OrthoPediatrics Q2 Earnings Call Highlights

Key Points

• Record Q2 revenue reached $70.5 million, up 15% year over year, driven by 26% growth in Trauma & Deformity and more than 20% growth in specialty bracing, which offset a 9% decline in scoliosis revenue.
• Profitability and cash flow improved materially: adjusted EBITDA rose to a record $6.8 million, gross margin increased to 74%, and free-cash-flow usage fell 78% to $3.1 million.
• OrthoPediatrics raised its 2026 revenue outlook to $265 million-$269 million while maintaining its approximately $25 million adjusted EBITDA target and expectation for full-year free-cash-flow breakeven or better.

OrthoPediatrics NASDAQ: KIDS reported record second-quarter revenue of $70.5 million, up 15% from a year earlier, as strong Trauma & Deformity and specialty bracing performance offset a reported decline in scoliosis revenue. The company also raised its 2026 revenue outlook while maintaining its adjusted EBITDA and free-cash-flow targets.

President and CEO David Bailey said the company helped nearly 46,000 children during the quarter, bringing its cumulative patient impact to 1.4 million children. He said the quarter reflected continued market-share gains, expansion in the OrthoPediatrics Specialty Bracing business, or OPSB, and early contributions from a multiyear product-launch cycle.

“We have reached an inflection point in our financial trajectory,” Bailey said, citing revenue growth, adjusted EBITDA expansion and reduced free-cash-flow usage. The company expects positive free cash flow in the second half of 2026 and free-cash-flow breakeven or better for the full year.

Revenue growth led by Trauma & Deformity and OPSB

Global Trauma & Deformity revenue rose 26% year over year to $52.6 million, driven by procedure demand, market-share gains in core implant systems, OPSB growth and early contributions from new products, including the 3P Hip plating system.

Bailey said deployment of 3P Hip sets did not meaningfully begin until late June, leaving the larger revenue contribution ahead. The company also began a small beta release of its 3P Small-Mini system late in the quarter and completed its first procedures using the platform. OrthoPediatrics expects a full market release for 3P Small-Mini in early 2027.

The company also announced an exclusive distribution agreement with OSSIO for biointegrative, metal-free fixation technology at children’s hospitals. Bailey said the agreement complements OrthoPediatrics’ existing Bioretec partnership and could support the company’s expansion into pediatric hand and foot procedures.

OPSB grew more than 20% during the quarter, supported by clinic execution, same-store sales, volume gains, product introductions and disciplined clinic expansion, according to Bailey. He said the company has more than 45 clinics and is seeing growth from both newer locations and established clinics.

Within OPSB, Bailey said the DF2 pediatric femur-fracture product has been adopted by more than 150 children’s hospitals. The company is also advancing modular hip braces, the Machi4 upper-extremity prosthetic and orthotic platform, TractorFix contracture-management technology and the TRAXIO Halo Gravity Traction system.

Scoliosis sales affected by 7D and Brazil timing

Global scoliosis revenue declined 9% to $16.9 million. However, the company said underlying scoliosis implant sales grew in the mid-teens, with demand in the U.S. and Europe offset by the absence of 7D unit sales and lower scoliosis set sales in Brazil.

Chief Operating and Financial Officer Fred Hite said 7D sales in the second quarter of 2025 contributed roughly a couple million dollars that did not recur in the 2026 period. The company sold no 7D units in the latest quarter, compared with multiple units in the year-earlier period.

Hite said lower Brazilian set sales were not related to market demand. Rather, the company is balancing demand with cash collections and has been selective about when to release sets into the market. OrthoPediatrics acquired one of its Brazilian distributors last year and is using that entity to sell to other stocking distributors while focusing on collections and receivable balances.

Bailey said the company saw a strong summer schedule for scoliosis implant procedures that extended into the third quarter. VerteGlide, a growth-friendly treatment option for young scoliosis patients with complex conditions, added incremental revenue during the quarter. OrthoPediatrics had trained 124 surgeons on the system as of the call.

The company expects VerteGlide’s impact to increase as additional sets are deployed and surgeons identify appropriate patients. Bailey also said eLLi, the company’s next-generation smart electromechanical lengthening spinal implant, remains on track for first in-patient procedures in late 2026, pending FDA guidance. The company expects first cases for its Veraxis pediatric scoliosis fusion system in early 2027.

Profitability, cash flow and international expansion

Gross margin improved to 74% from 72% a year earlier, helped by product mix and strong growth in higher-margin areas. Hite said the absence of lower-margin 7D unit sales and international set sales also supported the quarterly margin.

Operating expenses rose 3% to $56.4 million, reflecting higher sales commissions and personnel supporting clinic expansions and earlier small acquisitions. The year-earlier quarter included $3 million of restructuring expenses, compared with a nominal amount in the latest period.

• Adjusted EBITDA reached a record $6.8 million, compared with $4.1 million a year earlier.
• GAAP net loss per share was unchanged at $0.30.
• Non-GAAP net loss per share was $0.26, compared with $0.11 a year earlier, primarily due to unrealized non-cash foreign-exchange effects.
• Free cash flow used was $3.1 million, improving $10.8 million, or 78%, from $13.9 million used in the prior-year quarter.
• Cash, short-term investments and restricted cash totaled $47.9 million at quarter-end, with $20 million of term-loan availability remaining.

International revenue increased 22% to $15.7 million, led by record performance in Europe. Bailey and Hite said the company is in the early stages of benefiting from EU Medical Device Regulation approvals for its Trauma & Deformity, scoliosis and external-fixation portfolios. They expect broader European access and a larger benefit in 2027 and beyond as sets are deployed.

Outlook raised, though management remains cautious

OrthoPediatrics raised its full-year 2026 revenue forecast by $2 million at both ends of the range to $265 million to $269 million, representing growth of 12% to 14%. The company reiterated guidance for approximately $25 million in adjusted EBITDA, about $10 million in set deployment and free-cash-flow breakeven or better for the year.

Hite said the company had deployed about $5 million in sets through the first half, with much of the remaining deployment expected in the third quarter. Management currently forecasts third- and fourth-quarter revenue to be roughly equal and a couple million dollars lower than second-quarter revenue.

Bailey said the company’s outlook reflects continued conservatism because capital-equipment placements, including 7D units, and international distributor orders can be timing-dependent. Still, he said OrthoPediatrics expects its product-launch cycle to increasingly contribute to growth, margins and returns on capital over the next several years.

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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