OrthoPediatrics Q3 Earnings Call Highlights

Key Points

• Record Q3 performance: Revenue rose 19% year over year to $72.7 million, driven by broad-based demand across trauma, deformity, scoliosis and specialty bracing products. Adjusted EBITDA reached a record $6.9 million, while the GAAP net loss narrowed to $0.25 per share.
• Product and business expansion: OrthoPediatrics fully launched its 3P Hip system, continued limited launches of newer implants, and grew its OPSB bracing business by more than 20% to over 60 clinics. Additional growth opportunities include PNP Retrograde, eLLi and the TRAXIO system.
• 2026 outlook raised: The company increased full-year revenue guidance to $270 million–$273 million, while maintaining its approximately $25 million adjusted EBITDA target and expectation of breakeven or better free cash flow for 2026.

OrthoPediatrics NASDAQ: KIDS reported record third-quarter revenue and raised its full-year sales outlook, citing broad-based demand across its trauma, deformity, scoliosis and specialty bracing businesses, as well as continued progress from recently introduced products.

Revenue for the third quarter of 2026 rose 19% year over year to $72.7 million, compared with $61.2 million in the prior-year period. Chief Executive Officer David Bailey said the company’s legacy implant portfolio continued to gain share, while demand for newer products and growth in its OrthoPediatrics Specialty Bracing, or OPSB, business also supported results.

“Our existing portfolio continues to deliver, while the Super Cycle is starting to contribute growth, with additional product launches on the horizon,” Bailey said. He described the company’s innovation program as a multi-year opportunity for growth, margin expansion and more efficient capital deployment.

Revenue Growth Across Core Businesses

Trauma and Deformity revenue increased 19% to $52.6 million in the quarter. The company attributed the growth to demand across several products, including Cannulated Screws, PNP Femur, PediPlates and 3P Hip, along with continued OPSB growth.

The 3P Hip system moved from a limited release to a full commercial launch and began contributing revenue during the quarter. Other products within the pediatric plating platform, including 3P Small and 3P Mini, remain in limited launches. Bailey said the company expects 3P Small and 3P Mini to move into full market release during the first half of 2027.

OrthoPediatrics also announced that it had surpassed 1,000 PNP tibial nail implantations in September. Following FDA clearance late that month, the company began a limited launch of PNP Retrograde and completed its first cases in October. Bailey said management is targeting a full commercial release for PNP Retrograde around the middle of 2027.

Scoliosis revenue increased 18% to $19.2 million, driven primarily by increased VerteGlide and RESPONSE revenue. Bailey said underlying implant demand, rather than sales of the company’s 7D systems, was the main source of scoliosis growth. OrthoPediatrics placed one 7D unit during the quarter, compared with none in the third quarter of 2025.

The company said it had formally trained about 125 surgeons on VerteGlide and that more than 40 hospitals have used the system. Bailey said adoption has come from both repeat users and new accounts, with certain larger scoliosis accounts developing after surgeons had positive experiences with VerteGlide.

Looking further ahead, management said its eLLi electromechanical growing implant is expected to begin inpatient procedures in early 2027, subject to FDA approval of its investigational device exemption. Bailey said eLLi could be a larger opportunity than VerteGlide over time, though he characterized it as more of a 2028 and 2029 growth opportunity than a major contributor next year.

OPSB Expansion Continues

OPSB grew by more than 20% in the third quarter, supported by same-store sales, new products and clinic expansion. The company now has more than 60 clinics, more than double its total from several years ago, according to Bailey.

During the quarter, OrthoPediatrics completed the full market release of the PediHip Rigid Brace, also called Hippo, for children age 3 and younger. The company also launched the OPSB Knee ‘TractorFIX contracture-management orthosis on a limited basis in October.

Bailey said the company sold out of its initial limited units for the TRAXIO Halo Gravity Traction System and is accelerating its 2027 production plans ahead of a full market release. OPSB now accounts for 34 systems, up from 31 at the start of the year and representing more than one-third of OrthoPediatrics’ product portfolio.

Management said newer bracing products can offer attractive margins without requiring inventory deployment. Bailey pointed to DF2, a pediatric femur-fracture product, as an example, saying nearly half of U.S. children’s hospitals have adopted it within a few years of its introduction.

Profitability and Cash Flow Improve

Gross margin was 74%, unchanged from the prior-year quarter. Chief Operating and Financial Officer Fred Hite said the mix of faster-growing OPSB revenue can put pressure on gross margin because implant products generally carry higher gross margins, though he said OPSB contribution margins are comparable to the implant business.

Operating expenses rose 6% to $58.2 million. Sales and marketing expenses increased 24%, primarily because of higher sales commissions and increased unit volumes. Hite said all six of the company’s top sales partners and distributors achieved quota levels that triggered higher commission payments during the quarter, an effect he expects to partially reverse in the fourth quarter.

GAAP net loss narrowed to $0.25 per basic and diluted share from $0.50 a year earlier. Non-GAAP net loss per share was $0.23, compared with $0.24 in the prior-year period.

Adjusted EBITDA reached a record $6.9 million, up from $6.2 million a year earlier, representing an adjusted EBITDA margin of about 10%. Free cash flow was positive $1.6 million, compared with $3.4 million used in the third quarter of 2025. The company ended the period with $45 million in cash, short-term investments and restricted cash, along with $20 million remaining under its term loan.

Outlook Raised

OrthoPediatrics raised its full-year 2026 revenue guidance to $270 million to $273 million, representing anticipated growth of 14% to 16%. It reiterated adjusted EBITDA guidance of approximately $25 million and expects to deploy about $10 million in instrument sets for the full year.

The company also reaffirmed its expectation of achieving free-cash-flow breakeven or better in 2026 and positive free cash flow in 2027 and beyond. Hite said the company had used roughly $6 million in free cash flow year to date and would need to generate about $6 million in the fourth quarter to reach its full-year objective.

Management said it remains cautious in its outlook because fourth-quarter results may not include certain sales that benefited the prior year, including set sales to Brazil and substantial 7D unit sales. Still, Bailey said the company sees continued healthy pediatric orthopedic procedure volumes heading into the fourth quarter and 2027.

About OrthoPediatrics (NASDAQ:KIDS)

OrthoPediatrics Corp. is a medical device company focused exclusively on developing and commercializing orthopedic products for children. The company designs implants, instruments and related technologies intended to address the distinct anatomical and clinical needs of pediatric patients, including those with congenital conditions, traumatic injuries and musculoskeletal disorders.

Its product portfolio covers pediatric trauma and deformity correction, scoliosis, limb reconstruction, sports medicine and other specialized orthopedic procedures.

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