response Rib and Pelvic, and expect to have the new VertiGlide Growing Spine System FDA approved in 2024. Beyond that, we'll launch our new rod reduction instrumentation in 2024 that will support both the Response Spine System and our new fusion system currently in development. Lastly, we continue progress on the development of our electromechanical growing rod, although its launch will be a few more years.

The full year 2023 saw record numbers of educational moments for pediatric orthopedic surgeons and other allied health professionals globally, we advanced our partnership with multiple surgical societies, including the European pediatric Orthopedic society as well as special scoliosis meetings in the UK and Germany.

Hosting several hundred European surgeons.

We conducted a total of 391 learning experiences for our surgeon customers, thus advancing our ongoing commitment to training. The next generation of pediatric orthopedic surgeons, and leading innovation and our sub specialty around the world.

David R. Bailey: Notably, U.S. surgery scheduling trends strengthened late in Q3 and continued into Q4, but for a few weeks at the end of the year. We expect this strength to continue into 2024 as the elective market normalizes. Moving on to international.

Lastly continued focus on our people is a critical part of our competitive advantage, which is why it's so important that we recently announced for the eighth time Ortho Pediatrics was named as one of the best places to work in the state of Indiana.

David R. Bailey: In the fourth quarter of 2023, we generated international revenue of $9.3 million, delivering 13% growth on top of 67% growth in the fourth quarter of 2022. This growth was led by extremely solid performance with our T&D products, offset by slow scoliosis sales to stocking distributors in South America. We're pleased to see a continuation of the rebound in our international business in the fourth quarter and expect it to continue throughout 2024. International agency market sales continue to be particularly strong both in trauma and deformity and scoliosis. Progress in our German direct sales model continues to track favorably and should produce good growth in 2024. We have onboarded several new users, and we look forward to increasing penetration in the German market. We expect strong PECA product sales to continue into 2024 and, likely, 2025 as we deploy inventory and train our sales channels. Despite the scoliosis softness we experience in Latin and South America, we're making great progress with launching scoliosis in Europe.

We are committed to fostering a culture that is positive engaging and allows our associates to do their best work. This important culture allows us to further our mission and successfully help more kids all over the world.

With that I'd like to turn the call over to Fred to provide more detail on our financial results Fred.

Thanks, Dave.

Our fourth quarter 2023 worldwide revenue of $37 6 million increased 21% compared to the fourth quarter of 2022.

Growth in the quarter was driven primarily by the strong performance across global trauma, and deformity domestic scoliosis and the <unk>.

U S revenue of $28 3, million% to 24% increase from the fourth quarter of 2022.

Growth in the quarter was primarily driven by our trauma and deformity product lines scoliosis and PSP.

We generated total international revenue of $9 $3 million.

Representing growth of 13% compared to the fourth quarter of 2022, which grew by 67%.

Growth in the quarter was primarily driven by trauma and deformity offset by lower scoliosis sales to stocking distributors in South America.

In the fourth quarter of 2023 trauma and deformity global revenue of $27 1 million increased 23% compared to the prior year period.

Growth in the quarter was driven primarily by share gain across our entire portfolio with strong contributions from purger products trauma ex fix and <unk>.

David R. Bailey: We're performing the first surgeries in new markets and with new surgeon customers. Additionally, we're making good headway in growing Australia and entering New Zealand as we have had added cases and leadership in support of our long-standing agency partner. And we're starting cases in Canada following recent approvals and launches. Overall, we've got a really nice setup for our international business, and we believe that 2024 will show great improvement beginning as early as Q1. That brings us to Surgeon Training and Education.

In the fourth quarter of 2023, scoliosis revenue of $9 $7 million increased 20% compared to the prior year period.

Growth was primarily driven by increased U S growth of 35%, partially offset by canceled cases in late December from RSV and lower than expected orders in Latin and South America.

Finally sports medicine other revenue in the fourth quarter of 2023 was $0 9 million compared.

Compared to <unk> 9 million in the prior year period.

Turning to set deployment.

$5 $9 million of sets were consigned in the fourth quarter of 2023 compared to $6 $3 million in the fourth quarter of 2022.

David R. Bailey: In Q4, we hosted 98 unique training experiences for over 2,600 healthcare professionals, among these events, our premier sponsorship of the Akron Resident Review Course and the annual International Pediatric Orthopedic Society meeting, IPOS, which takes place in Orlando every December. In 2023, we unveiled a new sponsorship level for the Pediatric Orthopedic Society of North America, POP, and IPOS as the first emerald-level sponsor. Our presence at IPOS this year was marked by multiple hands-on workshops featuring five sessions, including one for our new specialty bracing business and the DF2 brace for kids with femur fractures. The full year 2023 saw record numbers of educational moments for pediatric orthopedic surgeons and other allied health professionals. Globally, we advanced our partnership with multiple surgical societies, including the European Pediatric Orthopedic Society, as well as held special scoliosis meetings in the UK and Germany, each hosting several hundred European surgeons.

For the full year of 2023, we deployed 22.0 million.

Compared to $20 1 million in 2020 to the.

The increase was driven by significant new product development deployment.

Significant purger deployments as well as multiple consigned 70 units.

Touching briefly on a few key metrics.

For the fourth quarter of 2023 gross profit margin was 71.0% compared to 68, 5% for the fourth quarter of 2022.

The slight increase in gross profit margin was driven primarily by lower set sales to international stocking distributors.

Total operating expenses increased $5 2 million or 18% to $34 8 million in the fourth quarter of 2023. The increase was mainly driven by increased volume related commissions as well as incremental personnel required to support the growth in the company.

Sales and marketing expenses increased $1 5 million or 14% to $12 4 million in the fourth quarter of 2023. The increase was primarily driven by increased sales Commission expenses.

David R. Bailey: We conducted a total of 391 learning experiences for our surgeon customers, thus advancing our ongoing commitment to training the next generation of pediatric orthopedic surgeons and leading innovation in our subspecialty around the world. Lastly, continued focus on our people is a critical part of our competitive advantage, which is why it's so important that we recently announced for the eighth time that Orthopediatrics was named one of the best places to work in the state of Indiana. We are committed to fostering a culture that is positive, engaging, and allows our associates to do their best work. This important culture allows us to further our mission and successfully help more kids all over the world. With that, I'd like to turn the call over to Fred to provide more detail on our financial results. Fred

General and administrative expenses increased 3.0 or $1 million or 18% to $19 6 million in the fourth quarter of 2023 the increase was.

It's driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization expense.

Research and development expenses increased <unk> 7 million or 35% to $2 7 million in the fourth quarter of 2023, driven by additional resources as well as increased payments to third party providers.

Total other income was $1 2 million for the fourth quarter of 2023 compared to zero point $4 million for the same period last year.

Adjusted EBITDA was $1 $3 million in the fourth quarter of 2023. This compares to a loss of $2 2 million in the fourth quarter of 2022. This increase was driven by incremental revenue combined with cost control across the organization.

Fred L. Hite: Thanks, Dave. Our fourth quarter 2023 worldwide revenue of $37.6 million increased 21% compared to the fourth quarter of 2022. Growth in the quarter was driven primarily by the strong performance across global trauma and deformity, domestic scoliosis, and the OPSB. U.S. revenue of $28.3 million, a 24% increase from the fourth quarter of 2022. Growth in the quarter was primarily driven by our trauma and deformity product lines, scoliosis, and OPSB. We generated total international revenue of $9.3 million, representing growth of 13% compared to the fourth quarter of 2022, which grew by 67%. Growth in the quarter was primarily driven by trauma and deformity, offset by lower scoliosis sales to stocking distributors in South America.

Net loss for the full year of 2023 was 21.0 million.

Compared to a net income of $1 $3 million last year.

Fair value adjustment of contingent consideration for the total year 2023 was a favorable $3 million compared to a favorable $26 million in 2022.

Adjusted EBITDA for the full year of 2023 was 5.0 million <unk>.

<unk> two zero point $2 million for the full year of 2022.

We ended the fourth quarter was $82 $3 million in cash short term investments and restricted cash as of December 31, 2023, $10.0 million had been drawn on our new term loan with midcap.

Fred L. Hite: In the fourth quarter of 2023, trauma and deformity, global revenue of $27.1 million, increased 23% compared to the prior year period; growth in the quarter was driven primarily by share gains across our entire portfolio with strong contributions from PEGA products, trauma, xFix, and OPSB. In the fourth quarter of 2023, scoliosis revenue of $9.7 million increased 20% compared to the prior year period. Growth was primarily driven by increased U.S. growth of 35 percent, partially offset by canceled cases in late December from RSV and lower than expected orders in Latin and South America. Finally, sports medicine other revenue in the fourth quarter of 2023 was $0.9 million compared to $0.9 million in the prior year period. Turning to Set Deployment.

Closing the Boston <unk> acquisition in January 2024, our cash and restricted cash balance was approximately $60 million.

With our current cash position as well as our new debt facility, we are well capitalized to continue to execute on our strategy.

Given our strong balance sheet positive adjusted EBITDA, our line of sight to cash flow breakeven and our recent acquisitions, we are in a position of tremendous strength.

Turning to guidance, we are reiterating our expectation for full year 2020 for revenue to be in the range of $197 million to $200 million.

Representing year over year growth of 32% to 34%.

Additionally, we now expect to generate between $8.0 million to $901 million of adjusted EBITDA in 2024.

We expect less than $20 million of new set deployed in 2024, representing our continued focus on driving the business to cash flow breakeven sooner rather than later.

Lastly, our S. Three shelf registration filed in 2020 was fully sold in 2022 and.

In keeping up with good corporate housekeeping, we will likely establish another universal shelf in 2024.

As discussed previously we have no need or plans to raise capital in the near term, but we believe maintaining a shelf is consistent with good corporate practices.

I'll now turn the call back over to Dave for closing remarks.

Thanks Fred.

As we look back on 2023, we're proud of all that we've achieved and are confident that we have the right growth drivers in place for continued success in 2024.

Fred L. Hite: Total operating expenses increased $5.2 million, or 18%, to $34.8 million in the fourth quarter of 2023. The increase was mainly driven by increased volume-related commissions, as well as incremental personnel required to support the growth of the company. Sales and marketing expenses increased $1.5 million, or 14%, to $12.4 million in the fourth quarter of 2023. The increase was primarily driven by increased sales commission expenses.

We expect positive trends in the business to continue including robust topline revenue growth and continued profitability growth as we move toward cash flow breakeven earlier than anticipated.

In addition in 2023, we launched eight new products, including response power Scoliosis and.

The Giro growth modulation system pediatric nailing platform tibia system, the <unk> Mitchell Ponseti, plus bar and the levity device. We continue to expect strong performance from our legacy products as a result of our heavy investment in set deployments in 2022 and 2023. However.

Fred L. Hite: General and administrative expenses increased $3.0 million, or 18%, to $19.6 million in the fourth quarter of 2023. The increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization expenses. Research and development expenses increased $0.7 million or 35% to $2.7 million in the fourth quarter of 2023, driven by additional resources, as well as increased payments to third-party providers. Total other income was $1.2 million for the fourth quarter of 2023, compared to $0.4 million for the same period last year. Adjusted EBITDA was $1.3 million in the fourth quarter of 2023. This compares to a loss of $2.2 million in the fourth quarter of 2022. This increase was driven by incremental revenue combined with cost controls across the organization. The net loss for the full year of 2023 was $21.0 million, compared to a net income of $1.3 million last year.

However, our recent acquisitions, along with <unk> and <unk> and our most recent organic product launches such as <unk> femur, and tibia drive rail and <unk> require less capital deployment to drive growth due to a faster return on invested capital.

This combined with the launch and the growth of the <unk> franchise ensure we can maintain our high rate of growth or using less cash for inventory deployment, thus, ensuring we drive to cash flow breakeven much sooner than earlier anticipated.

All of our long term plans, including profitability growth are supported by our robust balance sheet strong cash position and access to debt.

I've been with the op for nearly 17 years, now and I'm not sure I ever been more excited we are.

Our in an extremely strong position with all the tools in place to help more children than ever before and I think our customers feel the same way.

Together, our associates, our customers and our shareholders are building something special.

And that is having a profound impact on the lives of children.

The future is bright for orthopedic metrics and we're just getting started.

In closing I'd like to thank our surgeon partners.

Associates are investors and all the innovators in pediatric health care freestanding together to help kits.

Operator, let's open the call for Q&A.

Thank you if you'd like to ask a question. Please press star one one if your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Our first question comes from Matthew O'brien with Piper Sandler Your line is open.

Good morning can you guys hear me okay.

Good morning, Matt.

Okay excellent.

So just maybe starting obviously with the Boston LNP commentary first of all sorry, it's going to be a multi parter is that going to get split out separately, Fred Youre, saying this morning, clearly youre not going to need additional capital because you have plenty of funding for that to.

To build out these facilities because I don't think though that expensive and then how do we model. This growth going forward off of this base that you have today as youre, adding new clinics.

Fred L. Hite: Post-closing the Boston O&P acquisition in January of 2024, our cash and restricted cash balance was approximately $60 million. With our current cash position, as well as our new debt facility, we are well capitalized to continue to execute on our strategy. Given our strong balance sheet, positive adjusted EBITDA, our line of sight to cash flow breakeven, and our recent acquisitions, we are in a position of tremendous strength. Turning to guidance, we are reiterating our expectation for full year 2024 revenue to be in the range of $197 to $200 million, representing year over year growth of 32 to 34%. Additionally, we now expect to generate between $8.0 to $9.0 million of adjusted EBITDA in 2024. Additionally, we expect less than $20 million of new set deployment in 2024, representing our continued focus on driving the business to cash flow breakeven sooner rather than later.

Across the U S.

Yes.

Good questions Boston is approximately 30% scoliosis bracing custom braces.

And the other 70% is deformity correction and so that's how the sales will show up.

In those two segments going forward.

The business.

Has a different seasonality than our typical business.

They don't have the big summer selling season, the way, we do in our scoliosis and deformity correction business.

Their fourth quarter is a few points.

Percentage points higher than the other quarters and typically their first quarter is a few percentage points lower the middle quarters are roughly 25% of the year.

The growth of this business, obviously, we're still working on that for 2025, but we would expect this to grow faster than the overall business.

Fred L. Hite: Lastly, our S3 shelf registration filed in 2020 was fully sold in 2022. In keeping up with good corporate housekeeping, we will likely establish another universal shelf in 2024. As discussed previously, we have no need or plans to raise capital in the near term, but we believe maintaining a shelf is consistent with good corporate practice. I'll now turn the call back over to Dave for closing remarks. Thanks, Fred.

As the sales force becomes effective as new products are introduced and we are.

Looking to open new clinics, starting next year.

That does take some time to get the hospital to approve it to find the facility to get the obviously specialists trained in the pediatric space.

But overall I would say that this segment is going to grow much faster than the overall business for the next several years.

David R. Bailey: As we look back on 2023, we're proud of all that we've achieved and are confident that we have the right growth drivers in place for continued success in 2024. We expect positive trends in the business to continue, including robust top-line revenue growth and continued profitability growth as we move toward cash flow break even earlier than anticipated. In addition, in 2023, we launched eight new products, including Response Power Scoliosis, the Gyro Growth Modulation System, the Pediatric Nailing Platform Tibia System, the DF2 Brace, Mitchell Ponsetti Plus Bar, and the Levity Device.

Yes, Matt I think what we're trying to signal here is the clinic side kind of as I walk through the three point strategy.

We expect no question as we add sales reps, we have already done that we expect the sales of the <unk> franchise.

