On Thursday, OrthoPediatrics (NASDAQ:KIDS) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
OrthoPediatrics reported a 13% increase in first quarter revenue, driven by strong performance in international markets and the OPSB segment.
The company is in the early stages of a multi-year product launch super cycle, with new products like Vertiglide and 3P hip showing strong demand.
2026 revenue guidance has been raised to $263-267 million, representing 11-13% growth, with an expected $25 million in adjusted EBITDA and free cash flow breakeven.
Operational highlights include a 14% growth in the T&D business, advancements in scoliosis products, and a successful international expansion.
Management emphasized the importance of maintaining a balance between growth and achieving free cash flow breakeven, while being open to accelerating growth as the product cycle develops.
Full Transcript
OPERATOR
Good afternoon and welcome to Ortho Pediatrics Corporation’s first quarter 2026 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 Tripp Taylor from the Gilmartin Group for a few introductory comments.
Tripp Taylor (Moderator)
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 risk factors, I encourage you to review the Company’s most recent annual report on Form 10K, which was filed with the SEC on March 4, 2026 and its subsequent quarterly reports on Form 10Q. 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 first 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, April 30, 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.
David Bailey (President and Chief Executive Officer)
Thanks, Tripp Good afternoon everyone and thank you for joining us today. We are pleased to begin 2026 by highlighting our most meaningful metric, patient impact. In the first quarter, we supported the treatment of a record number of 45,000 children, extending our cumulative impact to nearly 1.4 million kids. Helped pediatric patients have long been underserved by solutions not tailored to their needs. We at Orthopediatrics are dedicated to changing that through focused innovation and a continued commitment to this most important patient population. 2026 started strong with 13% first quarter revenue growth further highlighted by significant improvements in adjusted EBITDA and free cash flow over prior year. As we look closer at the quarter, we saw a softer start to the first quarter due to weather related shutdowns in many of our OPSP clinics in January and February, but trends rebounded in March. Since then, momentum remains strong and is carrying into the second quarter. Growth remains solid across the business with particular strength internationally and continued 20% plus expansion in OPSB driven by new products and clinic growth. Importantly, we’re at the earliest stages of a multi year innovation super cycle consisting of what we believe is the most clinically significant and technologically advanced series of product launches in our history. During the quarter we began to see small contributions from recent beta launches including three phip and vertiglide. These products are generating strong demand and we are confident that as we move into full market release and increase set deployments in the second quarter, we are positioned well for more meaningful impacts in each of the upcoming quarters. Early trends are reinforcing our expectations for higher ASPS margin expansion and improved capital efficiency as each of these products continue to scale. As we expand our portfolio and reinforce our core orthopaedic platform from this unassailable position we see a clear opportunity for continued growth. Our consistent execution underpins our confidence in sustained revenue growth, expanding profitability and achieving free cash flow breakeven in 2026. We continue to gain share across each of our businesses with our legacy product portfolio and share gain will only continue to accelerate as we execute our super cycle and further expand opsb. Our powerful competitive position is becoming increasingly dominant and will only grow stronger as we further execute our strategy and demonstrate both top and bottom line expansion in a way that is unique in our industry. We remain focused on enhancing shareholder value while advancing our cost of helping 1 million kids per year in the future. Accordingly, we are raising our 2026 revenue guidance to a range of 263 million to $267 million in revenue representing 11 to 13% growth and reaffirming our expectations for approximately $25 million in adjusted EBITDA and full year free cash flow breakeven driven by continued share gains, OPS B expansion and execution of our multi year new product launch cycle Turning to our T and D business in the first quarter of 2026 the T&D business grew by 14% driven by increased sales of our flagship trauma and deformity systems. Early returns from the beta launch of new implant and OPSB systems. We continue to see success in case volume growth as we move deeper into the launch of PMP Tibia and will pick up additional share as we launch 3P hip. We are also pleased to advance toward the beta launch of the next 3P system, 3P Small/Mini, which should kick off late in Q2. Beyond those products, we are advancing the next system within the 3P family as well as the next PMP system. PMP Retrograde looking closer at 3P, our 3P hip system has exceeded early expectations with