OrthoPediatrics Corp. (KIDS) Bundle
Understanding OrthoPediatrics Corp. (KIDS) Revenue Streams
Understanding OrthoPediatrics Corp. Revenue Streams
OrthoPediatrics Corp. generates revenue primarily through the sale of medical devices designed for pediatric orthopedic applications. The key revenue streams include:
- Product Sales: The company focuses on various product categories, including Trauma and Deformity, Scoliosis, and Sports Medicine.
- Geographic Distribution: Revenue is sourced from both U.S. and international markets.
Revenue Breakdown by Product Category
| Product Category | Three Months Ended September 30, 2024 (in $000s) | Three Months Ended September 30, 2023 (in $000s) | Nine Months Ended September 30, 2024 (in $000s) | Nine Months Ended September 30, 2023 (in $000s) |
|---|---|---|---|---|
| Trauma and Deformity | 37,642 | 28,806 | 108,715 | 79,715 |
| Scoliosis | 15,635 | 10,304 | 39,521 | 28,270 |
| Sports Medicine/Other | 1,296 | 862 | 3,824 | 3,134 |
| Total Revenue | 54,573 | 39,972 | 152,060 | 111,119 |
Year-over-Year Revenue Growth Rate
The company experienced significant revenue growth over the past year. The year-over-year revenue growth rates are as follows:
- Three Months Ended September 30, 2024: Revenue increased by 37% compared to the same period in 2023.
- Nine Months Ended September 30, 2024: Revenue also rose by 37% year-over-year.
Revenue Contribution by Geographic Region
| Geographic Location | Three Months Ended September 30, 2024 (in $000s) | Three Months Ended September 30, 2023 (in $000s) | Nine Months Ended September 30, 2024 (in $000s) | Nine Months Ended September 30, 2023 (in $000s) |
|---|---|---|---|---|
| U.S. | 42,714 | 29,360 | 118,269 | 82,748 |
| International | 11,859 | 10,612 | 33,791 | 28,371 |
| Total Revenue | 54,573 | 39,972 | 152,060 | 111,119 |
Analysis of Significant Changes in Revenue Streams
Revenue growth in 2024 was primarily attributed to:
- The integration of Boston O&P, which contributed to increased sales across product categories.
- Strong performance in Trauma and Deformity and Scoliosis product lines, which saw increases of 31% and 52% respectively during the three months ended September 30, 2024.
Overall, the company reported a revenue increase of $14.6 million or 37% for the three months ended September 30, 2024 compared to the same period in 2023, driven by both organic growth and acquisitions.
A Deep Dive into OrthoPediatrics Corp. (KIDS) Profitability
A Deep Dive into OrthoPediatrics Corp.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the net revenue was $54,573 thousand, with a cost of revenue of $14,513 thousand. This resulted in a gross profit of $40,060 thousand, leading to a gross margin of approximately 73.4%.
Operating expenses for the same period totaled $45,626 thousand, resulting in an operating loss of $5,566 thousand. The net loss for the three months was $7,919 thousand, yielding a net profit margin of (14.5%).
For the nine months ended September 30, 2024, net revenue reached $152,060 thousand with a cost of revenue of $39,027 thousand, leading to a gross profit of $113,033 thousand and a gross margin of approximately 74.4%. The operating loss for this period was $20,955 thousand, and the net loss was $21,753 thousand, resulting in a net profit margin of (14.3%).
Trends in Profitability Over Time
Comparing the three months ended September 30, 2024, to the same period in 2023, net revenue increased by $14,601 thousand or 37% from $39,972 thousand. However, the net loss increased by $3,328 thousand or 72% from $4,591 thousand in 2023.
For the nine-month comparison, net revenue rose by $40,941 thousand or 37% from $111,119 thousand in 2023, while the net loss increased by $7,470 thousand or 52% from $14,283 thousand in 2023.