Which is still inclusive obviously of MD orthopedics and Rhino in aura in the organic products that we launched last year <unk> and the new stuff, we're going to launch. This year, we would expect that business to continue to grow well in excess of 20% that's kind of what we've what it's done ever since we acquired <unk> and then started adding products to that I think what we're saying here is it's going to.

Take a little bit of time on the clinic side, obviously to get that side of the Boston business ramp.

David R. Bailey: We continue to expect strong performance from our legacy products as a result of our heavy investment and set deployments in 2022 and 2023. However, our recent acquisitions, along with Apofix and Orthx, and our most recent organic product launches, such as PMP Femur and Tibia, Drive Rail, and DF2, require less capital deployment to drive growth due to a faster return on invested capital. This, combined with the launch and growth of the OPSB franchise, ensures we can maintain our high rate of growth while using less cash for inventory deployment, thus ensuring we drive to cash flow breakeven much sooner than earlier anticipated. All of our long-term plans, including profitability growth, are supported by our robust balance sheet, strong cash position, and access to debt. I've been with OP for nearly 17 years now, and I'm not sure I've ever been more excited.

But we're definitely expecting growth in the rest of the business again as we've seen for the last couple of years.

Okay and just on the on the upfront cost side can you just comment a little bit there and then I'll just ask my second question here, just just expectations for <unk> this year.

Is that going to start to be a bigger contributor or is it more still the 25 event.

Yes, I think.

On <unk> as the data continues to get stronger there is no question.

And as the data gets stronger we expect us to continue to go up into the right. I think we have kind of come office position that theres going to be some quarter or some specific moment, where it's this watershed.

Ah moment wherever resurgent agrees that this is the right treatment.

But theres no question that the entire.

Non fusion segment of pediatric spine is super interesting, it's still embryonic it's still generally growing a lot of questions. We think we're answering those questions with the data.

Operator: We are in an extremely strong position with all the tools in place to help more children than ever before. And I think our customers feel the same way. Together, our OP associates, our customers, and our shareholders are building something special, and that is having a profound impact on the lives of children. The future is bright for orthopediatrics, and we are just getting started. In closing, I'd like to thank our surgeon partners, my opioid associates, our investors, and all the innovators in pediatric health care for standing together to help kids. Operator, let's open the call for Q&A. Thank you. If you'd like to ask a question, please press star 1 1. If your question has been answered and you'd like to remove yourself, please press star 11 again.

And generally we expect <unk> to continue to outpace the growth of our fusion business.

And Thats kind of how we're modeling it for 2024 and specifically on the cost so today Boston at 26 clinics.

They are all leased facilities, so really the cost if we were to open a new facility is minimal upfront. It's just building out of the space hiring and training.

The actual clinicians and then hiring more clinicians as the volume ramps so.

Don't know million dollars I would say Max to open one of these maybe less.

Operator: Our first question comes from Matthew O'Brien with Piper Sandler. Your line is open. Morning. Can you guys hear me okay?

And then the revenue starts coming in pretty quick because we're not going to open one unless we have commitments from the surgeons at the hospitals that obviously, they're going to be using the clinic.

Matthew O'brien: Morning, Matt. You got us, Matt. Oh, good. Yeah, excellent. So, just maybe starting, obviously, with the Boston O&P commentary. First of all, and I'm sorry, it's going to be a multi-parter.

Got it very helpful. Thank you so much.

Thanks, Matt.

Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Rick if your telephones Richard please on mute.

Yes.

If I could here.

Fred L. Hite: Is that going to get split out separately, Fred? You're saying this morning, clearly, you're not going to need additional capital, because you have plenty of funding for that, to build out these facilities because I don't think they're that expensive. And then how do we model this growth going forward off of this base that you have today as you're adding new facilities across the U.S. Yes, so good questions.

Good morning, Thank you.

Alright, great.

On a big picture question.

If im hearing you correctly it sounds like a lot of the headwinds that you've experienced.

Over the last year or so.

Or either.

Going away gone away.

Or sort of resolved.

On the staffing front.

On the RFP front on the.

Fred L. Hite: Boston is approximately 30% scoliosis bracing and custom braces, and the other 70% is deformity correction. And so that's how the sales will show up in those two segments going forward. The business has a different seasonality than our typical business. They don't have the big summer selling season the way we do in our scoliosis and deformity correction business. Their fourth quarter is a few points, a few percentage points higher than the other quarters, and typically, their first quarter is a few percentage points lower.

A variety of things and so I mean.

That sounds very encouraging.

Me correctly.

I think that we are another quarter into this improvement and I think we're seeing that improvement here in Q1 as well.

And so yes, I think what we've said for a while here as we think that this is probably something that's behind US, let's say by mid year, We're a little cautious just because we recognize the June July August. These are our obviously, our big months on the surgical side, so until we see that.

Fred L. Hite: The middle quarters are roughly 25% of the year. The growth of this business, obviously, we're still working on that for 2025. But we would expect this to grow faster than the overall business. As the sales force becomes effective, as new products are introduced, and we are looking to open new clinics starting next year. That does take some time to get the hospital to approve it, to find the facility, and to get the, obviously, specialists trained in the pediatric space.

June July and August I don't know that we're going to declare victory, but its certainly encouraging that we're seeing this come through it's also encouraging that as the business further diversifies on those specialty bracing side that a lot of the headwinds that we saw in the <unk>.

<unk> setting we don't see on the specialty bracing side, and so as that business becomes bigger enables us to kind of mitigate some of the risks associated with the environmental environmental risks that we saw over the last few years and I think that's also encouraging us that overall the business should be less affected.

Fred L. Hite: But overall, I would say that this segment is going to grow much faster than the overall business for the next several years. Yeah, man, I think what we're trying to signal here is the clinic side of things as I walk through the three-point strategy. We expect, no question, as we add sales reps, and we have already done that, we expect the sales of the OPSB franchise, which is still inclusive, obviously, of MD Orthopedics and Rhino and Aura and the organic products that we launched last year, DF2 and the new stuff we' That's kind of what we've done ever since we acquired MDO and then started adding products to that.

By those types of environmental.

Abnormalities that we've experienced over the last few years.

Gotcha.

Fred.

Help us think through.

The quarterly setup for.

For the year.

It went by quickly I wasn't sure if I thought at one point.

Relative.

Not overall.

Talking about maybe sequentially better.

First quarter revenues overall, but.

Help us level set the right place to start thinking about the first quarter.

Especially given the Boston OMB mixed in there now.

Thank you for the specific guidance that you gave about it.

With near quarters, but how should we think about the.

The flow of.

The new offer.

In pediatrics quarterly flow overall.

24 years. Thank you.

Yeah, absolutely so traditionally the pre.

Pre COVID-19 in particular because less.

Several years have been so unusual the first quarter is typically around five or 6% lower than the fourth quarter.

And so if you think about the legacy business and those factors. The first quarter revenue would come down. However, with the addition of Boston that is going to generate a first quarter revenue numbers are actually higher.

Fred L. Hite: And then I'll just ask my second question here. Just expectations for aptiFix this year. Is that going to start to be a bigger contributor, or is it more still the kind of 25?

Then the fourth quarter.

And.

David R. Bailey: Yeah, I think our view on Appifix is the data continues to get stronger. There's no question. And, you know, as the data gets stronger, we expect this to continue to go up. I think we've kind of come off this position that there's going to be some quarter or some specific moment where it's this watershed, a moment where every surgeon agrees that this is the right treatment. But there's no question that the entire non-fusion segment of the pediatric spine is super interesting, but it's still embryonic.

Good.

Bet or I would assume that it's probably in that 41 and a half 42.

$1 million range, so definitely a nice increase over the third quarter.

Over the fourth quarter of 37 six.

Alright.

Some of the past.

You broken the overall company quarters by as a percentage of sales. So you are guiding us to that $197 million to $200 million range, how would you frame the.

David R. Bailey: It's still generally growing. There are a lot of questions. We think we're answering those questions with the data. And generally, we expect Apifex to continue to outpace the growth of our fusion business. And that's kind of how we're modeling it for 2024. And specifically on the cost.

A percentage of sales in rough terms.

The flow of the quarters as you contemplate 2024.

Yes, I mean, Boston is still right $25 million out of 200. So it is not going to have a dramatic first year impact on changing the overall.

Fred L. Hite: So today, Boston has 26 clinics. They're all leased facilities. So really, the cost if we were to open a new facility is minimal up front. It's just building out of the space, hiring and training the actual clinicians, and then hiring more clinicians as the volume ranges. So, I don't know, a million dollars, I would say the max, to open one of these, maybe less.

Metrics. So the third quarter, we still would anticipate is by far the largest.

And followed by the second quarter, and then the fourth quarter and the first quarter, obviously would be the smallest number.

So I think it's going to be pretty similar honestly to historical with a slight change.

Fred L. Hite: And then the revenue starts coming in pretty quick because we're not going to open one unless we have commitments from the surgeons at the hospital that they're obviously going to be using the clinic. Got it. Very helpful. Thank you so much.

With Boston, but not not much.

Gotcha.

Squeeze in one more if you don't mind.

I know you don't guide to gross margin.

I'm hearing you correctly, Boston is going to be above average also you've got new products launching you've got.

Rick Wise: Thanks, Matt. Thanks. Thank you. Our next question comes from Rick Wise. Unlined.

Recovery a variety of other things.

Rick Wise: Rick, if your telephone is muted, please unmute it. Yeah, here I am. Sorry, it was a glitch. I couldn't hear you.

Help us understand.

More clearly.

David R. Bailey: Good morning. Thank you. To start off on a big picture question, if I'm hearing you correctly, it sounds like a lot of the headwinds that you've experienced over the last year or so are either going away, or have gone away, and are sort of resolved on the staffing front, on the RSV front, on a variety of things. And so, I mean, that sounds very encouraging. Am I hearing you correctly, Dave?

Again, the cadence and how we should be thinking about gross margins in 'twenty, four and put that in perspective relative to be as always seasonally slow.

Fourth quarter performance.

Given the.

The mix of business typically thank you.

Yes, absolutely so the fourth quarter of 2023 gross margin at 71%, obviously lower than the third quarter, which is always our highest revenue and highest gross margin quarter.

David R. Bailey: I think that we are another quarter into this improvement, and I think we're seeing that improvement here in Q1 as well. And so, yeah, I think what we have said for a while here is that we think that this is probably something that's behind us, let's say, by mid-year. We're a little cautious just because we recognize June, July, and August. These are obviously our big months on the surgical side. So, until we see that,

The 71% was an improvement year over year versus the 68 five we saw in the fourth quarter previously.

And so the gross margin in 2024, I would expect would continue to follow the sales so it's going to be highest in the third quarter.

Fred L. Hite: June, July, and August; I don't know that we're going to declare victory, but it's certainly encouraging that we're seeing this come through. It's also encouraging that as the business further diversifies on the specialty bracing side, a lot of the headwinds that we saw in the OR setting, we don't see on the specialty bracing side. So, as that big business becomes bigger, it enables us to kind of mitigate some of the risks associated with the environmental risks that we saw over the last few years. And I think that's also encouraging us that, overall, the business should be less affected by those types of environmental abnormalities that we've experienced over the last few years. Chair and Fred.

Lower in the second quarter come down again.

In the fourth quarter and.

A little softer in the first quarter I think overall the business was under 75% in 'twenty two 'twenty three and we would expect to see a similar type of result between 74, 575% for 2024.

Boston business gross margin is good if you think about it it's really two businesses in one it's a manufacturing business and so we get the manufacturing margin from their products they manufacture and it's a retail business in the clinics. So we're getting the retail pricing and the margins associated with that and so.

Fred L. Hite: Help us think through the quarterly setup for the year. It went by quickly. I wasn't sure if you were talking about maybe sequentially better first quarter revenues overall, but, Help us level set the right place to start thinking about the first quarter, and especially given the Boston O&P mix in there now. Thank you for the specific guidance that you gave about it in terms of their quarters, but how should we think about the flow of the new orthopediatrics quarterly flow overall for the 24 years? Thank you. Yeah, absolutely. Traditionally, the pre- COVID era, in particular, because the last several years have been so unusual.

We're all very strong similar gross margins to our overall business, but historically they've had very little sales.

Commissions, if you will so the contribution margin from that business is very strong better than our legacy business and even adding some sales force into that to grow higher revenue. The contribution margin is still very strong in that business, which is very attractive obviously to the bottom line for us.

That's wonderful perspective, thanks for all the color. Thank you.

Thank you Rick.

Fred L. Hite: The first quarter is typically around five or 6% lower than the fourth quarter. And so if you think about the legacy business and those factors, the first quarter revenue would come down. However, with the addition of Boston, that is going to generate a first quarter revenue number that is actually higher than the fourth quarter. And, you know, I would bet or I would assume that it's probably in that 41 and a half, 42 million dollar range.

Thank you. Our next question comes from Ryan Zimmerman with <unk>. Your line is open.

Thanks for taking the questions.

Bob a couple of questions for me.

A lot already been asked on the Boston on PC side.

Just first.

Dave the last few weeks of the summer and any quantification there to think about that impact on the flow through.

Potentially the first quarter as a result of some of those cases.

Yes. Good question. So I guess, what I would say is that we were we were really really doing well throughout the entirety of the quarter and we saw.

Fred L. Hite: So definitely a nice increase over the third quarter and over the fourth quarter at 37.6. And sometimes in the past, you've broken down the overall company quarters as a percentage of sales. So you're guiding us to that $197 to $200 million range. How would you frame it, you know, as a percentage of those, in rough terms, the flow of the quarters as you contemplate 2024? Yeah, I mean, Boston is still right about 25 million out of 200.

Sure.

Kind of a screeching halt in the last two weeks.

Last two weeks are traditionally two of the largest weeks for US. These are weeks when kids are out of school and so it was a pretty steep drop in kind of happened all of a sudden and it did extend into the early part of January.

So maybe Ryan it's a couple of points probably of total topline revenue growth for us and it was a bit bit unfortunate, but not a lot. We can do about it what we did see though in the quarter. So is this quarter now is that obviously a fair with the hospital systems were hit seems.

Fred L. Hite: So it's not going to have a dramatic first year impact on changing the overall metric. So the third quarter, we still would anticipate, will be by far the largest, followed by the second quarter, and then the fourth quarter, and the first quarter will obviously be the smallest number. So I think it's going to be pretty similar, honestly, to the historical one with a slight change with Boston, but not much. Gotcha. And I'm going to squeeze in one more if you don't mind.

Like.

Handling that much better, particularly on the elective surgical side and seen a really nice rebound in.

In Q1, it seems like cases that were scheduled or starting to get put back on and get done and so I think that's why you're here fairly bullish commentary about the way the hospitals are handling the RSV situation how rapidly it went up.

Fred L. Hite: I know that you don't guide to gross margins, but if I'm hearing you correctly, Boston is going to be above average. Also, you've got new products launching, you've got, you know, recovery, a variety of other things. Help us understand a little more clearly the, again, the cadence and how we should be thinking about gross margins in 24 and put that in perspective relative to the, as always, seasonally slow fourth quarter performance, given the mix of business. Thank you. Yeah, absolutely.

<unk> and came back down here in the first quarter and things seems to be really normal going forward.

Okay.

Helpful and then.

Yes.

Youre going to build out more of this.

<unk> sales force you already started doing that.

When I think about kind of all the heads in ftes that are.

Dedicated to ortho pediatrics.