limited set availability in Q1. We will increase supply of the 3P hip in Q2 and commence the beta launch of 3P small mini. We expect a more meaningful impact on growth in the second half of the year. We will also continue advancing additional systems over the next several years. The 3P platform is building strong momentum and we believe it will become the most advanced and comprehensive pediatric plating system in our field. Overall, TD remains a key growth driver for the business, supported by consistent execution and a pipeline that is both highly clinically relevant and increasingly robust. We believe the depth and quality of our development efforts position us well to sustain innovation, drive future revenue growth and reinforce our leadership position in the market. Looking at our specialty bracing business, OPSB remains a key growth driver for the business and delivered over 20% growth in the quarter, contributing meaningfully to both the revenue expansion and profitability. Our clinic expansion strategy continues to progress ahead of plan, supported by both greenfield openings and selective aqua hires. Same store sales growth remains strong reinforced by ongoing new product introduction and continued sales force expansion. Overall, we are on track to meet or exceed our goal of expanding to 27 territories by the end of 2027. Within OPSB, we are seeing the impact of our new product development engine. We recently advanced the Modular Hip Brace portfolio into commercial release and initiated the beta launch of the Traxio Halo Gravity Traction System. Early feedback for Traxio has been strong with initial customer engagement including multiple requests for quotes for this differentiated system. In addition, we remain on track to beta launch the OP Contracture Management Brace which is designed to integrate directly with our Orthex External Fixation platform, further enhancing synergies across our surgical and non surgical offerings. OPSP is progressing as planned toward our goal of delivering four to five new product introductions annually, reinforcing a consistent cadence of innovation. Going forward, we continue to execute effectively across our three pillar OPSB strategy which includes sales force expansion, targeted product innovation and disciplined clinic growth. Overall, we are very pleased with the performance of the business and its increasingly important role within our broader growth strategy in scoliosis we experienced 13% growth in the first quarter of 2026 driven by increased sales of response and Vertiglide systems and revenue generated from 7D technology and once again we were particularly pleased with our EOS products. During the quarter we continued our push into the EOS space with Response Ribbon, Pelvic and the Vertiglide system, which we believe provide a promising new growth friendly treatment option for young scoliosis patients. Looking more closely at this progress, we continue to see strong demand for Vertiglide despite very limited set availability. With approximately 80 surgeons now trained and additional training sessions scheduled, this success is triggering our move to full market release of this important system in the second quarter. Supported by additional SET deployment to meet the rising demand. This growing adoption along with 7D placements is driving higher utilization of our response fusion system, all ahead of the anticipated limited release of our next generation scoliosis fusion platform Veraxis. Purposely built exclusively for the treatment of pediatric spinal deformity. Designed from the ground up for growing patients and the surgeons who treat them, Veraxis represents a step change in fusion technology by combining advanced implant design, streamlined instrumentation and integrated digital planning into a single cohesive platform with first surgeries by year end. In addition, we remain on track for first inpatient procedures with elli, our third and most complex EOS product in the fourth quarter. As a reminder, ELLIE is a next generation smart electromechanical lengthening spinal implant designed to deliver consistent, reliable power through RF power transmission. We expect the first implantation of the LE device in late 2026. We are proud of how far our EOS products EOS products have come and they further bolster our belief that our EOS strategy is working. We believe that OP is continuing to establish an unmatched portfolio of pediatric scoliosis technologies, enabling clinicians to treat even the most complex and severe pediatric spinal deformities with a comprehensive set of advanced solutions. Moving to our international business, OUS had a strong first quarter with growth in excess of 20%, highlighted by great sales in EMEA and a nice performance in Brazil under our new agency structure. Continued success in EMEA is being driven by like increased sales of legacy TND products in our agency markets and a small but rapidly growing scoliosis franchise. We’re pleased to have received full EU MDR approval for our T and D portfolio scoliosis products and most recently our external fixation devices. We are now actively working to make these long anticipated products available across our European markets and we expect this expanded access to support Improved EMEA Growth 2026 LATAM is building on our structural improvement in Brazil. While we’re still cautious, we do