Good afternoon, and welcome to the OrthoPediatrics Corporation's Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a 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 Matt Bacso from the Gilmartin Group for a few introductory remarks.

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 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 a discussion of risk factors, including among others, the risks related to COVID-19, the impacts 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 quarterly report on Form 10-Q, which will be filed with the SEC soon. 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 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, to the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, November 4, 2021. 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, Matt. Good morning, everyone, and thank you for joining us. We hope you're safe and well. Before providing a business update and review of the financials, I'd like to highlight that we helped approximately 10,400 children in the third quarter of 2021, bringing the total number to more than 226,000 since the inception of OrthoPediatrics. Doing the right thing for children remains our top priority. Consistent with our pre-announcement on October 13, we generated quarterly revenues of $25.1 million, representing growth of 13% compared to the third quarter of 2020. Before commenting on each business segment, I wanted to address three key topics that have a broad-scale impact across the medical device industry. First being COVID. While pleased with our mid-teens growth rate in the third quarter, it is important to point out that the recent spike in delta variant cases impacted children more than any other period during the pandemic, thus negatively impacting elective procedural volumes. Secondly, we also saw the impact from hospital staffing shortages and increased cases of RSV, which in recent months have increased dramatically. In September alone, the impact of COVID, RSV, and staffing shortages generated our largest number of canceled procedures since April of 2020. While all of these factors negatively impacted elective procedure volumes in the quarter, we view them as transitory in nature. That said, we believe the demand curve to recapture backlog cases will be flattened this cycle, as parents wait for COVID infection rates to decline before revisiting clinics for diagnostic evaluations and staff shortages at hospitals reducing capacity. Given this dynamic, we do not expect to recapture the entire Q3 backlog until early 2022. Lastly, the disruption associated with the global supply chain so far has had little to no impact on our company. We are proud to say that we source approximately 98% of all materials and inventory domestically, which significantly reduces our exposure to global supply contracts. Moving to our revenue segments. In the third quarter of 2021, we generated quarterly trauma and deformity revenue of $16.8 million, representing growth of 12% compared to the prior year period. This growth was primarily driven by a strong international recovery, continued trauma growth, as well as PNP and cannulated screw growth as a result of ongoing investments and set deployments. Due to a reduction in elective procedures in the third quarter from increased COVID and RSV hospitalizations in children and staffing shortages, deformity revenues declined on a sequential basis. Although it was an unfavorable environment for elective procedures, we continue to expand the number of active users using Orthex and other deformity correction systems. In the third quarter of 2021, we generated quarterly scoliosis revenue of $7.3 million, representing growth of 11% compared to the prior year period. International revenue was the primary growth driver in the quarter, while domestic environmental headwinds mentioned previously negatively impacted elective procedures in the third quarter. Specifically, our international business generated sales of $5.7 million, an increase of 118% compared to the third quarter of 2020. Growth in the quarter was primarily driven by our recovery in procedural volumes in EMEA and South America, improving agency sales and increased set purchases from stocking distributors. Additionally, in the third quarter of 2021, we sold the largest number of international instrument sets in the last 18 months. While international procedure volumes have lagged the U.S. recovery, we believe increased set purchasing is a positive catalyst and gives us confidence in a more sustainable recovery over the immediate term as COVID headwinds continue to dissipate. I will now provide an update on our key initiatives, which we have compared to five strategic pillars, focusing on high volume children's hospitals, product portfolio expansion, set deployment and sales expansion, strategic partnerships, and clinical education. There was substantial progress on several of these initiatives during Q3. Starting with strategic partnerships, in the third quarter, we announced distribution agreements on two enabling technologies. In September, we executed an exclusive distribution arrangement with SeaSpine for the 7D surgical flash interoperative navigation platform for pediatric applications. This