OrthoPediatrics Q2 2025 Earnings Report

OrthoPediatrics EPS Results

• Actual EPS: -$0.11
• Consensus EPS: -$0.17
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: N/A

OrthoPediatrics Revenue Results

• Actual Revenue: $61.08 million
• Expected Revenue: $61.40 million
• Beat/Miss: Missed by -$318.00 thousand
• YoY Revenue Growth: N/A

OrthoPediatrics Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 4:30PM ET

OrthoPediatrics (NASDAQ:KIDS), founded in 2007 and headquartered in Warsaw, Indiana, is a medical device company dedicated exclusively to providing orthopedic solutions for children. The company focuses on developing, manufacturing and marketing a broad portfolio of implants and instruments designed to address a wide range of pediatric conditions, including trauma, deformity correction, spine disorders and sports injuries.

The company’s product lines include locking plates and screws for upper and lower extremity reconstruction, intramedullary nails for femur and tibia stabilization, and specialized systems such as the MAGEC Magnetic Growth Rod for treatment of early-onset scoliosis. OrthoPediatrics also offers unique epiphysiodesis and guided growth devices designed to correct limb length discrepancies and angular deformities in growing children. These devices are supported by accompanying instrumentation that simplifies surgical technique and enhances procedural efficiency.

OrthoPediatrics markets its products through a direct sales organization in the United States and through distributors and regional offices in Europe, Latin America and the Asia-Pacific region. The company collaborates with leading pediatric orthopedic surgeons and academic institutions to advance clinical research, refine surgical protocols and expand its product offerings. Continuous investment in R&D underpins its strategy to fill gaps in pediatric care that are often overlooked by general orthopedic manufacturers.

Led by a management team with deep expertise in the orthopedic device industry, OrthoPediatrics emphasizes quality systems, regulatory compliance and physician education. The company’s global footprint and specialized focus on the pediatric segment position it as a growing participant in the niche market of children’s orthopedics, striving to improve clinical outcomes and quality of life for young patients worldwide.

OrthoPediatrics Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q2 revenue with 16% global growth and exceptionally high procedure volumes in June and July, driving confidence for another outstanding year.
• Positive Sentiment: Raised full-year 2025 revenue guidance to $237 – $242 million while maintaining adjusted EBITDA targets of $15 – $17 million and expecting positive free cash flow in Q4.
• Positive Sentiment: OrthoPediatrics now operates over 40 OPSB clinics worldwide, including new Greenfield sites in California and Ohio and the first international clinic in Ireland, surpassing 2025 expansion goals.
• Positive Sentiment: Scoliosis revenue surged 35% in Q2 on market share gains and strong adoption of Response, ApiFix and 7D systems, with more EOS product launches (Vertaglyde, Ellie) ahead.
• Negative Sentiment: Gross profit margin declined to 72% from 77% year-over-year, pressured by higher-growth, lower-margin 7D sales and increased international set transactions.

Presentation

[Operator]

Good afternoon, and welcome to OrthoPediatrics Corporation's Second Quarter twenty twenty five 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 Hannah Jeffrey from the Gilmartin Group for a few introductory comments. Please begin.

[Hannah Jeffrey, Associate VP at Gilmartin Group]

Thank you for joining today's call. With me from the company are Dave 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 for 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, I encourage you to review the company's most recent annual report on Form 10 ks, which was filed with the SEC on 03/05/2025, and its subsequent quarterly reports on Form 10 Q.

[Hannah Jeffrey, Associate VP at Gilmartin Group]

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 second quarter 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, 08/05/2025.

[Hannah Jeffrey, Associate VP at Gilmartin Group]

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 Dave Bailey, President and Chief Executive Officer.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Thanks, Hannah. Good afternoon, everyone, and thank you for joining us on our second quarter twenty twenty five conference call. As always, I want to start by highlighting the metric we're most proud of. In the second quarter alone, we helped treat over thirty seven thousand children, bringing our total impact to over one million two hundred and seventeen thousand kids since inception. For far too long, pediatric patients and healthcare providers have lacked appropriate support in meeting the major unmet needs in pediatric healthcare.

[David Bailey, President, CEO & Director at OrthoPediatrics]

OP remains deeply committed to changing that, and we're well on our way. Q2 twenty twenty five was another strong quarter for OrthoPediatrics, highlighted by record revenue that generated global growth of 16 and exceptionally high procedure and clinic volumes in June that remained strong in July. With two of our busiest summer months now behind us, we are pleased with our momentum and increasingly confident in another outstanding year. Growth was driven by market share gains across all businesses, with standout performances in scoliosis, trauma, 7D, and our nonsurgical specialty bracing business, or OPSB. International sales were also solid, fueled by strong surgical demand in Europe and The Middle East, scoliosis set sales to stocking distributors, offset by lower trauma and deformity set sales in Brazil.

