Q4 2024 OrthoPediatrics Corp Earnings Call
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Speaker Change: Hello, and welcome to Arthur Pediatrics Corporation fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen only mode.
Unknown Executive: Hello, and welcome to Orthopediatrics Corporation fourth quarter and full year 2024 earnings conference call.
Unknown Executive: At this time, all participants are in a listen-only mode.
Unknown Executive: We will be facilitating a question and answer session towards the end of today's call.
Speaker Change: 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 chip Taylor from the Gilmartin group for a few introductory comments. Please go ahead.
Unknown Executive: As a reminder, this call is being recorded for replay purposes.
Tripp Taylor: I would now like to turn the call over to Tripp Taylor from the Gilmartin Group for a few introductory comments.
Tripp Taylor: Please go ahead. Thank you for joining today's call.
Speaker Change: 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 pipe.
Tripp Taylor: 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.
Speaker Change: But securities Litigation Reform Act of 1995 each.
Speaker Change: 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 upcoming annual report on Form 10-K, which will be filed with the SEC on March 5th 2020 spots.
Tripp Taylor: For a discussion of risk factors, I encourage you to review the company's upcoming annual report on Form 10-K, which will be filed with the SEC on March 5, 2025. 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 measure to the most directly comparable GAAP financial measure in its earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitute for orthopediatrics financial results prepared in accordance with GAAP.
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.
Speaker Change: Measure to the most directly comparable GAAP financial measure and its earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitute for ortho pediatrics financial results prepared in accordance with GAAP.
Speaker Change: 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 March four 2025, except as required by law. The company undertakes no obligation to revise or update any statements to reflect events or circumstances, taking place after that.
Tripp Taylor: 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, March 4th, 2025, 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.
Date of this call.
David Bailey: With that, I'd like to turn the call over to David Bailey, President and Chief Executive Officer. Thanks, Tripp. Good morning, everyone. And thank you for joining us on our fourth quarter of 2024. As always, I'd like to start by reporting the metric which most clearly defines our continued and in which we are most. During the fourth quarter, we helped more than 34,000 kids and over 138,000 kids in the full year, both record highs for Now having completed our 18th year at Orthopediatrics, and having helped over 1,140,000 kids, my associates and I recognize the positive impact our company has had on so many children and and we take our responsibility very.
Speaker Change: With that I'd like to turn the call over to David Bailey, President and Chief Executive Officer.
Speaker Change: Thanks, Good morning, everyone and thank you for joining us on our fourth quarter 2024 conference call as always I'd like to start by reporting the metric, which more clearly defines our continued success.
Speaker Change: And in which we are most proud of.
Speaker Change: During the fourth quarter, we helped more than 34000 kids in over 138000 kids in the full year, both record highs for orthopedic metrics now.
Speaker Change: Having completed our 18th year in orthopedic metrics and having helped over $1 million 140000 kit My associates and I recognize the positive impact our company has had on so many children and their families.
Speaker Change: And we take our responsibility very seriously.
David Bailey: Our customers and all health care providers in the pediatric space have been forced to make do with less than ideal options for children, and we will do everything in our power to right that. While 18 years have passed since our inception, in many ways, OP is just getting started, and our resolve to be a company that eventually helps one million kids every year has never been greater. During our journey, we have established orthopediatrics as the clear-cut market leader in pediatric orthopedic implants, and we anticipate our continued execution will lead to a dominant market share position in trauma and deformity correction and scoliosis implants in the coming five In the last few years, we have established ourselves as a leader in pediatric specialty bracing with our OPSB.
Speaker Change: Our customers and all health care providers in the pediatric space have been forced to make do with less than ideal options for children and we will do everything in our power to right that wrong.
Speaker Change: While 18 years have passed since our inception in many ways <unk> is just getting started and our resolve to be a company that eventually helps 1 million kids every year has never been greater.
Speaker Change: During our journey, we have established ortho pediatrics as the clear market leader in pediatric orthopedic implants and.
Speaker Change: And we anticipate our continued execution will lead to a dominant market share position in trauma and deformity correction and scoliosis implants in the coming five years.
Speaker Change: In the last few years, we've established ourselves as a leader in pediatric specialty pricing with our <unk> franchise.
David Bailey: on top of deepening our commitment to the field and meeting more of the needs of our customers. This expansion of our business enables orthopediatrics to grow in a more capital efficient In the coming several years, we plan to execute our clear cut strategy to obtain market dominance in this very large $500 million market. Given the OPSB business is generating a higher contribution margin than our implant. These investments will enable us to generate increased EBITDA and improve Every day, every quarter, every year, we became more ingrained in the children's hospitals by growing our market share and displacing the retreating incumbent competition.
Speaker Change: On top of deepening our commitment to the field and meeting more of the needs of our customers. This expansion of our business enables orthopedic matrix to grow in a more capital efficient way.
Speaker Change: In the coming several years, we plan to execute our clear cut strategy to obtain market dominance and thats very large $500 million marketplace.
Speaker Change: Given the <unk> business is generating a higher contribution margin than our implant business.
Speaker Change: These investments will enable us to generate increased EBITDA and improved cash flows.
Speaker Change: Every day every quarter every year, we became more ingrained in the children's hospitals by growing our market share and displacing the retreating incumbent competition and living out our near fanatical commitment to doing what is right for children and their caregivers.
David Bailey: and living out our near fanatical commitment to doing what is right for children and their caregivers. We demonstrate this commitment by delivering new products and technologies that meet major unmet needs, providing unparalleled customer service through the world's only global sales channel in pediatric orthopedics, and through a network of dedicated pediatric specific orthotists and professionals. by our outside support for surge in clinical education and training. And to put it simply, investing in important things that our customers care about and that impact the field of pediatrics. When you look at the success of our company across our 18 year history, our ability to execute on our commitments, our consistent track record of sales growth through share Deliberate step function improvements and adjusted EBITDA, laying a clear path to free cash flow breakeven in 2026.
Speaker Change: We demonstrate this commitment by delivering new products and technologies that meet major unmet needs, providing unparalleled customer service through the world's only global sales channel and pediatric orthopedics and through our network of dedicated pediatric specific orthopedist and processes.
Speaker Change: By our outside support for surgeon clinical education and training.
Speaker Change: But it's simply investing in important things that our customers care about and the impact of field of pediatrics.
Speaker Change: When you look at the success of our company across our 18 year history, our ability to execute on our commitments our consistent track record of sales growth through share taking.
Speaker Change: Deliberate step function improvements in adjusted EBITDA laying a clear path to free cash flow breakeven in 2026 and more recently our record performance in 2024, we believe our market valuation is entirely inconsistent with the company's performance.
David Bailey: and more recently, our record performance in 2024. We believe our market valuation is entirely inconsistent with the company's We recognize as a public company, certain metrics and external macrodynamics will always be But we believe the fundamentals of our business have never been stronger. Regardless of the quarter to quarter gyration and variation that can impact valuations for companies like ours. The unshakable truth is that orthopediatrics has carved out a unique position in the public growth med tech Unlike other medtech companies, we are not in a bare-knuckle struggle against focused competition. which gives us confidence in our growth trajectory while allowing us to leverage our P&L, and soon we will produce free cash flow positions.
Speaker Change: We recognize as a public company certain metrics and external macro dynamics will always be scrutinized, but we believe the fundamentals of our business have never been stronger.
Speaker Change: Regardless of the quarter to quarter gyrations variations that can impact valuations for companies like ours.
Speaker Change: Unshakeable through is that orthopedic matrix has carved out a unique position in the public growth Med tech sector.
Speaker Change: Unlike other med Tech company, we are not in a bare knuckle struggle against focused competition, which gives us confidence in our growth trajectory, while allowing us to leverage our P&L and soon we will produce free cash flow positivity. Therefore, we will continue to be aggressive and execute our strategy on our way to helping 1 million kits.
David Bailey: Therefore, we will continue to be aggressive and execute our strategy on our way to helping 1 million kids per year and creating substantial shareholder To this point, throughout the year, and again in the fourth quarter, we have successfully delivered positive results. We've produced extremely strong total revenue of $52.7 million, representing 40% growth from the comparable We saw quarterly growth in both Tandy and Scoliosis with 35% and 62% growth, respectively, led by domestic strength with quarterly growth of 52%. from a particularly robust performance from Domestic T&D, as well as the addition of Boston Elements. Our international growth was impacted by our decision to slow set sales shipments to South America, specifically Brazil, in order to reduce AR balances negatively affected by rapid currency.
Speaker Change: Per year, and creating substantial shareholder value.
Speaker Change: So at this point throughout the year and again in the fourth quarter, we have successfully delivered positive results with.
Speaker Change: We've produced extremely strong total revenue of $52 $7 million, representing 40% growth from the comparable period.
Speaker Change: We saw quarterly growth in both T&D in scoliosis, with 35% and 62% growth respectively led by domestic strength with quarterly growth of 52% from a particularly robust performance from domestic T&D as well as the addition of Boston LLP.
Speaker Change: Our international growth was impacted by our decision to slow sales shipments to South America, specifically, Brazil in order to reduce our balances negatively affected by rapid currency fluctuations. However, we still feel extremely strong EMEA T&D growth due to high demand and O U S. Scoliosis growth was <unk>.
David Bailey: However, we still saw extremely strong EMEA TND growth due to high demand, and OUS scoliosis growth was great despite challenges in Brazil. With extremely significant revenue growth and more than doubling our adjusted EBITDA during the fourth quarter of 2024, we improved our financial profile and took another step towards free cash flow breakeven in 2026. All of our businesses continue to grow rapidly entirely from share taking due to continued demand for our products. large-scale set deployments in 2023 and 2024, major new products. Successfully scaling of our past acquisitions, such as Orthx, Apofix, and Pegamedical, and the more recent launch of OPSD, and the acquisition and full integration of Boston OMP.
Speaker Change: Despite challenges in Brazil.