five-year agreement enables OP to provide children's hospitals with a unique market-leading navigation solution that we believe is ideal for children. Over the last few years, there has been an increased rate of adoption of interoperative navigation in children's hospitals, primarily for scoliosis surgery, and we expect that trend to continue. During that time, we evaluated different navigation solutions and also successfully launched the Mighty Oak Medical FIREFLY patient-specific navigation guide. In the end, we determined that the combination of the FIREFLY and 7D products would offer our customers two radiation-free solutions that we believe are the safest and most accurate options for children. The 7D flash navigation system is the only approved image guidance system that utilizes novel and proprietary camera-based technology and machine vision algorithms. The system uses only visible light, reducing radiation exposure by eliminating interoperative CT and fluoroscopy for purposes of registration, both of which are commonly used with other technologies. This results in a registration workflow that takes just seconds and allows surgeons to control the system within the sterile field. Our continued commitment to enabling technology is also demonstrated by the recent extension of our distribution agreement with Mighty Oak Medical to sell its FIREFLY Patient Specific Technology as part of our strategy to offer a unique suite of enabling technologies that complement our surgical system. Transitioning to ApiFix. In the third quarter, we added an additional clinical site in the post-approval study registry and subsequently added new ApiFix users. We now have 18 U.S. clinical locations that have both required IRB approvals enabling those locations to enroll patients in the registry. We have, however, strategically pivoted away from adding additional clinical sites and focused on securing the next 10 to 20 commercial sites. While the patient registry is extremely important from a data collection perspective, it is now independent of our broader commercial launch plans in 2022. We conducted three major in-person sales training courses in the third quarter, with upcoming surgeon training courses scheduled. We have identified numerous non-registry sites that completed initial commercial cases and booked additional cases in the fourth quarter. Turning to clinical education. In early August, we were a diamond sponsor of the Baltimore Limb Deformity Course where several Orthex training sessions were conducted, which led to multiple surgeon conversions. Additionally, in October, we continued our leading sponsorship of other key educational events, including the annual SRS or Scoliosis Research Society meeting in St. Louis and the sixth annual pediatric orthopedic surgical techniques or post course. I am proud to say that OrthoPediatrics was the originator and continues to be the leading supporter of the post course since its inception in 2016. This CME course focuses on senior residents, fellows, and early-career surgeons to provide training in a variety of pediatric orthopedic surgical techniques through both didactic instruction and hands-on labs led by pediatric orthopedic surgeons from prominent U.S. pediatric hospitals. We believe our efforts address an unmet need for surgical training, which has a direct and positive impact on this subspecialty. We look forward to supporting physicians at all career levels and driving superior outcomes. The timing of the SRS conference lined up perfectly with our recent 7D partnership announcement. We were able to showcase this technology to interested surgeons, and many who saw the demos were deeply impressed by the navigation system and its synergistic application to our broad product portfolio. While only a few months into the strategic partnership, this early excitement gives us confidence we will be able to drive robust surgeon adoption. In addition, we hosted our first ApiFix user group at SRS which was well attended by surgeons both from institutions in the registry and outside. The user group was conducted by renowned surgeons from Children's Healthcare of Atlanta, Dayton Children's Hospital, and Sanford University. Lastly, we were fortunate to have Dr. Geoffrey Haft, Sanford University lead a live ApiFix webinar with approximately 30 surgeons registered. As a market leader, we believe it is integral to our mission to partner with pediatric orthopedic surgeons in advancing the entire field of pediatric orthopedics, not just selling more of our product. Our commitment to clinical education initiatives fosters collaboration and stronger partnerships with surgeons, thus furthering this mutual objective. In summary, we are pleased with our resilient mid-teens growth in the third quarter and view the factors which negatively impacted elective procedures in August and September to be transitory in nature. While we cannot control COVID and RSV, we are taking action and making the investments to ensure our long-term success as the market leader in pediatric orthopedics. In the next few quarters, we expect to recapture COVID backlog cases, which ultimately gives us confidence to reiterate our 2021 revenue guidance range of $97 million to $101 million.