[David Bailey, President, CEO & Director at OrthoPediatrics]

OPSD continues to gain momentum as we expand the franchise's footprint through increasing product sales, such as DF2, and execution of our clinic expansion strategy. Just this morning, we announced several milestones achieved through July, including multiple US Aqua hire and Greenfield clinic openings and our first international clinic in Ireland and expect additional expansion throughout the second half of the year. Beyond OPSD, our scoliosis and trauma implant systems continue to aggressively take market share with revenue growing very rapidly, which we expect to continue in H2 and throughout 2026. We are pleased with the way things are progressing on the revenue and share taking front, and we are clearly bullish about the year. We expect our business to continue to gain momentum throughout 2025 based on our success scaling OPSB, driving market share gains through leveraging existing set deployments, and the ongoing success of our innovative product launches.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Beyond revenue, we remain on track to meet our adjusted EBITDA goals, which will fully pay for our 2025 set deployments and lead to positive free cash flow generation in Q4 of this year and full year free cash flow breakeven in 2026. All of this, combined with the earlier mentioned strong start to our summer selling season and the momentum we've built over the last several quarters, gives us confidence in an extremely successful second half and full year 2025, which will also set us up well for 2026 and beyond. Given these facts, we are raising our revenue guidance range from $236,000,000 to $242,000,000 to $237,000,000 to $242,000,000 and we continue to expect to produce 15,000,000 to $17,000,000 in adjusted EBITDA and to generate our first quarter of positive free cash flow in 2025. In the 2025, the T and D business grew 10%, as we continued to deliver strong market share gains across multiple product lines. Overall growth in the quarter was led by strength from US trauma, PNP femur and tibia, cannulated screws, OPSB, and DF2, slightly offset by slow case scheduling in elective limb deformity early in the quarter and lower T D set sales to Brazil.

[David Bailey, President, CEO & Director at OrthoPediatrics]

This quarter's performance was fueled by past investments in set allocation, surgeon education, and new product adoption, leading to strong share gains across the T and D portfolio. Significant set deployments in 2023 and 2024 continue to translate into increased utilization and meaningful growth. Trauma saw particularly strong revenue gains, driven by rapid adoption of PMP tibia, cannulated screws, and DF2. We also launched additional PMP tibia sets this quarter with more to follow, positioning it as a key growth driver for the foreseeable future. Additionally, we have recently received FDA approval for sterile products, which will start to positively impact set deployment dollars due to increased efficiency, with the first sterile product set to release in the 2025.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Further, DF2 continues to outperform expectations, with rapid surgeon adoption and growing demand. As this product is quickly becoming the new standard of care, we continue to see support from the industry. A recent publication in J. Posna highlighted positive DF2 study results. These results demonstrated similar short term clinical outcomes compared to spica casting, while significantly reducing hospital admission, length of stay, and need for general anesthesia.

[David Bailey, President, CEO & Director at OrthoPediatrics]

This study replicates previously presented work that the DF2 brace represents an attractive alternative for managing pediatric femoral shaft fractures while optimizing health care resource utilization without compromising treatment efficiency. The study continues to amplify the value proposition for the DF2, and we are seeing that play out in reality with surgeons as well, thus creating a new standard of care. Looking at our 3P platform. Following FDA approval of the 3P pediatric plating platform hip system, which we announced last quarter, we just announced the completion of our first surgical case last week and are gearing up for more cases throughout the balance of the year. We anticipate this will create a nice headwind for the remainder of 2025 and 2026.

[David Bailey, President, CEO & Director at OrthoPediatrics]

The next 3P system, 3P Small and Mini, is on track to be submitted to the FDA in the coming months. Just as a reminder, 3P is a series of systems designed to be the most innovative and comprehensive plating portfolio in pediatric orthopedic history. And we expect to launch a few new systems each year for the next several years, bolstering both trauma and limb deformity revenue. T and continues to be a key driver of our performance as we leverage our scale, gain market share, and launch innovative products that meet unmet needs and fuel sustained growth. Our path to market dominance in T and D is well defined.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Our OPSB strategy also continues to advance. And as the business hits more milestones, our confidence in the OPSB opportunity continues to grow. It offers a significant capital efficient growth avenue, which we're targeting through territory expansion, accelerated R and D, and scaling our sales force. Recently, execution of the OPSB strategy made significant progress, which will positively impact the balance of 2025 and 2026, as evidenced by another strong quarter of growth in excess of twenty percent and now surpassing our initial guidance for 2025 territory expansion. As mentioned above and in our press release, we have now expanded our footprint into two very large markets, New York City and California, expanded Denver and Ohio, as well as expanded for the first time internationally in Ireland.