I'm just kind of wondering if you could kind of size and scale kind of what that is relative to the existing sales force is your distributors and dedicated sales agents kind of ramp up over the coming years for opioid space.

Sure the question so.

Fred L. Hite: So the fourth quarter of 2023 gross margin was 71%, obviously lower than the third quarter, which is always our highest revenue and highest gross margin quarter. However, 71% was an improvement year over year versus the 68 and a half we saw in the fourth quarter previously. And so the gross margin in 2024, I would expect it to continue to follow the sale. So it's going to be highest in the third quarter, a little lower in the second quarter, come down again in the fourth quarter, and a little softer in the first quarter.

We've already factored some of those headwinds obviously, we started some of the hiring here in Q4 and early in Q1, so just to be clear the expense associated with that is captured in our guide for the $8 million to $9 million in EBITDA.

Thank orders of magnitude you might expect over the year for us to add or have had maybe 20 people or so.

In the U S that are focusing more heavily or exclusively on the <unk> side of the business.

Obviously thats up from zero this time last year.

So that's why we're pretty bullish about that sales forces capacity to help us drive revenue.

With the <unk> products and <unk> and all the <unk> all the things that we've come out with in the last year, but you have to remember that these people aren't spending time standing in the operating room right and so it doesn't take as many people to cover the geographies that we want to cover we also have obviously really strong.

Fred L. Hite: I think overall, the business was under seventy five percent in twenty twenty three, and we would expect to see a similar type of result between seventy four and a half seventy five percent for twenty twenty four. The Boston business gross margin is good. If you think about it, it's really two businesses in one.

Relationships with our surgeons in the operating room and when your partner to these <unk> salesforce with our existing sales force and our existing sales force. So far has been really great about receiving these people in and working as a team. We just think the combination of.

Fred L. Hite: It's a manufacturing business, and so we get the manufacturing margin from their products they manufacture. And it's a retail business in the clinics, so we're getting the retail pricing and the margins associated with that. And so overall, very strong, similar gross margins to our overall business. But historically, they've had very little sales commissions, if you will.

The great people, we have in the field already in the 200, plus strong or base sales reps that we have combined with 20 years or so of these.

Fred L. Hite: So the contribution margin from that business is very strong, better than our legacy business. And even adding some sales force into that to grow higher revenue, the contribution margin is still very strong in that business, which is very attractive, obviously, to the bottom line for us. That's a wonderful perspective. Thanks for all the color.

More clinical based sales reps.

A real tonic for us to grow and Ryan over the course of the next several years, we will see maybe that salesforce grows out.

Larger, but we're not committing that at this point.

Yes, Okay. Just real quick one quick modeling question for Fred or you already gave the split between Scully and deformity correction on the Boston ODP business and.

Fred L. Hite: Thank you. Thank you, Rick. Thank you. Our next question comes from Ryan Zimmerman with BTIG. Your line is open. Good morning. Thanks for taking the question. Later, man.

It's all U S based though right Fred.

Is there any international revenue and theirs.

From a modeling perspective wanted to make sure we take care of that correctly.

Yes, sorry, great question, we Havent clarified that it is 100% domestic as of today.

Ryan Benjamin Zimmerman: I just wanted to follow up. A couple of questions for me, a lot already. First, Dave, the last few weeks of December, any quantification there to think about and that impact on the first quarter?

But that in 'twenty five 'twenty six 'twenty seven may be an opportunity for us to enhance the growth of that business as well.

Yeah. Okay. Thank you guys. That's it for me I have a good one.

David R. Bailey: Yeah, good question. So I guess what I would say is that we were really, really doing well throughout the entirety of the quarter, and we saw a kind of a screeching halt in the last two weeks. The last two weeks are traditionally two of the largest weeks for us. These are weeks when kids are out of school. And so it was a pretty steep drop and kind of happened all of a sudden.

Thanks.

Thank you. Our next question comes from Mike Matson with Needham <unk> Company. Your line is open.

Yes.

Hey, guys. This is Joseph on for Mike.

So.

You guys have a lot of growth prospects moving for international expansion.

X X ramping new product launches.

But I guess the comments today.

It seems like or the pediatrics has shifted its strategy to favoring maybe.

David R. Bailey: And it did extend into the early part of January. So, you know, maybe, Ryan, it's a couple points of total top-line revenue growth for us, and it was a bit unfortunate, but there's not a lot we can do about it. What we did see, though, in the quarter, so it is this quarter now, is that, you know, obviously, after the hospital systems were hit, they seem to be handling that much better, particularly on the electrosurgical side, and seeing a really nice rebound in Q1. It seems like cases that were scheduled are starting to get put back on and get done, and so I think that's why you hear fairly bullish commentary about the way the hospitals are handling the R That's helpful. You know, you're going to build out more of the scope. You have already started doing that. You know, when I think about all the heads and FTs that are dedicated to orthopedics. I was kind of wondering if you could kind of scale it down in size and scale, that is.

<unk> growth and profitability.

Profitability over growth.

So I guess, maybe could you just give you a little bit more color a little bit more of your thoughts on.

The shift in the strategy and why that's good moving forward.

Yes Joseph.

I don't think I would characterize our strategy as a focus of profit over growth.

Sure.

We're heads down focusing on growth, but also recognizing that balancing growth with profitability with the aspiration to.

To get to cash flow breakeven is probably a more prudent rational course, particularly in the current financial environment and so this is not a new I guess I don't view this as a new thing for us.

This over the last three years has been our aspiration to continue to focus more heavily on topline revenue growth and I think that was one of the reasons. Why we were we're excited about the <unk> side and all the product launches going on in the legacy side and all the stuff that we've deployed over the last two years.

We think all of those are going to generate really nice growth for the business for the next several years, but we also think that the growth is going to come be more profitable growth and the cash usage associated with that is going to be lower.

David R. Bailey: Salesforce as your distributors and dedicated sales agents. Sure. Good question.

Which is kind of what we've been trying to get to over the course of the last three years and I think we're well positioned to do it. So we still see this as a aggressive topline growth strategy. There is no question about that.

David R. Bailey: So, we've already factored some of those heads in. Obviously, we started some of the hiring here in Q4 and early in Q1. So just to be clear, the expense associated with that is captured in our guide for the $8 million to $9 million in EBITDA. I think orders of magnitude you might expect over the year for us to add or have maybe 20 people or so in the U.S. that are focusing more heavily or exclusively on the OPSB side of the business. Obviously, that's up from zero this time last year. So that's why we're pretty bullish about it, that sales force's capacity to help us drive revenue with the MDO products and Rhino and Aura and DF2, all the things that we've come out with in the last year. But you have to remember that these people aren't spending their time standing in the operating room, right?

I think that it's a bit unique in that this is going to aggressive topline growth strategy. That's also going to be profitable and generate its own cash and I think thats pretty unique right now in the marketplace.

Okay.

Super helpful. Maybe just touch on that a little bit more.

We estimate your organic growth to be in the mid teens or so for the last two years, but do you think you can maybe get back to the 20% plus number or do you think mid teens is more of a real realistic expectation for.

Organic growth moving forward.

Yes, so obviously the guide implies mid teens and I think we.

<unk>.

Everything we're doing here internally and the setup, particularly on the <unk> and the legacy product launch is pointing us towards driving topline revenue growth in excess of mid teens.

David R. Bailey: And so it doesn't take as many people to cover the geographies that we want to cover. We also have, obviously, really strong relationships with our surgeons in the operating room. And when you partner these OPSB sales force with our existing sales force, and our existing sales force so far has been really great about receiving these people in and working as a team, we just think the combination of the great people we have in the field already and the 200 plus strong OR-based sales reps that we have combined with 20 or so of these more clinical-based sales reps, it's a real tonic for us to grow. And Ryan, over the course of the next several years, we'll see.

But yes, I think as we model as we guide we're not going to get ahead of ourselves here and so that's what you see in the guide, but you can rest assured that our team is aligned around a growth rate that's in excess of 20% and obviously with the acquisition. It's in excess of 30 for 2024. So we're putting the drivers in place and I think again.

On the <unk> side, we're trying to put a driver in place that we have really low share really good competitive opportunities here and a really big Tam for us and.

We see that as a catalyst to hopefully get to where we are we're cheating higher in the upper teens or maybe bridging back over the <unk> and.

David R. Bailey: Maybe that sales force grows out larger, but we're not committing to that at this point. Real quick, one quick modeling question for Fred. Are you ready, Gabe?

That's a real feat when you're a business thats much larger now and in the future than we have been when we were consistently grow in 2022%. It's our aspiration to continue to do that but we're just not going to guide to that at this stage.

Unknown Executive: Unknown Executive, Philip Taylor, Orthopedics Corp. And it's all U.S. based, right? Yeah, sorry, great question. We haven't clarified that it is 100% domestic as of today.

Okay that makes sense, thanks, very much for taking our questions.

Thanks Joseph.

Thank you. Our next question comes from Dave <unk> with citizens JMP. Your line is open.

Hey, good morning, guys.

Hey, Dave.

I think when you add in <unk>.

David R. Bailey: But that, you know, in 25, 26, 27, may be an opportunity for us to enhance the growth of that business as well. Thank you, guys. That's it for me. Thanks. Our next question comes from Mike Matson with Needham & Company. Your line is open. Hey guys, this is Joseph on for Mike.

$22 million upfront and I was just curious if you.

You might comment on any.

Milestones or sales related targets is that the all in price or is there additional.

Payments com.

That is the all in price there are no contingent.

Additional payments.

Sounds like you.

You said, the SaaS base there but.

So again, thanks for all the detail on the business.

Joseph: So, you guys have a lot of growth prospects moving forward, you know, international expansion, Pega, X6 ramping, new product launches. But I guess the comments today, it seems like Orthopediatrics has shifted its strategy to, you know, favoring maybe growth and profitability or profitability over growth. So I guess maybe could you just give us a little bit more color, a little bit more of your thoughts on maybe the shift in the strategy? You know why that's good moving forward.

To follow up on I think it was Ryan's question about the <unk> business.

RSV the impact maybe in a couple of points.

When you look at the.

Lower sales to stocking distributors in South America, and maybe the.

Lower than expected orders in Latin and South America.

Is that another point or is that I guess im trying to quantify it grew 20% in <unk>.

Kind of three things you called out I don't know, maybe its even more than a couple of points.

Yes, certainly the situation that we had in the last few quarters in Latin America fairly unexpected <unk> that.

David R. Bailey: Yeah, Joseph, I don't think I would characterize our strategy as a focus on profit over growth. We're heads down focusing on growth, but also recognizing that balancing growth with profitability with the aspiration to get to the cash flow break even is probably a more prudent or rational course, particularly in the current financial environment. And so this is not a new thing, I guess, I don't view this as a new thing for

It had a pretty.

Pretty big impact it was a pretty big headwind on the <unk> growth overall and on the company's growth overall and it was disappointing to see but I think at this stage, we feel good about that being behind us.

<unk>.

And being able to diversify our scoliosis business now that we're in markets like Canada.

David R. Bailey: For the last 3 years, it has been our aspiration to continue to focus more heavily on top line revenue growth. And I think that was one of the reasons why we were excited about the OPSB side and all the product launches going on on the legacy side, and all the sets that we've deployed over the last 2 years. We think all of those are going to generate really nice growth for the business for the next several years, but we also think that the growth is going to come, be more profitable growth, and the cash usage associated with that is going to be lower, which is kind of what we've been trying to achieve over the course of the last 3 years. And I think we're well positioned to do it. So we still see this as an aggressive top-line growth strategy. There's no question about that.

And the rest of the Europe again, that's small segment right now, but it's going to grow and it's going to be all peer growth for us in 2024, because it essentially growth up a zero base.

So, yes, I think thats behind Us I don't know if we call it a couple of points.

Yes, we haven't really quantified it but.

We don't expect it to continue and have pretty good line of sight into that.

As we head into as we're in 2024, we expect that to be a tailwind for our business not a headwind.

Sure.

And just one last one if I could.

<unk> you mentioned gross margin I think you said the profile is pretty similar but operating margin wise.

I'm just curious.

If thats higher than sort of where you stand today I know the EBITDA guide of eight to nine was higher than the street seven are taking some of that is coming from that acquisition, but any comments sort of on that.

David R. Bailey: We just think that it's a bit unique and that this is an aggressive top-line growth strategy that's also going to be profitable and generate its own cash. And I think that's pretty unique right now in the marketplace. Okay, yeah, that's super helpful.

The bottomline contribution as that scales.

Thanks.

Yes, absolutely so very similar to <unk> when we bought it this business Boston proper.

Profitable.

Positive adjusted EBITDA positive net income positive cash flow.

Joseph: Maybe just touch on that a little bit more. You know, we estimate your organic growth to be in the mid-teens or so for the last two years. But, you know, do you think we can maybe get back to the 20% plus number? Or do you think mid-teens is more of a realistic expectation for organic growth moving forward? Yeah, obviously, the guide implies mid-teens, and I think, you know, we, Everything we're doing here internally and the setup, particularly on the OPSB and the legacy product launch, is pointing us towards driving top-line revenue growth in excess of mid-T. But, you know, I think as we model, as we guide, we're not going to get ahead of ourselves here.

And however, however, historically hadn't been growing tremendously fast.

And so we will be investing a little bit of money into that business. Obviously, the sales force, but yes, you are correct in assuming that that business is more profitable than.

Then our overall business was in 2023 that is correct and we would expect that to continue going forward.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Samuel Brodowski with <unk> Securities. Your line is open.

Hey, good morning, guys. Thanks for taking my question I'll, just ask one more on Boston to start off I think you had mentioned a 1% to $3 million revenue number per clinic.

Joseph: And so that's what you see in the guide, but you can rest assured that our team is aligned around a growth rate that's in excess of 20%. And obviously, with the acquisition, it's in excess of 30 for 2024. So, we're putting the drivers in place.

Six clinics that.

Implies a pretty nice opportunity to ramp revenue, there or or without adding new clinics is that something we should think about being able to be achieved quickly sort of after the integration is completed or is that going to be a steady ramp over time as new products come on.

David R. Bailey: And I think, again, on the OPSB side, we're trying to put a driver in place that we have really low share, really good competitive opportunities here, and a really big TAM for us. We see that as a catalyst to hopefully get to where we're, you know, cheating higher in the upper teens or maybe breaching back over the 20s. And, you know, that's a real feat when you're a business that's much larger now and in the future than we have been when we were consistently growing 20, 22%. It's our aspiration to continue to do that, but we're just not going to guide ourselves to that at this stage. Okay, that makes sense. Thanks very much for taking the question. Thanks, Jeff.

Yes.

Good question. So it definitely is an opportunity for us to drive the efficiency of the existing clinics and the kind of flow of patients through the existing clinics as well as the products used at the existing clinics.

The added sales channel.

Something we've modeled aggressively yet.

Because it's so new but I do think youre right, thats, probably probably an opportunity there.

Operator: Thank you. Our next question comes from Dave Turkaly with Citizens J&P. Your line is open. Hey, good morning, guys. Hey Dave.

And part of the reason that that is such is that these clinics are primarily surround it around Boston around Philadelphia kind of upper northeast, which are major major.

David Louis Turkaly: Hey, I think when you announced the BOP deal, it said $22 million up front. I was just curious if you might comment on any... Milestones or sales-related targets? Is that the all-in price, or are there additional payments to come? That is the all-in price. There are no contingent additional payments.

Population centers as well as major hospitals that are are using Boston products and so it takes a few maybe more clinics in those areas where patients are coming from longer distance because of their catchment and so maybe some of those clients are doing a little less than they would if there were fewer it isn't our intent to consolidate but it is.

