Q1 2025 OrthoPediatrics Corp Earnings Call

May 7, 2025

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Speaker Change: Good day, and thank you for standing by. Welcome to the Orthopediatrics Corporation first quarter 2025 earnings conference call. At this time, all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.

Speaker Change: To ask a question during this session, you'll need to press start 1-1 on your telephone You will then hear automated message advising your hand as a raise To withdraw your question, please press start 1-1 again

Speaker Change: Please be advised that today's conference is being recorded. I'll nod to hand the conference over to your first speaker today, Trip Taylor, Investor of Nations, please go ahead.

Speaker Change: Thank you for joining today's call, with me from the company, David Bailey, President and Chief Executive Officer, and Fred Hite, Chief Operating and Financial Officer.

Speaker Change: 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 Security's litigation reform act of 1995.

Speaker Change: These forward-looking statements are subject to numerous risks and uncertainties, and the company's actual results may differ materially [inaudible]

Speaker Change: For a discussion of risk factors, I encourage you to review the company's upcoming quarterly report on Form 10Q, which will be filed with the SEC on May 8, 2025.

Speaker Change: During the call today, management will also discuss certain non-GAAP financial measures, which are supplemental measures of performance

Speaker Change: The company believes these measures provide useful information for investors in evaluating its operations period over period [inaudible]

Speaker Change: For each non-GAAP financial measure referenced on this call, the company has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in its earnings release.

Speaker Change: Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for orthopediatrics financial results prepared in accordance with Gap.

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 May 7th, 2025.

Speaker Change: Except is 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 [inaudible]

Speaker Change: With that, I would like to turn the call over to David Bailey, President and Chief Executive Officer.

Speaker Change: Thanks, Trip. Good afternoon, everyone, and thank you for joining us on our first quarter 2025 conference call. As always, I want to begin by highlighting the metric that best represents our ongoing success, and the one we're most proud of.

Speaker Change: In the first quarter alone, we supported the treatment of nearly 39,000 children, bringing our total impacts to over 1.175 million kids helped since our inception.

Speaker Change: For too long, pediatric health care providers have had to rely on inadequate solutions and we remain steadfast in our mission to change that for the better.

Our ability to execute on our commitments.

Our Consistent Track Record of Fales Growth for Share Taking

Speaker Change: as well as deliberate step-function improvements in adjusted EBITDA and cash usage are just a few small aspects of what continues to set us apart and enable us to maintain our position as the clear cut market leader in pediatric orthopedic. [inaudible]

Speaker Change: These capabilities were on full display throughout another strong first quarter, underscored by solid performances in revenue growth, improved profitability, and reduced cash usage. Our success in 2025 and beyond will be driven by three main factors.

Speaker Change: Executing and scaling of OPSB, share-taking across the surgical business by leveraging prior set deployment and ongoing success of our innovative product launches. Our global revenue growth of 17% is a result of executing in each of these areas.

Speaker Change: Our efforts to scale OPSB are advancing steadily. Execution of the OPSB strategy and further clinic expansion is on track and driving total OPSB growth of better than 20%.

Speaker Change: Organic Market Chair and the Sturgical Segment by strategically leveraging previously deployed set

Speaker Change: It is particularly gratifying to see growing utilization from previous set deployment, along with continued search and adoption of key product launches such as PMP FEMA, PMP Tibia, Canulated Scrooze, and D.F. II.

Speaker Change: During the first quarter of 2025, we were very excited to receive final FDA approval for the vertigoide system, sterile PNP femur, sterile PNP tibia, as well as orthx titanium

Speaker Change: In late April , we received a much anticipated approval for the 3P Pediatric Plating Platform Tip System.

Speaker Change: This brings our total FDA approvals for the year to five and includes two major systems.

Speaker Change: Additionally, surgeon adoption of our response fusion system continues to grow, which is being positively impacted by past 70 placements and would be bolstered by additional unit deployments that happen in the first quarter.

Speaker Change: and we will continue to benefit from 70 placements throughout the year. All in all, we are very pleased with the way things are progressing on the revenue front, and remain bullish about the year. [inaudible]

Speaker Change: Beyond revenue, we improved profitability and reduced cash usage. Our adjusted EBITDA loss was reduced by more than half year over year, while we improved free cash flow by 36% [inaudible]

Speaker Change: We remain on track to meet our adjusted EBITDA goals which will fully pay for our 2025 set deployments and lead to positive free cash flow in the fourth quarter of this year and full year free cash flow

Speaker Change: Additionally, we expect cash usage will improve materially in the second half of 2025, which will result in very little cash usage in H2.

Speaker Change: While we continue to prioritize growth, the efforts we have been making to improve profitability and free cashflow are clearly working

Speaker Change: Proving we are quickly becoming a high growth med tech asset that will be solidly profitable and generating cash from operations This is a difficult transition for early stage companies to navigate and I am proud of the work our entire team is doing to make it happen I am proud of the work our entire team is doing to make it happen

Speaker Change: Regarding tariffs and the broader macro-economic environment, Orthopediatrics has minimal exposure to tariff-related impacts. We estimate that approximately 95% of our cost of goods sold come from domestic suppliers and our Canadian entity, which is currently exempt from tariff.

Speaker Change: Even under the worst case scenarios, contemplated in recent months, any potential impact would be minimal and would be absorbed within our current guidance.

Speaker Change: Additionally, reciprocal tariffs, real or potential are unlikely to material impact revenue, especially given that we do not sell any products in China.

Speaker Change: Also, it is very important to reiterate that most of our procedures, our customers perform, are non-elected and are often carry out in hospitals supported by substantial endowment, which have historically helped shield us from the effects of economic downturns. [inaudible]

Speaker Change: Over 20% of our global revenue is trauma-related, which is clearly non-elected, with a US-based manufacturing and supply chain backbone, and the largely non-elective nature of our procedures, we are positioned to sustain our growth and profitability trajectories, regardless of broader economic condition.

