WARSAW, Ind. - OrthoPediatrics Corp. (NASDAQ:KIDS), a company specializing in pediatric orthopedics, has entered into a financing agreement with Braidwell LP, securing up to $100 million through a term loan and private placement of convertible notes. The funding is scheduled for August 12, 2024, and is aimed at bolstering the company's balance sheet and supporting strategic growth initiatives, including the expansion of OPSB clinics.
The financing package consists of a $50 million term loan, with an initial loan of $25 million and an option for an additional $25 million under certain conditions. The term loan carries an interest rate of SOFR + 6.50%, with a payment-in-kind interest option of 1.00% per annum. The loan will be interest-only until its maturity in August 2029. OrthoPediatrics must adhere to financial covenants such as maintaining a minimum cash balance and achieving net product sales targets.
Additionally, the company will issue $50 million in convertible notes at an interest rate of 4.75% per annum, payable interest-only until maturity in February 2030. These notes can be converted into common stock at a conversion price of $40.98, a 30% premium over the recent average stock price.
The funding will be utilized to repay existing debt of approximately $10 million, cover transaction fees, potential stock repurchases, and general corporate purposes. OrthoPediatrics' board has approved a stock repurchase program of up to $5 million, which could represent around 169,000 shares based on the closing price as of August 2, 2024.
Post-financing, and before any stock repurchases, OrthoPediatrics' pro forma cash balance would have been about $90 million, excluding the additional $25 million term loan option.
Stifel, Nicolaus & Company, Incorporated, Piper Sandler & Co., BTIG, LLC, and Needham & Company, LLC served as financial advisors for the transaction.
In other recent news, OrthoPediatrics Corporation reported a significant increase in revenue and patient assistance in the first quarter of 2024. The company experienced a 47% year-over-year growth, serving a record 27,600 children. This growth is mirrored in the company's reported first-quarter revenue of $44.7 million, marking a 41% increase compared to the same period in the prior year. This increase was driven by strong sales in the Trauma and Deformity segment, International Scoliosis, and Specialty Bracing businesses.
Following this positive performance, OrthoPediatrics raised its full-year revenue guidance for 2024 to between $200 million and $203 million. The company also plans to generate between $8.0 million to $9.0 million in adjusted EBITDA in 2024. Despite these promising figures, OrthoPediatrics reported an adjusted EBITDA loss of $1.1 million in Q1 2024.
As part of their recent developments, OrthoPediatrics plans to expand into key European markets within the next 12 to 15 months and expects strong growth in the EOS product line. The company is also planning new product launches for the first half of the year to capitalize on market normalization.
InvestingPro Insights
OrthoPediatrics Corp. (NASDAQ:KIDS) is navigating a challenging financial landscape, as highlighted by the latest insights from InvestingPro. The company's market capitalization stands at $684.6 million, reflecting investor valuation of the company's potential despite recent hurdles.
InvestingPro Data indicates a negative P/E ratio of -29.57, which is slightly adjusted to -29.94 for the last twelve months as of Q1 2024, suggesting that the market has yet to see profitability from the company. This aligns with the InvestingPro Tip that analysts do not anticipate OrthoPediatrics will be profitable this year. Moreover, the company's revenue growth is notable, with a 24.04% increase over the last twelve months as of Q1 2024, and an even more impressive quarterly revenue growth of 41.46% in Q1 2024, indicating robust sales performance.
On a positive note, OrthoPediatrics maintains a strong gross profit margin of 74.07%, with gross profits reaching $119.87 million in the last twelve months as of Q1 2024. However, the company is not without its financial burdens, as it operates with a moderate level of debt and has not been profitable over the last twelve months. Moreover, the company does not pay a dividend to shareholders, which is an essential consideration for income-focused investors.
InvestingPro Tips also reveal that the company's liquid assets exceed short-term obligations, providing some financial flexibility in the near term. This could be critical for OrthoPediatrics as it embarks on its strategic growth initiatives and explores the expansion of OPSB clinics.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available at: https://www.investing.com/pro/KIDS which can provide further guidance on the company's financial health and investment potential.
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