Fred L. Hite: Thanks for all the detail on the business. To follow up on Ryan's question about the Scholey business, the RSV, the impact maybe being a couple points. When you look at the lower sales to stocking distributors in South America, maybe the lower than expected orders in Latin and South America. I mean, is that another point?

Our intent to drive more volume through the existing so that is a possibility, but I also think you've got this right, though and when you think about our capacity over the course of the next several years.

Our intent is to scale. This to every major children's hospital jurisdiction in the United States and then some internationally and when you start thinking about those 26 clinics, we think theyre, serving give or take 15 children's hospitals right now.

David R. Bailey: I guess I'm trying to quantify, you grew 20% in school, and you had kind of three things you called out, and I don't know, maybe it's even more than a couple. Yeah, certainly the situation that we've had in the last few quarters in Latin America, while fairly unexpected, it had a pretty, pretty big impact. It was a pretty big headwind on scolia growth overall and on the company's growth overall, and it was disappointing to see, but I think at this stage.

When you think about the math there.

<unk> is a really big opportunity for us to do.

The scale of this into the other 285 children's hospitals that are active.

Users don't have active Boston.

Onyx in their area. So that's obviously why we're one of the reasons why we think we.

David R. Bailey: We feel good about that being behind us and being able to diversify our scoliosis business now that we're in markets like Canada and the rest of Europe. Again, that's a small segment right now, but it's going to grow, and it's going to be all pure growth for us in 2024 because it essentially grows from a zero base. So, yeah, I think that's behind us. I don't know if we would call it a couple of points.

We should be pretty excited about the opportunity here.

Great. Thanks, and then just switching to guidance can.

Can you just remind us what's factored in in terms of respiratory normal seasonal I think coming into 2003 and factored in a pretty worst case scenario is that how we should be thinking about it. This year and then just philosophically, it's pretty pretty tight range, especially given the given the.

Fred L. Hite: We haven't really quantified it, but we don't expect it to continue. And yeah, I have a pretty good line of sight into that.

Acquisition coming into revenue.

Did you settle out of the range and then how should we think about the high and low end.

Yes, so similar to last year 2024 guidance assumes that we will see a similar RSV environment in the fourth quarter of.

Fred L. Hite: As we head into this, as we're in 2024, we expect that to be a tailwind for our business, not a headwind. And just one last one, if I could, the OB&P, you mentioned gross margin. I think you said the profile is pretty similar, but operating margin wise. I'm just curious if that's higher than sort of where you stand today.

2024 that we saw in 2023, so we're not assuming that it goes away, we're not assuming it's worse.

And as far as the guidance goes.

Fred L. Hite: I know the EBITDA guide of 8 to 9, higher than the Street Seven. I'm thinking some of that's coming from that acquisition, but any comments sort of on the bottom line contribution are on that scale. Yeah, absolutely. So very similar to MDO when we bought it.

As a tight range.

We have a pretty good line of sight on the core business as well as Boston coming into this and it is kind of what it is I guess so.

I don't have any philosophy of why it's as tight as it is but we're pretty confident.

Fred L. Hite: This business, Boston, is profitable. It's positive adjusted EBITDA, it's positive net income, and positive cash flow. However, historically, it hadn't been growing tremendously fast.

In those numbers.

Great. Thanks for taking my questions.

Thanks, Nick.

Thank you there are no further questions I'd like to turn the call back over to David Bailey for any closing remarks.

Fred L. Hite: And so we will be investing a little bit of money into that business, obviously the sales force. But yes, you are correct in assuming that that business is more profitable than our overall business was in 2023. That is correct. And we would expect that to continue going forward. Great, thank you.

Thanks, operator, well I appreciate you all.

Joining us today on the call today's call a little bit longer.

Wanting to make sure that we can fully explain the Boston acquisition and the opportunity we have on the opiates being combined with everything else that's going on so thanks for your time today and we look forward to seeing you all at meetings in the next several months.

Fred L. Hite: Thank you. Thank you. Our next question comes from Samuel Brodovsky with Truist Securities. Your line is open.

Have a great day.

Thank you for your participation. This does conclude the program you may now disconnect good day.

Samuel E. Brodovsky: Hey, good morning, guys. Thanks for taking the questions. I'll just ask one more question about Boston.

Okay.

Fred L. Hite: To start off, I think you mentioned a one to three million dollar revenue number implies a pretty nice opportunity to ramp revenue there without adding new clinics. Is that something we should think about being able to be achieved quickly, sort of after the integration is completed? Or is that going to be a steady ramp? Yeah, it's a good question.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

[music].

Fred L. Hite: And part of the reason that that is such is that these clinics are primarily surrounded around Boston, around Philadelphia, kind of the upper northeast, which are major, major population centers, as well as major hospitals that are using Boston's products. And so it takes a few, maybe more clinics in those areas where patients are coming from a longer distance because of their catchment. And so maybe some of those clinics are doing a little less than they would if there were fewer. It isn't our intent to consolidate, but it is our intent to drive more volume through the existing. So that is a possibility. But I also think you've got this right, though.

Yeah.

Yes.

Okay.

[music].

Fred L. Hite: And when you think about our capacity over the course of the next several years, our intent is to scale this to every major children's hospital jurisdiction in the United States and then some internationally. And when you start thinking about those 26 clinics, we think they're serving, give or take, 15 children's hospitals right now.

Sure.

Okay.

Yes.

Sure.

Yes.

Fred L. Hite: When you think about the scale there, it is a really big opportunity for us to scale this into the other 285 children's hospitals that aren't active users or don't have active Boston clinics in their area. So, yeah, that's obviously why we're one of the reasons why we think we should be pretty excited about the opportunity here. And then I'm just changing a guide. Can you remind us what's factored in in terms of respiratory illness? I think coming into 23, in fact. Worst-case scenario

Yes.

[music].

Fred L. Hite: Is that how we should be thinking about it this year? And then, just philosophically, it's a pretty, pretty tight range, especially given the acquisition coming into revenue. Just how do you settle out of that? Yeah, so similar to last year, 2024 guidance assumes that we will see a similar RSV environment in the fourth quarter of 2024 to what we saw in 2023. So we're not assuming that it goes away. We're not assuming it's worse, and as far as guidance goes, it's a tight range.

Sure.

Okay.

[music].

Fred L. Hite: You know, we have a pretty good line of sight on the core business as well as Boston coming into this, and it is kind of what it is, I guess. So I don't have any philosophy on why it's as tight as it is, but we're pretty confident in those numbers. Thank you. Thank you. There are no further questions.

Okay.

Yes.

[music].

Okay.

Sure.

Thanks.

Okay.

Hum.

Fred L. Hite: I'd like to turn the call back over to David Bailey for any closing remarks. Thanks, operator. Well, I appreciate you all joining us today on the call. Today's call was a little bit longer.

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David R. Bailey: Just wanting to make sure that we can fully explain the Boston acquisition and the opportunity we have on OPSB combined with everything else that's going on. So, thanks for your time today and look forward to seeing you all at meetings in the next several months. Have a great day.

Okay.

Operator: Thank you for your participation. This does conclude the program. You may now disconnect.

Yes.

Operator: Good day. Phone Ringing, Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning and welcome to Orthopediatrics Corporation's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode.

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Philip Taylor: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Tripp Taylor from the Gilmartin Group for a few introductory comments. Thank you for joining us today. With me from the company are David Bailey, President and Chief Executive Officer, and Fred Hite, Chief Operating and Financial Officer. Before we begin today, let me remind you that the company's 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.

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Philip Taylor: For a discussion of risk factors, I encourage you to review the company's most recent annual report on Form 10-K, which will be filed with the SEC in the near future. During the call today, management 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 measure 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.

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Philip Taylor: With that, I'd like to turn the call over to David Bailey, President and Chief Executive Officer. Thanks, Tripp. Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2023 conference call. As we start all earnings calls, I'd like to begin by highlighting that we helped over 82,000 kids in 2023, a new record for orthopediatrics. Since inception, we've helped over 710,000 kids, and including Boston O&P, our combined organizations have helped more than one million kids.

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David R. Bailey: This continues to be the most important metric of success for orthopediatrics, and each year, we strive to increase our impact and benefit more kids. In line with our pre-announcement from early January, for the fourth quarter of 2023, we generated quarterly revenue of $37.6 million, representing growth of 21% compared to the fourth quarter of 2022. For the full year of 2023, we generated record revenue of $148.7 million, representing growth of 22% compared to the full year of 2022. Driven by favorable leverage in the cash portion of GNA, disciplined expense management, strong margins, and healthy revenue growth, we are excited to report that we outperformed our original adjusted EBITDA expectations, producing a record adjusted EBITDA of $5 million in 2023. In addition, we're thrilled to see our prior acquisitions fully integrated and performing well with robust top-line revenue contributions and profitability. Looking closer at the quarter, revenue and surgery scheduling was strong throughout, except during the final two weeks of December, when we started to experience lighter surgical volumes due to an uptick in RSD. After RSV rates rose rapidly at the end of December and extended into early January, volumes quickly returned to more normalized levels.

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Yes.

Good morning, and welcome to Arthur Pediatrics Corporation's fourth quarter and full year 2023 earnings conference call.

At this time, all participants are in listen only mode.

We will be facilitating a question and answer session towards the end of today's call.

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to trip Taylor from the Gilmartin group for a few introductory comments.

Reading the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95. 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 I encourage you to review the company's most recent annual report on form 10.

K, which will be filed with the SEC in the near future.

David R. Bailey: Overall, global scoliosis growth was slightly muted by a continuation of slower-than-expected ordering in our Latin and South American businesses, resulting in a 31% reduction in OUS scoliosis sales and negatively impacting overall growth. We expect OUS scoliosis to rebound in 2024 and to act as a tailwind for the year beginning as early as Q1, with multiple opportunities, including continuing legacy product growth and several key new organic product lines. Pega Sales Expansion, Normalization of International Markets, Positive Longer-Term Affix Data Publication, A Newly Formed and Rapidly Expanding Specialty Bracing Business, OPSB, and an early start in digital health care, we are confident in our growth prospects for 2024 and beyond. Importantly, we remain in an extremely secure financial position and are confident that our current balance sheet enables us to execute our long-term strategy without additional equity capital.

Please note that these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for worth of pediatrics 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 today March seven 2024, except as required by law. The company undertakes no obligation to revise or update any statements to reflect events or circumstances, taking.

Place after the date of this call.

With that I'd like to turn the call over to David Bailey, President and Chief Executive Officer.

David R. Bailey: Therefore, we are reiterating our revenue guidance for the full year 2024 of $197 to $200 million, including Boston O&P historical revenue of $25 million, representing overall growth of 32 to 34 percent. We are also issuing our full year EBITDA guidance of $8 to $9 million and our expectation for set deployments of less than $20 million as we continue to focus on improving profitability and reducing cash usage. We close 2023 on an extremely high note; we achieved a record number of children helped, record revenue, and generated record adjusted EBITDA. We continue to balance top line revenue growth with improved profitability on our way to cash flow break even sooner, a trend we expect to carry into 2024. Moving to our revenue segment, in the fourth quarter of 2023, we generated total trauma and deformity revenue of $27.1 million, representing growth of 23% compared to the prior year period. Strong performances from PEGA products, Trauma, X6, and OPSB led revenue growth in the quarter.

Since inception, we've helped over 710000 kids.

And including Boston LNP, our combined organizations have helped more than 1 million kits.

This continues to be the most important metric of success for orthopedic matrix and each year, we strive to increase our impact and benefit more kids.

For the full year of 2023, we generated record revenue of $148 $7 million representing growth of 22% compared to the full year of 2022.

Driven by favorable leverage and the cash portion of G&A disciplined expense management strong margins and healthy revenue growth. We are excited to report that we outperformed our original adjusted EBITDA expectations, producing a record adjusted EBITDA of $5 million in 2023 and.

In addition, we are thrilled to see our prior acquisitions fully integrated and performing well with robust topline revenue contributions and profitability.

After RSV rates rose rapidly at the end of December and extended into early January volumes quickly returned to more normalized levels.

David R. Bailey: We saw continued record PEGA product performance with substantial growth of 59% in the U.S. and 32% outside of the U.S. Sales of PEGA continue to be better than we ever expected, and as we more deeply penetrate our U.S. accounts with the full PEGA product portfolio and ramp international sales, we believe PEGA growth will continue to be very strong globally in 2024 and beyond. Elsewhere in T&D, we continue to take share across our entire T&D portfolio, a trend we expect to maintain for several years.

Hospitals appear to be managing their spikes of the respiratory season, better and mitigating the impact on case schedules all.

Altogether volumes and staffing continued to improve month over month, and while still not running full tilt, we're encouraged recovery and the environment is tracking our expectations for modest sequential improvement overall, we feel this headwind is lessening and we will remain cautious until we see further normalization.

The diverse nature of our business continued to benefit orthopedic metrics in the quarter, the global trauma and deformity domestic scoliosis and <unk> business were very strong offset by lower growth in international Scoliosis fourth quarter Global T&D was very strong at 23% with <unk>.

David R. Bailey: We enjoy a leading share position in the T&D franchise within the U.S. Children's Hospitals, and we plan to continue to execute our market dominant strategy with set deployment, new product development, and superior service. On the R&D side, we received FDA approval and beta-launched the PMP tibia system in Q3 and performed more cases than we expected in Q4. Initial surgeries have gone extremely well.

Led by sales of Peg, a product's Pnp femur early sales of <unk> and growth within the <unk> franchise.

U S scoliosis revenue bounce back aggressively in the fourth quarter with 35% growth. Despite a very slow a few weeks at the end of December.

New scoliosis users continue to increase significantly across the response and App a fixed product lines overall global scoliosis growth was slightly muted by a continuation of slower than expected ordering and our Latin and South American business, resulting in a 31% reduction in scoliosis sales and negatively impacting.

David R. Bailey: So far, the surge in usage rate has been higher than we forecasted, which bodes well for our full market launch of the PMP tibia, scheduled to start in the first half of 2024. We expect the PMP tibia to be an important growth driver in 2024 and for the next several years and expect the full release of the new PEGA gyro product to make a positive impact as well. Driven by continued execution of our key account conversion strategy, we have seen an increase in the number of customers and the quantity of products used. Now, with more high-tech products coming to the market and a robust pipeline that was strengthened by the PEGA acquisition, our T&E business is positioned to deliver sustainable growth over the next several years as we execute our long-term strategy to capture greater than 50% market share. We also have several prominent R&D projects in the process within the surgical side of the T&D business. We're making great progress on the development of our entirely new pediatric plating platform, the P3 project, which we expect will be world-class and spawn further share-taking opportunities for us within our plating franchise.

Overall growth.

We expect U S scoliosis to rebound in 2024 and to act as a tailwind for the <unk> for the year beginning as early as Q1.

With multiple opportunities, including continuing legacy product growth several key new organic product launches Pegasus.

<unk> sales expansion normalization of international markets positive longer term at a fixed data publication, a newly formed and rapidly expanding specialty bracing business <unk>.

And an early start in digital health care, we are confident in our growth prospects for 2024 and beyond <unk>.

Importantly, we remain in an extremely secure financial position and are confident that our current balance sheet enables us to execute our long term strategy without additional equity capital.

Therefore, we are reiterating our revenue guidance for the full year 2024 of $197 million to $200 million.

Including Boston LNP historical revenue of $25 million.