Speaker Change: With that said, we expect our business to gain momentum throughout 2025 based on our success scaling OPSB, driving market share gains through leveraging existing set deployments, and the ongoing success of our innovative product launches.

Speaker Change: As such, we are increasing our full year revenue guidance. We now expect to generate revenue of $236 to $242 million, representing annual growth of 15 to 18%

Speaker Change: We still expect to generate adjusted EBITDA of $15 to $17 million, which will be greater than the $15 million of sets we plan to deploy in 2025. We also continue to expect our first quarter of positive recast flow in the fourth quarter of 2025.

Speaker Change: In the first quarter of 2025, the Attendee business grew 14% as we continued to deliver strong market share gains across multiple product lines, bolstered by strong growth of OPSB.

Speaker Change: Growth in the quarter was extremely strong in the U.S., and I'll set by softness in Latin and lower O.U.S. set

Speaker Change: The quarters performance was driven by prior investments in set allocation, surge in education, a new product adoption, resulting in strong share gains for T&D across the breadth of products.

In 2023 and in 2024, we have sizable set deployments.

Speaker Change: As a result, the usage of prior set deployments is increasing and contributing to growth in meaningful ways.

Speaker Change: In the quarter, we saw very strong revenue growth of trauma products, led by rapid adoption of PMP Tibia, Incanoated Scroovers, and DF-2.

Speaker Change: Additionally, we launched several sets of PMP Tibia, with more expected to launch in the second quarter, as PMP Tibia will continue to be a solid growth driver for the next several quarters, if not several years.

Speaker Change: Once again, DF-2 continues to exceed our expectation as demand accelerates and we are seeing rapid surge in adoption. This product is differentiated within the pediatric femur fracture management.

Speaker Change: is benefitting from expanded indications for use and is quickly becoming the new gold standard of care.

Speaker Change: As of today, we have achieved approval for this product in 33 countries internationally within just a few months and we're just starting to sell in many of these countries. So we are very early in this successful launch. [inaudible]

Speaker Change: Further, we are pleased to report that we have mended the short-term supply issues and are now working on several longer-term solutions.

Speaker Change: On the R&D front, as you may have seen in our recent press release, we are proud to announce that we have received FDA approval for our 3P pediatric plating platform HIP system.

Speaker Change: With this approval, the 2025 beta launch of the first 3P system, 3P HIP, will begin in earnest this summer and we look forward to providing more updates as that product is launched and rolled out.

Speaker Change: As a reminder, 3P HIP is the first of several systems in a long line of coming product launches from the new 3P family and will result in a complete transformation of our Platon screw product portfolio, giving us the most robust and modern plating portfolio in pediatric orthopedic history.

Speaker Change: Additionally, we are continuing the process of EUMDR compliance and expect to launch new products into Europe starting in the second half of 2025, followed by more next year.

Speaker Change: Overall, TND remains a strong contributor to our performance as we capitalize on our scale, expand market share, and introduce innovative products that address unmet needs and support sustained growth across all areas.

Our path to market share dominance within TND is clear.

Speaker Change: On our non-surgical specialty bracing business, or OPSB, the further we progress our strategy and the more the pieces of business come together, the more encouraged we are by the opportunity and support we are seeing for this franchise . . . . . . . .

Speaker Change: OPSB represents a large new source of capital-friendly growth that we plan to capitalize on through territory expansion, R&D acceleration, and scaling our sales channel and sales force.

Speaker Change: Most notably on the territory expansion side, we have hit our initial guidance for 2025. We have now entered North Carolina, our fourth territory in 2025.

Speaker Change: As we previously discussed, not every territory or clinic will be equivalent, and their size, ramps, and impacts will vary [inaudible]

Speaker Change: So while we are pleased with the pace with which we have been able to achieve this territory expansion, the North Carolina clinic is currently a smaller but strategically important opportunity and we want to take that into account when we look at our overall goals for 2025.

Speaker Change: With that being said, we believe there is potential to add additional territories in the second half of 2025.

Speaker Change: The opportunities for clinic expansion are immense. The demand for our customers is high and our funnel for clinic expansion is very large.

Speaker Change: Notably, we are in very early discussions on multiple opportunities for OPSB internationally.

Speaker Change: When we first looked into OPSB territories, our initial focus was on the US from getting the ball rolling here.

Speaker Change: The early expansion clinics in the US are progressing well, and we are creating a repeatable playboat that serves as a strong growth driver with considerable long-term potential. And we are looking at various ways to bring OPSB to international markets.

Speaker Change: Importantly, the international markets are not included in our $500 million tan. So these clinics would offer an opportunity for tan expansion. We're pleased with our progress toward the launch of four new territories and anticipating sharing further updates of the year unfold.

Speaker Change: On the OPSB R&D side, in the first quarter, we launched two distributed product lines, including Thrive, Carbon Fiber Braces, and Unfo, Metatarsis Abductis Brace.

Speaker Change: through OPSB. These product lines complement our existing OPSB portfolio and expand options available within the OPSB clinic.

Moving to the Scoliosis business.

Speaker Change: Our strong growth of 34% seen in Scoliosis Discord was driven by more share-taking both in the US and US markets with increasing demand for new markets in the EU.

Speaker Change: US scoliosis growth was very strong due to 70 placements and new users adopting orthopediatrics technology, including apophics, response, as well as our commitment to new solutions for EOS patient.

Speaker Change: We saw healthy 70 unit placements in the first quarter and anticipate more to come throughout 2025.

Speaker Change: OPSB 3D Patient Specific Scoliosis Braces also contributed to the strong growth [inaudible]

Speaker Change: International scoliosis was strong due to solid revenue in our direct markets, including Canada and Australia, where we are seeing new users come on board. We are very happy with the progress made in 2024 and it continues through the first quarter.

Speaker Change: The coming EUMDR approvals will further positively impact our EU spine franchise [inaudible]

Speaker Change: As we've discussed since our analyst day last year, our scoliosis portfolio is rapidly evolving to meet all the needs of our customers. Recently, our EOS product portfolio took a masses that forward, with the FDA approval of vertiglyde in the first quarter.

