OrthoPediatrics Corp. Common Stock 2026 Q3 Earnings Call

Thank you for joining today's call. With me from the company are David 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 of the 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 a discussion of those risk factors, I encourage you to review the company's most recent annual report on Form 10-K, which was filed with the SEC on March 4, 2026, and its subsequent quarterly reports on Form 10-Q. 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 third 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 on this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, October 27, 2026. 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 David Bailey, President and Chief Executive Officer.

Thanks, Tripp. Good afternoon, everyone, and thank you for joining us today. This was an outstanding quarter for OrthoPediatrics, and I want to begin with the metric that matters most to us. During the quarter, we helped nearly 42,000 children, bringing our total impact to over 1.4 million kids helped. I am proud of what our team and our clinical partners continue to accomplish. We are reaching more patients each day with our pediatric-focused products, increasing the quality of care, and improving outcomes for kids around the world. For the third quarter, we delivered record revenue of $72.7 million, up 19% over the prior year, with substantial growth across all of our businesses. Ongoing share gains across our legacy product portfolio served as a key driver alongside robust implant demand, a rapidly growing OPSB franchise, and strong overall international results.

Our existing portfolio continues to deliver, while the Super Cycle is starting to contribute growth, with additional product launches on the horizon. The combination of top-line performance and improving profitability gives us a solid foundation as we enter our next chapter of growth. As a result, we are raising our full-year revenue guidance to $270 million-$273 million, representing growth of 14%-16%. Beyond the top line, we continue to make significant progress on margins and profitability with record adjusted EBITDA and positive free cash flow in the quarter. We are very pleased with our continued ability to grow the business while strengthening its financial profile and driving leverage. At the same time, it is clear we are investing in innovation while staying focused on expenses, working capital, and capital deployment. Now, let us talk briefly about our performance in the context of our innovation Super Cycle.

We are extremely encouraged by the revenue contributions of our recent product launches, such as 3P Hip, TRAXIO, and VerteGlide, to the third quarter performance. As utilization ramps, we are beginning to see the positive impact of these products, both in clinical settings and in our P&L, which is proving the value of our work for the kids and clinicians who rely on our technology. That said, many of the products within our Super Cycle are still in the very early stages of full market release, with limited customer availability or in their limited launches. Those products in the limited launch phase are not yet meaningfully contributing to growth. But many of these products, combined with our recent full launches, set us up well for multiple years of growth.

The bottom line here is that we are still early in the multi-year cycle, and we believe the largest opportunities for market expansion, deeper portfolio penetration, revenue impact, and leverage are still ahead of us. We are being thoughtful with our set deployment strategy, bringing sets to market at a steady pace as we move multiple innovations from development into the hands of surgeons and clinicians, while ensuring that we manage the free cash flow implications to ensure we remain free cash flow breakeven or better in 2026 and free cash flow positive in 2027 and beyond. Importantly, we are not just innovating new versions of products. These products address substantial clinical needs our surgeon partners experience every day, and our engineering and commercial teams are working with clinicians to turn those needs into pediatric-specific solutions that cannot be addressed by any other products or companies in orthopedics.

We continue to focus on platform and product family development, and each additional innovation creates another opportunity to serve patients with unique clinical conditions and deepens our role across pediatrics. As the super cycle progresses, the opportunities we have with these differentiated pediatric specific technologies are extending beyond revenue growth. Many of these systems are designed to support attractive product economics with higher ASP, ROI, and more efficient capital deployment. Additionally, they are generating negotiating power in contracting while driving pull-through of legacy products. With our commercial infrastructure already in place, we can better serve the market with greater sales force efficiency and improve operating leverage. Our OSSIO partnership, which continues to do well, highlights these efficiencies in action. OSSIO's bio-integrative technologies broaden our portfolio alongside our complementary Bioretec partnership while leveraging our existing commercial infrastructure. Overall, we see this super cycle as a multi-year growth, margin, and capital efficiency story.

As we advance our pipeline, we continue bringing products to market in a measured fashion, balancing cash usage. This plan positions the super cycle as a long-term, sustainable growth driver and allows us to best support our customers along the way. Moving to our businesses. Trauma and Deformity delivered revenue of $52.6 million, up 19%. Continued share gains within our legacy implant portfolio and healthy demand for super cycle products together with OPSB's growth drove this strong performance. Our established systems remain an important growth engine, and we are building on that position of strength as new pediatric specific technologies expand the opportunities our teams can pursue. Our Pediatric Plating Platform, also known as 3P, is off to an extremely promising start. We continue to see success with the 3P Hip system, which has progressed from limited to a full commercial launch and is already contributing early revenue.

Moving down the 3P pipeline, 3P Small and 3P Mini are currently in limited launch. We are pleased to see the 3P platform move beyond its initial offering toward a broader range of solutions designed for pediatric anatomy and procedure needs. With more to come as we develop the full platform to become the most comprehensive pediatric plating product platform in the history of pediatrics. We continue to advance our super cycle with teams focused on careful rollout, surgeon support, and feedback as these systems progress. In addition to the progress with 3P, we also recently reached important milestones in our Pediatric Nailing Platform. In September, we announced that we had surpassed 1,000 PNP tibial nail implantations. Elsewhere, following FDA clearance in late September, PNP Retrograde limited launched, and we had our first successful cases in October with very positive surgeon feedback.

The system includes anatomic nails for trauma and straight nails for deformity and builds on our ongoing success with PNP Femur and PNP Tibia and leverages existing PNP instrumentation. We are planning full commercialization for PNP Retrograde while continuing the ongoing deployment of PNP Tibia in 2027. Taken together, 3P Hip, 3P Small, 3P Mini, PNP Tibia, and PNP Retrograde, in addition to our OSSIO partnership, show how much opportunity is in front of us in 2027 and beyond. While some of these products are not expected to contribute significant revenue in 2026, their release shows that the super cycle is progressing as planned, and we expect the bigger growth opportunity to come in 2027 and beyond as we move toward full launches and wider adoption. Our focus is now on training, service, and clinical feedback to support those introductions. Turning to specialty bracing. OPSB once again delivered an outstanding quarter with growth above 20%.

Similar to the prior quarter, new products, same-store sales growth, and clinic expansion continue to drive this rapidly growing franchise, and we are very pleased that our bracing offerings continue to broaden our reach outside the operating room. OPSB has become an increasingly key part of our pediatric orthopedic platform and our long-term growth strategy. Within OPSB, the super cycle of new product launch and development is hitting a fever pitch with no end in sight. In September, we completed the full market release of the PediHip Rigid Brace, also known as the Hippo. This product expands our hip care offering for children three years of age and younger, including developmental dysplasia of the hip and postoperative stabilization. It addresses a significant pediatric need within our growing hip care portfolio.

In October, we also announced the limited launch of the OPSB Knee 'TractorFIX contracture management orthosis. This knee product is designed to address preexisting or developing contractures in children and young adults undergoing tibial external fixation. By connecting directly to orthotics and external fixation technologies, Knee 'TractorFIX demonstrates the breadth of our portfolio across the continuum of care. These launches build on a portfolio that has been transformed over the last few years and now includes DF2, our modular hip braces, macu4, and the recently launched TRAXIO Halo Gravity Traction System. As a reminder, TRAXIO supports halo gravity traction therapy in pediatric spine care and illustrates the connection between OPSB and our surgical systems. Together, these offerings expand the range of solutions we can provide for our customers.