David R. Bailey: We are also making solid strides on new external fixation devices that will continue the growth trajectory of our X-Fix franchise. Further, we expect numerous new EU MDR-approved products that we'll be launching in the EU market in the coming year to be impactful. Our Orthopediatrics Non-Surgical Specialty Bracing Business, or OPSB, continues to perform extremely well, and I'd like to spend a little more time today outlining this significant opportunity that we have here. We recently announced the official orthopediatric specialty bracing brand, or OPSB, featuring a new website that incorporates the full MDO Clubfoot and Rhino product portfolio, along with several new products, as well as the acquisition of Boston L&P.

<unk> overall growth of 32% to 34%.

We are also issuing our full year EBITDA guidance of $8 million to $9 million and our expectation for set deployments of less than $20 million as we continue to focus on improving profitability and reducing cash usage.

We closed 2023 on an extremely high note we achieved a record number of children helped record revenue and generated record adjusted EBITDA. We continue to balanced top line revenue growth with improved profitability on our way to cash flow breakeven sooner.

We expect to carry into 2024.

Yes.

Moving to our revenue segments.

In the fourth quarter of 2023, we generated total trauma and deformity revenue of $27 1 million representing growth of 23% compared to the prior year period.

Strong performances from Peg a products trauma ex fix and <unk> led revenue growth in the quarter we.

We saw continued record peg a product performance with substantial growth of 15, 9% in the U S and 32% are outside of the U S.

Sales of peg it continued to be better than we ever expected and as we more deeply penetrate our U S accounts with a full packet product portfolio and ramp international sales. We believe peg a growth will continue to be very strong globally in 2024 and beyond.

Elsewhere in T&D, we continue to take share across our entire T&D portfolio a trend we expect to maintain for several years.

We enjoy a leading share position and then T&D franchise within the U S children's hospitals, and we plan to continue to execute our market dominant strategy was set deployment new product development and superior service.

On the R&D side, we received FDA approval and beta launch the <unk> system in Q3.

And perform more cases than we expected in Q4 <unk>.

Initial surgeries have gone extremely well.

So far the surgeon usage rate has been higher than we forecasted which bodes well for our full market launch of the <unk> scheduled to start in the first half of 2024.

We expect <unk> to be an important growth driver in 2024 and for the next several years and expect the full release of the new Peg a gyro product to make a positive impact as well.

David R. Bailey: Their portfolio of some of the most advanced individualized braces available to treat pediatric orthopedic conditions includes custom pediatric-specific Boston bracing for scoliosis, Lower Limb Orthosis and Dynamic Movement Orthosis, DMO, as well as the Boston Band for Plagiocephaly. Boston collaborates with world-class medical facilities, including Boston Children's Hospital, Children's Hospital of Philadelphia, Nationwide Children's Hospital in Columbus, Ohio, Boston O&P maintains 26 patient care clinics, primarily concentrated in the Northeast. Boston O&P's annual historical revenue is approximately $25 million. As we mentioned on previous calls, we continue to successfully execute a build aggressively strategy in OPSB and anticipate it to grow very rapidly in the coming years. We see many of the same characteristics in the OPSB opportunity that we witnessed when we started OP 17 years ago. These include a large $775 million U.S. TAN, $500 million of which is allocated to the top 300 U.S. children's hospitals.

Driven by continued execution of our key account convergent strategy, we've seen an increase in the number of customers and the quantity of products used.

We also have several prominent R&D projects in process within the surgical side of the T&D business, we're making great progress on the development of our entirely new pediatric playing platform.

Three project, which we expect will be world class and spawn further share taking opportunities for us within our plating franchise.

We're also making solid strides on new external fixation devices that will continue the growth trajectory of our Xbox franchise.

Further we expect numerous new EU, India approved products that we'll be launching in the EU market in the coming year to be impactful.

Our ortho pediatrics non surgical specialty bracing business, our old PSB continues to perform extremely well.

And I'd like to spend a little more time today outlining this significant opportunity that we have here.

We recently announced the official ortho pediatric specialty bracing brand Earl PSB, featuring a new website that incorporates the full MTO clubfoot and Rhino product portfolio, along with several new products as well as the acquisition of Boston LNP.

We believe the <unk> franchise represents a large new source of capital friendly revenue growth.

It's estimated that 80% of the pediatric orthopedic care happens before and after surgery and we're extremely excited to now be better positioned to address this important segment.

We estimate the U S. Non surgical specialty bracing market is at minimum $775 million in total and conservatively $500 million of opportunity in the top 300 children's hospitals.

David R. Bailey: We do not plan to just scratch the surface of this segment of the pediatric orthopedic market, and we believe the Boston O&P acquisition makes that very clear. This is another market dominance play where we plan to be very aggressive and to scale this business rapidly until we are the clear-cut market leader. This has been a historically fragmented market, and we're able to leverage our current channel to increase access and, most importantly, provide the service required to achieve optimal patient outcomes in a way that allows us to increase our partnership with all of our customers. While the integration of Boston O&P will happen throughout 2024, we expect the rest of the OPSD franchise to organically grow aggressively this year. Once integrated, our strategy to aggressively grow Boston will produce many years of future growth. Our strategy for the OPSB business is rooted in three core initiatives that we believe will enable orthopediatrics to deliver outsized growth. These include Salesforce expansion to drive adoption and scale usage.

<unk> these customers at prices do not require the upfront capital investment in consigned inventory our instrument sets.

It has always been our aspiration to surround the pediatric orthopedic surgeon with all the products they need to treat children and we are thrilled about this opportunity to provide our surgeon customers with more of the products they use to treat their patients every day.

Plagiocephaly and various neuromuscular disorders.

Their portfolio of some of the most advanced individualized <unk> available to treat pediatric orthopedic conditions includes custom pediatric specific Boston embracing for scoliosis.

Lower limb orthosis, and dynamic movement orthosis, BMO as well as the Boston band for Plagiocephaly.

Partnering with World class medical facilities, including Boston Children's Hospital Children's Hospital of Philadelphia nationwide Children's Hospital in Columbus, Ohio, and Phoenix Children's Hospital, just to name a few Boston LNP maintains 26 patient care clinics, primarily concentrated in the northeast.

David R. Bailey: Product Development to Build a Competitive and Comprehensive Portfolio and the addition of new clinics to enhance profitability. While we're in the early innings of this growth journey, we believe we are well on our way to growing this business to be in excess of $100 million in the coming years. In anticipation of the Boston O&P acquisition and to support the OPSB business as a whole, we have been preemptively recruiting OPSB-specific sales representatives that will be integrated into our existing agency sales network.

Boston <unk> annual historical revenue is approximately $25 million.

As we mentioned on our previous call. We continue to successfully execute a build aggressively strategy in op ESB and anticipate it to grow very rapidly in the coming several years we.

We see many of the same characteristics and the <unk> opportunity that we witnessed when we started <unk> 17 years ago.

These include a large $775 million U S Tam $500 million of which is in the top 300 U S children's hospitals.

With very limited competition, a general lack of ongoing innovation and the opportunity to provide elite level of customer service and support clinical education and training.

We also see an opportunity for strong margins healthy profits and the potential to build a large business in a very capital friendly manner.

Beyond all of that non surgical specialty bracing fits with our goal of providing our customers with all of the products they need to treat children with orthopedic conditions.

And building further brand loyalty across our entire surgical and non surgical portfolio.

Okay.

We do not plan to just scratched the surface of this segment of the pediatric orthopedic market and we believe the Boston RMP acquisition makes that very clear.

David R. Bailey: Beyond these product launches and partnerships, there will be several more in the coming months and quarters, supporting our thesis that we can build a scaled business in this space in the coming year. Now, looking at the third initiative. Over the last several years, we have completed multiple acquisitions and partnerships, all of which we have successfully grown and will continue to grow. But never have we seen such a favorable response from our customers as when we announced our partnership with Boston O&P in early January. This is a true testament to the legacy of amazing service, products, and patient care that Boston O&P has provided our customers through their 26 clinics, largely in Upper New England. Our customers' feedback makes clear their desire to have a true partner in the non-surgical treatment of their patients and validates the large unmet need for the non-surgical support of their patients.

This is another market dominance play, where we plan to be very aggressive and to scale. This business rapidly until we are the clear cut market leader.

Product development to build a competitive and comprehensive portfolio.

David R. Bailey: In addition, it signifies our customer support for our growth strategy to scale Boston O&P to the rest of our 300 children's hospitals around the U.S. and in certain international markets. It'll take us a little time, but we feel this is an important first step that will open a larger opportunity for our company. Importantly, the operating economics for each of our existing clinics and future clinics is favorable for orthopedics. Generally speaking, we expect modest startup costs with limited initial capital outlay consisting mainly of leased office space, limited build out, and staffing orthotists growing with the scale of the opportunity.

And the addition of new clinics to enhance profitability.

We're in the early innings of this growth journey. We believe we are well on our way to growing this business to be in excess of $100 million in the coming years.

Turning to the first initiatives of Salesforce expansion.

In anticipation of the Boston <unk> acquisition and to support the <unk> business as a whole we have been preemptively recruiting Oh PSB specific sales representatives that will be integrated into our existing agency sales network.

We continue to actively recruit and train new associates and so far we are pleased with the types of people we are attracting with.

With our pre existing customer relationships, we expect to see rapid organic revenue ramp in each territory, where our new <unk> reps are partnering with our existing surgical sales teams.

David R. Bailey: Consistent with Boston O&P's historical revenue, we expect each new clinic will have the capacity to generate between $1 and $3 million in revenue and produce a profit rapidly once fully operational. Again, it will take us some time for us to integrate Boston O&P and ramp up the strategy, but we are already working to build a large funnel of opportunity and expect this to have a material contribution to revenue growth as early as 2025. Moving to the scoliosis business. In the fourth quarter of 2023, we generated revenue of $9.7 million, representing global growth of 20% compared to the prior year. This global growth was led by an extremely strong domestic performance of 35% growth and muted by a few slower weeks in the back of December due to RSV rates and a slower quarter internationally. In the fourth quarter, international sales declined by 31% and were lighter due to continued chopping ordering patterns from a few large international stocking distributors in Latin and South America.

Regarding the second initiative product development within the Mbo team in Iowa, the <unk> team in Warsaw, and now the Boston LNP team at our <unk> headquarters in Boston, We are now staffed to deliver our aspiration to launch four to five new products every year beginning in 2020 for.

This cadence along with the launch of several products in 2023, such as the MP Leigh MP plus the move bar DS two the Rhino cruiser and the aura medical levity device set us up nicely for strong growth.

Beyond these product launches and partnerships there will be several more in the coming months and quarters supporting our thesis that we can build a scale business in this space in the coming years.

Looking at the third initiative over.

Over the last several years, we have completed multiple acquisitions and partnerships all of which we have successfully grown and will continue to grow.

But never have we seen such a favorable response for our customers is when we announced our partnership with Boston LNP in early January.

This is a true testament to the legacy of Amazing service products and patient care. The Boston <unk> has provided our customers through their 26 clinics largely in the upper upper New England.

Our customers feedback makes clear their desire to have a true partner in a non surgical treatment of their patients and validates large unmet need and the non surgical support of their patients.

In addition, it signifies our customer support of our growth strategy to scale, Boston LNP to the rest of our 300 children's hospitals around the U S and in certain international markets.

David R. Bailey: Despite this, we've started to see a rebound across the international scoliosis business, and we expect improved international scoliosis in 2024 as we overcome these difficult comparables, Latin and South American ordering improves, and new revenue growth opportunities materialize as we launch scoliosis in Europe. We're very proud of the way this business has rebounded and have a clear line of sight into continued improvement for the A highlight in the quarter is the success of our U.S. scoliosis business, which outpaced a rebounding international business. The fourth quarter saw strong U.S. growth of 35%, driven by more users of response and apathetics and the successful execution of new launches this year.

It'll take us a little time, but we feel this is an important first step that will open a larger opportunity for our company importantly.

The operating economics for each of our existing clinics and future clinics is favorable for orthopedic metrics generally speaking, we expect modest setup costs with limited initial capital outlay, consisting mainly of leased office space limited build out and staffing orthopedists growing with the scale of the opportunity.

Consistent with Boston <unk> historical revenue, we expect each new clinic, while the capacity to generate between one and $3 million in revenue and produce a profit rapidly once fully operational.

It will take us some time for us to integrate Boston LNP and ramp the strategy, but we are already working to build a large funnel of opportunities and expect this to have a material contribution to revenue growth as early as 2025.

David R. Bailey: In addition, we're pleased to report that the surgeons from the three largest sites who transitioned to new practice locations are now settled in and have ramped up to speed, starting to perform more cases, and returning to more normalized levels. This significant growth in U.S. scoliosis is representative of both the strength of this business and the opportunity we have for the future. We are bullish on 2024 scoliosis growth as we exit 2023 with 25% more total users of response and appetite. Several new products that were launched in 2023, such as response cannulated screws and response power, strengthening apothecs data, a robust pipeline of 7D placement, and an improving international outlook. Further, the 2024 R&D pipeline is rich with extremely novel technologies that solve major unmet needs for our customers, specifically for patients with early-onset scoliosis, an area historically we've never had problems with. We recently announced the FDA approval and beta launch of our first EOS product, Response Rib and Pelvic, and expect to have the new VertiGlide Growing Spine System FDA approved in 2024.

Moving to the scoliosis business.

In the fourth quarter of 2023, we generated revenue of $9 $7 million, representing global growth of 20% compared to the prior year.

This global growth was led by an extremely strong domestic performance of 35% growth and muted by a few slower weeks in the back of December due to RSV rates and a slower quarter internationally.

<unk> comparable.

Latin and South America, and ordering improves and new revenue growth opportunities materialize as we launched scoliosis in Europe.

We're very proud of the way this business is rebound and have a clear line of sight into continued improvement for the coming year.

David R. Bailey: Beyond that, we'll launch our new rod reduction instrumentation in 2024 that will support both the response spine system and our new fusion system currently in development. Lastly, we continue progress on the development of our electromechanical growing rod, although its launch will be a few more years. Notably, U.S. surgery scheduling trends strengthened late in Q3 and continued into Q4, but for a few weeks at the end of the year. We expect this strength to continue into 2024 as the elective market normalizes. Moving on to international.

We are bullish on 2020 for scoliosis growth as we exit 2023 with 25% more total users of response on <unk> seven.

Several new products that were launched in 2023, such as response cumulated screws in response power.

Strengthening app of fixed data a robust pipeline of 70 placements and an improving international outlook.

David R. Bailey: In the fourth quarter of 2023, we generated international revenue of $9.3 million, delivering 13% growth, on top of 67% growth in the fourth quarter of 2022. This growth was led by extremely solid performance with our T&D products, offset by slow scoliosis sales to stocking distributors in South America. We're pleased to see a continuation of the rebound in our international business in the fourth quarter and expect it to continue throughout 2024. International agency market sales continue to be particularly strong both in trauma and deformity and scoliosis. Progress in our German direct sales model continues to track favorably and should produce good growth in 2024. We have onboarded several new users, and we look forward to increasing penetration in the German market. We expect strong PECA product sales to continue into 2024 and, likely, 2025 as we deploy inventory and train our sales channels. Despite the scoliosis softness we experience in Latin and South America, we're making great progress with launching scoliosis in Europe.

We've recently announced the FDA approval and beta launch of our first pass product response ribbon pelvic and expect to have the new vertical I'd growing spine system FDA approved in 2024.

Beyond that we will launch our new Rod reduction instrumentation in 'twenty 2024 that will support both the response spine system and our new fusion system currently in development Lastly.