Speaker Change: We expect the first cases to be completed in the coming weeks, and we are already seeing requests from customers at large US accounts where we historically have had little scoliosis revenue.

Speaker Change: Ellie, our mechanical growing spine implant product development, continues to move forward and we are having frequent positive interactions with the FDA. At this point, our goal is to make an Ellie regulatory submission in late 2025 or early 2026.

Speaker Change: With response, ribbon pelvic launched, vertigoide, FDA approved, and early progressing, we have a clear line of sight to having far and away the most robust set of the OS solutions available for our customers to treat this very complex patient population.

Speaker Change: And that fact alone is driving more adoption of our total scoliosis offerings.

Speaker Change: Moving on to International, while we saw double-digit growth internationally, our strength was again offset by pressure from Latam and lower set sails.

Speaker Change: General International Replenishment Demand across the entire TND and Scoliosis portfolio was strong, especially in our agency markets where during the quarter we saw strong procedure growth.

Speaker Change: In fact, TND replenishment growth was nearly 20% and scully grew greater than 20% highlighting extremely strong underlying demand.

Speaker Change: We are also seeing very strong adoption trends in Canada and Australia.

Speaker Change: Higher International Growth was impacted by Brazil and our conscious decision to limit new set sales to South America in an effort to focus on improved cash metrics.

Speaker Change: We will continue to focus on profitable growth, improved profitability, and improving free cash low coming out of our international business as we deliver our overall performance.

Speaker Change: Within our international business, the EMDR approval remains a large catalyst for our future growth, and we are well positioned for approval.

Speaker Change: Once our EMDR status is finalized, we plan to launch several waves of products into the EU. As a reminder, EMDR approval for implants is an expensive process. We believe it is the right thing to do for kids who need these devices outside of the US and it strengthens our strategic position. [inaudible]

Speaker Change: Apart from the EUMDR, we have additional international opportunities ahead. Again, we are exploring expansion opportunities for OPSB outside the US in 2025, where we view the regulatory and administrative processes to be very straightforward.

Speaker Change: In tandem, we are looking to further expand DF2 and expect surgeries for vertigo light to occur outside of the US in 2025.

That brings us to Surgeon Training and Education.

Speaker Change: In the first quarter we hosted 172 unique training experiences for over 2,245 healthcare professionals.

Speaker Change: Recently, we attended the annual meeting for E-Post, the European Pediatric Orthopedic Society held in France Or though Pediatrics was well represented and we were excited that through our significant presence we were able to highlight our products and interact with many surgeons and customers and we were excited that through our significant presence we were able to highlight our products and interact with many

Speaker Change: Looking forward, we're excited for the upcoming pediatric orthopedic society of North America or positive meeting on May 13th through 17th and Las Vegas. This is a key industry event for OP and we will again have a huge presence with multiple sessions, events and new products on display.

Speaker Change: In mid March, we announced our partnership with the Crossroads Pediatric Device Consortium, a multi-institutional initiative focused on accelerating the development, approval, and availability of medical devices designed specifically for pediatric patients.

Speaker Change: Lastly, we are happy to announce that once again Orthopediatrics was named as one of the best places to work in Indiana for 2025, marking the ninth time we have been included on this list.

Speaker Change: We've been able to help as many children as we have as a direct result of the hard work and dedication of our employees, and we are incredibly proud of their work and how they continue to support our mission.

Thanks Dave.

Fred Hite: Taking a closer look at the PNL, our first quarter of 2025 worldwide revenue of $52.4 million increased 17% compared to the first quarter of 2024.

Fred Hite: Growth in the Quarter was driven primarily by strong performance across trauma and deformity, scoliosis, and OPSB.

Flightly Offset by Lower Growth in the International Business

Fred Hite: US revenue was $40.9 million, a 19% increase from the first quarter of 2024, representing 78% of our total revenue.

Fred Hite: Growth in the quarter was primarily driven by our organic growth in trauma and deformity, scoliosis, and OPSB.

Fred Hite: We generated total international revenue of $11.5 million, representing growth of 11% compared to the first quarter of 2024, and 22% of total revenue.

Fred Hite: Growth in the Quarter was primarily led by increased procedure volumes.

Strong Scoliosis Growth and Reduced Trauma in the Formity Set Sailed.

Parsley Offset by Lower OUS Set Sales

Fred Hite: In the first quarter of 2025, Scoliosis Global Revenue of $13.7 million increased 34% compared to the prior period.

Growth was primarily driven by increased sales of response response.

Happy Fixed Non-Busian System

Fred Hite: Revenue generated from 70 technology as well as increased 3D patient-specific scoliosis braces.

Fred Hite: Finally, sports med other revenue in the first quarter of 2025 was $0.9 million, compared to $1.2 million in the prior year period.

Fred Hite: Turning to set deployment, $3.6 million of sets were consigned in the first quarter of 2025 compared to $4.3 million in the first quarter of 2024.

Touching briefly on a few key metrics.

Fred Hite: For the first quarter of 2025, gross profit margin was 73%, compared to 72% for the first quarter of 2024.

Fred Hite: Total operating expenses increased $7.3 million or 18% compared to the prior year period to $49.2 million in the first quarter of 2025.

Fred Hite: The increase was primarily driven by incremental personnel required to support the ongoing growth of the company, including increased non cash stock compensation. .

as well as the addition of OPSB clinics.

Fred Hite: Sales and marketing expenses increased $2.4 million, or 17% compared to the prior year period to $16.6 million in the first quarter of 2025.

Fred Hite: The increase was mainly driven by increased sales commission expense and an overall increase in volume of units sold.

Fred Hite: General and administrative expenses increased $5.5 million or 22% year over year to $30.3 million in the first quarter of 2025.

Fred Hite: The first quarter increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business, increased non-cash stock compensation, as well as the addition of OPSB clinics.