Speaker Change: With extremely significant revenue growth and more than doubling our adjusted EBITDA. During the fourth quarter of 2024, we improved our financial profile and took another step towards free cash flow breakeven in 2026.
Speaker Change: All of our businesses continue to grow rapidly entirely from share taking due to continued demand for our products.
Speaker Change: Large scale set deployments in 2023, and 2024 major new products.
Speaker Change: Successfully scaling of our past acquisitions, such as <unk>, <unk> and peg a medical and a more recent launch of <unk> and the acquisition and full integration of Boston LLP.
David Bailey: With all of these levers in place, we are confident we will continue to reach new highs and deliver important results for orthopedics. We expect our business to continue this momentum and our success in 2025 and beyond is driven by three main factors. Execution and scaling of OPSD. Sharetaking across the business by leveraging prior set deployment and ongoing success of our innovative products. This year, we expect to generate revenue of $235 to $242 million, representing annual growth of 15% to 18% as we last the Boston Olympia acquisition. Importantly, we also expect adjusted EBITDA of $15 to $17 million to be greater than $15 million of set deployments in 2020.
Speaker Change: With all of these levers in place we are confident we will continue to reach new highs and deliver important results for orthopedic metrics.
Speaker Change: We expect our business to continue this momentum and our success in 2025 and beyond is driven by three main factors.
Speaker Change: Execution and scaling of <unk>.
Speaker Change: Sure taking across the business by leveraging prior step one and.
Speaker Change: And ongoing success of our innovative product launches this.
Speaker Change: This year, we expect to generate revenue of $235 million to $242 million representing.
Speaker Change: Representing annual growth of 15% to 18% as we lap the Boston LNP acquisition.
Speaker Change: We also expect adjusted EBITDA of $15 million to $17 million to be greater than $15 million of set deployments in 2025.
David Bailey: We also expect to have our first quarter of positive free cash flow in the fourth quarter of 2025. In the fourth quarter of 2024, the T&D business continued to drive significant market share gains across several products, as well as the addition of Boston L&P reps. This quarter's performance was highlighted by both trauma and OPSB products, including PMP tibia, DF2, cannulated screws, and Boston OMP. We continue to leverage our prior set deployments, which are driving increasing share gains for trauma and deformity across the breadth of our process. U.S. trauma and deformity was extremely strong. And in fact, U.S.
Speaker Change: We also expect to have our first quarter of positive free cash flow in the fourth quarter of 2025.
Speaker Change: In the fourth quarter of 2020 for the T&D business continued to drive significant market share gains across several products as well as the addition of Boston LNP revenue.
Speaker Change: This quarters performance was highlighted by both trauma and OSB products, including <unk> <unk> to <unk> latest curves and Boston LNP sale.
Speaker Change: We continue to leverage our prior site deployments, which are driving increasing share gains for trauma and deformity across the breadth of our products.
Speaker Change: Trauma and deformity was extremely strong and in fact U S trauma is likely as robust as we've ever seen in company history.
David Bailey: trauma is likely as robust as we have ever seen it in company history. Mainly attributable to set deployments in 2023 and 2024 and the more rapid adoption of our new product. In addition, during the quarter, several sets of PMP tibia were launched, and we expect this will remain an important growth driver for the next several years. DF2 demand is now far exceeding our expectations and is quickly setting a new gold standard for femur fracture management in young. DF2 recently received expanded indications for postoperative care, which we believe is a much larger market than the femur fracture.
Speaker Change: Mainly attributable to set deployments in 2023, and 2024 and the more rapid adoption of our new products.
Speaker Change: In addition, during the quarter several sets of <unk> were launched and we expect this will remain an important growth driver for the next several years.
Speaker Change: Do you have to demand is now far exceeding our expectations and is quickly setting a new gold standard for femur fracture management in young children.
Speaker Change: Do you have two recently received expanded indications for postoperative care, which we believe is a much larger market than the femur fracture market.
David Bailey: All of this has created the need for expanding our supply chain to meet exploding demand. On the R&D front, we're excited about our projects on the surgical side of our team. Our Pediatric Plating Platform, or 3P, a world-class system with significant opportunity to fill unmet needs, is progressing according to plan, and we anticipate a beta launch of 3P HIPAA. Once launched, 3PHIP will spawn further share-taking opportunities for us within the plating.
All of this has created the need for expanding our supply chain to meet exploding demand.
Speaker Change: On the R&D front, we are excited about our projects on the surgical side of our T&D business, our pediatric plaguing platform or three P. A world class system with significant opportunity to fill unmet needs is progressing according to plan and we anticipate a beta launch of <unk> hip.
Speaker Change: Once launched three P hip respond further share taking opportunities for us within the <unk> franchise.
David Bailey: Overall, T&D continues to be a solid performer for us as we leverage our scale, capture market share, and bring new products to market that fill unmet needs and drive continued growth across For more information visit www.FEMA.gov As for the non-surgical specialty bracing business, or OPSB. From the start, we have been very bullish about this franchise, which represents a large new source of capital friendly. Following the successful integration of Boston O&P, we are very pleased to see our strategic rationale validated and playing out as we expected, maybe even better than As previously announced, we expanded our clinic business through both Greenfield Expansion in Indianapolis and Aquahire in Florida and Colorado.
Speaker Change: Overall candy continues to be a solid performer for us as we leverage our scale and capture market share and bring new products to market that fill unmet needs and drive continued growth across the board.
Speaker Change: As for the non surgical specialty bracing business or <unk> from.
Speaker Change: From the start we have been very bullish about this franchise, which represents a large new source of capital friendly growth.
Speaker Change: Following the successful integration of Boston, a lumpy we are very pleased to see our strategic rationale validated and playing out as we expected maybe even better than we expect.
Speaker Change: As previously announced we expanded our clinic business for both Greenfield expansion in Indianapolis.
Speaker Change: Aqua hire in Florida and Colorado.
David Bailey: The opportunities for clinic expansion are immense. The demand from our customers is high, and our funnel for clinic expansion is varied. The standup of the early expansion clinics is going well and providing a reproducible playbook that represents a substantial growth lever with significant growth. We are pleased with how we are tracking to our guidance for four new territories in 2025 and expect that will be more updates on this front throughout the year. On the product side of OPSB, and as previously mentioned, we are experiencing rapid growth of our DF2 femur fraction. which is growing so rapidly that we are seeking additional manufacturing sources so that we can meet current and future demand.
Speaker Change: The opportunities for clinic expansion are amidst the demand from our customers is high and our funnel for clinic expansion is very large.
Speaker Change: The standup of the early expansion clinics is going well and providing a reproducible playbook that represents a substantial growth lever with significant runway.
Speaker Change: We are pleased with how we are tracking to our guidance for four new territories in 2025, and expect that will be more updates on this front throughout the year.
Speaker Change: On the product side of <unk> and as previously mentioned, we are experiencing rapid growth of our <unk> femur fracture base, which is growing so rapidly that we are seeking additional manufacturing sources. So that we can meet current and future demand.
David Bailey: Beyond that, our OPSB R&D team launched multiple products, such as a new scoliosis brace sensor with patient compliance software. and additional DF2 sizes as we extend its use beyond fracture management. and we signed distribution and licensing agreements for the Move D brace to minimize tremors developed at Children's Hospital of Orange County. and the Thrive product portfolio, including Thrive Orthopedics F3 Hero Pediatric AFO, the TrueStretch Pediatric Aquinas Brace, and the Thrive Pediatric X-Glide Carbon Fiber Insulin. all focused on three unique pediatric orthotics. These solutions are more evidence supporting our thesis that OPSB can become the clearinghouse for specialty bracing products specifically designed for OPSB.
Speaker Change: And that our <unk> R&D team launched multiple products, such as our new scoliosis brace sensor with patient compliance software.
Speaker Change: And additional DFT sizes as we extend its use beyond fracture management.
Speaker Change: And we signed and we signed distribution and licensing agreements for the move debrief to minimize trimmers develop the children's hospital of Orange County.
Speaker Change: And the thrive product portfolio, including thrive orthopedics FRE hero pediatric CFO, the true stretch pediatric acquaintance breweries and the thrive pediatric X glide carbon fiber installed.
Speaker Change: All focused on three unique pediatric orthotic conditions.
Speaker Change: These solutions are more evidence supporting our thesis that <unk> can become the clearinghouse for specialty bracing products, specifically designed for kids.
David Bailey: Further, the pipeline of new opportunities coming on the business development side of OPSB is really rampant. We are certainly attracting entrepreneurs and inventors with new product lines and technologies that they desire to scale globally through our growing sales channel and clinic. This is coming in licensing, distributing, and in some cases, small acquisition opportunities that will continue to allow us to leverage our channel, thus growing revenue and adding profit. We are building a flywheel. At this point, it is small and it's spinning very fast. But with scale comes increasing movement, and we are very confident our flywheel will become quite large in the coming years.
Further the pipeline of new opportunities coming on the business development side of <unk> is really ramping we are certainly attracting entrepreneurs and inventors with new product lines and technologies that they desire to scale globally through our growing growing sales channel and clinic network.
Speaker Change: This is coming in licensing distributing and in some cases small acquisition opportunities that will continue to allow us to leverage our channel, thus growing revenue and adding profit.
Speaker Change: We are building a flywheel at this point it is small and is spinning very fast, but with scale comes increasing moment and we are very confident our flywheel will become quite large in the coming years.
David Bailey: We recognize the huge potential within OPSB to drive our patient impact potential for treating more patients with capital efficient growth and early traction within our strategy suggests that we are on track with our plans to execute through the remainder of 2025 and for several years.
Speaker Change: We recognize the huge potential within <unk> to drive our patient impact potential for treating more patients with capital efficient growth and early traction within our strategy suggests that we are on track with our plans to execute through the remainder of 2025 and for several years beyond.
Speaker Change: Moving to the scoliosis business.