Great. Thanks, Dave. Our third quarter 2021 worldwide revenue of $25.1 million increased 13% when compared to the third quarter of 2020. Growth in the quarter was driven primarily by the strong international recovery offset by a difficult operating environment domestically due to increased COVID cancellations in late August and September. In the third quarter of 2021, U.S. revenue was $19.4 million, a 1% decrease from the third quarter of 2020. Due to a deferral of elective procedures in the third quarter from increased COVID and RSV hospitalizations in children and staffing shortages, U.S. revenue declined relative to the prior year period. International revenue was $5.7 million increased to 118% as compared to the third quarter of 2020. From a geographic basis, growth was driven primarily by strong sales in South America and EMEA. Additionally, in the third quarter of 2021, we shipped the largest number of international instruments sets in the last 18 months. This growth was driven primarily by a strong international recovery, continued trauma growth, PNP, and cannulated screw growth as a result of ongoing investments in set deployments. In the third quarter of 2021, scoliosis revenue of $7.3 million increased 11% compared to the prior year period. International revenue was the primary growth driver in the quarter, while domestic environmental headwinds mentioned previously negatively impacted elective procedures in the third quarter. Finally, sports medicine other revenue in the third quarter of 2021 was $1.0 million representing 46% growth over the $0.7 million in the same period last year. Growth in the quarter was driven by another strong quarter of Telos revenue growth. Turning to set deployment, in the third quarter, we continued to execute our strategy upset deployment. Specifically $1.7 million of sets were consigned in the third quarter of 2021, compared to $4.0 million in the third quarter of 2020. Year-to-date 2021, we have deployed $11.1 million, compared to $13.1 million in the first three quarters of 2020. We continue to anticipate $13 million to $15 million of set deployments in 2021, a somewhat lower number from recent years because of the significantly lower cost and greater return on investment of ApiFix and Orthex instrument sets. Touching briefly on a few key metrics for the third quarter of 2021, gross profit margin was 74.0%, compared to 79.4% in the third quarter of 2020. This change was driven by a higher percentage of international revenue, including set sales, which generates a lower gross margin rate than our domestic revenue. Total operating expenses increased $2.1 million, or 10% from $20.1 million in the third quarter of 2020 to $22.2 million in the third quarter of 2021. The change resulted mainly from increased employee and travel expenses, increased sales commissions, and increased research and development expenses. However, cost controls during the softer COVID volume enabled our operating expenses to grow at a lower rate than our revenue during the third quarter of 2021. Fair value adjustment of contingent considerations benefited the P&L by $1.4 million in the third quarter of 2021, compared to a charge of $0.9 million in the third quarter of 2020. This impact was generated from an updated Monte Carlo simulation from our third-party valuation firm. We reported adjusted EBITDA of approximately $500,000 in the third quarter of 2021, compared to $1.1 million in the third quarter of 2020. Given the lower than expected revenue in the quarter, we were pleased to add another quarter of positive adjusted EBITDA. Year-to-date, we reported approximately $400,000 of adjusted EBITDA and keeps us on track for an estimated full year of breakeven to positive adjusted EBITDA. We ended the third quarter with $59.1 million in cash and restricted cash. Finally, turning to our outlook for the remainder of 2021, we are reiterating our revenue guidance range of $97 million to $101 million, representing growth of 36% to 42%. While we continue to take a measured approach, given the potential impacts resulting from COVID, the current operating environment has improved relative to the third quarter. Given this backdrop, we remain confident in our original guidance range issued during our second-quarter earnings call in August. We also continue to plan on deploying between $13 million and $15 million of new sets in 2021.