Fred Hite: Research in development expenses decreased $0.6 million in the first quarter of 2025 to the timing of product development third-party invoice during the first quarter of 2025.

Fred Hite: Adjusted EBITDA was a loss of $0.4 million in the first quarter of 2025 over 50% improvement when compared to a loss of $1.1 million for the first quarter of 2024.

Fred Hite: In the first quarter of 2025, free cash flow usage was $8.4 million, representing a significant reduction of 36% when compared to the same period in the prior year.

Fred Hite: We expect additional cash usage in the second quarter as we continue to deploy sets to support the overall growth of the business.

Fred Hite: followed by reduced cash usage in the second half of 2025 and we expect positive free cash flow in the fourth quarter of 2025.

Fred Hite: We ended the first quarter with $60.8 million in cash, short-term investments, and restricted cash, and we still have $25 million available to us on our new term loan.

Turning to Guidance [inaudible]

Fred Hite: We are increasing our expectation for the full year of 2025 revenue to 236 to $242 million, representing year-over-year growth of 15% to 18%.

Fred Hite: We are reiterating the guidance that our four-year gross margin will be within the range of 72 to 73 percent.

Fred Hite: We also continue to expect to generate between $15 to $17 million of adjusted EBITDA in 2025.

Fred Hite: 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 break even by 2026.

Fred Hite: and we anticipate delivering our first quarter a free cash flow positivity in the fourth quarter of 2025.

Fred Hite: Notably, our current guidance absorbs the impact of tariffs and other government changes as they stay in today. We will continue to monitor the dynamics, but at this point we expect potential impacts to be minimal.

Dave: I'm now turn to call over to Dave for closing remarks.

Dave: Thanks, Fred. We are encouraged by how we've carried our business momentum into 2025. Our success this year will be driven by our execution and scaling of OPSB, taking share by leveraging prior set deployments and the ongoing success of our innovative product launches.

Dave: We are completely committed to helping more children than ever, aggressively growing our top line, making step function improvements to our adjusted EBITDA and materially improving our cash usage in 2025 and beyond.

Dave: I hope you can tell from my tone how encouraged we are by our improving profitability in cash flow.

Dave: We are on a mission to help one million kids every year, and we believe that building a very profitable and cash-generative business is vital to getting us there.

Dave: It is well documented that pediatric health care is underserved, largely due to underfunding from industry.

Dave: which is resulted in a requirement for government support. It has been our long-held belief that creating a successful, profitable business that self-funds the future of pediatric technology development is the answer.

Dave: OP is clearly on that track. In closing, I'd like to thank my associates, our partners and pediatric health care and you as investors for standing with us in this important course. Operator, let's open the call for Q and A.

Dave: Thank you. At this time, we'll conduct the question answer session. As a reminder to ask the question, you'll need to press start one one or your telephone and wait for your name to be announced.

To withdraw your question, please press star 1 again.

Dave: Please continue yourself to one question in the follow-up. Please stand by when we compile the Q&A roster.

Speaker Change: Now, first question, because some line of Matthew Bryan from Pupper's Handler, your line is now open.

Matthew O'brien: Thanks for taking the questions. Maybe just to be off on this fine business here. I mean, another phenomenal good quarter.

Speaker Change: and what's typically a seasonally software quarter for that business, so Dave or Fred, can you just talk a little bit about...

Speaker Change: What's going on there? How does Vertiglyde really contribute going forward plus all the other US products you have come in and then, you know, just maybe the OPE

Matthew O'brien: OPSB, Business, and how that's contributing to that franchise, because I think about things that I think you're probably, I don't know, like, you know, couple percent market share, maybe three, four percent market share, I guess kind of where can that go, just given all the momentum there. [inaudible]

Yeah, thanks, man.

Matthew O'brien: You know, I guess I would point you back to commentary we made really throughout the second half of last year where we had very substantial adoption rates. I said a higher adoption rate than we've ever had in terms of scoliosis fusion surgeons coming on board. We opened up some pretty substantial new accounts. Now, let's take a closer look at some of the new accounts that we've had in the last half of the second half of last year.

Matthew O'brien: and some of that was driven by apapyx, some of that was driven by the notion that we are moving forward down this EOS path that I think is really important to our customers.

Matthew O'brien: And then a lot of it was 7D placements that really opened up some new big accounts for us that were using our trauma and deformity products, but hadn't converted yet to scoliosis. And I think what you're seeing here in the first quarter on all of that is really just.

Matthew O'brien: Having those surgeons and those accounts on board, even before we get to our seasonally high months of June , July and August feels really good as we move into the summer.

Matthew O'brien: And I think with your quote with the question related to OPSB, you know, certainly more people using our speciality bracing products is contributing there. I think the synergies that we are seeing very early on as you point out, but the synergies we're seeing between our customers who have again an aspiration to avoid surgery, kind of at all costs if they can for these kids. [inaudible]

Matthew O'brien: The synergies we're seeing with our commitment to helping them do that.

Matthew O'brien: as well as adding products in EOS as well as Fusion products.

Matthew O'brien: I think that's leading to a search and adoption. I mean, we're putting our money where our mouth is in terms of treating the entire continuum of care of scoliosis. And I think we're the only company in the world that's doing that.

Matthew O'brien: God, it makes total sense. And then, you know, I don't want to make a mountain out of a mulleler, but, you know, the low end of the range on the top line came up by about a million bucks by my model, you beat by about a million six.

Matthew O'brien: So I guess the midpoint wouldn't like to go up by you know that million six obviously given the range so anything to call out there. [inaudible]

Matthew O'brien: that you're a little bit more cautious about, you know, I guess through the first four months of the year, versus just traditional, you know, conservativeism that you guys typically chart finger with. Thank you.

Matthew O'brien: No, I don't think so. I think, you know, we haven't got into the summer. We're always nervous. We, you know, we, those are big months in June , July and August and until we start seeing that, you know, we tend not to be too aggressive there. And so I would say that's

Kind of generally with you to that principal.