Lastly, we continue progress on the development of our electromechanical growing rod although its launch will be a few more years.

Notably U S surgery scheduling trends strengthened late in Q3 continued into Q4, but for a few weeks at the end of the year. We expect this strength to continue into 2024 as the electric market normalizes.

Moving on to international in the fourth quarter of 2023, we generated international revenue of $9 3 million delivering 13% growth on top of 67% growth in the fourth quarter of 2022.

Fourth quarter of 2023 growth was led by extremely solid performance with our T&D products offset by slow scoliosis sales to stocking distributors in South America.

We're pleased to see a continuation of the rebound in our international business in the fourth quarter and expect it to continue throughout 2024.

International Agency market sales continued to be particularly strong both in trauma and deformity and scoliosis proper.

David R. Bailey: We're performing first surgeries in new markets and with new surgeon customers. Additionally, we're making good headway in growing Australia and entering New Zealand as we have had added cases and leadership in support of our long-standing agency partner, and we're starting cases in Canada following recent approvals and launches. Overall, we've got a really nice setup for our international business, and we believe that 2024 will show great improvement beginning as early as Q1. That brings us to Surgeon Training and Education. In Q4, we hosted 98 unique training experiences for over 2,600 health care professionals. Among these events were our premier sponsorship of the Akron Resident Review Course and the annual International Pediatric Orthopedic Society meeting, IPOS, which takes place in Orlando every December.

Progress in our German direct sales model continues to track favorably and should produce good growth in 2024.

We are onboarding, several new users and we look forward to increasing penetration in the German market.

We expect strong packet product sales to continue into 2024 and likely 2025, as we deploy inventory and train our sales team.

Despite the scoliosis softness we experienced from Latin and South America, we're making great progress launching scoliosis in Europe.

Overall, we've got a really nice setup for our international business and we believe that 2024 will show great improvement beginning as early as Q1.

That brings us the surgeon training and education in Q4, we hosted 98 unique training experiences for over 2600 healthcare professionals. Among these events our premier sponsorship of the Akron Resident review course, and the annual International Pediatric Orthopedic Society meeting Iqos, which takes place.

David R. Bailey: In 2023, we unveiled a new sponsorship level for the Pediatric Orthopedic Society of North America, POP, and IPOS as the first emerald level sponsor. Our presence at IPOS this year was marked by multiple hands-on workshops featuring five sessions, including one for our new specialty bracing business and the DF2 brace for kids with femur fractures. The full year 2023 saw record numbers of educational opportunities for pediatric orthopedic surgeons and other allied health professionals. Globally, we advanced our partnership with multiple surgical societies, including the European Pediatric Orthopedic Society, as well as special scoliosis meetings in the UK and Germany, each hosting several hundred European surgeons.

And Orlando every December.

In 2023, we unveiled a new sponsorship level for the pediatric orthopedic Society of North America partner and Iqos as the first ever Emerald level sponsor.

Our presence at <unk>. This year was marked by multiple hands on workshops, featuring five sessions, including one for our new specialty breaking the business and the <unk> for kids with femur fractures.

David R. Bailey: We conducted a total of 391 learning experiences for our surgeon customers, thus advancing our ongoing commitment to training the next generation of pediatric orthopedic surgeons and leading innovation in our subspecialty around the world. Lastly, continued focus on our people is a critical part of our competitive advantage, which is why it's so important that we recently announced that for the eighth time, Orthopediatrics was named as one of the best places to work in the state of Indiana. We are committed to fostering a culture that is positive, engaging, and allows our associates to do their best work. This important culture allows us to further our mission and successfully help more kids all over the world. With that, I'd like to turn the call over to Fred to provide more detail on our financial results. Fred

<unk>.

Lastly continued focus on our people is a critical part.

Part of our competitive advantage, which is why it's so important that we recently announced for the eighth time Ortho Pediatrics was named as one of the best places to work in the state of Indiana.

With that I'd like to turn the call over to Fred to provide more detail on our financial results Fred.

Thanks, Dave or.

Our fourth quarter 2023 worldwide revenue of $37 $6 million increased 21% compared to the fourth quarter of 2022.

Growth in the quarter was driven primarily by the strong performance across global trauma, and deformity domestic scoliosis and the <unk>.

U S revenue of $28 3, million% to 24% increase from the fourth quarter of 2022.

Growth in the quarter was primarily driven by our trauma and deformity product lines scoliosis.

We generated total international revenue of $9 $3 million.

Representing growth of 13% compared to the fourth quarter of 2022, which grew by 67%.

Growth in the quarter was primarily driven by trauma and deformity offset by lower scoliosis sales to stocking distributors in South America.

Fred L. Hite: In the fourth quarter of 2023, trauma and deformity global revenue of $27.1 million increased 23% compared to the prior year period; growth in the quarter was driven primarily by share gains across our entire portfolio with strong contributions from PEGA products, trauma, x fix, and OPSB. In the fourth quarter of 2023, scoliosis revenue of $9.7 million increased 20% compared to the prior year period. Growth was primarily driven by increased U.S. growth of 35 percent, partially offset by cancelled cases in late December from RSV and lower-than-expected orders in Latin and South America. Finally, sports medicine, and other revenue in the fourth quarter of 2023 was $0.9 million compared to $0.9 million in the prior year period. Turning to Set Deployment.

In the fourth quarter of 2023 trauma and deformity global revenue of $27 $1 million increased 23% compared to the prior year period.

Growth in the quarter was driven primarily by share gain across our entire portfolio with strong contributions from peg a products trauma ex fix and <unk>.

In the fourth quarter of 2023, scoliosis revenue of $9 $7 million increased 20% compared to the prior year period.

Growth was primarily driven by increased U S growth of 35%, partially offset by canceled cases in late December from RSV and lower than expected orders in Latin and South America.

Finally sports medicine other revenue in the fourth quarter of 2023 was zero point $9 million compared.

Compared to <unk> $9 million in the prior year period.

Fred L. Hite: $5.9 million of sets were consigned in the fourth quarter of 2023 compared to $6.3 million in the fourth quarter of 2022. For the full year of 2023, we deployed $22.0 million compared to $20.1 million in 2022. The increase was driven by significant new product development deployments and significant PEGA deployments, as well as multiple consigned 7D units. Touching briefly on a few key metrics, for the fourth quarter of 2023, gross profit margin was 71.0% compared to 68.5% for the fourth quarter of 2022. The slight increase in gross profit margin was driven primarily by lower set sales to international stocking distributors. Total operating expenses increased $5.2 million, or 18%, to $34.8 million in the fourth quarter of 2023. The increase was mainly driven by increased volume-related commissions, as well as incremental personnel required to support the growth of the company. Sales and marketing expenses increased $1.5 million, or 14%, to $12.4 million in the fourth quarter of 2023. The increase was primarily driven by increased sales commission expenses.

Turning to set deployment.

$5 $9 million of sets were consigned in the fourth quarter of 2023 compared to $6 $3 million in the fourth quarter of 2022.

For the full year of 2023, we deployed $22.01 million.

Compared to $20 $1 million in 2022.

The increase was driven by significant new product development deployment.

Significant purger deployments as well as multiple consigned 70 units.

Touching briefly on a few key metrics.

For the fourth quarter of 2023 gross profit margin was 71.0% compared to 68, 5% for the fourth quarter of 2022.

The slight increase in gross profit margin was driven primarily by lower set sales to international stocking distributors.

Total operating expenses increased $5 2 million or 18% to $34 $8 million in the fourth quarter of 2023. The increase was mainly driven by increased volume related commissions as well as incremental personnel required to support the growth in the company.

Sales and marketing expenses increased $1 5 million or 14% to $12 4 million in the fourth quarter of 2023. The increase was primarily driven by increased sales Commission expenses.

General and administrative expenses increased 3.0 or $1 million or 18% to $19 $6 million in the fourth quarter of 2023. The increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization expense.

Total other income was $1 2 million for the fourth quarter of 2023 compared to zero point $4 million for the same period last year.

Adjusted EBITDA was $1 $3 million in the fourth quarter of 2023. This compares to a loss of $2 2 million in the fourth quarter of 2022.

This increase was driven by incremental revenue combined with cost controls across the organization.

Net loss for the full year of 2023 was 21.0 million.

Compared to a net income of $1 $3 million last year.

Fred L. Hite: Fair value adjustment of contingent consideration for the total year 2023 was a favorable $3 million compared to a favorable $26 million in 2022; adjusted EBITDA for the full year of 2023 was $5.0 million compared to $0.2 million for the full year of 2022. We ended the fourth quarter with $82.3 million in cash, short-term investments, and restricted cash. As of December 31, 2023, $10.0 million had been drawn on our new term loan with MidCap. Post-closing the Boston O&P acquisition in January of 2024, our cash and restricted cash balance was approximately $60 million. With our current cash position, as well as our new debt facility, we are well capitalized to continue to execute on our strategy. Given our strong balance sheet, positive adjusted EBITDA, our line of sight to cash flow breakeven, and our recent acquisitions, we are in a position of tremendous strength. Turning to guidance, we are reiterating our expectation for full year 2024 revenue to be in the range of $197 to $200 million, representing year over year growth of 32 to 34%. Additionally, we now expect to generate between $8.0 to $9.0 million of adjusted EBITDA in 2024.

Fair value adjustment of contingent consideration for the total year 2023 was a favorable $3 million compared to a favorable $26 million in 2022.

Adjusted EBITDA for the full year of 2023 was 5.0 million.

Compared to zero point $2 million for the full year of 2022.

We ended the fourth quarter with $82 $3 million in cash and short term investments and restricted cash as of December 31, 2023, $10.0 million had been drawn on our new term loan with midcap.

Post closing the Boston <unk> acquisition in January 2024, our cash and restricted cash balance was approximately $60 million.

With our current cash position as well as our new debt facility, we are well capitalized to continue to execute on our strategy.

Given our strong balance sheet positive adjusted EBITDA, our line of sight to cash flow breakeven and our recent acquisitions, we are in a position of tremendous strength.

Turning to guidance, we are reiterating our expectation for full year 2020 for revenue to be in the range of $197 million to $200 million.

Representing year over year growth of 32% to 34%.

Additionally, we now expect to generate between 8.0 to 9.0 or $1 million of adjusted EBITDA in 2024.

Fred L. Hite: We expect less than $20 million of new sets to be deployed in 2024, representing our continued focus on driving the business to cash flow break-even sooner rather than later. Lastly, our S3 shelf registration filed in 2020 was fully sold in 2022. In keeping up with good corporate housekeeping, we will likely establish another universal shelf in 2024. As discussed previously, we have no need or plans to raise capital in the near term, but we believe maintaining a shelf is consistent with good corporate practice. I'll now turn the call back over to Dave for his closing remarks. Thanks, Fred.

We expect less than $20 million of new set deployed in 2024, representing our continued focus on driving the business to cash flow breakeven sooner rather than later.

Lastly, our S. Three shelf registration filed in 2020 was fully sold in 2022 and keeping up with good corporate housekeeping, we will likely establish another universal shelf in 2024.

As discussed previously we have no need or plans to raise capital in the near term, but we believe maintaining a shelf is consistent with good corporate practices.

I'll now turn the call back over to Dave for closing remarks.

Fred L. Hite: As we look back on 2023, we're proud of all that we've achieved and are confident that we have the right growth drivers in place for continued success in 2024. We expect positive trends in the business to continue, including robust top-line revenue growth and continued profitability growth as we move toward cash flow break even earlier than anticipated. In addition, in 2023, we launched eight new products, including Response Power Scoliosis, the Gyro Growth Modulation System, the Pediatric Nailing Platform Tibia System, the DF2 Brace, Mitchell Ponsetti Plus Bar, and the Levity Device.

Thanks Fred.

As we look back on 2023, we're proud of all that we've achieved and are confident that we have the right growth drivers in place for continued success in 2024, we expect.

Positive trends in the business to continue including robust topline revenue growth and continued profitability growth as we move towards cash flow breakeven earlier than anticipated.

In addition in 2023, we launched eight new products, including response power Scoliosis <unk>.

The Giro growth modulation system pediatric nailing platform <unk> system, the <unk> Mitchell Ponseti, plus bar and celebrity device. We continue to expect strong performance from our legacy products as a result of our heavy investment in set deployments in 2022 and 2023. However.

David R. Bailey: We continue to expect strong performance from our legacy products as a result of our heavy investment and set deployments in 2022 and 2023. However, our recent acquisitions, along with Apothex and Orthex, and our most recent organic product launches, such as PMP Femur and Tibia, Drive Rail, and DF2, require less capital deployment to drive growth due to a faster return on invested capital. This, combined with the launch and growth of the OPSB franchise, ensures we can maintain our high rate of growth while using less cash for inventory deployment, thus ensuring we drive to cash flow breakeven much sooner than earlier anticipated. All of our long-term plans, including profitability growth, are supported by our robust balance sheet, strong cash position, and access to debt. I've been with OP for nearly 17 years now, and I'm not sure I've ever been more excited.

<unk> ensure we can maintain our high rate of growth or using less cash for inventory deployment, thus, ensuring we drive to cash flow breakeven much sooner than earlier anticipated.

All of our long term plans, including profitability growth are supported by our robust balance sheet strong cash position and access to debt.

I've been with op for nearly 17 years, now and I'm not sure I've ever been more excited we are.

David R. Bailey: We are in an extremely strong position with all the tools in place to help more children than ever before, and I think our customers feel the same way. Together, our OP associates, our customers, and our shareholders are building something special, and that is having a profound impact on the lives of children. The future is bright for orthopediatrics, and we are just getting started. In closing, I'd like to thank our surgeon partners, my OP Associates, our investors, and all the innovators in pediatric health care for standing together to help kids. Operator, let's open the call for Q&A. Thank you. If you'd like to ask a question, please press star 11. If your question has been answered, and you'd like to remove yourself, please press star 11 again.

Our in an extremely strong position with all of the tools in place to help more children than ever before and I think our customers feel the same way.

Together, our <unk> associates, our customers and our shareholders are building something special.

And that is having a profound impact on the lives of children.

The future is bright for orthopedic metrics and we are just getting started.

In closing I'd like to thank our surgeon partners.

Associates are investors and all the innovators in pediatric health care freestanding together to help kids.

Operator, let's open the call for Q&A.

Thank you if you'd like to ask a question. Please press star one one if your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Operator: Our first question comes from Matthew O'Brien with Piper Sandler. Your line is open. Morning. Can you guys hear me okay?

Our first question comes from Matthew O'brien with Piper Sandler Your line is open.

Matthew O'brien: Morning, Matt. You got us, Matt. Oh, good. Yeah, excellent. So, just maybe starting, obviously, with the Boston O&P commentary. First of all, I'm sorry, it's gonna be a multi-parter.

Good morning can you guys hear me okay.

Good morning, Matt.

Excellent.

So just maybe starting obviously with the Boston LNP commentary first of all sorry, it's going to be a multi parter is that going to get split out separately, Fred Youre, saying this morning clearly.

Fred L. Hite: Is that going to get split out separately, Fred? You're saying this morning, clearly, you know, you're not going to need additional capital because you have plenty of funding for that, to build out these facilities, because I don't think they're that expensive. And then how do we model this growth going forward off of this base that you have today as you add more across the U.S. Yeah, so good questions. Boston is approximately 30% scoliosis bracing, custom braces, and the other 70% is deformity correction.

Youre not going to need additional capital because you have plenty of funding for that.