[David Bailey, President, CEO & Director at OrthoPediatrics]

As we examine some of these recent announcements, I'd like to highlight a few key points with each. Starting with Greenfield clinic expansion. First, we have entered into a new territory with our first clinic in California. The Los Angeles market provides access to millions of potential pediatric and adolescent patients, and the location in California provides us the opportunity for further expansion across the state. We are thrilled to be establishing OPSD in this territory, and will look to build off this initial clinic to further expand our footprint within this incredibly large market. Next, we've opened a new clinic in Dayton, Ohio, providing skilled clinicians a presence within Dayton Children's Hospital, as well as a new clinic in Denver, Colorado, where we continue to build our footprint. Now, looking at our Aqua hire opportunities.

[David Bailey, President, CEO & Director at OrthoPediatrics]

First, we've added multiple locations to our existing clinics in the greater New York City territory.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Each of these new clinics are located in major children's hospital centers.

[David Bailey, President, CEO & Director at OrthoPediatrics]

While we are already in this territory, these new clinics represent a significant opportunity within a very large market, allowing us to further penetrate this market. Notably, we have also announced our first international clinic with a small acquihire in Ireland. This location is complementary to OrthoPediatrics' strong implant business and one of the country's largest pediatric hospitals and provides opportunities to expand with additional Ireland based clinics in the future. We expect this clinic will drive further synergies with the implant business as we are growing scoliosis implant revenue there as well. This is a major step into the international markets and just the beginning of the journey for OPSB International.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Following a strong first quarter, the second quarter has further built on the successful start to 2025 for the OPSB business, and our recent actions have us well positioned to overperform our goals in H2 and is setting us up nicely for 2026. As of today, we now operate over 40 clinics worldwide, up from the 26 acquired with Boston OMP in January 2024, and have expanded into six territories, surpassing our goal of four in 2025. We're seeing a strong wave of clinic expansion opportunities, driven by high customer demand and a robust pipeline. This momentum reinforces our decision to move aggressively, and we expect to share more updates in the near future. The OPSD strategy is clearly working and has proven to be a highly successful expansion for OrthoPediatrics.

[David Bailey, President, CEO & Director at OrthoPediatrics]

The synergies with our implant business are exceptionally strong, and we remain focused on executing our plan to secure a dominant share in this market. Moving to the scoliosis business. Our strong growth of 35% seen in scoliosis this quarter was again driven by more share taking in both The US and OUS markets, with increasing demand from new markets in The EU and The Middle East. US scoli growth continues to be led by new users adopting orthopedics technology, including Apafix, Response, as well as our commitment to new solutions for EOS patients, in addition to 7D. This quarter, we saw even stronger surgeon conversion and are feeling the positive impact of past conversions in the busy summer season.

[David Bailey, President, CEO & Director at OrthoPediatrics]

To this point, there has been a large uptick in new surgeon users, both of Apafix and Response, resulting in strong summer case volume starting in mid May that should extend throughout H2 and 2026. In addition, sales and placements of 7D units in key US accounts were healthy in the second quarter. The large pipeline of 7D targets will further build upon this progress, and we expect this will drive further share gains and growth in the coming quarters. International scoliosis, while still small, is becoming increasingly more relevant as we onboard new high volume users and rapidly grow rapidly. As we look to the second half of twenty twenty five, we expect small stature EU MDR approval, and we'll begin providing more updates as they come.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Looking at our EOS product portfolio, following its FDA clearance, we expect the first cases with Vertaglyde to be completed in August. The addition of Vertaglyde should provide further tailwinds to an already growing business. The rest of our EOS products are progressing according to plan, and we are excited to continue to see development across our scoliosis portfolio. Moving on to international. International sales were solid in the quarter as a result of extremely strong demand in surgical volume in Europe and scoliosis set sales to stocking distributors.

[David Bailey, President, CEO & Director at OrthoPediatrics]

While we are pleased with the many positive trends within our international business, T and D growth was offset by lower set sales in LatAm. Elsewhere, we are very pleased with international expansion progress, especially as we have our first international OPSD clinic expansion and see robust demand for new scoliosis markets abroad. Within our international business, EU MDR approval remains a large catalyst for our future growth. And during the second quarter, we achieved our first EU MDR approval through LP Canada, which included the Pega product portfolio. This is a huge milestone for us as we anticipate several additional approvals in the coming quarters as we continue the process of EU MDR registration and expect to launch new products into Europe next year. As a reminder, EU MDR approval for implants is an expensive process, but we believe it is the right thing to do for kids who need these devices outside of The US, and it strengthens our strategic position.

[David Bailey, President, CEO & Director at OrthoPediatrics]

That brings us to surgeon training and education. In the second quarter, we hosted 182 unique training experiences for over 3,420 healthcare professionals. This includes interactions from the Pediatric Orthopedic Society of North America or POSNIP, a key industry event in May. OrthoPediatrics was once again proud to be the leading sponsor and highlighted our growing portfolio of pediatric solutions with multiple events and new products on display. While at POSNA, OrthoPediatrics, the Ruth Jackson Orthopedic Society, and POSNA hosted a women's networking launch where we had over 150 participants.