Matthew O'brien: I do think, you know, you obviously saw us once again managing the international business a little differently differently.

Matthew O'brien: We're not going to continue, you know, to get out over our skis there. I think we have an opportunity for you know better collect cash collection particularly in Latin America. Thank you.

Matthew O'brien: and so we continue to be judicious, I think, about how aggressively we are in some of those markets where we could have orders, but we may push those orders to help improve cash flow.

Matthew O'brien: And so I guess those are two areas but nothing I think that we would have we'd call out any different than in prior years

Got it. Thanks so much.

You bet.

Thank you, one moment for our next question.

Speaker Change: Our next question comes online of Ryan Zimmerman of BTIG, your line is not open.

Hey, Dave Fred, thanks for taking our questions and

Speaker Change: The impact that has on adoption of your scoliosis products, if you're seeing you know greater uptake specifically within the scoliosis business in those accounts and you know can we kind of look at those as

Speaker Change: leading indicators, I guess, of kind of greater scoliosis growth because they have that 70 or enabling technology in the account.

Yeah, I mean...

Speaker Change: Certainly in places, Ryan, where we didn't have any business, obviously we're seeing a lot of uptick and I think what we saw

Speaker Change: particularly in Lake Q3 and throughout Q4, where some of those placements were in locations where we had nearly zero pedical screw sales.

Speaker Change: and we had a lot of trauma and limb deformity sales, and so the 70 units. [inaudible]

Speaker Change: essentially everything that we're getting in terms of response fusion sales there is all growth to the top line.

There are other locations where we have pretty substantial share here.

Speaker Change: and we may not be getting as much uplift in those accounts.

Speaker Change: But you can imagine the sales force is pretty aggressively targeting locations where we need to break through in terms of you know getting getting some movement on on response fusion and I think that's what you're seeing in the growth numbers is that largely adoption by surgeons who have been exposed to our response system. [inaudible]

for the 7D Deployments. [inaudible]

Speaker Change: from navigation. And, you know, as we've called down the analyst day, we're working on an entirely new fusion system. And so I think...

Speaker Change: The future is pretty bright when you see that the growth of our fusion business with a system that's been out there for a while is as robust as it is and then the technology that we have coming behind that here over the next let's say six quarters. Let's say six quarters.

Speaker Change: Pretty substantial, so I think we like the tailwinds that we have within that business.

Speaker Change: and in-day to follow up on Scully for a minute. I mean...

Speaker Change: Your portfolio is now very, you know, wide. You have this breath between response and ethics and vertiglides. I'm curious, you know, where you see

Speaker Change: How do you think about any gaps that maybe you had before? How we as investors should think about, you know, the scoliosis, breast?

Speaker Change: And also like the interplay between devices. I mean, if you didn't have vertic light, I don't think someone's using response, but is there any kind of. [inaudible]

Speaker Change: You know, swapping out or things that we need to think about as you brought in that that breath of the portfolio I guess I'm just trying to understand kind of the totality of the scoliosis portfolio of the portfolio.

Speaker Change: Yeah, great question. I think what investors really need to understand about our scoliosis businesses that it's very different than an adult spine business and that we essentially treat one indication, right? It's it's purely scoli. We're not doing a lot. You know, we don't do a lot of inner body work. We're not we're not treating a number of the indications that are seen in adults.

Speaker Change: And why that benefits us, obviously it's a smaller tan, but why that benefits us is that we have this intense focus on all of these solutions that accommodate the complexity associated with scoliosis.

Speaker Change: and so I think that the vertigoide, the ribbon pelvic, [inaudible]

Speaker Change: Obviously we haven't done a case yet with Vertigo Ad, but we're just getting started. And Ellie, those products are designed to tree.

I would say far and away the most complex complex.

Speaker Change: Early onset scoliosis or syndromic patients that are treated at the major children's hospitals by some of the top pediatric orthopedic surgeons in the world and historically those are the places where we have had more difficulty getting our scoliosis products on contract. Thank you very much.

Speaker Change: They're historically dominated by some of the larger adult spine companies that have just had a head start on us.

Speaker Change: And so as we make investments where other people are unwilling to make investments in these maybe slightly smaller markets, it really shines the positive light on what we're doing as a company to meet the unmet needs of those very specific patients and by default, those surgeons.

Speaker Change: And then I think it gives us a lot of ammunition, a lot of credibility to talk to those surgeons about the rest of our product portfolio and pull through our fusion devices, get apathits on board, get 70 there, and we're already seeing that simply by doing the work. [inaudible]

Speaker Change: in that area of early onset scoliosis. I really believe that when you see the combination of rib pelvic, le and verteglide, there's nobody else who will have anything close to what we have on the EOS side, and I think that will be very well recognized by customers at the largest institutions.

Very helpful, Dave. Thank you.

Thank you for a moment for our next question.

Speaker Change: Our next question comes from line up, Rick Wise of Steve Foyle. Your line is now open.

Lina Wyse: Good afternoon to you both. Nice to see the solid quarter here. I wanted to

Lina Wyse: Tackle a couple things. One of the the Gross Margin guide, you know, Fred, you said 72, 73.

Speaker Change: But it just helped us think through it from two vantage points [inaudible]

Lina Wyse: One why wouldn't we why wouldn't it be 73 plus just

Thinking about it.

You'll keep adding all these.

New attractive, compelling products.

Speaker Change: You just outperformed strong US sales. I don't know that the OUS Dynamics is going to change radically. Just help us think through both the cadence for the quarters and maybe how we should think about the outlook as well. Thank you.

Speaker Change: Yeah, absolutely, obviously very pleased with the strong first quarter here, great start to the year.

Speaker Change: Only 11% growth and very limited set sales on the international side.

Speaker Change: Two biggest contributors there. Assuming international, we do sell sets internationally in the future that will pull it down a little bit.

Speaker Change: And then you may recall typically the fourth quarter is often a softer, gross margin number for us as well.