believe an improvement is on track and over the next several quarters we expect to turn this headwind into a potential tailwind. The structural improvements we’ve made in Brazil through the purchase of one of our Brazilian distributors will improve our cash collection and over time will normalize ordering patterns and allow for additional growth and market penetration. In addition, we were once again the largest sponsor of the European Pediatric Orthopedic Society. Meeting in Seville, Spain in early April, we showcased a broad range of new products that had previously not been available in Europe under prior regulatory constraints. These offerings were well received by both surgeons and distributors and are expected to contribute to revenue growth the second half of the year. Lastly, looking beyond our traditional segments, we are building on the success of our 7D experience and are kicking off the launch of our digital preoperative interoperative workflow management platform Playbook, and expect deployment of beta launch sites at 2026. Beyond that, we’ve completed the deployment and the first cases with the IOTA Motion robot for pediatric cochlear implant placement and expect additional deployments throughout 2026. Beyond OrthopediaX is also making deliberate, focused investments in artificial intelligence to drive meaningful clinical and operational impact. We are advancing multiple AI initiatives, including embedding intelligence into our Playbook platform, leveraging AI enabled tools to support pre surgical planning and evaluating opportunities to enhance patient care and efficiency across our OPS B clinics. Earlier this year, we completed an internal AI flight school to build organizational readiness, and we have established a corporate Objective to deploy 6 to 8 targeted AI agents to drive tangible efficiencies. After prioritizing data security and foundational controls last year, our focus in 2026 is firmly on execution, moving from experimentation to scaled implementation that delivers real value to surgeons, clinicians and our teams. In summary, we believe the company is entering its most compelling phase of expansion to date, supported by a multi year product launch super cycle that will increasingly shape results over the coming years. These new technologies are meaningfully more advanced and clinically differentiated, addressing significant unmet needs, supporting higher ASPs, improved gross margins and stronger returns on invested capital. They also enhance our ability to bundle solutions across accounts, supporting broader contract opportunities in pediatric hospitals and reinforcing share gains across our legacy portfolio. At the same time, OPSV continues to scale through both new product introductions and disciplined clinic expansion via greenfield openings and AQUI hires, a trajectory we expect to sustain over the coming years. Collectively, these initiatives are expected to drive significant improvement in profitability and cash flow generation over the long term. More broadly, we believe our hospital and surgeon partners increasingly recognize the value of working with a dedicated, self sustaining pediatric platform focused exclusively on improving care for children. Together, we’re advancing innovation in a historically underserved area of healthcare and building a stronger long term outlook for patients and the business. With that, I’d like to turn the call over to Fred to provide more detail on our financial results.
Fred Hite
Fred thanks Dave. Taking a closer look at the P and l our first quarter of 2026 worldwide revenue of $59.4 million increased 13% compared to the first quarter of 2025. The increase in revenue in the quarter was driven primarily by strong performance across trauma and deformity scoliosis and OPSD. US revenue was $45.3 million, an 11% increase from the first quarter of 2025, representing 76% of total revenue. Growth in the quarter was primarily driven by trauma, deformity, scoliosis and OPSD. We generated total international revenue of $14.1 million, representing growth of 22% compared to the first quarter of 2025, or 24% of our total revenue in the first quarter of 2026. Trauma informed me global revenue of $43.0 million increased 14% compared to the prior year. Period growth was primarily driven across numerous product lines, specifically our Tron products, Xfix and OPSB. In the first quarter of 2026, scoliosis global revenue of $15.4 million increased 13% compared to the prior year. Period growth was primarily driven by increased sales of Response and Vertiglide systems and revenue generated from 7D technology. Finally, sports medicine. Other revenue in the first quarter of 2026 was $0.9 million and which stayed consistent year over year. Touching briefly on a few key Metrics, for the first quarter of 2026, gross profit margin was 73%, which is consistent year over year. Total operating expense increased $2.5 million, or 5% compared to the prior year period to $51.7 million in the first quarter of 2026. Sales and marketing expenses increased $1.9 million, or 11% compared to the PR, driven primarily by increased sales commission expense and an overall increase in volume of units sold to $18.5 million in the first quarter of 2026. General and administrative expenses increased $0.7 million, or 2% year over year to …
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