OrthoPediatrics Corp.

Good morning and welcome to the Orthopediatrics Corporation third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. We'll 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 Emma Palolillo 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 Height, 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. For discussion of risk factors, including among others, the risks related to COVID-19, the impact this pandemic may have on the demand for the company's products, and the company's ability to respond to the related challenges, I encourage you to review the company's most recent annual report on Form 10-K, which was filed with the Securities and Exchange Commission on March 3rd, 2022. 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 non-GAAP financial measures to the most directly comparable GAAP financial measures in its earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for orthopediatrics 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, November 1st, 2022. 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 would like to turn the call over to David Bailey, President and Chief Executive Officer.

Thanks, Emma. Good morning, everyone, and thank you for joining us on our third quarter conference call. As we start all earnings calls, I'd like to highlight, after refining the calculation of our acquisitions, we helped over 17,000 children in the third quarter of 2022. Since inception, Orthopediatrics combined with MD Orthopedics and Pega Medical has now helped more than 610,000 children. Doing the right thing for children is and will always remain our top priority. In the third quarter of 2022, we generated record total revenue of $35 million, which includes stronger than expected revenue from our two acquisitions, MD Ortho and Pega Medical, and in total represents growth of 39% compared to the third quarter of 2021. We generated domestic organic sales growth of 25% and overall global organic growth of 22% compared to the prior year period. Organic international sales growth compared to the prior year period was 10% and was negatively impacted by unfavorable foreign exchange conversion, volume disruptions in Australia and the EU due to staffing shortages, and lower than expected set purchases from stocking partners due to the stronger dollar. Although we generated 39% revenue growth in the third quarter of 2022, this was below our expectations. While the acquisition revenue outperformed our estimates, organic growth was below our forecast. Despite strong commercial and operational execution, surge in conversions, and market share gains, we experienced extreme swings in case volumes in numerous locations late in the quarter. hospital staffing and capacity constraint, and a high rate of respiratory illness, or RSV, negatively impacted case volumes. As it has been published in multiple national publications, which reference many of our largest customers, RSV is filling beds and significantly reducing the capacity for surgery. This started showing up in September and has continued through October. All of these factors may continue for the remainder of the year and are now reflected in our reduced full-year revenue guidance. We have observed that unlike adult hospitals, pediatric cases are not being moved to ambulatory surgery centers or ASCs, where case capacity and efficiency seems to be much higher than in the hospital setting. Obviously, we cannot control these unexpected environmental factors, but we can control our commercial and operational execution, which are producing strong growth in new users and increasing technology adoption across our expanding portfolio. Looking at the business overall in the quarter, through strong operational efficiency, we generated over $1.9 million of adjusted EBITDA. The last two quarters of positive adjusted EBITDA began a positive trend, forming the foundation to deliver on our goal of producing several million dollars in adjusted EBITDA in 2022 and sets us up to further improvement in 2023. Additionally, we took steps to strengthen the balance sheet. which will provide further flexibility to invest in sustainable growth initiatives. We believe our current position and continuing efficiency initiatives can enable sustained 20-plus percent sales growth, profitability, and cash flow break-even in the next three to five years. Moving to our revenue segments. Overall, on the surge in adoption front, we drove major new users with our Response, Apifix, 7D, and Orthex products. Orthex, Response, Apifix, PNP Femur, and cannulated screws all drove significant growth, with Apifix more than doubling over prior quarter and prior year quarter. In the third quarter of 2022, we generated total trauma and deformity revenue of $23.9 million, representing growth of 42% compared to the prior year period. This included combined global revenue of approximately $4.4 million for MD Orthopedics and Pega Medical. Organic T&D was $19.5 million, representing growth of 16% compared to the same period prior year. Revenue growth in the quarter was driven by market share gains within our external fixation franchise and ongoing search and adoption of the PNP femur and cannulated screw system. In the third quarter of 