Speaker Change: So as Dave said, we're still anticipating a strong summer. We haven't seen it yet. It'd be great when it gets here. But we obviously don't want to get ahead of ourselves. And so we'll stick with what we have for right now and kind of let the performance speak for itself going forward. [inaudible]

Hey

Speaker Change: Maybe turning to the specially-breasing clinic expansion part of the story.

Speaker Change: David, obviously you've sounded particularly excited there and all the progress and opening North Carolina, etc.

Speaker Change: And I just wanted to, I thought it might be instructive for us all to hear about your

You're...

Speaker Change: Chronic Expansion Efforts in Florida in Colorado. It's been like something like six months, if I recall, since they happen to any incremental details, you can, or color you can share about the ongoing ramp to being fully productive. Where are we there? How does that? How might that? I don't know, I don't know. I don't know. I don't know.

Suggest we should think about future.

Speaker Change: Clinic expansion efforts, how are you thinking? And can you talk a little bit more about your plans over the next, not just the next quarter to bet over the next six, 12 months, even for further expansion in the US and and internationally.

Speaker Change: Sure, well, you could assume Rick that we have no plans to slow down the clinic expansion strategy here. We're not gonna call out

Speaker Change: Specifically, how many more we think we can get done, but it's reasonably likely that in the second half we could...

Speaker Change: Expand. I think what we're also seeing is in places like Colorado or Florida, really seeing this in Ohio, where we have a new clinic starting to see more throughput from those clinics. So I think Fred and I are both really pleased.

Speaker Change: with the increases in volume we've seen, we're seeing, you know, the usage of our sales force, both the surgical sales force as well as the addition of

Speaker Change: OPSB members that are helping make surgeons aware of how they can have a clinician that is 100% focused on pediatrics.

Speaker Change: and so see nice uptick generally in those clinics. So I'm really pleased with the not only the territory expansion. Thank you very much.

Speaker Change: But what we're seeing from the territories that we've expanded into obviously place like Florida is very early we have a number of other clinics within the territory that we're working on

Speaker Change: and I think when those clinics are set and we're moving forward, we're going to continue to see growth from the locations we've already set up.

Speaker Change: and then that becomes a bit compounding when you start adding new in new clinic opportunities and new jurisdictions or new territories. Thank you very much for your time.

Speaker Change: The pipeline is very full and as we kind of knock out one, we three more continue to add and so I think we have several years of expansion and growth ahead of us for this section of our business. [inaudible]

Speaker Change: And, you know, what we're 34, 35 clinics at this stage, I mean, I'm not going to call out what you're going to see in the next six to 12 months, but I think

Speaker Change: You know, over the course of our time here, three to five years our intent would be to dominate this the market share in this space. And there's 300 children's hospitals. So we have a lot of work to do to to continue to scale. Thank you.

Speaker Change: I think on that OUS side, pretty interesting because we are having some success with...

Speaker Change: What is still a fairly limited scoliosis portfolio due to lack of EU-MDR approval on our small stature system, but we're having success already with our implants in certain pretty key

Speaker Change: in Europe , and seeing growth still small, but the growth is large.

Speaker Change: and that is also then leading to conversations that we maybe didn't expect to have to have.

a year ago, and that's leading to these conversations with

Speaker Change: spine surgeons who are now using our fusion devices about how we can serve them on the scoliosis bracing side. And so there's a few opportunities for us there that are good ones and don't require MDR approval. And so I think, you know, it would be fair to say that if we got good opportunities for expansion.

Speaker Change: and certain, particularly markets in Western Europe that we're going to take those opportunities, and I think it's going to be good business for us.

Appreciate the color. Thank you

You bet.

Thank you, one moment for our next question.

Speaker Change: Good afternoon, gentlemen. Thanks for taking the questions. First off, for me, it's great to hear the productive conversations that you've had with the FDA on Ellie. It's just wondering if there's any more color you can share there on, you know, maybe what you're understanding is presently on what a submission could look like there. It really ain't anything you can share on that, huh? Thank you very much.

Speaker Change: Yeah, I guess without getting too detailed, I think that our concerns early on would be that we would have to do some a big PMA some type of multi year study.

Speaker Change: I think at this stage, we think that it's a very, very small likelihood that that would occur and so I would say the FDA recognizes the need for this device in the marketplace.

Speaker Change: and the patients that need that and are working with us the way they should be. Particularly with a device that has breakthrough device designation. .

to make the pathway for that approval rational and cost effective.

Speaker Change: But also, you know, one in which we do need to collect data, you know, on some levels to make sure that we, you know, the device is safe and effective. And I'm just really, really pleased with the way the FDA has operated here in the last five months, four months.

Speaker Change: Maybe a change of tone on vertiglyde because I think we told you all that we were a little concerned that vertiglyde could drag on and then through productive conversations that didn't [inaudible]

Speaker Change: And I would just say that the tone of the conversations we're having around Ellie is very similar to the tone of conversations we had around vertigoide, which is why we're quite optimistic.

Speaker Change: Excellent, very encouraging obviously there. And then secondly for me on the EU and the MDR, you know, what is kind of that first bolus of

Speaker Change: Products that you're taking through there and what sort of case mixes the right word, but what sort of market share of procedure volume do those sorts of products hit in these European markets?

Speaker Change: That makes sense. Yeah, so I would say the first few approvals will be on the trauma Linda Formy side, so we have a number of products there, you know.

Speaker Change: we just don't have available. And what's also interesting, Ben, is that we have a number of products that are within a number of individual SKUs or instrumentation or sizes

Speaker Change: that are included in the US sets that make those sets more competitive and far more useful to a surgeon.

Speaker Change: that are available to U.S. customers but not available to U.S. customers or customers in Europe . And so it's not only just a bolus of literally new systems.

Speaker Change: It's a bolus of different products that could modernize some of the other systems that we already have in market, but and could take additional share as a result of having some of the more modern instrumentation and influence. Thank you very much.

Speaker Change: Some of the systems that we've been selling in Europe have been unchanged really for 15 years.