David Bailey: Moving to the scolios. Our strong growth seen in Scoliosis this quarter was driven by continued share gain combined with new users from larger We anticipate that this trend will continue into 2025. As we increase our volume, we expect to reap the benefits of the new user acceleration from late 2024. To highlight a few key products, we continue to see strong growth in our response fusion franchise from new customer. We saw additional 70 placements in the fourth quarter in large institutions. and the continued introduction of our first EOS product, Response-Driven Pellet. We have a substantial opportunity to grow scoliosis revenue over the next three to five years.
Speaker Change: Our strong growth seen in scoliosis. This quarter was driven by continued share gain combined with new users from large accounts we.
Speaker Change: That this trend will continue into 2025 as we increase our volume we expect to reap the benefits of the new user acceleration from late 2024.
Speaker Change: To highlight a few key products, we continue to see strong growth in our response fusion franchise from new customer acquisition we.
Speaker Change: We saw additional 70 placements in the fourth quarter and large institution.
Speaker Change: And the continued introduction of our first pass product response rhythm pill.
Speaker Change: We have a substantial opportunity to grow scoliosis revenue over the next three years to five years. Additionally, we are seeing a consistent stream of new amethyst users and growth, but only continues to pick up more users are learning where apathy.
David Bailey: Additionally, we're seeing a consistent stream of new apathy. and growth that only continues to pick up. More users are learning where Appifix fits in their treatment algorithm. This supports our vision that eventually, AppFix will be a tool used by almost every pediatric scoliosis. While still relatively small, we expect Apathix to continue to grow rapidly in 2025 as more surgeons better understand the best use case for the device in their practice. Looking at our EOS products, our EOS product portfolio development remains on track, and we are directly discussing the requirements for product approvals for ELE and VertiGlide with the FDA.
Speaker Change: And their treatment algorithm.
Speaker Change: This supports our vision that eventually.
Speaker Change: Mix will be a tool used by almost every pediatric scoliosis surgery.
Speaker Change: While still relatively small we expect <unk> to continue to grow rapidly in 2025 as more surgeons better understand the best use case for the device in their practices.
Speaker Change: Looking at our Pos products, our Eos product portfolio development remains on track.
We are directly discussing their requirements for product approvals for elli and vertical IDE with the FDA.
David Bailey: We have been working on confirming the regulatory path. And recently, we've had encouraging feedback. The most recent discussion have led us to believe that there is a higher likelihood that VertiGlide will be approved in the U.S. sooner than expected and under 5-10 years.
We have been working on confirming the regulatory path and recently, we've had encouraging feedback from the FDA. The most recent discussions have led us to believe that there is a higher likelihood that vertical will be approved in the U S sooner than expected and under five 10-K clearance.
Speaker Change: Moving on to international in.
David Bailey: Moving on to Internet. In the quarter, we saw slower international sales, generating revenue of $9.8 million and delivering 5% growth year-over-year. Despite significant international demand, we made a conscious decision to limit additional stocking order shipments to certain stocking distributors in order to stimulate timely receivables collection, which had been negatively affected by the rising dollar against South American currency. Trauma and deformity implants were most affected by the shipping holes in South America, while scoliosis delivered very nice growth year-round. That said, general demand across the entire T&D and scoliosis portfolio was healthy, especially in our agency. where we saw strong In fact, non-LATAM T&D growth exceeded 20% and scoliosis grew nearly 30%.
Speaker Change: In the quarter, we saw slower international sales generating revenue of $9 $8 million and delivering 5% growth year over year.
Speaker Change: Despite significant international demand, we made a conscious decision to limit additional stocking order shipments to certain stocking distributors in order to stimulate timely receivables collection, which had been negatively affected by the rising dollar against South American currency.
Speaker Change: Trauma and deformity implants were most affected by the shipping hold in South America, while scoliosis delivered very nice growth year over year.
Speaker Change: That said general demand across the entire T&D in scoliosis portfolio was healthy, especially in our agency market, where we saw strong sales growth in fact, non Latam T&D growth exceeded 20% and scoliosis grew nearly 30% highlighting the extremely compelling underlying demand.
David Bailey: highlighting the extremely compelling underlying International scoliosis perform well due to solid revenue in our direct markets, where we are seeing new users come We are very happy with the progress made in 2024 launching the scoliosis business in the EU. and expect that with the anticipated EU MDR approvals, our EU spying franchise is set for high growth and As we look ahead, EUMDR approval remains a large catalyst for our growth in 2025 and beyond, and we are confident that we are well positioned for We are awaiting the Notified Body Audit to finalize our EUMDR status, which we expect to be completed in mid-2020.
Speaker Change: International Scoliosis performed well due to solid revenue in our direct markets, where we are seeing new users come on board. We are very happy with the progress made in 2020 for launching the scoliosis business in the EU.
Speaker Change: And expect that with the anticipated EU <unk> approvals are EU spine franchise is set for high growth in the future.
Speaker Change: As we look ahead, even MTR approval remains a large catalyst for our growth in 2025 and beyond and we are confident that we are well positioned for approvals. We are awaiting the notified body audits to finalize our <unk> status, which we expect to be completed in mid 2025 and.
David Bailey: And once we receive our first, we will launch a wave of products into the EU and then expect additional waves as further approvals are accomplished over the next 18 months. I want to point out that EUMDR approval for implants is an expensive process, but we believe it is the right thing to do for kids who need these devices outside of the United States, and it strengthens our strategic position. Additionally, we are exploring further expansion opportunities for OPSB outside the U.S.
Speaker Change: And once we receive our first we will launch a wave of products into the EU and then expect additional ways as further approvals are accomplished over the next 18 months.
Speaker Change: I want to point out the <unk> approval for implants is an expensive process, but we believe it is the right thing to do for kids need these devices outside of the United States and strengthened our strategic position.
Speaker Change: Additionally, we are exploring further expansion opportunities for <unk> outside the U S. In 2025, which comes with a light touch and quick turnaround when it comes to regulatory approvals.
David Bailey: in 2025, which comes with a light touch and quick turnaround when it comes to regular Overall, the international business is set up nicely, and we believe the remainder of the year will contribute toward a healthy 2020.
Speaker Change: Overall, the international business is set up nicely and we believe the remainder of the year will contribute toward a healthy 2025.
David Bailey: Finally, this brings us to Surgeon Training and Education. In the fourth quarter, we hosted 132 unique training experiences for over 2,700 health including during IPOS, the International Pediatric Orthopedic Symposium, where orthopediatrics continued our leadership position as an Emerald-level sponsor. Once again, our team was well-represented and connected with customers to share hands-on learning experiences with our new and innovative We were excited that through our booths and our educational events, we were able to introduce our new Enabling Technology Division. as well as highlight all the great work we are doing in non-operative care through OP Specialty Brands.
Speaker Change: Finally, this brings us to surgeon training and education.
Speaker Change: In the fourth quarter, we hosted 132 unique training experiences for over 2700 health care professionals include.
Speaker Change: Including during the <unk> the international pediatric orthopedic symposium.
Arthur Pediatrics continued our leadership position as an emerald level sponsor.
Speaker Change: Once again, our team was well represented and connected with customers to share hands on learning experiences with our new and innovative products. We were excited that through our boots and our educational events, we were able to introduce our new enabling technology Division.
Speaker Change: As well as highlight all the great work, we are doing in non operative care through <unk> specialty pricing.
David Bailey: Our time at events like this is incredibly important as we prioritize providing clinical education opportunities to grow alongside the pediatric orthopedics.
Speaker Change: Our time at events like this is incredibly important as we prioritize providing clinical education opportunities to grow alongside the pediatric orthopedic community.
Fred Hite: So with that, I'd like to turn the call over to Fred to provide more detail on our financial results. Fred? Thanks, Dave. Before giving more details on our financial results, I wanted to reiterate that through our continued execution, we have established Orthopediatrics as a high-quality and differentiated asset with the demonstrated ability to scale growth, increase operating leverage, provides a clear path to free cash. and we are supported by a very strong balance.
Speaker Change: With that I'd like to turn the call over to Fred to provide more detail on our financial results Fred.
Fred Hite: Thanks, Dave.
Fred Hite: Before giving more details on our financial results I wanted to reiterate that through our continued execution. We've established ortho pediatrics is a high quality and differentiated asset with a demonstrated ability to scale growth.
Fred Hite: Increased operating leverage which provides a clear path to free cash positivity and we are supported by a very strong balance sheet.
Fred Hite: That said, we made some very difficult, yet very strategic decisions in the quarter that we expect to support our commitment to growth, profitability, and improved cash You will notice some one-time charges on the P&L. The $3.7 million restructuring charge is primarily due to the closure of our OP Israel which was the former Appy Fix head. We have decided to move production out of Israel and into the U.S. to Reduce Supply Risk. and to consolidate the management of the AppyFix product line into our Warsaw operation.
Fred Hite: That said, we made some very difficult.
Fred Hite: Yet very strategic decisions in the quarter that we expect to support our commitment to growth profitability and improved cash usage.
Fred Hite: You will notice some one time charges on the P&L.
Fred Hite: The $3 $7 million restructuring charge is primarily due to the closure of our <unk> Israel office.
Fred Hite: Which was the former <unk> headquarters.
Fred Hite: We have decided to move production out of Israel and into the U S to reduce supply risk.
Fred Hite: And to consolidate the management of the <unk> product line into our Warsaw operations.
Fred Hite: These difficult decisions are a component of our continued focus on delivering improved, adjusted, even and Demonstrate that Adjusted EBITDA Improvement and Reduced Cash Usage are top priorities. Additionally, as you will see from our results, during the quarter, our gross profit margin profile has shifted. as we continue to integrate Boston-owned. We are growing the OPSB business. Launching this new strategy and working through the process, we are learning and have adjusted certain expenses out of general and administrative expenses into cost of goods sold. As a result, we saw a negative impact on the gross margin profile of OPSB and our overall gross margin for the I wanted to be clear, this does not impact our profitability, and given our growing channel in OPSB, we will not shun lower gross margin distribution opportunities that leverage our fixed costs and improve overall profitability.