Thank you, Fred. We continue to make progress on each of our five strategic pillars, which we believe are key to improving the lives of children who suffer from orthopedic conditions. I would like to conclude by thanking everyone for their interest in OrthoPediatrics, and look forward to updating you on our future progress and meeting many of you at upcoming investor conferences. With that said, I'd like to turn the call back over to the operator to open the line for questions.

Thank you. Our first question comes from Matthew O'Brien from Piper Sandler. You may begin.

Hi, good morning, guys. This is Simran on for Matt. Thank you for taking the questions. I guess I want to start out with the guidance range that you reaffirmed. So at the midpoint that would imply a small step up from Q3 to Q4, which is typically a weaker quarter for the business. And you guys mentioned you still kind of are feeling the impact of those ongoing macro headwinds due to COVID. So can you expand a little bit more on maybe some of the things that you've been seeing that give you confidence in that range?

Absolutely. Good morning. So the first thing is, is that there's definitely a softening of the COVID impact on the business. So while we're still seeing it, it's much less than it was during the third quarter. And some of those deferred surgeries are now coming back onto the calendar for the fourth quarter, and we're starting to see a bit of that uptick already. So that would be the first thing. The second thing is, the international business did very well for us in the third quarter. And we see that continuing into the fourth quarter, as you said, typically, the fourth quarter is our lower quarter than third. But because of strong international demand, and these deferred cases coming back onto the calendar, we're confident that the fourth quarter will be equal to or better than the third quarter of this year.

Okay, perfect. And then, secondly, on ApiFix, so you guys mentioned you have 18 of those IRB sites. When do you expect to hit that 20 site enrolled milestone, and then as you pivot to focusing on the commercial ramp of the product? What kind of revenue contributions are you expecting to book in potentially Q4, and where do you see that ramp going into 2022?

Yes, good question. I'll let Fred, you can comment on the revenue ramp if you'd like. But I think at this stage, our focus has been up until about a month ago. Our focus has been obviously on these registry sites. And we announced in our last quarter earnings call that we would shift that focus, not purely away from the sites, but start to shift some of our focus on these commercial sites, which we did, and we did successfully in Q3. And so it could take a couple of months to a couple of weeks. We've kind of been in a holding pattern and getting these other two sites and these registry sites completed. But I think that our focus now has is really on starting to commercialize the product in this first wave through the next 10 to 20 sites. And we saw enormous interest there from sites that we had, frankly, put on the back burner for the last year as we were focused exclusively on the registry. And so we made progress there. We did see some cases already from some of the commercial sites. Obviously, we did additional cases within the registry sites as well. And I wouldn't expect that in Q4, we would see an outsized influence from those commercial sites in Q4 specifically, just because we're starting to ramp that. That said, because we've been able to decouple the registry sites from the commercial sites, we expect that the ApiFix product line will contribute substantially to our growth next year.

Our next question comes from the line of Mike Matson with Needham.

Good morning. This is David on for Mike, thanks for taking the questions. I just wanted to follow up on one of the previous questions about guidance and the rest of 2021. I mean, it sounds like September was a pretty bad month. But you did note that you saw some improvement. So I just wanted to hear, you called our three impacts deferrals, hospital staffing, and RSV. So are you seeing improvement across all those three sources of disruption? And then in terms of guidance, does guidance assume, if they stay where they are, or do you see continued improvement across those three factors?

Yes, with respect to the environment, what we saw in Q3 was kind of a gradual worsening of case cancellations that really started in August. We saw the impact of the delta variant, and then as kids started to go back to school, certainly the impact of RSV. When combined with the impact of delta, RSV, and staff shortages, we just did not see the immediate snap back in elective procedures like we had seen at the height of the pandemic in late spring of last year that really snapped back in the fall or the summer and fall of last year. So it happened quickly, and we saw a lot of cases canceled in August; those cases got rescheduled in September. And we saw a lot of cases re-cancel again in September. That said, as we move into Q4, we have, as Fred mentioned earlier, already seen an environment where COVID cases are declining, hospital admissions for RSV are declining, and we are seeing a much more favorable elective surgical environment in October already. And again, we can't predict this, obviously, no one can, but we would expect to see that continue through the balance of the year and hope that we can see a continuation of progress here into the first part of next year.

Yes, related to guidance, when we had our second-quarter call, we were just at the beginning of the delta variant really starting to pick up in the U.S. And we didn't know when that was going to have a negative impact on us. But we anticipated it definitely negatively impacting the second half revenue. And so luckily, we had that built in to the 97 to 101. I would say it happened a little sooner and quicker and more aggressively than maybe what we thought it was going to be. But we feel good sitting here today, we think we've got the majority of that behind us. And really the only thing that's limiting some of the growth right now is the staff shortages at some of the hospitals, which we think is going to continue on for some time. But to Dave's point, we're definitely seeing those deferred cases coming back onto the calendar and getting completed. And we anticipate that increasing throughout November and December.

Okay, thanks for that. That's super helpful. And then my second question is just on the partnership with SeaSpine and their 7D platform. Can you just talk about the size of that opportunity there and maybe share what the economics look like? Is there any sort of revenue sharing component to the partnership or is it more about broadening the technology you can offer? Thanks so much.