2022, we generated total scoliosis revenue of $10 million, representing organic growth of 37% compared to the prior year period. Despite key account disruptions, we added several new response and Apifix users and deployed multiple demo units to 7D. Apifix saw continued improvement in the quarter, more than doubling over prior quarter and prior year quarter. The combination of response, Apifix, and 7D continue our progress of taking market share from key competitors. I'll now provide an update on the integration progress with our recent acquisitions, starting with Pega Medicals. We are one quarter into the integration and are pleased with the initial progress. As expected, following the post-acquisition announcement of the termination of nearly all legacy US PEGA distributors, we experienced some revenue disruption as the distributors worked through their 60-day notice period. This was immediately followed by record monthly revenue in September after the OP US sales organization officially took control. Looking forward, we are eager to get more PEGA instrument sets in the hands of our customers so that we can meet the increasing demand for these innovative technologies. Our surge in customers' feedback is extremely positive. The product synergies are obvious, and the cultural integration of this business is exactly what we had hoped for. As we increase that allocation and train our global sales representatives, we fully expect this business to grow revenue at greater than 20%. Turning to the integration of MD Orthopedics, or MDO, During the quarter, we continued seeing favorable acquisition synergies. Strong sales resulting from new distributor reorders, increased volumes, and the opening of Brazil, our first new market post-acquisition. Continuing to build on these synergies, along with new product launches, makes us confident that our non-surgical franchise is going to be a great success and will also produce revenue growth of greater than 20% while delivering profit and positive cash flow. Overall, it is very early. but we are excited by what we are seeing with the integration synergies in the initial stages of both of these acquisitions. Feedback from our customers has been very positive, and it is translating into increasing revenue already. We view both of these acquisitions as new sources of growth and key pieces in strengthening our competitive position. Turning to new product development. During the quarter, we commenced consignment placements of our recently launched drive rail external fixation system, which complements the Orthex external fixation product and is leading to continued market share gains and new user acquisition. We also progress with R&D projects across each segment of our business. In Scoliosis, we are preparing to launch a number of response instrument set upgrades, including our new response derotation instrument and response cannulated screws. We also furthered our early-onset scoliosis system development and expect to launch our first-ever power system during the first quarter of 2023, which will allow surgeons to place both pedicle screws and set screws under power with ease. In trauma and deformity, we continued advancing our Orthex pre-planning software, along with PNP Tibia and several PEGA deformity correction products. We're also nearing completion of our OP non-surgical DF2 product, for the non-surgical treatment of pediatric femur fractures. Lastly, we are preparing for the upcoming MDO line extension and the MDO spring assist clubfoot brace to be available in the near future. Transitioning to strategic partnerships. As a reminder, during the quarter, we placed our first 7D surgical interoperative navigation system at St. Mary's Palm Beach and continue to have several evaluation units currently working their way through the value analysis committee. Based on our early experience, we are pleased with the initial pull-through, particularly of our response spine system, with increasing utilization in accounts that have historically demonstrated low penetration. We are increasingly confident several units will be converted into sales as we look into 2023. As a reminder, Orthopediatrics owns exclusive access to the 7D technology within the fields of pediatric orthopedics and pediatric spine surgery within children's hospitals in the United States. Lastly, we remain at the forefront of helping train the next generation of pediatric orthopedic surgeons and are particularly proud of our continued contributions across the community. So far in 2022, we have conducted nearly 200 training events for healthcare professionals. In September, we served as a gold-level sponsor of the Scoliosis Research Society in Stockholm, Sweden, where we conducted Apathix user meetings and hosted surgeons in our technology suite featuring 7D. Additionally, we continued as the only orthopedic OEM and leading sponsor of the American Academy for Cerebral Palsy and Developmental Medicine annual meeting. Finally, we were the premier sponsor of the Pediatric Orthopedic Surgical Techniques course offered to all pediatric orthopedic surgeon fellows in North America. With that, I'll turn the call over to Fred to provide more detail on our financial results. Fred?