[David Bailey, President, CEO & Director at OrthoPediatrics]

We are grateful to partner with others to support events such as this and will continue to do so in the future. And with that, I'd like to turn the call over to Fred to provide more detail on our financial results. Fred?

[Fred Hite, CFO & COO at OrthoPediatrics]

Thanks, Dave. Taking a closer look at the P and L, our 2025 worldwide revenue of $61,100,000 increased 16% compared to the 2024. Growth in the quarter was driven primarily by strong performance across Trauma and Deformity, Scoliosis and OPSB, slightly offset by lower growth in international revenues. US revenue was $48,100,000 a 17% increase from the 2024, representing 79% of our total revenue. Growth in the quarter was primarily driven by Trauma and Neformity, Scoliosis and OPSB.

[Fred Hite, CFO & COO at OrthoPediatrics]

We generated total international revenue of $12,900,000 representing growth of 12% compared to the 2024 and representing 21% of our total revenue. Growth in the quarter was primarily led by increased procedure volumes and scoliosis SET sales, partially offset by lower T and D SET sales to Latin America. In the 2025, Trauma and Deformity Global revenue of $41,700,000 increased 10% compared to the prior year period. Growth was primarily driven by PMP femur, PMP tibia, DF2 and OPSB, partially offset by lower T and D set sales to Latin America. In the 2025, Scoliosis global revenue of $18,500,000 increased 35% compared to the prior year period.

[Fred Hite, CFO & COO at OrthoPediatrics]

Growth was primarily driven by increased sales of Response, ApiFix non fusion system, and revenue generated from 7D Technology. Finally, Sports Medicine other revenue in the 2025 was 900,000 compared to $1,300,000 in the prior year period. Turning to SET deployment, dollars 4,600,000.0 of SETs were consigned in the 2025 compared to $7,800,000 in the 2024. Touching briefly on a few key metrics. For the 2025, gross profit margin was 72% compared to 77% for the 2024.

[Fred Hite, CFO & COO at OrthoPediatrics]

The change in gross margin was primarily driven by higher 7D growth as well as higher international set sales, which both generate lower gross margin. Total operating expenses increased $8,200,000 or 18% compared to the prior year period to $54,700,000 in the 2025. The increase was mainly driven by $3,000,000 of restructuring charges, increased non cash stock compensation, as well as the incremental personnel required to support the ongoing growth of the company, including OPSB clinics. Sales and marketing expenses increased $2,500,000 or 15% compared to the prior year period to $19,100,000 in the 2025. The increase was mainly driven by increased sales commission expenses and an overall increase in volume of units sold.

[Fred Hite, CFO & COO at OrthoPediatrics]

General and administrative expenses increased $3,100,000 or 11% year over year to $30,400,000 in the 2025. The second quarter increase was driven primarily by increased non cash stock compensation as well as the addition of personnel and resources to support the continued expansion of the business, including OPSB clinics. Research and development expenses decreased by $400,000 in the 2025 due to timing of product development third party invoices during the 2025. Restructuring charges recorded during the 2025 were $3,000,000 and related to the company's global restructuring plan started in the 2024, aimed at improving operational efficiency, reducing operating costs, as well as reducing staffing, which will benefit the 2025, as well as 2026. Total other income was $3,600,000 for the 2025, compared to $400,000 of other expense for the same period last year.

[Fred Hite, CFO & COO at OrthoPediatrics]

Non GAAP net loss per share for the period was $0.11 per basic and diluted share compared to $0.23 per basic and diluted share for the same period last year. Adjusted EBITDA was $4,100,000 in the 2025, roughly 50% improvement when compared to $2,600,000 for the 2024. We ended the second quarter with $72,200,000 in cash, short term investments and restricted cash. We did draw down $25,000,000 on the Braidwell line of credit at the June 2025. Turning to guidance.

[Fred Hite, CFO & COO at OrthoPediatrics]

We are increasing our expectation for full year 2025 revenue to the range of $237,000,000 to $242,000,000 representing year over year growth of 16% to 18%. We are reiterating the guidance that our full year gross margin will be within the range of 72 to 73%. We also continue to expect to generate between 15,000,000 to $17,000,000 of adjusted EBITDA in 2025. Additionally, we continue to expect approximately $15,000,000 of new set deployed in 2025. This represents our continued focus on driving the business to free cash flow breakeven by 2026 and we anticipate delivering our first quarter of free cash flow positivity in the 2025.

[Fred Hite, CFO & COO at OrthoPediatrics]

I will now turn the call back over to Dave for his closing remarks.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Thanks, Fred. We're very pleased with the progress made through the 2025. Our focus this year is on strong execution, scaling OPSD, leveraging prior set deployment, and driving growth through innovative product launches. We're fully committed to helping more children than ever, significantly growing revenue, improving adjusted EBITDA, and reducing cash burn in 2025 and beyond. And the second quarter was another positive step towards those goals and has positioned us well for a strong second half of the year.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Before closing, I want to thank all of our associates, our partners in pediatric healthcare, and you, our investors, for continuing to share our mission to help 1,000,000 children each year. Operator, let's open the call for Q and A.