Fred Hite: These difficult decisions are a component of our continued focus on delivering improved adjusted EBITDA and demonstrate that adjusted EBITDA improvements.
And reduced cash usage are top priorities for the company.
Fred Hite: Additionally.
Fred Hite: As you will see from our results during the quarter, our gross profit margin profile has shifted slightly.
Fred Hite: As we continue to integrate Boston LNP.
Fred Hite: We are growing the <unk> business.
Fred Hite: Watching this new strategy and working through the process. We are learning and have adjusted certain expenses out of general and administrative expenses into cost of goods sold.
Fred Hite: As a result, we saw a negative impact on the gross margin profile of <unk> and our overall gross margin for the quarter.
Fred Hite: I wanted to be clear this does not impact our profitability and giving our growing channel and <unk>, we will not shun lower gross margin distribution opportunities that leverage our fixed costs and improve overall profitability.
Fred Hite: We've made a full year adjustment of approximately $3 million out of G&A and into cost of goods This negatively impacted our fourth quarter gross margin.
Fred Hite: We've made a full year adjustment of approximately $3 million out of G&A and into cost of goods sold.
Fred Hite: This negatively impacted our fourth quarter gross margin, but.
Fred Hite: but properly reflects our full year 2024 gross margin.
Fred Hite: But properly reflects our full year 2020 for gross margin.
Fred Hite: Taking a closer look at the P&L.
Fred Hite: Taking a closer look at the P&L. Our fourth quarter 2024 worldwide revenue of $52.7 million increased 40% compared to the fourth quarter of 2023. Growth in the quarter was driven primarily by strong performances across trauma and deformity, scoliosis, and OPSV, as well as the addition of Boston OMP. Slightly offset by the lower growth in the international revenue. U.S. revenue is $42.9 million, a 52% increase from the fourth quarter of 2023, representing 79% of our total revenue. Growth in the quarter was primarily driven by our additional market share gains across trauma, deformity, scoliosis, and OPSB, as well as the addition of Boston O&P.
Fred Hite: Our fourth quarter 2024 worldwide revenue of $52 $7 million increased 40% compared to the fourth quarter of 2023.
Fred Hite: Growth in the quarter was driven primarily by strong performances across trauma and deformity.
Fred Hite: <unk> and <unk> as well as the addition of Boston one Pete.
Fred Hite: Slightly offset by the lower growth in the international revenues.
Fred Hite: The us revenue was $42 $9 million, a 52% increase from the fourth quarter of 2023, representing 79% of our total revenue.
Fred Hite: Growth in the quarter was primarily driven by our additional market share gains across trauma deformity, and scoliosis and <unk> as well as the addition of Boston LNP.
Fred Hite: We generated total international revenue of $9.8 million, representing growth of 5% compared to the fourth quarter of 2023, representing 21% of our total revenue. Growth in the quarter was primarily led by strong scoliosis sales in our agency market. In the fourth quarter of 2024, trauma and deformity global revenue of $36.4 million increased 35% compared to the prior year period. Growth was primarily driven by PEGA products, trauma, xFix, and OPSB plus the addition of Boston O&P. In the fourth quarter of 2024, scoliosis, global revenue of $15.6 million increased 62% compared to the prior year period. Growth was primarily driven by increased U.S.
Fred Hite: We generated total international revenue of $9 8 million representing growth of 5% compared to the fourth quarter of 2023, representing 21% of our total revenue.
Fred Hite: Growth in the quarter was primarily led by strong scoliosis sales and our agency market.
Fred Hite: In the fourth quarter of 2020 for trauma and deformity global revenue of $36 $4 million increased 35% compared to the prior year period growth was primarily driven by peg a products trauma ex fix and <unk> plus the addition of Boston LNP.
Fred Hite: In the fourth quarter of 2020 for Scoliosis global revenue of $15 $6 million increased 62% compared to the prior year period.
Fred Hite: Growth was primarily driven by increased U S growth across the response and <unk> non fusion system and additional impact from 70 as well as the addition of Boston LNP.
Fred Hite: growth across the response and Apifex non-fusion system. and additional impact from 7D as well as the addition of Boston O&P.
Fred Hite: Finally, sports medicine other revenue in the fourth quarter of 2024 was $0.6 million compared to $0.9 million in the prior year period.
Fred Hite: Finally sports medicine other revenue in the fourth quarter of 2024 was zero point $6 million compared to <unk> 9 million in the prior year period.
Fred Hite: Turning to set the appointment.
Fred Hite: Turning to set the point. $3.7 million of sets were consigned in the fourth quarter of 2024 compared to $5.9 million in the fourth quarter of 2022. In 2024, we deployed $21.1 million of sets compared to $22.0 million in 2023. The $21.1 million for 2024 was slightly higher than our forecast of less than $20 million, driven by higher-than-expected 7D and some earlier than expected deliveries on some recent product launches.
Fred Hite: $3 $7 million of sets were consigned in the fourth quarter of 2024 compared to $5 $9 million in the fourth quarter of 2023.
Fred Hite: In 2024, we deployed $21 $1 million of sets compared to $22.01 million in 2023.
The $21 1 million for 2024 was slightly higher than our forecast of less than $20 million driven by higher than expected 70 placements and some earlier than expected deliveries on some recent product launches.
Fred Hite: Touching briefly on a few key metrics for the fourth quarter of 2024 gross profit margin was 68% compared to 71% for the fourth quarter of 2023. The decrease in gross profit margin was primarily driven by an approximately $3 million full year adjustment from the.
Fred Hite: Touching briefly on a few key metrics. For the fourth quarter of 2024, gross profit margin was 68% compared to 71% for the fourth quarter of 2023. The decrease in gross profit margin was primarily driven by an approximately $3 million full year adjustment from the reclassification of expenses from overhead costs related to manufacturing across the OPSB business.
Fred Hite: Occasion of expenses from overhead costs related to manufacturing across the <unk> business.
Fred Hite: Full year 2024 gross margin of 72.6% is a better representation of the business's performance and is more indicative of the gross margin rate for the near future. Total operating expenses increased $14.8 million, or 43% compared to the prior year period, to $49.6 million for the fourth quarter of 2024. The increase was primarily driven by the restructuring charge, the impairment charge. The addition of Boston O&P increases in spending related to EU MDR compliance. Increased Commissioning. and the incremental personnel required to support the ongoing growth of the company. Sales and marketing expenses increased $4.0 million or 31% compared to the prior year period to $16.8 million in the fourth quarter of 2024.
Fred Hite: Full year 2024 gross margin of 72, 6% is a better representation of the businesses performance and is more indicative of the gross margin rate for the near future.
Fred Hite: Total operating expenses increased $14 8 million or 43% compared to the prior year period to $49 6 million for the fourth quarter of 2024.
Fred Hite: The increase was primarily driven by the restructuring charge the <unk>.
Fred Hite: Impairment charge.
Fred Hite: The addition of Boston LNP increases in spending related to EU MTR compliance increase.
Fred Hite: Increased commission expense and the incremental personnel required to support the ongoing growth of the company.
Fred Hite: Sales and marketing expenses increased 4.0 million or 31% compared to the prior year period to $16 8 million in the fourth quarter of 2024.
Fred Hite: The increase was mainly driven by increased sales and commission. General and administrative expenses increased $5.4 million or 28% year over year to $24.4 million in the fourth quarter of 2024. The fourth quarter increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization. Research and development expenses remain flat at $2.9 million in the fourth quarter of 2024 due to the timing of external development expenses.
Fred Hite: The increase was mainly driven by increased sales and commission expense.
Fred Hite: General and administrative expenses increased $5 4 million or 28% year over year to $24 $4 million in the fourth quarter of 2020 for the fourth quarter increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business and an increase in depreciation and amortization.
Fred Hite: <unk>.
Fred Hite: Research and development expenses remained flat at $2 $9 million in the fourth quarter of 2024 due to the timing of external development expenses.
Fred Hite: As discussed in the fourth quarter, we did see the impact from the one time charge of $3.7 million restructuring. that includes severance, inventory write-off, lease break, and other expenses associated with the closure of our Israel office. In addition, we recorded a charge related to one of our trade names of $1.8 million. The other expense was $2.4 million for the fourth quarter of 2024 compared to $1.2 million of other income for the same period last year.
Fred Hite: As discussed in the fourth quarter, we did see the impact from the one time charge of $3 $7 million restructuring charge that includes severance inventory write off lease break and other expenses associated with the closure of our Israel office.
Fred Hite: In addition, we recorded a charge related to one of our trade names of $1 8 million.
Fred Hite: The other expense was $2 4 million for the fourth quarter of 2024 compared to $1 $2 million of other income for the same period last year.
Fred Hite: Adjusted EBITDA was $3.0 million in the fourth quarter of 2024, more than doubled when compared to the $1.3 million for the fourth quarter of 2023. For the full year of 2024 adjusted EBITDA was $8.5 million compared to $5.0 million in the prior year. In the fourth quarter of 2024, free cash flow usage was $3.7 million. Representing a significant reduction of 70% when compared to the year-to-date average through the first three quarters of 2024 and a 67% reduction when compared to the same period in the prior year.
Fred Hite: Adjusted EBITDA was $3 zero or $1 million in the fourth quarter of 2024 more than doubled when compared to the $1 3 million for the fourth quarter of 2023.
Fred Hite: For the full year of 2024, adjusted EBITDA was $8 5 million compared to $5.01 million in the prior year.
Fred Hite: In the fourth quarter of 2020 for free cash flow usage was $3 7 million.
Fred Hite: Presenting a significant reduction of 70% when compared to the year to date average through the first three quarters of 2024.
Fred Hite: And a 67% reduction when compared to the same period in the prior year.
Fred Hite: We now expect the first quarter of positive free cash flow to be in the fourth quarter of 2025. We ended the fourth quarter with $70.8 million in cash, short-term investments, and restricted cash. and we still have $25 million available on our new term.