To build out these facilities because I don't think though that expensive and then how do we model. This growth going forward off of this base that you have today as youre, adding new clinics across the U S.

Yes.

Good questions Boston is approximately 30% scoliosis bracing custom braces.

And the other 70% is deformity correction.

Fred L. Hite: And so that's how the sales will show up in those two segments going forward. The business has a different seasonality than our typical business. They don't have the big summer selling season the way we do in our scoliosis business in the formative correction business. Their fourth quarter is a few points, a few percentage points higher than the other quarters, and typically, their first quarter is a few percentage points lower.

And so that's how the sales will show up in those two segments going forward.

The business.

Has a different seasonality than our typical business.

I don't have the big summer selling season, the way, we do in our scoliosis and deformity correction business.

Their fourth quarter is a few points percentage.

Percentage points higher than the other quarters and typically their first quarter is a few percentage points lower the middle quarters are roughly 25% of the year.

The growth of this business, obviously, we're still working on that for 2025, but we would expect this to grow faster than the overall business.

As the sales force becomes effective as new products are introduced and we are.

Looking to open new clinics, starting next year.

That does take some time to get the hospital to approve it to find the facility to get the obviously specialists trained in the pediatric space.

Fred L. Hite: But overall, I would say that this segment is going to grow much faster than the overall business for the next several years. Yeah, Matt, I think what we're trying to signal here is the clinic side of things as I walk through the three-point strategy. We expect no question as we add sales reps, and we've already done that. We expect the sales of the OPSB franchise, which is still inclusive, obviously, of MD Orthopedics and Rhino and Aura and the organic products that we launched last year, DF2, and the new stuff we're We would expect that business to continue to grow well in excess of 20%. That's kind of what it has done ever since we acquired MDO and then started adding products to it.

But overall I would say that this segment is going to grow much faster than the overall business for the next several years.

Yes, Matt I think what we're trying to signal here is the clinic side kind of as I walk through the three point strategy.

We expect no question as we add sales reps and we've already done that we expect the sales of the <unk> franchise.

David R. Bailey: I think what we're saying here is it's going to take a little bit of time on the clinic side, obviously, to get that side of the Boston business ramped up, but we're definitely expecting growth in the rest of that business, again, as we've seen for the last couple of years. Okay, and just on the upfront cost side, can you just comment a little bit there? And then I'll just ask my second question here. Just just expectations for the app to fix this year? Is that going to start to be a bigger contributor? Or is it still the kind of 25?

Take a little bit of time on the clinic side, obviously to get that side of the Boston business ramp.

But we're definitely expecting growth in the rest of that business again as we've seen for the last couple of years.

Okay and just on the on the upfront cost side can you just comment a little bit there and then I'll just ask my second question here, just just expectations for <unk> this year.

Is that going to start to be a bigger contributor or is it more installed 25 event.

David R. Bailey: Yeah, I think our view on AppaFix is the data continues to get stronger. There's no question. And, you know, as the data gets stronger, we expect this to continue to go up. I think we've kind of come off this position that there's going to be some quarter or some specific moment where it's this watershed, a moment where every surgeon agrees that this is the right treatment. But there's no question that the entire non-fusion segment of the pediatric spine is super interesting, but it's still embryonic.

Yes, I think.

On <unk> as the data continues to get stronger there is no question.

Ah moment wherever resurgent agrees that this is the right treatment.

But theres no question that the entire.

Non fusion segment of pediatric spine is super interesting, it's still embryonic it's still generally growing a lot of questions. We think we're answering those questions with the data.

And generally we expect <unk> to continue to outpace the growth of our fusion business.

And Thats kind of how we're modeling it for 2024 and specifically on the cost so today Boston at 26 clinics, they're all leased facilities.

Fred L. Hite: So today, Boston has 26 clinics. They're all leased facilities. So really, the cost, if we were to open a new facility, is minimal upfront. It's just building out of the space, hiring and training the actual clinicians, and then hiring more clinicians as the volume ranges. So, I don't know, a million dollars, I would say, max, to open one of these, maybe less.

So really the cost if we were to open a new facility is minimal upfront. It's just building out of the space hiring and training.

The actual clinicians and then hiring more clinicians as the volume ramps so.

I don't know million dollars I would say Max to open one of these maybe less.

Fred L. Hite: And then the revenue starts coming in pretty quick because we're not going to open one unless we have commitments from the surgeons at the hospital that, obviously, they're going to be using the clinic. Got it. Very helpful. Thank you so much.

And then the revenue starts coming in pretty quick because we're not going to open one unless we have commitments from the surgeons at the hospital that obviously, they're going to be using the clinic.

Got it very helpful. Thank you so much.

Rick Wise: Thanks, Matt. Thanks. Thank you. Our next question comes from Rick Wise. Your line is: Rick, if your telephone is muted, please unmute it. Yeah, here I am. Sorry, there was a glitch. I couldn't hear you.

Thanks, Matt.

Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Rick if your telephones Richard please on mute.

Yes.

Sorry.

Rick Wise: Good morning. Thank you. Morning. To start off on a big picture question, if I'm hearing you correctly, it sounds like a lot of the headwinds that you've experienced over the last year or so are either going away, gone away, or are sort of resolved on the staffing front, on the RSV front, on a variety of things. And so, I mean, that sounds very encouraging. Am I hearing you correctly, Dave?

I couldn't hear.

Good morning, Thank you.

Alright, great.

On a big picture question.

If I'm hearing you correctly it sounds like a lot of the headwinds that you've experienced.

Over the last year or so.

Or either.

Going away gone away.

Or are sort of resolved.

On the staffing front.

On the RFP on.

A variety of things and so I mean that sounds very encouraging.

Mike correctly day.

Yes.

That we are another quarter into this improvement and I think we're seeing that improvement here in Q1 as well.

And so yes, I think what we have said for a while here as we think that this is probably something that's behind US, let's say by mid year, We're a little cautious just because we recognize the June July August. These are our obviously, our big months on the surgical side, so until we see that.

Our setting we don't see on a specialty bracing side and so as that business becomes bigger enables us to kind of mitigate some of the risks associated with the environmental environmental risks that we saw over the last few years and I think that's also encouraging us that overall the business should be less affected.

By those types of environmental.

Abnormalities that we've experienced over the last few years.

Gotcha.

And Fred.

Help us think through the quarterly setup.

For the year.

Fred L. Hite: I wasn't sure if you were talking about maybe sequentially better first quarter revenues overall, but, Help us level set the right place to start thinking about the first quarter, and especially given the Boston O&P mix in there now. Thank you for the specific guidance that you gave about it in terms of their quarters, but how should we think about the flow of, quote, the new orthopediatrics quarterly flow overall for the 24 years? Thank you. Yeah, absolutely. Traditionally, the pre- COVID era, in particular, because the last several years have been so unusual.

It went by quickly I wasn't sure if you I thought at one point, maybe it was.

Relative.

Our product not overall I thought you were talking about maybe sequentially better.

First quarter revenues overall, but.

Help us level set the right place to start thinking about the first quarter.

Especially given the Boston RMP mixed in there now.

Thank you for the specific guidance.

Gave you about it in terms of.

Their quarters, but how should we think about the.

The new orphan pediatric quarterly flow overall.

<unk> 24 year. Thank you.

Yeah, absolutely so traditionally the pre.

Pre COVID-19 in particular because of the less.

Several years have been so unusual the first quarter is typically around five or 6% lower than the fourth quarter.

Then the fourth quarter.

And.

I would bet or I would assume that it's probably in that 41 and a half 42.

Range, so definitely a nice increase over the third quarter over.

Over the fourth quarter of 37 six.

Right.

Some of the past.

You broken the overall company quarters by as a percentage of sales. So you are guiding us to that $197 million to $200 million range, how would you frame the.

As a percentage of sales in rough terms.

The flow of the quarters as you contemplate 2024.

Yes, I mean, Boston is still right $25 million out of 200, so it's not going to have a dramatic first year impact on changing the overall.

Metrics. So the third quarter, we still would anticipate is by far the largest.

And followed by the second quarter, and then the fourth quarter and the first quarter, obviously would be the smallest number.

So I think it's going to be pretty similar honestly to historical with a slight change.

With Boston, but not much.

Gotcha.

Number of squeeze in one more if you don't mind.

I know you don't guide to gross margin.

I'm hearing you correctly, Boston is going to be above average also you've got new products launching you've got.

Recovery a variety of other things.

Help us understand.

A little more clearly the again the cadence and how we should be thinking about gross margin in 'twenty, four and put that in perspective relative to be as always seasonally slow.

Fourth quarter performance given the mix of business typically thank you.

Fred L. Hite: Yeah, absolutely. So the fourth quarter of 2023's gross margin was 71%, obviously lower than the third quarter, which is always our highest revenue and highest gross margin quarter. The 71% was an improvement year over year versus the 68 and a half we saw in the fourth quarter previously. And so the gross margin in 2024, I would expect, would continue to follow the sales. So it's going to be highest in the third quarter, a little lower in the second quarter, go down again in the fourth quarter, and a little softer in the first quarter.

Yeah, absolutely so the fourth quarter of 2023 gross margin at 71%, obviously lower than the third quarter, which is always our highest revenue and highest gross margin quarter.

71% was an improvement year over year versus the $68 five we saw in the fourth quarter previously.

And so the gross margin in 2024, I would expect would continue to follow the sales. So it is going to be highest in the third quarter.

Lower in the second quarter come down again in the fourth quarter and and a little softer in the first quarter I think overall the business was under 75% in 'twenty two 'twenty three and we would expect to see a similar type of result between 74 575.

Fred L. Hite: I think overall, the business was under 75% in 2023, and we would expect to see a similar type of result between 74 and a half and 75% for 2024. The Boston business gross margin is good. If you think about it, it's really two businesses in one.

<unk> for 2024.

The Boston business gross margin is good if you think about it it's really two businesses in one the manufacturing business and so we get the manufacturing margin from their products they manufacture and it's a retail business in the clinics. So we're getting the retail pricing and the margins associated with that.

So overall very strong similar gross margins to our overall business, but historically they've had very little sales.

Commissions, if you will so the contribution margin from that business is very strong better than our legacy business and even adding some sales force into that to grow higher revenue.

Contribution margin is still very strong in that business, which is very attractive obviously to the bottom line for us.

That's wonderful perspective, thanks for all the color. Thank you.

Fred L. Hite: Thank you. Thank you, Rick. Thank you. Our next question comes from Ryan Zimmerman with BTIG. Your line is open. Good morning.

Thank you Rick.

Thank you. Our next question comes from Ryan Zimmerman with <unk>. Your line is open.

Ryan Benjamin Zimmerman: Thanks for taking the question. Later, man. I wanted to just follow up. A couple of questions for me. First, Dave, the last few weeks of December, any quantification there to think about and that impact on the first quarter? potentially.

Good morning, Thanks for taking the question wanted to follow up okay.

Couple of questions for me.

A lot already been asked on the Boston on PC side.

Just first.

Dave.

Last few weeks of the summer and any quantification there to think about that impact on the flow through.

Potentially the first quarter as a result of some of those cases.

David R. Bailey: Yeah, good question. So I guess what I would say is that we were really, really doing well throughout the entirety of the quarter, and we saw a kind of a screeching halt in the last two weeks. These last two weeks are traditionally two of the largest weeks for us, because these are weeks when kids are out of school.

Yes. Good question. So I guess, what I would say is that we were we were really really doing well throughout the entirety of the quarter and we saw a.

<unk>.

Kind of a screeching halt in the last two weeks.

Last two weeks are traditionally two of the largest weeks for US. These are weeks when kids are out of school and so it was a pretty steep drop.

David R. Bailey: And so it was a pretty steep drop and kind of happened all of a sudden, and it did extend into the early part of January. So, you know, maybe, Ryan, it's a couple points of total top-line revenue growth for us, and it was a bit unfortunate, but not a lot we can do about it. What we did see, though, in the quarter, so this quarter now, is that, you know, obviously, after the hospital systems were hit, they seem to be handling that much better, particularly on the electrosurgical side, and seeing a really nice rebound in It seems like cases that were scheduled are starting to get put back on and get done, and so I think that's why you hear fairly bullish commentary about the way the hospitals are handling the RSV situation, how rapidly it went up, affected us, and came back down here in the first quarter, and things seem to be really normal going forward. That's helpful. You know, you're going to build out more of this open space. You already started doing this. When I think about kind of all the heads and FTs that are... dedicated to orthopedics, I kind of wonder if you could kind of size and scale that is.

And a half and all of a sudden and it did extend into the early part of January.

Like.

Handling that much better, particularly on the elective surgical side and seen a really nice rebound in Q1. It seems like cases that were scheduled or starting to get put back on and get done and so I.

I think Thats why you hear fairly bullish commentary about the way the hospitals are handling the RSV situation how rapidly it went up.

<unk> and came back down here in the first quarter and things seems to be really normal going forward.

Okay.

Helpful and then.

Yes.

Youre going to build out more of this.

<unk> sales force you already started doing that.

When I think about kind of all the heads in ftes that are.

Dedicated to ortho pediatrics.

David R. Bailey: Salesforce is your distributors and dedicated sales agents kind of ramp. Sure, good question. So, we've already factored some of those heads in.

Sure the question so.

David R. Bailey: Obviously, we started some of the hiring here in Q4 and early in Q1. So just to be clear, the expense associated with that is captured in our guide for the $8-9 million in EBITDA. I think orders of magnitude you might expect over the year for us to add or have maybe 20 people or so in the U.S. that are focusing more heavily or exclusively on the OPSB side of the business. Obviously, that's up from zero this time last year. So that's why we're pretty bullish about it, Salesforce's capacity to help us drive revenue with the MDO products and Rhino and Aura and DF2, all the things that we've come out with in the last year. But you have to remember that these people aren't spending time standing in the operating room.

EBITDA.

I think orders of magnitude you might expect over the year for us to add or have had maybe 20 people or so in the U S that are focusing more heavily or exclusively on the <unk> side of the business.

Obviously thats up from zero this time last year.

So that's why we're pretty bullish about that Salesforce has capacity to help us drive revenue.

David R. Bailey: And so it doesn't take as many people to cover the geographies that we want to cover. We also have, obviously, really strong relationships with our surgeons in the operating room. And when you partner these OPSB Salesforce with our existing Salesforce, which has so far been really great about receiving these people in and working as a team, we just think the combination of the great people we have in the field already and the 200-plus strong OR-based sales reps that we have combined with 20 or so of these more clinical-based sales reps is a real tonic for us to grow. And Ryan, over the course of the next several years, we'll see.

Our relationships with our surgeons in the operating room and when your partner of these <unk> sales force with our existing sales force and our existing sales force. So far has been really great about receiving these people in and working as a team. We just think the combination of.

The great people, we have in the field already in the 200 plus strong Omar based sales reps that we have combined with 20 or so of these more clinical based sales reps.

Our real tonic for us to grow and Ryan over the course of the next several years, we will see maybe that salesforce grows out.

David R. Bailey: Maybe that Salesforce grows out larger, but we're not committing to that at this point. Real quick, one quick modeling question for Fred. You already gave it.

Larger, but we're not committing that at this point.

Yes, Okay. Just real quick one quick modeling question for Friday, you already gave the split between Scully and deformity correction on the Boston E&P business.

Unknown Executive: Unknown Executive, Philip Taylor, Orthopedics Corp. And it's all U.S. based, right? For any international customers, Yeah, sorry, great question. We haven't clarified that it is 100% domestic as of today.

It's all U S base, though right Fred.

