OrthoPediatrics Q1 Earnings Call Highlights

Key Points

• OrthoPediatrics reported Q1 revenue of $59.4 million, up 13% year‑over‑year, and improved adjusted EBITDA to $2.2 million (versus a $0.4 million loss a year earlier), finishing the quarter with $50.9 million in cash.
• The company raised full‑year 2026 revenue guidance to $263–267 million (up 11–13%) and reiterated targets of about $25 million adjusted EBITDA and free cash flow breakeven.
• Management emphasized an “innovation super cycle” with early traction from launches like 3P Hip, VerteGlide and the TRAXIO system, plus >20% international growth and >20% OPSB bracing growth, while adding a $20 million delayed‑draw term loan for capital flexibility.

OrthoPediatrics NASDAQ: KIDS opened 2026 with first-quarter revenue growth, improving profitability metrics, and what management described as early traction from a new wave of product launches. Executives emphasized patient impact as a core operating focus, noting the company supported the treatment of a record 45,000 children during the quarter and has helped nearly 1.4 million children cumulatively.

President and CEO David Bailey said the quarter started softly due to weather-related shutdowns at certain OPSB clinics in January and February, but trends improved materially in March and continued into April. “Momentum remains strong and is carrying into the Q2,” Bailey said.

Financial results and key metrics

Chief Operating and Financial Officer Fred Hite reported worldwide revenue of $59.4 million in Q1 2026, up 13% from Q1 2025. U.S. revenue was $45.3 million, up 11% and representing 76% of total revenue. International revenue increased 22% to $14.1 million, representing 24% of revenue.

By segment, Hite reported:

• Trauma and Deformity (T&D): Global revenue of $43.0 million, up 14%, driven by performance across numerous product lines including trauma products, XFix, and OPSB.
• Scoliosis: Global revenue of $15.4 million, up 13%, driven by increased sales of RESPONSE and VerteGlide systems and revenue generated from 7D technology.
• Sports medicine/other: Revenue of $0.9 million, consistent year over year.

Gross margin was 73%, unchanged from the prior year. Total operating expenses increased $2.5 million, or 5%, to $51.7 million. Sales and marketing expenses rose 11% to $18.5 million, driven primarily by sales commissions and higher unit volume. General and administrative expense increased 2% to $31.0 million due to added personnel supporting clinic expansions and small acquisitions, partially offset by savings from prior restructuring actions. R&D expense declined 5% to $2.2 million.

GAAP net loss per share was $0.45 versus $0.46 a year earlier. On a non-GAAP basis, net loss per share was $0.42 compared to $0.39 in the prior-year period. Adjusted EBITDA improved to $2.2 million versus an adjusted EBITDA loss of $0.4 million in Q1 2025.

The company ended the quarter with $50.9 million in cash, short-term investments, and restricted cash. Set deployment was $2.3 million compared with $3.6 million last year. Hite said deployments are lower than historical levels but are “primarily all new products being launched as part of our innovation super cycle” and are generating higher revenue per deployed dollar than legacy systems.

Free cash flow used was $5.0 million, a 40% improvement from $8.4 million used in Q1 2025, driven by higher adjusted EBITDA, lower set deployment, and improved working capital metrics.

Guidance raised modestly; profitability targets reiterated

Bailey said the company raised full-year 2026 revenue guidance to $263 million to $267 million, representing 11% to 13% growth, and reaffirmed expectations for approximately $25 million of adjusted EBITDA and free cash flow breakeven for the year. Hite added the company expects to deploy approximately $10 million in sets in 2026 and said EBITDA and free cash flow should follow similar seasonal patterns to 2025, with some quarters negative and others positive.

On the question of why guidance was not raised more materially despite strong execution, Hite told analysts the company prefers to wait for incremental set deployments and related revenue to “show up in the numbers” before becoming more aggressive. “In traditional fashion, we’ll continue to stay conservative and let the numbers speak for themselves,” he said.

Product cycle: 3P platform, scoliosis innovation, and TRAXIO

Management repeatedly framed 2026 as the beginning of a multi-year “innovation super cycle.” Bailey said initial Q1 contributions came from recent beta launches including 3P Hip and VerteGlide, with expectations for broader impact as the company moves toward full market releases and increased set deployments.

In Trauma and Deformity, Bailey said the T&D business grew 14% in Q1, supported by flagship trauma and deformity systems, and cited continued momentum in the PNP Tibia launch. He said 3P Hip “exceeded early expectations” despite limited set availability, and the company expects to increase supply in Q2 and begin the beta launch of 3P Small Mini late in the quarter.

Asked about the timing of a visible growth inflection from 3P, Bailey said additional sets are expected late in Q2 and that Q4 will benefit from additional sets, while noting that rollouts can take years. He said the platform’s strong early performance includes “very strong ASP,” “extremely high demand,” and “very strong margins,” with impacts expected in the second half and more significantly in 2027 and 2028.

In scoliosis, Bailey said the segment grew 13% in Q1, driven by RESPONSE, VerteGlide, and 7D. He highlighted demand for VerteGlide despite limited sets, noting about 80 surgeons have been trained. The company plans to move VerteGlide to full market release in Q2 supported by additional set deployments.

Bailey also outlined upcoming milestones for the company’s next-generation scoliosis fusion platform, Veraxis, and its next-generation electromechanical lengthening implant, Elli. Bailey said first surgeries for both Elli and Veraxis are expected by year-end, while clarifying that Veraxis is a 510(k) submission and has not yet been cleared. He added he does not expect Veraxis to have a “huge impact” on second-half revenue, describing it more as a 2027–2028 rollout.

Separately, Bailey discussed the company’s beta launch of the TRAXIO Halo Gravity Traction System, describing it as a differentiated, FDA-approved solution for hospitals treating complex early-onset scoliosis patients. He said initial customer engagement has included “multiple requests for quotes” and characterized demand as high given that many hospitals currently build traction solutions in-house.

OPSB and international expansion; capital and leverage focus

Bailey said the company’s specialty bracing business, OPSB, delivered 20%+ growth in Q1 and remains a meaningful contributor to revenue and profitability. He said clinic expansion remains ahead of plan via greenfield openings and selective “acqui-hires,” with strong same-store sales growth supported by new product introductions and sales force expansion. Management reiterated it is on track to meet or exceed the goal of expanding to 27 territories by the end of 2027, and Bailey told analysts he expects the company to reach “the necessary 6 markets in 2026 for sure.”

International results were another area of strength. Bailey said OUS grew more than 20% in Q1, with strong EMEA performance and improved results in Brazil under a new agency structure. He highlighted EU MDR approvals for the company’s T&D portfolio, scoliosis products, and external fixation devices, which he said should expand product availability across European markets. Hite added the company expects international to outgrow domestic revenue for each quarter for the rest of the year, though not necessarily at 22% each quarter.

In Brazil, Hite said OrthoPediatrics historically has had about 15 or 16 stocking distributors and acquired one of the larger distributors, representing roughly “1/15 of our sales in Brazil.” He said the purchase established a legal and operating entity that should improve cash collection, enable the company to stock inventory in-country, and better serve other partners. Hite said the company does not currently have plans to buy additional distributors in the region.

On the balance sheet, Hite disclosed that the company amended its credit agreement with Braidwell LP to add a $20 million delayed draw term loan facility, providing optional capital access through June 2027. He said the facility is fully discretionary, interest-only through maturity in 2029, and is intended to enhance flexibility while avoiding dilution.

About OrthoPediatrics NASDAQ: KIDS

OrthoPediatrics Corp., 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.

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