Fred Hite: We now expect the first quarter of positive free cash flow to be in the fourth quarter of 2025.
Fred Hite: We ended the fourth quarter with $70 $8 million in cash short term investments and restricted cash and.
Fred Hite: And we still have $25 million available on our new term loan.
Fred Hite: Turning to guidance.
Fred Hite: Turning to Gei We are reiterating our expectation for full year 2025 revenue to be in the range of $235 to $242 million, representing year-over-year growth of 15 to 18 percent. During our analyst day last September, I had communicated that we expect our gross margins to remain flat at 74 to 75% for the next several years. Given our current reclassification of GNA into cost of goods sold, I am restating the guidance that our gross margins will in fact continue to be flat. However, the newly updated range is 72 to 73 percent. This does not impact our profitability, just the buckets within the P&L.
Fred Hite: We are reiterating our expectation for full year 2025 revenue to be in the range of $235 million to $242 million.
Fred Hite: <unk> year over year growth of 15% to 18%.
Fred Hite: During our analyst day last September.
Fred Hite: We indicated that we expect our gross margins to remain flat at 74% to 75% for the next several years.
Fred Hite: Given our current reclassification of G&A into cost of goods sold I am restating the guidance that our gross margins will in fact continue to be flat.
Speaker Change: However, the newly updated range is 72% to 73%.
Speaker Change: It does not impact our profitability just the buckets within the P&L.
Fred Hite: We also continue to expect to generate between $15 to $17 million of adjusted EBITDA in 2025. Additionally, we continue to expect approximately $15 million of new sets deployed in 2025.
Speaker Change: We also continue to expect to generate between $15 million to $17 million of adjusted EBITDA in 2025.
Speaker Change: Additionally, we continue to expect approximately $15 million of new sets deployed in 2025.
Fred Hite: This represents our continued focus on driving the business to free cash flow breakeven by 2026. And we anticipate delivering our first quarter of free cash flow positivity in the fourth quarter of 2020.
Speaker Change: This represents our continued focus on driving the business to free cash flow breakeven by 2026, and we anticipate delivering our first quarter of free cash flow positivity in the fourth quarter of 2025.
Speaker Change: Our current guidance assumes no impact of tariffs or other government changes. However, we will continue to monitor the dynamics and while we expect potential tariffs to be minimal impact. It is too early to determine all potential government actions and their impact.
Fred Hite: Our current guidance assumes no impact of tariffs or other government changes, however, we will continue to monitor the dynamics and while we expect potential tariffs to be minimal impact, it is too early to determine all potential government actions and their impact.
Dave: I'll now turn the call back to Dave for closing remarks.
David Bailey: I'll now turn the call back to Dave for closing remarks. Thanks, Fred. We are encouraged by how we ended the year and have already seen that momentum begin to carry into 2020.
Dave: Thanks, Brett.
Dave: We are encouraged by how we ended the year and have already seen that momentum begin to carry into 2025. Our success in 2025 and beyond is driven by three main factors.
David Bailey: Our success in 2025 and beyond is driven by three main Execution and scaling of OPSB, sharetaking across the business by leveraging prior set deployment, and ongoing success of our innovative product. The aggressive approach we have taken to this business and the opportunity ahead of us over the next three to five years is very We are extremely proud that we've continued delivering strong performances, especially within this medtech quarter over quarter and year over year, and we do not plan for this to change moving forward. We will continue to help more children than ever, capture more share across the entire business as we continue to break revenue records, grow our adjusted EBITDA, and improve cash usage in 2025 and beyond.
Dave: Execution and scaling of opiate.
Dave: We're taking across the business by leveraging prior set deployment and ongoing success of our innovative product launches.
Dave: The aggressive approach we have taken to this business and the opportunity ahead of us over the next three to five years is very exciting. We are extremely proud that we've continued delivering strong performances, especially within this med tech market quarter over quarter and year over year, and we do not plan for this to change moving forward.
Dave: We will continue to help more children than ever.
Dave: Capture more share across the entire business as we continue to break revenue records grow our adjusted EBITDA and improve cash usage in 2025 and beyond.
Unknown Executive: Operator, let's open the call for Q&A.
Speaker Change: Operator, let's open the call for Q&A. Thank you. Thank.
Unknown Executive: Thank you so much, and as a reminder to our audience, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again.
Speaker Change: Thank you so much and as a reminder to our audience to ask a question simply press Star one one on your telephone and wait for your name to be announced to remove yourself Press Star. One again. Our first question is from Ryan Zimmerman with <unk>. Please proceed.
Ryan Zimmerman: Our first question is from Ryan Zimmerman with BTIG. Please proceed. Thanks for taking our questions, guys. Let's start with guidance a little bit. I know you don't guide by segment, but maybe you could help us kind of how you're thinking about, you know, some of the contributions here, you know, in each of the buckets of the businesses. It sounds like . Certainly the OUS business with the addition of the UMDR, Clarence. Step up a little bit in 25. I'd appreciate any call you have there.
Ryan Zimmerman: Thanks for taking my questions guys I appreciate it.
Speaker Change: Hey, Brian start with guidance a little bit.
Ryan Zimmerman: I know you don't guide by segment, but.
Speaker Change: Maybe you could help us kind of how youre thinking about some of the contributions here.
Speaker Change: In each of the buckets of the business as it sounds like.
Speaker Change: Certainly the O U S business with the addition of the <unk> clearance.
Speaker Change: Could step up a little bit in 'twenty five I appreciate any color you have there and then just I'll ask the second question upfront too, which is just around seasonality and pacing.
David Bailey: And then just I'll ask the second question up front, too, which is just around seasonality. and the Rolex Awards. Thanks for taking Yeah, thanks, Ryan. So I think from a seasonal perspective, maybe I'll take this one first, I think that, you know, likely to see consistency, consistent seasonality of the business, the way we've seen in the past with kind of June, July, August, still being our biggest months. December, obviously, a big month for us as well as school as kids get out. It is possible that over the course of, you know, the next several years as OPSB continues to grow, that some of that seasonality could maybe level out a little bit, but I think that, you know, normally see our first quarter a slight step down from Q4 of the previous year, and then we scale into Q2, or Q2 and Q3 as the summer season continues to grow.
Speaker Change: Through the year I mean, we know kids tend to get their surgeries second quarter third quarter during the summer imagery in school, but you've had some fluctuations I guess between the fourth quarter. The first quarter due to seasonal dynamics flu RSV et cetera. So any color there I think would certainly be appreciated as well thanks for taking.
Speaker Change: My questions guys.
Speaker Change: Yes, Thanks, Brian.
Speaker Change: So I think from a seasonal perspective, maybe I'll take this one first I think that.
Speaker Change: Likely to see consistency consistent seasonality of the business the way we've seen it in the past with kind of June July August still being our biggest months.
Speaker Change: December obviously, a big month for us as well as school kids get out it is possible that over the course of the next several years as <unk> continues to grow but some of that seasonality could maybe level out a little bit, but I think that.
Speaker Change: Normally see our first quarter, a slight step down from Q4 of the previous year and then we scale into Q2 as Q2 and Q3 as the summer season continues to grow I.
Speaker Change: I think youre spot on in terms of the impact that <unk> can have on the business.
It is not a panacea right away, obviously, we've got to get built and we've got to get set sold to distributors and sets into the market when we get a curve, but certainly it should have a positive impact in 2025, and probably more of an impact even in 2026 and 2027 I think the thing to call out there is that we're seeing really strong growth.
Speaker Change: Our scoliosis franchise in Europe.
Speaker Change: And that's really with only one of the systems available. So our Wi Fi six so response fusion system. So as we can bring a full product portfolio to Europe on the fusion side I think we're going to continue to see that business grow and that starts to negate some of the reliance that we've historically had on <unk>.
David Bailey: So, as we can bring a full product portfolio to Europe on the fusion side, I think we're going to continue to see that business grow, and, you know, that starts to negate some of the reliance that we've historically had on scoliosis OUS in Brazil and some of the South American markets, where it's primarily been our larger opportunities outside of the United States up until recently. As you think about trauma, deformity, and scoliosis here in the United States, and I guess around the world, generally speaking, you know, as you said, we don't generally guide specifically there, but, you know, I think you could expect to see scoliosis smaller business continue to grow a little bit faster than the trauma and deformity business.
Speaker Change: <unk> O U S in Brazil, and some of the South American markets, where it's primarily been our larger opportunities outside of the United States up and up until recently.
Speaker Change: Do you think about trauma deformity and scoliosis here in the United States and I guess around the World generally speaking as you said, we don't generally guide specifically there but.
Speaker Change: Yes, I think you could expect to see scoliosis smaller business.
Speaker Change: Continue to grow a little bit faster than the trauma and deformity business, obviously, much larger business on the T&D side and greater market share.
David Bailey: Obviously, much larger business on the T&D side and greater market share, and I think that's probably what you'll see again here in 2025. It's very helpful, Dave. I appreciate the call.
Speaker Change: And I think thats, probably what youll see again here in 2025.
Speaker Change: Okay very helpful. Dave I appreciate the color I'll hop back in queue.
Unknown Executive: I'll hop back. Thank you.
Speaker Change: Sounds good.
Speaker Change: Thank you.
Rick Wise: Our next question comes from the line of Rick Wise with Stifel, please proceed. Good afternoon, Dave. Hi, Fred.
Question comes from the line of Rick Wise with Stifel. Please proceed.
Speaker Change: Good afternoon, Dave Hi, Fred.
Rick Wise: So much to unpack here. It's intriguing. Maybe talking about a couple other opportunities. It seems like the business has tremendous momentum, as you're talking about them, the US numbers would suggest. But maybe maybe start with OPS, you know, OPSB, you know, just, just you're saying strategic rationale playing out. The funnel is full for new territory. Help us think through, talk through in more, maybe a little more detail, Dave, the pipeline new opportunity, the licensing. have that, what have you assumed in 25? When, you know, How do we translate that into thinking about growth or outlook or time of year?