Is there any international revenue Theres, just from a modeling perspective want to make sure we take care of that correctly.

Yes, sorry, great question, we Havent clarified that it is 100% domestic as of today.

David R. Bailey: But that, you know, in 25, 26, 27, may be an opportunity for us to enhance the growth of that business as well. Thank you guys, that's it for me. [inaudible] Thanks. Our next question comes from Mike Matson with Needham & Company. Your line is open. Hey guys, this is Joseph on for Mike.

But that in 'twenty five 'twenty six 'twenty seven may be an opportunity for us to enhance the growth of that business as well.

Yes, Okay. Thank you guys thats it from me to have a good one.

Thanks.

Thank you. Our next question comes from Mike Matson with Needham <unk> Company. Your line is open.

Yes.

Hey, guys. This is Joseph on for Mike.

So.

You guys have a lot of growth prospects moving for international expansion Tiger X X ramping new product launches.

But I guess the comments today.

It seems like or the pediatrics has shifted its strategy to favoring maybe.

<unk> growth and profitability.

Profitability over growth.

So I guess, maybe could you just give you a little bit more color a little bit more of your thoughts on.

Maybe the shift in the strategy and why that's good moving forward.

David R. Bailey: Yeah, Joseph, I don't think I would characterize our strategy as a focus of profit over growth. We're heads down focusing on growth, but also recognizing that balancing growth with profitability with the aspiration to get to Castleburg is probably a more prudent, a rational course, particularly in the current financial environment. And so this is not a new thing; I guess I don't view this as a new thing for us.

Yes Joseph.

I don't think I would characterize our strategy as a focus of profit over growth.

Sure.

We're heads down focusing on growth.

But also recognizing that balancing growth with profitability with the aspiration to get to cash flow breakeven is probably a more prudent rational course, particularly in the current financial environment and so this is not a new I guess I don't view this as a new thing for us.

David R. Bailey: This, over the last three years, has been our aspiration to continue to focus more heavily on top line revenue growth. And I think that was one of the reasons why we were excited about the OPSB side and all the product launches going on on the legacy side, and all the sets that we've deployed over the last two years. We think all of those are going to generate really nice growth for the business for the next several years. But we also think that the growth is going to come, and it will be more profitable growth. And the cash usage associated with that is going to be lower, which is kind of what we've been trying to get to over the course of the last three years.

Over the last three years has been our aspiration to continue to focus more heavily on topline revenue growth.

And I think that was one of the reasons why we were we're excited about the <unk> side and all the product launches going on in the legacy side and all the stuff that we've deployed over the last two years.

David R. Bailey: And I think we're well positioned to do it. So we still see this as an aggressive top-line growth strategy. There's no question about that.

Joseph: We just think that it's a bit unique and that this is an aggressive top-line growth strategy that's also going to be profitable and generate its own cash. And I think that's pretty unique right now in the marketplace. Okay, yeah, that's super helpful.

Okay.

Joseph: Maybe just touch on that a little bit more. You know, we estimate your organic growth to be in the mid-teens or so for the last two years, but, you know, do you think you can maybe get back to the 20% plus number, or do you think mid-teens is more of a realistic expectation for organic growth moving forward? Yeah, so obviously the guide implies mid-teens.

Super helpful. Maybe just touch on that a little bit more.

We estimate your organic growth to be in the mid teens. There. So for the last two years, but do you think you can maybe get back to the 20% plus number or do you think mid teens is more of a real expert realistic expectation for.

Organic growth moving forward.

Yes, so obviously the guide implies mid teens and I think we.

David R. Bailey: And I think, you know, we, Everything we're doing here internally and the setup, particularly on the OPSB and the legacy product launch, is pointing us towards driving top-line revenue growth in excess of mid-P. But, you know, I think as we model, as we guide, we're not going to get ahead of ourselves here. And so that's what you see in the guide, but you can rest assured that our team is aligned around a growth rate that's in excess of 20%. And obviously, with the acquisition, it's in excess of 30% for 2024. So, we're putting the drivers in place.

Everything we're doing here internally and the setup, particularly on the <unk> and the legacy product launch is pointing us towards driving topline revenue growth in excess of mid teens.

Joseph: And I think, again, on the OPSB side, we're trying to put a driver in place that we have really low share, really good competitive opportunities here, and a really big TAM for us. We see that as a catalyst to hopefully get to where we're, you know, cheating higher in the upper teens or maybe breaching back over the 20s. And, you know, that's a real feat when you're a business that's much larger now and in the future than we have been when we were consistently growing 20, 22%. It's our aspiration to continue to do that, but we're just not going to guide ourselves to that at this stage. Okay, that makes sense. Thanks very much for taking the question. Thanks, Joe.

On the <unk> side or trying to put a driver in place that we have really low share really good competitive opportunities here and a really big Tam for us and.

And we see that as a catalyst to hopefully get to where we are we're cheating higher in the upper teens or maybe bridging back over the <unk> and.

That's a real feat when you're a business thats much larger now and in the future than we have been when we were consistently grow in 2022%. It's our aspiration to continue to do that or just not going to guide to that at this stage.

Okay that makes sense, thanks, very much for taking our questions.

Thanks Joseph.

David Louis Turkaly: Thank you. Our next question comes from Dave Turkaly with Citizens J&P. Your line is open. Hey, good morning guys. Hey Dave.

Thank you. Our next question comes from Dave <unk> with citizens JMP. Your line is open.

Hey, good morning, guys.

Fred L. Hite: Hey, I think when you announced the BOP deal, it said 22 million up front. I was just curious if you might comment on any milestones or sales-related targets. Is that the all-in price, or are there additional payments to come? That is the all-in price. There are no contingent additional payments.

Hey, Dave.

I think when you add in <unk> 'twenty.

$22 million upfront and I was just curious if you.

You might comment on any.

Milestones or sales related targets is that the all in price or is there additional.

Payments com.

That is the all in price there are no contingent.

Additional payments.

Sounds like you.

David R. Bailey: Thanks for all the detail on the business. To follow up on, I think it was Ryan's question about the Scholey business, the RSV, the impact, maybe being a couple points. When you look at the lower sales to stocking distributors in South America, maybe the lower than expected orders in Latin and South America. I mean, is that another point, or is that I guess I'm trying to quantify that you grew 20% in school and you had kind of three things you called out, and I don't know, maybe maybe it's even more than a couple. Yes, certainly, the situation that we've had in the last few quarters in Latin America, while fairly unexpected, has had a pretty, pretty big impact.

You said, the SaaS base there but.

So again, thanks for all the detail on the business.

To follow up on I think it was Ryan's question about the <unk> business.

RSV the impact maybe in a couple of points.

When you look at the.

Lower sales to stocking distributors in South America, and maybe the.

Lower than expected orders in Latin and South America.

Is that another point.

Yes, I'm trying to quantify it grew 20% in <unk>.

Kind of three things you called out I don't know, maybe its even more than a couple of points.

Yes, certainly the situation that we had in the last few quarters in Latin America fairly unexpected <unk> that I had.

A pretty a pretty big impact it was a pretty big headwind on the <unk> growth overall.

David R. Bailey: It was a pretty big headwind on scoliosis growth overall and on the company's growth overall, and it was disappointing to see. But I think at this stage, we feel good about that being behind us and being able to diversify our scoliosis business now that we're in markets like Canada. And the rest of Europe, again, that's a small segment right now, but it's going to grow, and it's going to be all pure growth for us in 2024 because it essentially grows from a zero base. So, yeah, I think that's behind us. I don't know if we would call it a couple of points.

And on the company's growth overall, and it was disappointing to see but I think at this stage, we feel good about that being behind us.

<unk>.

And being able to diversify our scoliosis business now that we're in markets like Canada.

And the rest of the Europe again, that's small segment right now, but it's going to grow and it's going to be all peer growth for us in 2024, because it essentially grows off a zero base.

So, yes, I think thats behind Us I don't know if we call it a couple of points.

Fred L. Hite: We haven't really quantified it, but we don't expect it to continue. And, you know, I have a pretty good line of sight into that. As we head into this, as we are in 2024, we expect that to be a tailwind for our business, not a headwind. And just one last one, if I could, the OB&P, you know, you mentioned gross margin. I think you said the profile is pretty similar, but operating margin wise. I'm just curious if that's higher than sort of where you stand today. I know the EBITDA guide of 8 to 9, higher than the Street Seven.

We haven't really quantified it but.

We don't expect it to continue and have pretty good line of sight into that.

As we head into as we're in 2024, we expect that to be a tailwind for our business not a headwind.

Sure.

And just one last one if I could.

<unk> you mentioned gross margin I think you said the profile is pretty similar but operating margin wise.

I'm just curious.

If thats higher than sort of where you stand today I know the EBITDA guide of eight to nine was higher than the street <unk> taken some of that is coming from that acquisition, but any comments sort of on that.

Fred L. Hite: I'm thinking some of that's coming from that acquisition, but any comments sort of on the bottom line contribution are on that scale. Yeah, absolutely. So very similar to MDO when we bought it.

The bottomline contribution as that scales.

Thanks.

Yes, absolutely so very similar to <unk> when we bought it this business Boston is proper.

Profitable.

Positive adjusted EBITDA and positive net income positive cash flow.

And however, however, historically hadn't been growing tremendously fast.

And so we will be investing a little bit of money into that business. Obviously, the sales force, but yes, you are correct in assuming that that business is more profitable than the.

Then our overall business was in 2023 that is correct and we would expect that to continue going forward.

Fred L. Hite: Thank you. Thank you. Our next question comes from Samuel Brodovsky with Truist Securities. Your line is open.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Samuel Brodowski with <unk> Securities. Your line is open.

Samuel E. Brodovsky: Hey, good morning, guys. Thanks for taking the questions. I'll just ask one more on Boston. To start off, I think you mentioned a one to three million dollar revenue number, 26. 26.

Hey, good morning, guys. Thanks for taking my question I'll, just ask one more on Boston to start off I think you had mentioned a 1% to $3 million revenue number per clinic.

Fred L. Hite: 26, implies a pretty nice opportunity to ramp revenue there without adding new clinics. Is that something we should think about being able to be achieved quickly, sort of after the integration is completed? Or is that going to be a steady ramp? Yeah, it's a good question.

Six clinics that.

Implies a pretty nice opportunity to ramp revenue, there or or without adding new clinics or is that something we should think about being able to be achieved quickly sort of after the integration is completed or is that going to be a steady ramp over time as new products come on.

Yes.

Fred L. Hite: So it definitely is an opportunity for us to drive the efficiency of the existing clinics and the kind of flow of patients through the existing clinics, as well as the products used at the existing clinics with the added sales channel. It's not something we've modeled aggressively yet because it's so new, but I do think you're right. It's probably, probably an opportunity there. And part of the reason that that is such is that these clinics are primarily surrounded around Boston, around Philadelphia, kind of the upper northeast, which are major, major population centers, as well as major hospitals that are using Boston's products. And so it takes a few, maybe more clinics in those areas where patients are coming from a longer distance because of their catchment. And so maybe some of those clients are doing a little less than they would if there were fewer.

Good question. So it definitely is an opportunity for us to drive the efficiency of the existing clinics and the kind of flow of patients through the existing clients as well as the products used at the existing clinics.

The added sales channel.

Something we've modeled aggressively yet.

Because it's so new but I do think youre right, thats, probably probably an opportunity there.

And part of the reason that that is such is that these clinics are primarily surrounded around Boston around Philadelphia kind of upper northeast, which are major major population.

And centers as well as major hospitals that are are using boston's products and so it takes a few maybe more clinics in those areas where patients are coming from longer distance because of their catchment and so maybe some of those clients are doing a little less than they would if there were fewer it isn't our intent to consolidate but it is our intent.

Fred L. Hite: It isn't our intent to consolidate, but it is our intent to drive more volume through the existing channels. So that is a possibility. But I also think you've got this right, though. And when you think about our capacity over the course of the next several years, our intent is to scale this to every major children's hospital jurisdiction in the United States and then some internationally. And when you start thinking about those 26 clinics, we think they're serving, give or take, 15 children's hospitals right now.

To drive more volume through the existing so that is a possibility, but I also think you've got this right, though and when you think about our capacity over the course of the next several years.

Our intent is to scale. This to every major children's hospital jurisdiction in the United States and then some internationally and when you start thinking about those 26 clinics, we think they're serving give or take 15 children's hospitals right now.

Fred L. Hite: I mean, when you think about the amount there, it is a really big opportunity for us to scale this into the other 285 children's hospitals that aren't active users or don't have active Boston clinics in their area. So, yeah, that's obviously why we're one of the reasons why we think we should be pretty excited about the opportunity here, and then I'm just changing a guy. Can you remind us what's factored in, in terms of respiratory illness?

When you think about the math there.

<unk> is a really big opportunity for us to do.

The scale of this into the other 285 children's hospitals that are active.

Users are don't have active Boston clinics in their area. So that's obviously why we're one of the reasons why we think.

We should be pretty excited about the opportunity here.

Great. Thanks, and then just switching to guidance can.

Can you just remind us what's factored in in terms of sort of respiratory normal seasonal Dino I think coming into 2003 and factored in a pretty worst case scenario is that how we should be thinking about it. This year and then just philosophically, it's pretty pretty tight range, especially given.

Fred L. Hite: I think coming into 23, in fact. Worst case scenario, is that how we should be thinking about it this year? And then just philosophically, it's a pretty, pretty tight range, especially given the acquisition coming into revenue. Just how did you settle out of that? Yeah, so similar to last year, 2024 guidance assumes that we will see a similar RSV environment in the fourth quarter of 2024 that we saw in 2023. So we're not assuming that it will go away. We're not assuming it's worse, and as far as the guidance goes, it's a tight range. You know, we have a pretty good line of sight on the core business as well as Boston coming into this, and it is kind of what it is, I guess. So I don't have any philosophy on why it's as tight as it is, but we're pretty confident in those numbers.

Given the acquisition coming into revenue.

That all out of the range and then how should we think about the high and low end.

Yes, so similar to last year 2024 guidance assumes that we will see a similar RSV environment in the fourth quarter of 2024 that we saw in 2023. So we're not assuming that it goes away we're not assuming it's worse.

<unk>.

And as far as the guidance goes.

It's a tight range.

We have a pretty good line of sight on the core business as well as Boston coming into this.

It is kind of what it is I guess so.

I don't have any philosophy of why it's as tight as it is but we're pretty confident in.

Fred L. Hite: Thank you. Thank you. If there are no further questions, I'd like to turn the call back over to David Bailey for any closing remarks. Thanks, operator. Well, I appreciate you all joining us today on the call. Today's call is a little bit longer. Just wanting to make sure that we can fully explain the Boston acquisition and the opportunity we have on OPSB combined with everything else that's going on.

In those numbers.

Great. Thanks for taking my questions.

Thanks, Nick.

Thank you there are no further questions I'd like to turn the call back over to David Bailey for any closing remarks.

Thanks, operator, well I appreciate you all.

Joining us today on the call today's call a little bit longer just wanting to make sure that we can fully explain the Boston acquisition and the opportunity we have on <unk> combined with everything else that's going on so thanks for your time today and we look forward to seeing you all at meetings in the next several months.

David R. Bailey: So, thanks for your time today and I look forward to seeing you all at meetings in the next several months. Have a great day. Thank you for your participation. This does conclude the program. You may now disconnect. Good day.

Have a great day.

Thank you for your participation. This does conclude the program you may now disconnect good day.

Q4 2023 OrthoPediatrics Corp Earnings Call

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