[Operator]

Thank you. At this time, we will conduct the question and answer session. Our first question comes from the line of Ryan Zimmerman of BTIG. Your line is now open.

[Ryan Zimmerman, MD & Medical Technology Analyst at BTIG]

Oh, good afternoon. Thanks for taking our questions. Can you hear me okay?

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah. I'm doing good, Great.

[Ryan Zimmerman, MD & Medical Technology Analyst at BTIG]

Appreciate all the updates and the color. Maybe talk to us a little bit about the clinic strategy for a minute, Dave. You know, what do you see now the existing clinics? You know, how are those doing? How are those tracking from a production standpoint?

[Ryan Zimmerman, MD & Medical Technology Analyst at BTIG]

And, with all these new clinics announced today, when you expect those newer clinics to contribute to growth?

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, great question, Ryan. So I think the existing clinics that we acquired, so we had 26 clinics when we acquired Boston. I think generally speaking, we see growth in those clinics. So let's say same store sales kinds of growth, there's more patient flow, and largely due to the investments we've made on the sales side. Our newer Greenfield clinics, as you know, take a little bit more time to kind of peak.

[David Bailey, President, CEO & Director at OrthoPediatrics]

I would say none of the Greenfields we've done so far are they're not at max volume. But certainly, they are contributing to revenue, because it's all growth that we're getting from those clinics. But they're not none of them at this stage, I think, are maxed out. Potentially, what we have going at Nationwide Children's, which is, as you know, embedded in a super high volume children's hospital, that one I would say is growing extremely rapidly. And we have, I would say, a multitude of the share there.

[David Bailey, President, CEO & Director at OrthoPediatrics]

But the greenfields grow different, dependent upon whether we have them in the hospital. The ones we have in hospital obviously grow much more rapidly, and I think start to turn a profit much more quickly. The ones where we can't get in the hospital, but they're around the hospital or in a suburb, obviously those take a little bit more time to drive patients to. But overall, I think we're very pleased with the way the growth is coming through, the clinics we acquired, the clinics we've Greenfield, and the Aquahire clinics. And I think the Aquahire clinics, obviously, there were some revenue attached to some of those clinics.

[David Bailey, President, CEO & Director at OrthoPediatrics]

But using the sales force to drive more volume through those clinics and more of our products through those clinics, that's working as well. And I think to answer your last question, you hopefully hear the bullish tone in my voice. And obviously, talking about what we think we're going to see in H2, a lot of that is driven by the fact that we do have more clinics. We're ahead in terms of our territory expansion from six to four. And we hinted in the script, obviously, that there's more opportunities for us.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And so I think that's part of the cause for our bullishness as we head into the second half here.

[Ryan Zimmerman, MD & Medical Technology Analyst at BTIG]

Yeah. Okay. And then Fred, you haven't historically guided by segment, but I'm going to ask about it anyway, which is your Scolby business has done extremely well these past two quarters. You're facing a little bit tougher comps in the back half of the year. On the T and D side, it's a little bit lighter. I don't know if you can comment so much, but any color you have in terms of the composition of growth as we think about it in the back half of the year? Because Skol is doing exceedingly well. T and D, obviously, a little lighter from the OUS sales this quarter. But just as you think about the balance of the year, particularly amongst those two segments, what are your expectations when you think about growth?

[Fred Hite, CFO & COO at OrthoPediatrics]

Yeah, again, we don't provide guidance by segment, but I think the Scoliosis has done very, very well here in the first half of the year. Multiple new surgeons coming on, response very favorable, ApiFix, as well as 7D, which gives us nice growth in the future, both in the second half and into 2026. And so, I would expect SCOLI growth is probably going to be on the stronger side overall, Maybe not at the 35% mark, but heavier than the company growth each of the next two quarters would be my comment on segment growth.

[Ryan Zimmerman, MD & Medical Technology Analyst at BTIG]

Very helpful. Thank you. I'll hop back in queue.

[Operator]

One moment for our next question. Our next question comes from the line of Matthew O'Brien of Piper Sandler. Your line is now open.