Speaker Change: So much to unpack here, it's intriguing maybe talking about a couple of other opportunities it seems like the business.
Speaker Change: Tremendous momentum as Youre talking about in the U S numbers would suggest.
Speaker Change: But maybe maybe start with <unk>.
Speaker Change: Okay.
Speaker Change: Just.
Speaker Change: Just youre, saying the strategic rationale playing out.
Speaker Change: The funnel.
Speaker Change: As for four new territory.
Dave: I think through talk maybe a little more detail Dave.
Speaker Change: The pipeline of new opportunities of licensing.
Speaker Change: How is that what have you assumed in 'twenty five.
Speaker Change: How do we translate that into thinking about growth our outlook or time of year or do we see it in 25, just help us think through that.
David Bailey: Or do we see it in 25? Just help us think through that opportunity. You know, it just seems like there should be, there is room for upside as we head toward the end of the year and maybe start thinking about 26. Thank you. Yeah, thanks, Rick. Great question. And, you know, I would say we are hesitant to get ahead of ourselves. But we do agree that there may be some opportunities that we're working on in that area. As we've talked in the past, a little bit of selling price always helps in that area. And so we'll continue that trend.
Speaker Change: Opportunity.
Speaker Change: Sure Good question Rick.
Speaker Change: Obviously, when I talk about the three main things that we have to do to continue to really grow the business 2025 and beyond scaling <unk> is at the top of that list and I think.
Speaker Change: This time last year, obviously, we had just completed the acquisition of Boston and we're just really starting the journey of scaling El PSB and when I look at that now a year later.
Speaker Change: I think everything we thought Boston could be in the scaling of clinics and the addition of products.
Speaker Change: Has come true.
Speaker Change: And I think we're looking at a $500 million Tam that's easily accessible.
Speaker Change: With less capital frankly than the consignment model of our implant business and that's that was the thesis that we can scale into this and I think we have throughout the year and I think it's going to be a big part of 2025 and beyond.
Speaker Change: What we've learned I guess in our customers are certainly interested in and more clinics more products. It's clearly a very underserved segment of the pediatric orthopedic marketplace and it has a ton of synergies with our implant business. So I think that the implant business is in part growing because the opioid franchise is growing and the <unk>.
Speaker Change: Brand of ortho pediatrics and its importance in the mind of our customers is growing as well I.
Speaker Change: I guess when you think about clinics, our aspiration is to have four new territories as we called out in the analyst day, and we're sticking to that it does seem like we've got enough in the funnel, but it's possible that we could go to more than four territories in 2025, we're not calling that out but it is possible, we certainly won't hold back in.
Speaker Change: In terms of our opportunity to expand beyond those four territories, but I guess.
Speaker Change: We're really saying is coming out of the analyst day in September I think we are much much more solid on the pace with which we can scale, our obs be clinics and have a better sense of what the cost associated with that is to the P&L.
Speaker Change: We've now set up some greenfield clinics some of the first ones, we've ever done and those green field clinics continue to.
Speaker Change: Both screen clinics and that process was I would say in line with the timing and the cost that we thought and so that's encouraging and then I guess last but specialty bracing business on the R&D side are there in these licensing opportunities and distribution opportunities. It's really powerful I mean, we think of this business as an opportunity.
Speaker Change: And for us to establish what it really is a single channel almost dare I say, an Amazon of pediatric orthopedic devices non surgical devices.
Speaker Change: If entrepreneurs and small companies want to access the pediatric orthopedic market.
Speaker Change: And access our customers there will be an opportunity to do that through the scale that we enjoy here in the United States and then around the World and then as we add more clinics and you fast forward. This several years, where we would say we have a completely dominant position in clinics.
Speaker Change: And that becomes an even more powerful type of.
Speaker Change: <unk> channel for us.
Speaker Change: To drive revenue through and then I guess the last last thing sorry long answer to a short question, Rick, but we're seeing devices like <unk>, which as you heard called out in the script grow.
Speaker Change: Growing at rates that I am not sure we thought were.
Speaker Change: We're very encouraged by the way do you have to do is growing and we see a number of opportunities like <unk> to continue to grow and again that has a duplicative effect when you're not only selling into the hospitals, but then as we add clinics or selling it through our own channel. So I hope that answered your question, but a lot of optimism, obviously and <unk>.
Speaker Change: Encouraged a year post op ESB year Poe.
Speaker Change: <unk> Boston, what we can do with that over the next several years.
Speaker Change: That's great. Thanks for all the detail.
Speaker Change: Turning to gross margin again, I totally get what you're saying in the first thing I looked at it was to see whether your adjusted EBITDA would change and I see it.
Speaker Change: It's unchanged.
Speaker Change: So I get it.
Speaker Change: But help me understand you.
Speaker Change: You had said the $74 75 range before you made this adjustment.
Speaker Change: Flat you said it again Tonight.
Speaker Change: But it just strikes me.
Speaker Change: With all these new products launching youre gaining share.
Speaker Change: And I reflect on the Israeli closure I get the reasons, we're doing it wouldn't that be positive as you consolidate manufacturing and run more volume through Warsaw.
Speaker Change: So I guess my real question is help us think through some of the moving pieces on the <unk>.
Speaker Change: The Cogs line gross margin or whatever you want to say.
Speaker Change: And.
Speaker Change: Is there room for upside as we go through the year.
Speaker Change: European products are approved.
Speaker Change: It just seems like there should be.
There is room for upside as we head towards the end of the year and maybe start thinking about 26.
Speaker Change: Thank you.
Rick: Yes, Thanks, Rick.
Speaker Change: Great question and I will.
Speaker Change: I'd say, we are hesitant to get ahead of ourselves, but we do agree that there may be some opportunities that we're working on in that area.
Speaker Change: As we've talked in the past a little bit of selling price always helps in that area and so we'll continue that trend.
Speaker Change: There is some consolidation which could help.
Fred Hite: There is some consolidation, which could help show up as favorable gross margin. And then there's some other activities that we are, I think, refocused on this year that maybe we hadn't been as focused on in the past, that could definitely, over the next several years, have a favorable impact on the gross margin rate. So I think we're being conservative, keeping our guidance flat as it was before. But I would say we have a renewed focus in this area to make some improvements there.
Speaker Change: Show up as favorable gross margin.
Speaker Change: And then there's some other activities that we are I think refocused on.
Speaker Change: This year that maybe we haven't been as focused on in the past that could definitely over the next several years as a favorable impact on the gross margin rate. So I think we're being conservative keeping our guidance flat as it was before but I would say we have a renewed focus in this area to make some improvements.
Speaker Change: There.
Fred Hite: Sorry, Fred, you teased me. I got to ask other activities. Help me understand. Thank that we're we're reviewing all of the line items. We're reviewing all of the line items that go into our cost of goods sold and looking for opportunities to leverage that just like we're leveraging the the SG&A down below. Gotcha. Thank you. Thanks, Rick.
Speaker Change: Alright.
Speaker Change: You've got.
Speaker Change: Got to ask other activities helped me understand thank you.
Speaker Change: Yeah.
Speaker Change: We're reviewing all of the line items.
Speaker Change: We are reviewing all of the line items that go into our cost of goods sold and looking for opportunities to leverage that just like we're leveraging.
Speaker Change: The SG&A down below.
Speaker Change: Got you. Thank you.
Speaker Change: Thanks, Rick.
Speaker Change: Thank you.
Matthew O'brien: Our next question comes from the line of Matthew O'Brien with Piper Sandler. Please proceed. Good evening. Thanks for taking my questions.
Speaker Change: Our next question comes from the line of Matthew O'brien with Piper Sandler. Please proceed.
Matthew O'brian: Good evening, Thanks for taking my questions maybe to follow up on Rick's question on <unk>.
Matthew O'brien: Maybe to follow up on Rick's question on OPSB, did you guys, I think you mentioned doing better than 25 million in sales in 24 Did you do that? Are we still expecting north of 20% growth out of that business here in 25? And then just a little bit more specifics on things are going better than expected. Dave, is it really just going deeper in the existing facilities that you have? Or just that you're ramping the new ones faster than you expected? Or I don't know if it's cost or something else, but just any kind of, you know, detail there would be helpful.
Matthew O'brian: <unk> did you guys I think you had mentioned doing better than $25 million in sales in 'twenty four.
Speaker Change: You do that are we still expecting north of 20% growth out of that business here in 'twenty Fives, and then just a little more specifics on things are going better than expected. Dave is it really just going deeper in the existing facilities that you have or just that youre ramping the new ones faster than you expected.
Speaker Change: Ed or I don't know, if its cost or something else, but just any kind of.
David Bailey: And then I do have a follow Yeah, perfect. So I think it's safe to say that OPSB across the board, not just Boston, but OPSB across the board, MDO, DF2, the products associated with that, as well as the clinic expansion is growing rapidly. And yes, I think it will definitely be growing north of 20% in 2025. And so we see that growing north of 20% for a long time, frankly. So we got a long way to go as we scale that business. I think when we see things going better than expected, the volume of opportunities for clinic expansion is extremely high.
Speaker Change: Detail there would be helpful. And then I do have a follow up.
Speaker Change: Yes, perfect. So I think it's safe to say that <unk> be across the board not just Boston.
Speaker Change: But <unk> across the board mbo.
Speaker Change: <unk> to the products associated with that or a medical as well as the clinic expansion is.
Speaker Change: Growing rapidly and yes, I think it will definitely be growing north of 20% in 2025.
Speaker Change: And so we see that growing north of 20% for a long time frankly, so we've got a long way to go.
Speaker Change: As we scale that business I think when we see things going better than expected.
Speaker Change: The volume of opportunities for clinic expansion is extremely high it takes time.
David Bailey: It takes time. Some of those, as we said, are going to be acquihires where we've got to get a footprint in a big market that we have no clinics in currently. But the opportunities and profitable opportunities for us are very high. And surge in demand for that service, as well as the products, is very high. And so, again, we thought that was what we were going to see when we announced this acquisition a year ago. And at this stage, I would say the demand for what we are offering is higher than I would have expected at this time.
