KIDS — OrthoPediatrics Corp.

Summary of OrthoPediatrics Corporation Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: $61.2 million, a 12% increase year-over-year.
• U.S. Revenue: $48.7 million, up 14% from Q3 2024.
• International Revenue: $12.5 million, a 6% increase, primarily driven by strong surgical volumes in EMEA and APAC.
• Trauma and Deformity Revenue: $44.1 million, a 17% increase.
• Scoliosis Revenue: $16.3 million, up 4%, impacted by a decline in 7D unit sales.
• Gross Profit Margin: 74%, compared to 73% in Q3 2024.
• Adjusted EBITDA: $6.2 million, a 56% improvement from $4.0 million in Q3 2024.
• Net Loss per Share: GAAP net loss of $0.50, compared to $0.34 in the prior year.
• Free Cash Flow Usage: Improved to $3.4 million from $11.7 million in Q3 2024.

2. Strategic Updates and Business Highlights

• Supported treatment for over 37,100 children, totaling approximately 1.3 million.
• Strong growth in Trauma and Deformity (T&D) and OPSB (Orthopedic Specialty Bracing) segments, with T&D growing by 17%.
• Expansion of OPSB clinics from 26 to over 40, with new territories opened including New York City, California, and Ireland.
• Continued innovation with the 3P Pediatric Plating Platform, with FDA approvals for new systems expected to drive future growth.
• Focus on operational efficiency and cost reduction through restructuring initiatives.

3. Forward Guidance and Outlook

• Full Year 2025 Revenue Guidance: Adjusted to $233.5 million to $234.5 million, representing 14% to 15% year-over-year growth.
• Adjusted EBITDA Guidance: Expected to be between $15 million and $17 million.
• Anticipation of positive free cash flow in Q4 2025 and breakeven cash flow in 2026.
• Continued focus on high-margin core businesses, with expectations of strong growth from T&D and OPSB.

4. Bad News, Challenges, or Points of Concern

• 7D Capital Sales: No unit sales in Q3 2025 compared to strong sales in Q3 2024, negatively impacting overall revenue.
• Latin America Sales: Ongoing headwinds from reduced stocking and set sales, particularly in Brazil, with expectations of continued variability.
• Increased Operating Expenses: Total operating expenses rose 19% year-over-year, driven by restructuring and impairment charges.
• Competitive Pressures: Notable competitors like J&J and Smith & Nephew are exiting pediatric-focused product lines, which may create opportunities but also reflects a challenging market landscape.

5. Notable Q&A Insights

• Management expressed confidence in the demand for new clinics and indicated a willingness to accelerate openings if feasible.
• The competitive landscape is shifting, with larger OEMs reducing their focus on pediatric products, potentially benefiting OrthoPediatrics.
• Concerns about the timing of 7D unit placements were acknowledged, but management remains optimistic about long-term growth in the Scoliosis segment.
• The company is focused on balancing revenue growth with profitability and cash flow, particularly in Latin America, where they aim to improve operational efficiency.

Overall, while OrthoPediatrics demonstrated solid growth in several core areas, challenges in specific segments and international markets remain a concern. The company is strategically positioned to capitalize on market opportunities while managing operational efficiencies.