[Matt O'Brien, Senior Research Analyst at Piper Sandler Companies]

Afternoon. Thanks for taking the questions. Maybe just sticking with T and D for a second here. I don't know, Fred or Dave, if you can talk a little bit about the, I guess, the limb deformity case, selective case slowdown, what caused that? And maybe if you can quantify that plus the set sales that you missed internationally, because that business just was a bit softer than we were modeling, although complex spine was very good.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, we commented in the script, and I wish I had a better answer for you, Matt. But our business, especially a business like that, where we have extremely high share on the deformity side of our T and D business. I mean, there's We do a large percentage of the overall sales in The United States in children's hospitals with those products. It kind of ebbs and flows with some of the volume that we see from some of our major accounts. And for whatever reason, in the first, I would say, six weeks or so of Q2, the volume was just a little lighter.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And then we saw that come back pretty aggressively in the back six weeks. Certainly June, very strong overall. And not entirely sure why we saw that. And certainly, there's nothing that is long term and problematic about it, because it righted itself very rapidly. But it did contribute to a slightly lower growth rate, I think, the T and D in The US than we had expected.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And then obviously, you have some of the set sales, which we control a little bit more in terms of the set sales that we're not taking in Brazil. So I don't think there's anything I'm too concerned about there. Wish we knew exactly why that volume ebbed and flowed a little bit like that, but it did contribute a little bit. But on the other side of that, the trauma side of the T and D business was extremely strong. And it seemed like the trauma volumes in the quarter were as strong as they have ever been, particularly US based.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And great to see products like PNP, Tibia, DF2, those things really take in a lot of share. And so it was a bit of a tale of two cities in terms of those two businesses. But again, nothing long term that we can point to here. It's just a little slower in the first part of the second quarter on that business.

[Matt O'Brien, Senior Research Analyst at Piper Sandler Companies]

Got it. And then to follow-up on Ryan's question on the OPSB franchise, and this is a two partner, so forgive me. But are you really trying to say the reason you decided to go and expand even faster than expected is because the existing centers plus the ones you've added are ramping faster than expected? And then Fred, the EBITDA number for the year is steady even though you're adding more centers. I know there's a lot of upfront costs with those centers. They're not crazy. But so would that also imply that the profitability of those centers might be coming along a little faster than we had anticipated? Thank you.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, listen, I don't think that we specifically set out to drastically accelerate the territory expansion on our own. I mean, the demand for this is very high. And it's still a very small business, generally speaking. And so we're not going to place a governor on the expansion opportunities we see within OPSB. We view this as there are 300 children's hospitals that we serve in The United States.

[David Bailey, President, CEO & Director at OrthoPediatrics]

We have accounts we have sales for our implant products in every one of those. And over the course of certainly the long run, we want to be able to serve all 300 of those children's hospitals with clinics in our OPSB product portfolio. And so we are seeing a high demand for opportunities for clinic expansion in OPSB. And I guess we're just not going to governor the growth opportunities there. Yes, some of that comes with some upfront cost, some upfront expense.

[David Bailey, President, CEO & Director at OrthoPediatrics]

But I think the prudent thing here is that we got an opportunity to dominate that segment of the market. Our customers are very adamant about us expanding, and we're going to continue to expand in these big jurisdictions as fast as we can.

[Fred Hite, CFO & COO at OrthoPediatrics]

Yeah, and when you look at it, there is a diversity of these centers. So inside of Dayton's hospital, inside Nationwide, as compared to at a satellite location, and then Aqua hire versus startup. What I would say is that they are all performing within our expectations, and what we kind of had modeled. And so no big surprises on any of those as compared to what we expected. Very pleased with the growth, the ramp of those centers, and the profitability of those.

[Fred Hite, CFO & COO at OrthoPediatrics]

And to Dave's point, you know, we're not going to limit the growth of those. We're going to continue to open them and take advantage of the demand that's there and just keep this thing going, not just for the next couple of quarters, but really for the next several years, given the long list of demand that's out there for us.

[Matt O'Brien, Senior Research Analyst at Piper Sandler Companies]

Understood. Thank you.

[Fred Hite, CFO & COO at OrthoPediatrics]

Thanks, Matt.

[Operator]

One moment for our next question. Our next question comes from the line of Mike Matson of Needham and Company.

[Joseph Stringer, Senior Analyst at Needham & Company]

This is Joseph on for Mike. I guess maybe to start it off just looking at product expansion internationally. I'm just trying to understand a little bit how you guys are going about this. Is it more bit by bit? Should we expect kind of like product launches in different tranches over the years?

[Joseph Stringer, Senior Analyst at Needham & Company]

And then kind of just on the same point, international growth has been accelerating for the last couple of quarters, heard what you called out in LatAm, but I guess I'm kind of just wondering what you guys are thinking when OUS or international will start to outpace US growth as more product launches happen? And do you think once that does happen, that's going to be a kind of consistent thing for a while?

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, it's a great question. The international business, like you called out and we called out in the script, you see that business particularly in Europe and The Middle East, Australia, some of these places in particular where we have agencies, really growing rapidly. And I would say, yeah, generally speaking, you see that business outpacing The US growth minus some of the disruption we've had in Brazil. And I think those marketplaces, we have much less market share than we have in The United States. So I think generally speaking, you could expect those markets to continue to grow more rapidly than what we see in The US.