Comparison of Profitability Ratios with Industry Averages
| Metric | OrthoPediatrics (2024) | Industry Average |
|---|---|---|
| Gross Margin | 74.4% | 65% |
| Operating Margin | (13.0%) | (5%) |
| Net Profit Margin | (14.3%) | (8%) |
Analysis of Operational Efficiency
The operational efficiency can be assessed through the changes in gross margin, which improved from 74.4% in 2024 compared to 75.9% in 2023. Despite an increase in gross profit, operating expenses have also surged by 44% year-over-year, primarily due to the acquisition of Boston O&P and the associated integration costs.
Sales and marketing expenses for the three months ended September 30, 2024, were $16,750 thousand, up from $13,942 thousand in 2023. General and administrative expenses escalated to $26,299 thousand from $17,973 thousand, reflecting an increase of 46%.
Research and development expenses showed a slight increase to $2,577 thousand from $2,561 thousand, indicating a focus on maintaining product development amidst rising operational costs.
The total operating expenses increased from $35,461 thousand in Q3 2023 to $45,626 thousand in Q3 2024, showcasing a need for enhanced cost management strategies to improve profitability metrics moving forward.
Debt vs. Equity: How OrthoPediatrics Corp. (KIDS) Finances Its Growth
Debt vs. Equity: How OrthoPediatrics Corp. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total liabilities of the company amounted to $118.375 million, which includes long-term debt of $71.779 million and current liabilities of $34.625 million.
| Debt Type | Amount (in millions) |
|---|---|
| Long-term debt | $71.779 |
| Current liabilities | $34.625 |
| Total liabilities | $118.375 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is calculated as total liabilities divided by total stockholders' equity. As of September 30, 2024, the company's equity stood at $370.919 million, leading to a debt-to-equity ratio of approximately 0.32. This ratio is below the industry average of around 0.5, indicating a conservative approach to leveraging.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On August 5, 2024, the company signed a $100 million term loan and private placement arrangement with Braidwell LP. This includes a $50 million term loan and $50 million of convertible notes. The term loan has an interest rate of SOFR + 6.50% and is interest-only until the maturity date in August 2029. The convertible notes accrue interest at 4.75% per annum .
How the Company Balances Between Debt Financing and Equity Funding
The balance between debt and equity financing is vital for the company's growth strategy. The recent financing will be used to repay approximately $10 million of outstanding debt, transaction fees, stock repurchases, and general corporate purposes . As of September 30, 2024, the company's accumulated deficit was $219.495 million, highlighting the ongoing need for strategic financing to support operational growth .
The company has historically funded its operations through proceeds from sales of common and preferred stock, convertible securities, and debt . The recent refinancing has allowed for a streamlined debt structure while maintaining adequate equity levels to support future growth initiatives.
Assessing OrthoPediatrics Corp. (KIDS) Liquidity
Assessing OrthoPediatrics Corp.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $248,312 | $34,625 | 7.16 |
The current ratio indicates a strong liquidity position, suggesting the company can easily meet its short-term obligations.
Quick Ratio: The quick ratio, which excludes inventories from current assets, is calculated as:
| Current Assets (excluding inventories) | Current Liabilities | Quick Ratio |
|---|---|---|
| $127,378 | $34,625 | 3.68 |
This quick ratio reflects solid immediate liquidity, further supporting the company's ability to cover short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, is as follows:
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $248,312 | $34,625 | $213,687 |
| December 31, 2023 | $226,496 | $41,666 | $184,830 |
Working capital has increased from $184.8 million at year-end 2023 to $213.7 million as of September 30, 2024, indicating improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow trends for the nine months ended September 30, 2024, compared to 2023, are summarized below:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Used in Operating Activities | $(23,061) | $(19,503) |
| Net Cash Provided by (Used in) Investing Activities | $(10,750) | $23,755 |
| Net Cash Provided by (Used in) Financing Activities | $53,676 | $(2,086) |
| Net Increase in Cash | $20,018 | $1,770 |
Significant observations include:
- Increased cash used in operating activities primarily due to growth in working capital.