Yes, so just broadly speaking about the topic, and then maybe Fred can get into some of the revenue opportunities here. We have been watching as, over the last few years, navigation technology has become more prominent in children's hospitals, particularly with scoliosis procedures. When we were asked this question three years ago, it was uncommon, very uncommon for us to see patients who were having their spines navigated with these types of technologies. But it was our sense that over time, that technology that's well adopted in the adult space would ultimately become well adopted in pediatrics. And while it's still a minority of cases being done with interoperative navigation, it's a growing minority of patients who are treated that way. And so we had walked alongside the 7D technology, like we frankly do with almost every partnership. We've known these guys from 7D, as well as the spine for a number of years. And after looking at their technology and a number of others, we really felt like this radiation-free type of technology that gives surgeons complete control of the operative theater and the surgical environment was an ideal product for pediatrics. Beyond that, we see other opportunities in the partnership with SeaSpine and 7D to potentially develop applications outside of pediatric spine. And at this stage, we see no other company that's focusing on bringing navigation solutions to children's hospitals outside of spine. So we think this can have a real impact on the business, certainly in the next several years. We like the partnership; we like both SeaSpine and 7D combined; good people running good companies; and it felt like a really good time for this partnership. Ultimately, we expect like all companies who do this, we expect to gain share, particularly on the scoliosis side. But I think what could be unique for us is that to bundle this with our scoliosis platform and in the future potentially bundle this with trauma and limb deformity products. I think this could be key to large account conversions for us in the future.

Yes, that's right. When you combine this with Mighty Oak Medical, we view the 7D and Mighty Oak Medical as two radiation-free offerings that increase the accuracy of screw placement. We view them as enabling technologies, meaning that they're going to pull through more of our product sales. So with 7D, we probably will not be selling a lot of these units per se, but more placing them in hospitals with earn-out agreements with the hospitals to pull through more scoliosis sales initially, and at today’s point, eventually pull through more of our trauma and deformity correction product sales. We'll see what that looks like. It's not going to have an impact in 2021, but we do anticipate it's starting to have an impact in 2022 and then beyond.

Just two for me upfront. Number one, just the instrumentation increase internationally. Fred, I'd love to understand kind of what the capacity is from the distributor base or for Dave, what the capacity is for more instrumentation and kind of where they're at in terms of their demand relative to expectations or what you think over time? And then the second question, just love to understand the interplay between ApiFix and RESPONSE and how you think ApiFix may or may not impact your RESPONSE sales as maybe more parents and physicians choose to go with ApiFix. Thank you.

Yes, absolutely. So very pleased in the third quarter to start to see some demand from our partners outside of the U.S. requesting sets that they can then purchase, which enables them to grow their business. This is the largest set sale quarter that we've had in 18 months, as many of our partners outside of the U.S. are small family-run businesses. They were trying to get their feet back underneath them related to cash because of the COVID cases. Obviously, last year particularly in Brazil, the beginning of this year was really shut down; they did limited cases. That has started to open up in the third quarter. And as they see the strong demand and the big backlog that they're facing, they do, in fact, need more and more sets to meet that backlog. In addition to that, we're working on quite a few approvals outside of the U.S. of many of our surgical systems, which will then also increase the demand for new sets. And so, we would anticipate that the fourth quarter, and really throughout next year, the set sales should be equal to or greater than what we saw in the third quarter more sets than means more replenishment obviously in the future, as well, which grows the overall international business.

Building on Fred's point, I want to highlight that many of the products we launched at the start of the pandemic have been successful in the United States. The PNP femur, now our largest trauma limb deformity product, was mostly introduced during this time, and we are pleased with the results and the rate of surgeon adoption here. However, in many of our stocking distribution markets, we have yet to launch this product effectively, and we also haven't rolled out Orthex or ApiFix in a significant way. As our stocking distributors regain confidence in their business, especially in markets like Brazil where there is a massive patient backlog, we see that they are also becoming enthusiastic about our newer products that have proven to be successful in the U.S. We believe we are starting to experience the positive tailwinds we discussed several quarters ago. Regarding the ApiFix RESPONSE interplay, one of the main reasons for acquiring ApiFix was to be at the forefront of transformative technology to enhance the lives of children who typically undergo fusion procedures. Additionally, we believe it will significantly drive the positive impact we observe around the RESPONSE business. ApiFix, combined with Mighty Oak Medical's FIREFLY Technology and 7D technology, is undoubtedly increasing RESPONSE usage. We are seeing more users in hospitals where we already have a presence and are able to establish new accounts thanks to these innovative technologies and those involved with ApiFix. We are optimistic about the future, and as we expand the commercialization of ApiFix in 2022, we expect its adoption to positively affect the growth of our Fusion Business.