[David Bailey, President, CEO & Director at OrthoPediatrics]

That said, when we see the Scully business growing the way it is in The United States, it's hard to project that we're going to grow more than 35% outside of The US. But to be fair, those are small businesses outside of The US. We have new opportunities on Scoli. And just everything there is growing really nicely, again, with the exception of some the stuff we're doing in Brazil. I think if you look at EU MDR, I think that's what you must be referring to.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yes, when products get approved on EU MDR, we think this is going to be a quarter by quarter new product launch timeline. We did get our first EU MDR approval for a number of the Pega products through OP Canada. A number of those products did have CE, so there wasn't a big expansion opportunity for us there. But it was fantastic, frankly, to see that we got the first one done, and we expect several more in the future. So I think what you'll see from us back half of this year, certainly in 2026 and 2027, is not launching all of these products simultaneously, but launching new products that are well used here in The United States into European jurisdictions almost on a quarter by quarter basis.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And I do think that you could expect that at least the European business, Australian business, some of those businesses that are very stable to continue to grow, particularly on the T and D side, to grow faster than The US business.

[Joseph Stringer, Senior Analyst at Needham & Company]

Okay, great. That's super helpful. Thanks for that color. And then I guess just a real quick one for clarification. So Vertiglyde, those first cases are, I think you said it's this month.

[Joseph Stringer, Senior Analyst at Needham & Company]

Is ELE the next product launch there in EOS or is there anything smaller that you guys just haven't talked about?

[David Bailey, President, CEO & Director at OrthoPediatrics]

No, I think Ellie is the next. So we believe there's three products really needed to effectively take a major share of The US market. And that's the Response Ribbon Pelvic, which we launched last year. The Vertiglyde device, which, as I said, we'll do our first cases here in the next few weeks, which is awesome, a culmination of several years of work, and work with FDA and surgeons to get that much needed device out. So super excited about that.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And then Ellie is the next big one, I would say. And product development, I think, the R and D side is on track at this point. We're hoping to get that product before the agency, hopefully early next year. If we do cases next year, I think that would be great, but it's not going to be a full blown launch, I would say next year. But that will really complete the development for us within the EOS portfolio.

[Joseph Stringer, Senior Analyst at Needham & Company]

Okay, great. Well, congrats on the record quarter.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Thanks, Koush. Really appreciate it.

[Operator]

One moment for our next question. Our next question comes from the line of Ben Haynor of Lake Street Capital Markets. Your line is now open.

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Good afternoon, gentlemen. Thanks for taking the questions. First for me on OPSB, are there any changes to your guys' preferences on acquisition versus de novo? Are there certain sort of geographic market dynamics that favor one or the other? Any color there on what that might look like in the future?

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Or is it just kind of how it's looked in the past?

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, Ben, that's a great question. I think we would generally prefer the greenfield opportunities, particularly when we already have a clinic established. And so if we're in a jurisdiction or a state where we have clinics established already, we have reimbursement, We're in a position where we can see patients. I think Greenfield, assuming we can get a good location in or near the hospital, is preferred. The revenue ramp takes a little bit longer.

[David Bailey, President, CEO & Director at OrthoPediatrics]

So I think that generally speaking, in those markets where we already have established, that's why Dayton makes a ton of sense. We already were established in Ohio. While it took us some time, it's a fairly easy setup on the Greenfield side, and there's very limited associated with that. On the aqua hire, generally we're executing aqua hire in circumstances where we don't have any current footprint, any current established infrastructure. And we can do an acquihire in a big jurisdiction, for example, or a big state.

[David Bailey, President, CEO & Director at OrthoPediatrics]

That gives us license to then start setting up some greenfields. And so in that instance, we think the acquihire makes the most sense. Obviously, comes with a little bit of revenue. We get an established footprint. And then there's a number of opportunities for us to grow off of that base.

[David Bailey, President, CEO & Director at OrthoPediatrics]

I think that's probably the right call just because it accelerates the greenfield expansion opportunities for us in an area like that.

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Okay, got it. That's definitely helpful. And then on the EOS side of things, that's great that the Vertiglyde first cases will be in the next handful of weeks. Obviously, there's some anticipation out there for Ellie. I know you guys have had confidence that that ultimately leads to a pretty big halo effect.

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Do you still get that sense from talking to potential customers there?

[David Bailey, President, CEO & Director at OrthoPediatrics]

Without question. I think as much as we're very pleased, obviously, with the kind of growth that we're seeing on scoliosis. I would say, though, the halo effect, just from the fact that we are making those kinds of investments in the areas of really great unmet need in scoliosis treatment, that halo effect is in fact already benefiting the business in terms of getting opportunities with customers that maybe have known us for a long time, but haven't given us an opportunity to earn their Fusion business. And I think that is happening. And so as a driver, in addition to 7D and Apafix and all the other things, I think just the fact that we're making the investment on the EOS side is a big deal to our customers.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And it shows a commitment that I think is very unique. And partially, you think about that commitment we're making and then the commitment on the specialty bracing side and partnering on there, all of that is creating a really nice halo around the Scully business. And we think that'll continue.