Speaker Change: Some of those as we said we're going to be Aqua hires where we've got to get a footprint in a big market.
Speaker Change: That we have no clinics and currently but the opportunities in profitable opportunities for us are very high and surging demand for that service as well as the products is very high and so again, we thought that was what we're going to see.
Speaker Change: When we announced this acquisition a year ago and at this stage I would say the demand for what we're offering is higher than I would've expected at this time.
Speaker Change: And then devices like <unk> too.
Speaker Change: Are going better than we expected I see the demand for that product is very high I mean, we are now seeking alternative manufacturing sources, we make it in our in our facility in Boston and we're going to have to continue to be able to scale the manufacturing of it there in Boston as well as probably there are other facilities.
Speaker Change: We have I want to say 30, plus countries now that the <unk> product is approved so the thesis that we can get these products approved outside of the United States much faster than our implant products and that there is huge demand outside of the United States is certainly.
Speaker Change: And accurate thesis and.
David Bailey: And so, you know, we've got to be able to scale manufacturing of those devices such that we can meet demand outside of the U.S. But I can just say that the surge in demand for that device here in the U.S., again, still small, but maybe greater than we would expect. And we have several more devices that I'm not saying are all home runs like that one, but several more devices on the R&D side that we're close to launching. We're working with a number of surgeons on, and I would think that you're going to see similar kinds of impact from those devices on the OPSB business overall.
Speaker Change: So.
Speaker Change: We've got to be able to scale manufacturing of those devices such that we can meet demand outside of the U S. But I can just say that the surge in demand for that device.
Speaker Change: Here in the U S again, still small, but maybe greater than we would expect and we have several more devices than I.
Speaker Change: I'm, not saying, they're all homeruns like that one but several more devices on the R&D side that we're close to launching our working with a number of surgeons on and I would think that youre going to see similar kinds of impact.
Speaker Change: From those devices on the <unk> business overall.
Speaker Change: Okay. Okay. That's a good problem to have on the manufacturing side.
Matthew O'brien: Okay, okay. That's I guess a good problem to have on the manufacturing side.
Fred Hite: And then question for Fred, just as I look at the instrument set deployment, that you've done over the last couple of years. I think it was 23 and then 20. And now we're down to 15. I know you have a more capital efficient model now with OPSB. But you know, the legacy trauma and spine businesses are doing really well. Are you going to run the risk of starving those businesses a little bit in the near term? And we're going to need another big bump as far as as far as set deployments go in 26-27? Or is this more of a steady state in terms of how much you really need to be deploying in order to grow the businesses still at a very healthy?
Ryan Zimmerman: And then a question for Fred just as I look at the instrument set deployments that you've done over the last couple of years I think it was 23, and then 20 and now we're down to 15 I know you have a more capital efficient model now with PSP, but.
Speaker Change: Legacy trauma and spine businesses are doing really well are you going to run the risk of starting those businesses a little bit.
Speaker Change: In the near term and we're going to need another big bump as far as far as set deployments go in 'twenty six 'twenty seven or is this more of a steady state in terms of how much you really need to be deploying in order to grow the business is still at a very healthy clip.
Speaker Change: Yes, Great question. It's a question we spent time analyzing ourselves.
Fred Hite: Yes, great question. It's a question we spend time analyzing ourselves. We think 15 is the right number for 2026. I think the good news is a lot, a higher percentage of that is really for new products, as opposed to legacy products. So we're really excited about that. And the impact that that's going to have on our overall business and growth in 27 and beyond. In 2027, what is the right number that we'll deploy hasn't been determined yet. We'll see what the demand is both for legacy systems as well as new products. Again, I would expect 26 and 27 to be highly concentrated on the new product launches, given all the launches coming up that we have in 25, 26, and 27.
Speaker Change: We think 15 is the right number for 2026 I think the good news is a lot a higher percentage of that is really for new products as opposed to legacy products. So we're really excited about that and the impact that that's going to have on our overall business and growth in 2007 and beyond.
Speaker Change: In 2027, what is the right number that will deploy hasnt been determined yet we'll see what the demand is both for legacy systems as well as new products.
Speaker Change: Again, I would expect 27, 26, and 27 to be highly concentrated on the new product launches given all of the launches coming up.
Speaker Change: That we have in 'twenty five 'twenty six 'twenty seven.
David Bailey: So I would say that we haven't made that determination yet. But we will be confident in saying that it's gonna be highly focused on our new products being launched. Yeah, I think it's safe to say we're not going to starve those businesses, particularly when we see products like PNP Tibia that have, you know, relatively high ASPs, fantastic margin. I mean, the business that product line, I think we told you, you know, we achieved this year's revenue in May. So both of that device is obviously growing. And we're going to support that. I just I think what we've seen over the course of the last several years, Matt, and you know, that our story well, but, you know, when we were deploying three to $5 million worth of inventory for several years as primarily legacy products, you know, we've probably entered near the end of the need to deploy a lot of those legacy products.
Speaker Change: <unk>.
Speaker Change: I would say that we haven't made that determination, yet, but we will be confident in saying that it's going to be highly focused on our new products being launched.
Speaker Change: I think it is safe to say, we're not going to start those businesses, particularly when we see products like <unk> that have relatively high asps fantastic margin.
Speaker Change: The business that product line I think we told you we.
Speaker Change: <unk> achieved this year's revenue in May so those devices, obviously growing and we're going to support that.
Speaker Change: What we've seen over the course of the last several years, Matt and you know our story well, but when we were deploying $3 million to $5 million worth of inventory for several years, primarily legacy products.
Speaker Change: We probably entered near the end of the need to deploy a lot of those legacy products and as Fred said.
David Bailey: And as Fred said, you know, these are primarily new product development. And the numbers will shift as we have really, you know, compelling new products like PNP Tibia and, and some of the other devices. But when you also think about the out years of our growth, particularly on the scoli side, certainly a new scoliosis system coming soon that we've talked about, but also EOS products and EOS products, as you know, very high ASP. They're all scheduled procedures. And so you know, we're fighting tooth and nail on the regulatory side. But when you get through that, these aren't set deployment needs that are massive for us to be able to grow our top line, particularly on the scoliosis side and with some of these highly differentiated trauma implants.
Speaker Change: These are primarily new product development and the numbers will shift as we have really compelling new products like BNP trivia in and some of the other devices, but when you also think about the out years of our growth, particularly on the <unk> side.
Speaker Change: Certainly a new scoliosis system coming soon that we've talked about but also pass products and Eos products as you know very high Asps.
Speaker Change: They're all scheduled procedures and so we're fighting tooth and nail on the regulatory side, but when you get through that these arent.
Speaker Change: Set deployment needs that are massive for us to be able to grow our topline, particularly on the scoliosis side and with some of these highly differentiated trauma implants, and I think thats, what youre seeing.
David Bailey: And I think that's what you're seeing with with the move down a little bit on the on the implant side of deployment. And again, as we as demand dictates for some of these more differentiated products, you know, that'll change from time to time. But I think I think we're going to be able to sweat our assets in a way that's going to allow us to not have to deploy as much in the future. Very helpful.
Speaker Change: With the move down a little bit on the on the implant side of deployment.
Speaker Change: And again as we.
Speaker Change: As demand dictates for some of these more differentiated products that.
Speaker Change: That will change from time to time, but I think I think we're going to be able to sweat our assets in a way that's going to allow us to not have to deploy as much in the future.
Speaker Change: Very helpful.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Unknown Executive: Our next question is from the line of Mike Matson with Needham and Company. Please proceed. Hey guys, it's Joseph on for Mike. Thanks for taking our questions. Maybe to start off, just wanted to see if we could get an update. I guess the first one on Playbook, the enabling technology software, just kind of curious, you know, how's that business is going? You know, any milestones there? And then the new Fusion implant system, is that still on track to launch in second half of this year? Yeah, good question.
Speaker Change: Our next question is from the line of Mike Matson with Needham and company. Please proceed.
Speaker Change: Hey, guys, it's Joseph on for Mike Thanks for taking our questions.
Speaker Change: Maybe to start off just wanted to see if we could get an update.
Speaker Change: I guess the first one on playbook.
Speaker Change: The enabling technology software just kind of curious.
Speaker Change: How is that business is going.
Speaker Change: Any milestones there and then the new fusion implant system is that still on track to launch.
Speaker Change: Second half of this year.
Speaker Change: Yes. Good question, so playbook was.
David Bailey: So Playbook was, I think, officially launched to the sales team at our sales meeting here about a month ago. And so the device, the product is, we're very pleased with the way the product looks. And certainly it's a process to get those products implemented inside, inside hospital systems. But I think we've made really nice progress on Playbook on the enabling tech side. And just from a revenue perspective, it's a business that we, you know, we haven't forecasted a ton of revenue in 2025. We see that as contributing to driving revenue in our trauma deformity business and in our scoliosis business, and then driving more substantial revenue as a standalone play in 2026, 2027, and beyond, but extremely pleased with where it's at.
Speaker Change: It got officially launched to the sales team our sales meeting here about a month ago and so the device. The product is we're very pleased with the way the product works and certainly it's a process to get those products implemented inside <unk>.
Speaker Change: Inside a hospital systems, but I think we've made really nice progress on playbook on the enabling tech side.
Speaker Change: And just from a revenue perspective, it's a business that we we havent forecasted.
Speaker Change: Don our revenue in 2025, we see that as contributing to driving revenue in our trauma and deformity business and in our scoliosis business and then driving more substantial revenue as a standalone play in 2026, 2027 and beyond but extremely pleased with with with where it's at and.
David Bailey: And it created a heck of a lot of buzz at our sales meeting, which was, which was very encouraging.
Speaker Change: Created a heck of a lot of buzz at our sales meeting, which was which was very encouraging.
Speaker Change: And on fusion fusion side, yes, the fusion product development.