- Substantial cash inflow from financing activities, particularly from a new $100 million term loan signed on August 5, 2024.
- Overall net cash position improved significantly, reflecting a net increase of $20.0 million.
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios and working capital trends, the company has incurred operating losses, leading to an accumulated deficit of $219.5 million as of September 30, 2024. The negative cash flow from operations of $23.1 million for the nine months reflects ongoing financial pressures, although the company has secured financing to bolster liquidity.
The company’s recent financing activities, including the new term loan, enhance liquidity but also increase debt obligations. Continuous monitoring of cash flows and operational efficiencies will be crucial to maintaining liquidity in the future.
Is OrthoPediatrics Corp. (KIDS) Overvalued or Undervalued?
Valuation Analysis
To evaluate the financial health of the company, we will examine key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $29.56 as of August 2, 2024. The net loss for the most recent quarter was $7,919,000, translating to a basic and diluted net loss per share of $(0.34). As there is a net loss, the P/E ratio is not applicable.
Price-to-Book (P/B) Ratio
The book value per share can be calculated from total stockholders' equity of $370,919,000 and shares outstanding of 24,214,046, yielding a book value per share of approximately $15.31. The P/B ratio is therefore:
P/B Ratio = Stock Price / Book Value per Share = $29.56 / $15.31 = 1.93
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated by adding market capitalization, total debt, and subtracting cash and cash equivalents. The total debt stands at $71,000,000, and cash and cash equivalents amount to $53,045,000. The market capitalization is $716,383,000 (calculated as stock price multiplied by shares outstanding).
Thus, the EV is:
EV = Market Cap + Total Debt - Cash = $716,383,000 + $71,000,000 - $53,045,000 = $734,338,000
For EBITDA, the operating loss for the nine months ended September 30, 2024, was $(20,955,000). Since this is a loss, EBITDA is not applicable.
Stock Price Trends
Over the last 12 months, the stock price has experienced considerable volatility. The 52-week range is between $22.00 and $45.00. As of the latest report, the stock is trading near the lower end of this range.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
Analyst recommendations vary, with the consensus rating being a "Hold" as of the latest reports. Some analysts have expressed concerns regarding the company's ability to return to profitability in the short term.
| Metric | Value |
|---|---|
| Current Stock Price | $29.56 |
| Net Loss (latest quarter) | $(7,919,000) |
| Basic and Diluted Net Loss per Share | $(0.34) |
| Total Stockholders' Equity | $370,919,000 |
| Shares Outstanding | 24,214,046 |
| Book Value per Share | $15.31 |
| P/B Ratio | 1.93 |
| Total Debt | $71,000,000 |
| Cash and Cash Equivalents | $53,045,000 |
| Market Capitalization | $716,383,000 |
| EV | $734,338,000 |
| Analyst Consensus Rating | Hold |
| Dividend Yield | 0% |
Key Risks Facing OrthoPediatrics Corp. (KIDS)
Key Risks Facing OrthoPediatrics Corp.
The financial health of OrthoPediatrics Corp. is influenced by various internal and external risk factors that can impact its operations and profitability. Understanding these risks is essential for investors looking to assess the company's stability and growth potential.
Industry Competition
The pediatric orthopedic market is competitive, with numerous players vying for market share. As of September 30, 2024, the company's total net revenue reached $152.1 million, a 37% increase from $111.1 million in the same period of the previous year. However, ongoing competition could pressure margins and market presence.
Regulatory Changes
OrthoPediatrics operates in a heavily regulated environment. The potential for changes in healthcare regulations, including pricing policies and reimbursement rates, poses a strategic risk. The company has experienced recurring losses with an accumulated deficit of $219.5 million as of September 30, 2024. Compliance with regulatory standards is crucial for continued operations and market access.
Market Conditions
Economic fluctuations and market conditions can affect the demand for pediatric orthopedic products. For instance, the company reported a net loss of $21.8 million for the nine months ended September 30, 2024, compared to a net loss of $14.3 million in the same period the previous year. A downturn in market conditions could exacerbate financial losses and hinder growth initiatives.