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Okay. Got it. And so essentially, you get some benefit from Ellie. And that makes it really no need to rush cases out there after you get approval.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, we have some training to do on Vertaglyde. So Vertaglyde, we just got approved, we're going to start obviously with the surgeons that have invested so much time in this technique, and we'll be doing that first. We're definitely not in a huge rush to expand that everywhere. We want to get some first cases under our belt. But once we do, I would expect that to go pretty rapidly.

[David Bailey, President, CEO & Director at OrthoPediatrics]

We have the inventory to support it. It'll be a bit of a training exercise to support that. And then we do think that of the three products in the EOS portfolio, that LE probably represents the biggest opportunity. And I think it's probably the most widely used type of technique for early onset scoliosis. And so we are very excited about the opportunities that Ellie will provide.

[David Bailey, President, CEO & Director at OrthoPediatrics]

It's just we've got another year or so before I think we can start enjoying that.

[Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets]

Got it. Excellent. Well, thank you, gentlemen, for taking the questions.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Good questions. Thanks, Ben.

[Operator]

Our next question comes from the line of Richard Newitter of Truist Securities. Your line is now open.

[Ravi Misra, Associate Analyst - Medtech Equity Research at Truist Securities]

Hi, good afternoon. This is actually Ravi on for Rich. So, I wanted to kind of get into the trauma portfolio a little bit. Now you've been releasing a number of new products, another press release this afternoon. Just want to kind of understand, get a sense for where you think there are holes in that bag right now that you still need to fill and what the end market growth rate might be from a YAMGR perspective in that space?

[Ravi Misra, Associate Analyst - Medtech Equity Research at Truist Securities]

And then my second question just upfront, just on deformity, trying to understand your commentary around stronger June and July trends. Do you think potentially there were some cases maybe that were delayed to the summer months or so, I explained some of the 2Q shortfall, Any more color you can provide there? Thank you very much.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Yeah, good question. So I don't think that cases were delayed. Again, some of these product lines, all, but we can measure overall surgical volume with a few of our product lines that we have. We have near 100% share in certain product lines, because they're the only such products that exist in the deformity correction space. And again, we see sometimes this ebbs and flows.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And so I don't know that anything was being pushed into the summer, and that's possible. But the net net was it was just a little light, and then came back to normal volumes. We didn't certainly make that up, obviously, in June. When you talk about the trauma and deformity portfolio, I think 3P you saw a press release here, we did our first 3P case here last week, which was a huge milestone for the business. The 3P system does span deformity correction, as well as trauma.

[David Bailey, President, CEO & Director at OrthoPediatrics]

So the 3P surgery that was done last week was in fact a deformity application for it. And so I think that, again, for a business that has a lot of share, this will be a nice jolt to that business, to be able to have the 3P hip system that's largely around deformity. The other areas where we may have holes, and I think 3P really helps address that, is that there's a lot of specialty plating, more anatomic plating opportunities for us that we don't have products for. And so for us to be able to develop this, what we think will be the most comprehensive plating system, with specialty plates for trauma and for limb deformity across almost every bone and every anatomic structure available on the pediatric side, will certainly expand the indications for use for that system. And I would also say that our existing plating system that is out there now, it's a system that we've had for more than ten years.

[David Bailey, President, CEO & Director at OrthoPediatrics]

And I think the technology has advanced in locking screw technology, in variable angle screw technology, and maybe not advanced as much on the pediatric side, but certainly on the adult side. And I think the 3P brings technology to bear in the trauma and deformity section, a segment of the pediatric orthopedic market that's never been seen. And so it will be a nice opportunity for us, certainly over the course of what will probably be three years here, where we'll be launching multiple systems every year in the 3P family. It's going be a nice opportunity for us to continue to grow that business and continue to take share.

[Operator]

I am showing no further questions at this time. I would now like to turn it back to Dave Bailey for closing remarks.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Great. Thanks, operator. Thank you all for your continued interest in OrthoPediatrics. And I think Fred and I will be at a number of conferences in the near future. So look forward to seeing several of you there.

[David Bailey, President, CEO & Director at OrthoPediatrics]

Have a super evening, and we'll talk to you soon.

[Operator]

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Participants

Executives

• David Bailey, President, CEO & Director
• Fred Hite, CFO & COO

Analysts

• Hannah Jeffrey, Associate VP at Gilmartin Group
• Ryan Zimmerman, MD & Medical Technology Analyst at BTIG
• Matt O'Brien, Senior Research Analyst at Piper Sandler Companies
• Joseph Stringer, Senior Analyst at Needham & Company
• Ben Haynor, MD - Medical Technology Research at Lake Street Capital Markets
• Ravi Misra, Associate Analyst - Medtech Equity Research at Truist Securities