Speaker Change: And that wouldn't be the case or the experience that you would see if you were in Indiana or Ohio utilizing our products. There's kind of been a constant upgrade.

Speaker Change: and so the European surgeons haven't seen some of those upgrades. So I think the first things you're going to see are that. Thank you very much.

Speaker Change: Those types of devices that will help drive share through kind of our legacy products and some of the products we already have on shore in Europe .

Speaker Change: And then I think the bigger ones are, we have half of our portfolio, Scoliosis products available in Europe . We've launched the business there. It's still small, but if you can't launch your, your small stature system. [inaudible]

Speaker Change: and you're a pediatric orthopedic implant, Dominick, that's a tough go, right? In terms of trying to capture market share there. We're doing that with the 556O response right now, but having the 455O fusion system, as well as some of the other devices that make their response system very unique, I think are going to be a bigger catalyst, maybe than anything. Thank you.

Speaker Change: Excellent, that makes a lot of sense. Thank you, gentlemen, for taking the questions.

Hey, thank you then.

Thank you, one moment for our next question.

Speaker Change: Our next question comes from a line of Mike Matson of Needle & Company. Your line is now open.

Speaker Change: Hey, Fred, hey, Dave, this is Joseph, I'm from Mike today.

Hey, hey, maybe just to start off with DF2.

Speaker Change: The expanded indication there and post-operative management. I don't think you guys have maybe sides to the market with that.

Speaker Change: I was wondering if you could maybe tease that out a little bit and just maybe talk about if you've had any traction there with that indication, I guess maybe you want to see an expectation for postoperative use in 2025.

and then, just on OPSB.

Speaker Change: I think you guys called out too long. She was on this call so far in the year.

Speaker Change: And I believe your slide deck says the goal is for this year so I was just wondering if you could maybe talk about those other two launches coming if that information's correct.

Yeah.

Good question. So I guess...

Speaker Change: Let's just start with the bracing launches. I think, you know, the likelihood that we would get to four launches, if not more, is very high. I mean, the untold product as well as thrive are both products that

Speaker Change: We have experience with our clinics and now are able to sell through those two companies and expand into all of our clinics as well as clinics that we don't own.

and so we have... [inaudible]

Pretty Constantly Seeing [inaudible]

Speaker Change: Pretty unique technologies that can't get scale because they're just so small that we have access to and so it's really the timing of that for the Salesforce to determine how fast we want to do that.

Speaker Change: We are working on a couple interesting new products as well. We did the first bracing sensor for scoliosis. I don't think we called that out, but we have launched that product. Just done a few cases here. I guess in April . [inaudible]

Speaker Change: with a bracing sensor, so that has moving forward and has been well received. And then a lot of what we're working on right now on the OPSB side is around the pediatric hip.

Speaker Change: Children with the developmental hip dysplasia, a big market opportunity there for us, and so we're working on a couple of different products there together.

Speaker Change: and then we are working on a product that is connected to one of our our our or effects devices as well and we're starting to see the potential for interplay between some of the implant systems that we have. Let's go ahead and take a quick look at what we're going to do.

Speaker Change: and how those implant systems could potentially be married with post-operative bracing

Speaker Change: in the X-Fix case, it actually could be inter-digitated into the device itself. And so that's the primary things that we're working on. And I think we'll likely cruise to at least four products on the OPSB side for sure.

Disregarding the DF-2 Market Size .

Speaker Change: Uh, you know, there's no data for that. Um, but it, it actually converting their,

Speaker Change: We're converting what today is basically a spike of cast typically, which is just below the nipples all the way down to just above the knee.

Speaker Change: and that spikacast, which as you can imagine, is difficult to put on that with the patient under. And for a parent to deal with that is very, very difficult. We're replacing that spikacast with a brace.

Speaker Change: and so there's really no market data that tells us the size of that.

Speaker Change: But what I can tell you is that this phrase is quickly becoming the new standard of care.

and is absolutely winning over surgeons, left and right.

Speaker Change: It's just so much better than what they had to deal with before. Not only the surgeons, but the parents as well.

Speaker Change: So we're very excited about that. Unfortunately we don't have any data that we can point you to tell you the size, but we're creating a market with this brace, which is absolutely what we want to do in many of our situations here with this bracing opportunity. Thank you for your time today.

Speaker Change: Okay, oh, you're great. Yeah, fair enough that makes sense. I definitely understand that it can be a transformational product given with being used now. But I guess it's a layer on, you know, you have all of these launches that...

Speaker Change: You know, you're expecting here in 2025 and the second half potentially in Europe .

Speaker Change: You know, OPSB ramping. I'm just curious how you guys are thinking about manufacturing capacity and potential extension there. You know, whether this year, next year, I know you guys have, you know, product launches for the next three years. So just kind of wondering how you're thinking about all that.

Yeah.

It's a good problem to have, which is increasing capacity. Right now, we're only working two shifts, so we have another...

Speaker Change: Ship that's available to us, but we, you know, starting really when we first

Speaker Change: acquired this business back in January of 2024, fully expected to have increased the man and have been working on increasing capacity, both in the short term but also in the longer term as well.

Speaker Change: So good problem to have. We're working on it and don't see that as a limiting factor for us right now.

Okay, perfect. Congrats on the strong quarter you guys.

Thank you. Thank you much.

Speaker Change: Thank you. I'm showing no further questions at this time. I'll now turn it back to David Bailey for close remarks.

David Bailey: Great, thanks operator. Thank you all for joining us on the Q1 call. I look forward to talking to you all over the course of the next several months. I have a great great evening and we'll talk you soon.

David Bailey: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Frederick Wise, Michael Odle, Joseph Conway, Joseph Conway,

Michael Matson, Joseph Conway, Joseph Conway, David Turkaly

Speaker Change: and past Desiree Highgarden experience a pre gift or free commission on your COVID-19 test semester. REgarding tested data, there are various ways to test a test that provides more 자기 time where only a test takes a couple of shorter time than a regular person would. Please differentiate which test is seditious, would you leave it for longer, what test is zero?