Thank you. Our next question comes from the line of Sam Brodovsky from Truist.

I would like to focus on ApiFix and ask two questions upfront. First, I want to confirm the number of cases currently enrolled in the registry, which you have previously disclosed. Second, regarding the transition to the commercial model, did any insights from the registry cases boost your confidence in this shift, or is it mainly driven by demand from your commercial partners wanting earlier access to the system? Additionally, how should we assess the capacity of these centers to ramp up compared to the ramp we observed in the registry centers during the latter half of last year and the first half of this year? Thank you.

Thank you, Sam. That’s a great question. We haven’t provided specific numbers and it's unlikely we will in the future mainly due to competitive factors. These accounts are well known and we face competition from non-fusion technologies. To share some insights, we’ve performed more than half the cases needed for our registry, and we feel optimistic about our progress. The pace was affected by elective procedures in the third quarter. It’s important to note that in order for kids to qualify for the ApiFix procedure, they must visit clinics. We observed a decrease in the number of X-rays coming from our registry sites in Q3 because fewer patients visited the clinics. Still, we are very pleased with our trajectory towards reaching 200 patients, which we anticipate wrapping up in the first half of next year. The outcomes from our first 100 cases have been exceptionally strong, which has built confidence for both us and the FDA to expand to the next 10 to 20 sites. Moreover, there’s been significant interest from surgeons, particularly early adopters outside the registry who want access to this technology. This combination of positive results and interest from key US accounts is motivating us to move forward with the next phase of our commercial rollout. Being able to separate the registry from our commercial activities next year reassures us that ApiFix will significantly contribute to our revenue growth.

Thanks for the color on the cost that you say and I know you mentioned the gross margin was down a bit, I think because of OUS mix. But obviously freight does not appear to be something that impacts you guys. But I was wondering if we could get your thoughts on any other inflation that you might be seeing whether it be labor or materials of late?

Yes, Dave. Good to hear your voice. Knock on wood. We're very fortunate in that probably 98% of our products come from the U.S. So we are not impacted by the delays in a lot of shipping from overseas, which is a huge benefit for us. We've seen a small amount of inflationary impact on the business, but I would say very, very small on ancillary items; the core business has not been impacted, and long may that continue. We're hearing that there may be some pressures next year, but it's nothing I think that is going to have any major impact on the business. So right now we continue to have those conversations with our suppliers as we're hearing it from everywhere else. We have very little amount of transportation costs relative to our overall business. And so we think that will not have a major impact on the gross margin. To your point, the gross margin declined in the third quarter is exactly what you said; a higher percentage of international particularly the set sales, which bill out to zero margin definitely had an impact on overall profitability. As the domestic sales return, the gross margins should increase a little bit in the future.

Thank you, Fred. And a quick follow up, it would seem to us that pricing power, you may have that given the nature of the products you sell and where you're selling them. But I guess maybe you could just refresh our mind on price increases. Have you taken any? Do you think you can? Can you offset anything if it does come along in the future? Thank you.

Yes. So we're heading into the budgeting process, as you can imagine, this time of the year. And so every year, this time, we're having those discussions with our business teams to look at our pricing and look at our margin. I would say be overly aggressive because we think we have a fiduciary responsibility to be responsible for the hospitals, but where necessary, we have increased prices on selective items year-to-year in the past, and we'll continue to do that next year. Any of these inflationary impacts would obviously factor into those decisions on which product to add price increases.

Thank you. And I'm currently not showing any further questions in the queue. And this is all the time we have for Q&A. With that, I'll go ahead and close the call. This concludes today's conference call. Thank you for participating. You may now disconnect.