David Bailey: and on Fusion. Oh, on Fusion. So yeah, Fusion is product development on track. And I think, you know, the goal would be to try to get some surgeries done by the end of 2025 here in the United States. But again, not something that we have placed in the 2025 forecast in terms of revenue. And so, you know, we're going to make certain that we get the device, the device right, and it's everything we want it to be. We, you know, the Fusion business, as it stands with response is growing very rapidly now. So we're not, you know, we don't have to rush things certainly to get that device on the market.
Speaker Change: On track.
Speaker Change: And I think the goal would be to try to get some surgeries done by the end of 2025.
Speaker Change: Here in the United States, but again not something that we have placed in the 2025 forecast in terms of revenue.
Speaker Change: And so we're going to make.
Speaker Change: <unk> that we get the device.
Speaker Change: Device right and it's everything we want it to be weak fusion business as it stands with response is growing very rapidly now. So we're not we don't have to rush things certainly to get that device on the market.
Okay, Great and then maybe just one more.
Unknown Executive: Okay, great.
Unknown Executive: And then maybe some more on 7D. It seems like, you know, 3Q and this quarter, 4Q were pretty strong. It seems like that's ramping up. I guess just looking at 2025, do you guys kind of see this as more of an inflection for 7D placements? Or is it maybe just a little longer, maybe 2026, that it's more meaningful driver? Well, I think 7D is a driver right now, was a driver for us in the second half of the year. So you're seeing a response fusion business and just our scoliosis business, particularly in the United States, accelerating growth on a much larger business.
Speaker Change: 70.
Speaker Change: It seems like.
Speaker Change: <unk> in this quarter in <unk>.
Speaker Change: Pretty strong it seems like that's ramping up.
Speaker Change: I guess just looking into 2025 do you guys kind of see this as more of an inflection for for 70 placements.
Speaker Change: Or is it maybe just a little longer maybe 2026 that it's a more meaningful driver.
Speaker Change: Well I think 70 is a driver right now as a driver for us in the second half of the year. So you are seeing.
Speaker Change: Our response fusion business and just our scoliosis business, particularly in the United States.
Speaker Change: Accelerating growth on a much larger business.
David Bailey: And, and again, it's one of the reasons why, while we want to get the new system out, we're driving a heck of a lot of growth with our existing system in conjunction with, with 7D. So I think we're already starting to see the impact of that as we've placed 7D units in accounts that historically haven't been large users of our fusion products. And so that's impacting Q3, Q4 revenue. And, and, in fact, will have a pretty substantial impact. And I think why you see us so confident in our growth on the scoliosis side in 2025 and 2026, because a lot of that is connected to 7D placement.
Speaker Change: And again, it's one of the reasons why while we want to get the new system al We're driving a heck of a lot of growth with our existing system in conjunction with the.
Speaker Change: With 70, so I think we're already starting to see the impact of that as we've placed 70 units in accounts that historically haven't been large users of our fusion products.
Speaker Change: And so thats impacting Q3 Q4 revenue and in fact, we will have a pretty substantial impact and I think why you see us so confident in our growth on the scoliosis side in 2025 and 2026, because a lot of that is connected to 70 placements I think we've learned a lot about just capital placement and.
David Bailey: I think we've learned a lot about just capital placement in general. As you know, you know, just a few years ago, we had no experience in this space. And so our capacity to, to build a funnel, and to see these things come through the funnel in a more consistent way, quarter to quarter to quarter, I think has, that's a muscle that we have built. And I guess I have to credit the enabling technologies team that while we're also working on playbook and technologies like that, it's been a huge help to us to be able to, you know, develop the muscle to get involved in capital placement and capital equipment sales.
Speaker Change: <unk> as you know just a few years ago, we had no experience in this space.
Speaker Change: And so our capacity to build a funnel and to see these things come through the funnel and a more consistent way quarter to quarter to quarter. I think has that's a muscle that we have built and I guess I have to credit the enabling technologies team that while we're also working on playbook and technologies like that it's been a huge help.
Speaker Change: To us to be able to.
Speaker Change: Develop the muscle to get involved in capital placement in capital equipment sales and so I think youre going to see in 2025, consistent placements quarter to quarter to quarter of of 70 units that will impact our revenue on the scoliosis side, both in 2025 and for the term of those contracts, which are normally three years.
David Bailey: And so I think you're going to see in 2025, consistent placements quarter to quarter to quarter of 7D units that will impact revenue on the scoliosis side, both in 2025 and for the terminals contracts, which are normally three years. So it becomes a bit of a compounding effect as we place more and more of these units.
Speaker Change: So it becomes a bit of a car.
Speaker Change: Compounding effect as we place more and more of these units.
Speaker Change: Okay.
Unknown Executive: Okay, perfect. Much appreciated. Congrats on the great quarter. Thanks. Thank you.
Speaker Change: Okay perfect much appreciate it congrats on the great quarter.
Speaker Change: Hey, thanks. Thanks.
Speaker Change: Thank you.
Ryan Zimmerman: And we have a question from Ryan Zimmerman from a BTIG. Please proceed. Just a high-level question follow-up for me, Dave, for you. There's been a lot of chatter about Medicaid coverage. Unknown Again Daily and Remotely Coronavirus Treatment Center, Think about Chips and Medicaid! U.S. And so, you know, I don't know. What your thought is on it, if you have a thought. I have to imagine your customers are thinking about it, how they're thinking about positioning for it, and how you think about it in terms of... Yeah, well, certainly not a topic that anyone can give you a definitive answer on, as you know, but, you know, it's obviously something we're watching.
Speaker Change: And we have a question from Ryan Zimmerman from <unk>. Please proceed.
Speaker Change: Just to.
Dave: High level question follow up for me Dave for you.
Speaker Change: There's just been a lot of chatter about Medicaid coverage in the news lately.
Speaker Change: And potentially removing that I think as I.
Speaker Change: Thinking about chips in Medicaid I think it'd cover something like 37 million kids.
Speaker Change: In the U S and so.
Speaker Change: I don't know.
Speaker Change: What your thought is on it if you have a thought.
Speaker Change: But I have to imagine your customers are thinking about it how they're thinking about positioning for it and and how you're thinking about it in terms of Patel.
Speaker Change: Potentially impacting the business I just wanted to kind of.
Speaker Change: Pick your brain on it a little bit if I could.
Speaker Change: Yeah well.
Speaker Change: Certainly not a topic that anyone can give you a definitive answer on as you know but.
Speaker Change: It's obviously something we're watching.
David Bailey: You know, I, I'm not sure exactly how that, how that, how that impacts the business as we go forward. But obviously, we're not certain that it is going to impact it at all.
Speaker Change: Yes.
Speaker Change: I'm not sure exactly how that how that how that impacts the business as we go forward. Obviously, we're not certain that it is going to impact that at all that said.
David Bailey: That said, I think our feeling here is that we really struggle with the concept that, that children will be left without any form of health care. And if you look at the makeup of our customer base, so much of our customers are current. So many of our customers are currently in systems where, you know, they're, they're endowed hospitals or their hospitals, like the Shriners hospitals, for example, that certainly take what Medicaid, or private insurance might pay, but are still offering care based on, based on their, based on their endowments. So I think there is some shielding that we would have of that.
Speaker Change: I think our feeling here is that we really struggle with the concept that the children will be left without any form of health care and if you look at the makeup of our customer base. So much of our customers. Our current so many of our customers are currently in systems, where.
Speaker Change: There are they are in doubt hospitals or their hospitals like the shriners hospitals for example, but.
Speaker Change: Certainly take what Medicaid or private insurance might pay but are still offering care based on based on their based on their endowment. So I think there are some shielding that we would have of that and I think when push comes to show that seems very difficult that we are going to.
David Bailey: And I think when push comes to shove, it seems very difficult that we are going to, you know, allow kids in this country who have cerebral palsy or congenital deformities to not have appropriate access to, to the kinds of devices that they need in the hospital to live a normal life. And I think, you know, all of our devices. have a very, very rational impact on the total cost of care, right? And so if we can impact positively these patients in the operating room that then ultimately lowers their care to Medicaid thereafter, again, it's hard to imagine that, that those devices wouldn't be readily available to our customers.
Speaker Change: Allow kids in this country have cerebral palsy or congenital deformities to not have appropriate access to to the kinds of devices that they need in the hospital to live a normal life and I think.
Speaker Change: All of our devices.
Speaker Change: A very very rational.
Speaker Change: Impact on the total cost of care right and so.
Speaker Change: If we can impact positively these patients in the operating room that then ultimately lowers their care to Medicaid thereafter.
Speaker Change: Again, it's hard to imagine that.
Speaker Change: That those devices wouldn't be readily available to our customers, but again, it's anybody's guess at this stage and we have not.
David Bailey: But again, it's anybody's guess at this stage. And we have not, we can't formulate exactly, you know, what potential impact here. But I think it's I guess we aren't betting that this is a major impact on our business on a go-forward basis.
Speaker Change: We can't formulate exactly.
Speaker Change: What potential impact here, but I think it's.
Speaker Change: I guess, we aren't betting that this is a major impact on our business on a go forward basis.
Speaker Change: Yes no.
Unknown Executive: makes sense and I appreciate Thank you, and this concludes our Q&A session for today.
Speaker Change: Makes sense and I appreciate your thoughts on that.
Speaker Change: Thank you and this concludes our Q&A session for today I will turn it back to Dave Amy for final comments.
David Bailey: I will turn it back to Dave Bailey for final comments. Great thanks operator and thank you everybody who joined our call this evening and appreciate your questions and we'll look forward to giving you a business update in the coming quarter.
Speaker Change: Great. Thanks, operator, and thank you everybody who joined our call this evening and.
Speaker Change: Appreciate your questions and we'll look forward to giving you a business update in the coming quarter.
Unknown Executive: Have a great evening and thank you all for participating and you may now disconnect.
Speaker Change: Great evening.
Speaker Change: Thank you all for participating and you may now disconnect.
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