Operational Risks
Operational risks, including supply chain disruptions and manufacturing challenges, can impact product availability and quality. The cost of revenue increased by 61% year-over-year, reaching $39.0 million for the nine months ended September 30, 2024. Such increases may affect profitability if not managed effectively.
Financial Risks
The company has significant debt obligations, including a $100 million term loan signed in August 2024, which includes a $50 million convertible note. The interest rates on these loans are tied to SOFR + 6.50%, which could lead to increased financial strain if interest rates rise or if the company fails to meet financial covenants.
Strategic Risks
Strategic risks arise from the company's acquisition strategies. The acquisition of Boston O&P involved a total cash consideration of $21.5 million. While acquisitions can enhance market position, they also pose integration challenges and can distract from core operations if not executed properly.
Mitigation Strategies
To address these risks, OrthoPediatrics has implemented several mitigation strategies. The company actively monitors regulatory changes and engages with stakeholders to ensure compliance. Additionally, it is focused on optimizing supply chain processes to reduce operational risks and costs. Financially, the company aims to maintain sufficient cash reserves, with cash and cash equivalents totaling $53.0 million as of September 30, 2024.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in the pediatric orthopedic market | Potential pressure on revenue and margins |
| Regulatory Changes | Changes in healthcare regulations affecting pricing and reimbursement | Accumulated deficit of $219.5 million |
| Market Conditions | Fluctuating economic conditions affecting demand | Net loss of $21.8 million for nine months |
| Operational Risks | Supply chain disruptions and manufacturing challenges | Cost of revenue increased by 61% |
| Financial Risks | Significant debt obligations and interest rate exposure | $100 million term loan with SOFR + 6.50% |
| Strategic Risks | Challenges from acquisitions and integration efforts | Cash consideration of $21.5 million for Boston O&P |
Future Growth Prospects for OrthoPediatrics Corp. (KIDS)
Future Growth Prospects for OrthoPediatrics Corp.
Analysis of Key Growth Drivers
OrthoPediatrics Corp. is leveraging multiple growth drivers, including product innovations, market expansions, and strategic acquisitions, to enhance its market position. The company reported a net revenue of $54.6 million for the three months ended September 30, 2024, marking an increase of 37% compared to $40.0 million for the same period in 2023.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net revenue reached $152.1 million, up from $111.1 million in 2023, reflecting a 37% increase year-over-year. Analysts project continued revenue growth driven by an expanding product portfolio and increased market penetration.
Strategic Initiatives or Partnerships Driving Future Growth
The acquisition of Boston O&P for $21.5 million in cash, alongside strong sales performance across various product lines, is expected to bolster OrthoPediatrics' growth. Additionally, the company has entered into a $100 million term loan agreement with Braidwell LP to finance further growth initiatives.
Competitive Advantages Positioning the Company for Growth
With a focus on pediatric orthopedic solutions, OrthoPediatrics holds a competitive advantage through its specialized product offerings. For instance, Trauma and deformity sales increased by 31% in Q3 2024, reaching $37.6 million from $28.8 million in Q3 2023. This indicates a robust demand for its products, positioning the company favorably against competitors.
| Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Revenue | $54.6 million | $40.0 million | $152.1 million | $111.1 million |
| Growth Rate | 37% | - | 37% | - |
| Trauma and Deformity Sales | $37.6 million | $28.8 million | $108.7 million | $79.7 million |
| Scoliosis Sales | $15.6 million | $10.3 million | $39.5 million | $28.3 million |
Strategic acquisitions and partnerships are central to the company's growth strategy, with the acquisition of Boston O&P expected to enhance its product offerings and market reach, contributing to anticipated revenue growth in the upcoming years.
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Resources:
- OrthoPediatrics Corp. (KIDS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of OrthoPediatrics Corp. (KIDS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View OrthoPediatrics Corp. (KIDS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.