Before After Before After After Before After After

David Bailey: Michael Odle, Joseph Hite, Joseph Conway, Joseph Conway,

Thanks for watching!

Speaker Change: Good day, and thank you for standing by. Welcome to the Orthopediatrics Corporation First Quarter 2025 earnings conference call. At this time, all participants are in listen only mode.

David Bailey: After the speaker's presentation, there will be a question and answer session. Thank you very much.

David Bailey: To ask a question during this session, you'll need to press start 1-1 on your telephone. You'll then hear automated messages by your hand as a raise. To withdraw your question, please press start 1-1 again.

David Bailey: Pleased to advise that today's conference is being recorded. I'll now have to hand the conference over to your first speaker today, Trip Taylor, Investor of Nations, please go ahead.

David Bailey: Thank you for joining today's call. With me from the company or David Bailey, President and Chief Executive Officer and Fred Hite, Chief Operating and Financial Officer.

Speaker Change: These forward-looking statements are subject to numerous risks and uncertainties, and the company's actual results may differ materially [inaudible]

Speaker Change: For a discussion of risk factors, I encourage you to review the company's upcoming quarterly report on Form 10Q, which will be filed with the SEC on May 8th, 2025 Thank you for your time, and I'll see you in the next video.

Speaker Change: During the call of day, management will also discuss certain non-GAAP financial measures, which are supplemental measures of performance

Speaker Change: The company believes these measures provide useful information for investors in evaluating its operations period over period. For each non-GAAP financial measure referenced on this call, the company has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in its earnings release.

Speaker Change: In addition, the content of this conference call contains time-sensitive information that is after it, only as of the date of this live broadcast today May 7th, 2025 Except is 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

Speaker Change: With that, I would like to turn the call over to David Bailey, President and Chief Executive Officer.

Speaker Change: and the one we're most proud of. In the first quarter alone, we supported the treatment of nearly 39,000 children, bringing our total impact to over 1.175 million kids helped since our inception.

Speaker Change: For too long, pediatric health care providers have had to rely on inadequate solutions, and we remain steadfast in our mission to change that for the better.

Our ability to execute on our commitments.

Speaker Change: Our consistent track record of sales growth through share-taking, as well as deliberate step function improvements in adjusted EBITDA and cash usage are just a few small aspects of what continues to set us apart and enable us to maintain our position as the clear cut market leader in pediatric orthopedics.

Speaker Change: Our efforts to scale OPSB are advancing steadily. Execution of the OPSB strategy and further clinic expansion is on track and driving total OPSB growth of better than 20%. Organic market share and the surgical segment by strategically leveraging previously deployed set.

Speaker Change: It is particularly gratifying to see growing utilization from previous set deployment along with continued search and adoption of key product launches such as PMP FEMA, PMP Tibia, Canulated Scrooze, and D.F.2.

Speaker Change: During the first quarter of 2025, we were very excited to receive final FDA approval for the verticalide system.

Speaker Change: Staryl P&P Femre, Staryl P&P Kibbia, as well as Orthopedic Titanium Hathbend.

Speaker Change: In late April , we received a much anticipated approval for the 3P Pediatric Plating Platform Tip System.

Speaker Change: This brings our total FDA approvals for the year to five and includes two major systems.

Speaker Change: and we will continue to benefit from 70 placements throughout the year. All in all we are very pleased with the way things are progressing on the revenue front and remain bullish about the year. [inaudible]

Speaker Change: Beyond revenue, we improved profitability and reduced cash usage. Our adjusted EBITDA loss was reduced by more than half year over year, while we improved free cash flow by 36%.

Speaker Change: We remain on track to meet our adjusted EBITDA goals, which will fully pay for our 2025 set deployments and lead the positive free cash flow in the fourth quarter of this year and full year free cash flow

Speaker Change: Additionally, we expect cash usage will improve materially in the second half of 2025, which will result in very little cash usage in H2.

Speaker Change: While we continue to prioritize growth, the efforts we have been making to improve profitability and free cash flow are clearly working, proving we are quickly becoming a high growth med tech asset that will be solidly profitable and generating cash from operations.

Speaker Change: This is a difficult transition for early stage companies to navigate, and I am proud of the work our entire team is doing to make it happen.

Regarding tariffs and the broader macroeconomic environment, [inaudible]

Speaker Change: Orthopediatrics has minimal exposure to terror-related impacts. We estimate that approximately 95% of our cost of goods sold come from domestic suppliers and our Canadian entity, which is currently exempt from tariffs.

Speaker Change: Even under the worst case scenarios, contemplated in recent months, any potential impact would be minimal and would be absorbed within our current guidance.

Additionally, reciprocal tariffs, real or potential

Speaker Change: are unlikely to material impact revenue, especially given that we do not sell any products in China. Also, it is very important to reiterate that most of our procedures, our customers perform, are non-elected and are often carried out in hospitals supported by substantial endowment, which have historically helped shield us from the effects of economic downturns.

Speaker Change: Over 20% of our global revenue is trauma-related, which is clearly non-elected, with a US-based manufacturing and supply chain backbone and the largely non-elective nature of our procedures, we are positioned to sustain our growth and profitability trajectories, regardless of our broader economic condition.

Speaker Change: With that said, we expect our business to gain momentum throughout 2025 based on our success scaling OPSB, driving market share gains through leveraging existing set deployments and the ongoing success of our innovative product launches.

Speaker Change: As such, we are increasing our full year revenue guidance. We now expect to generate revenue of $236 to $242 million, representing annual growth of 15 to 18%

Speaker Change: In the first quarter of 2025, the Attendee business grew 14 percent as we continued to deliver strong market share gains across multiple product lines, bolstered by strong growth of OPSB.

Speaker Change: Growth in the quarter was extremely strong in the U.S., and I'll set by softness in Latin and lower O.U.S. set sales which contribute little to profitability.

Speaker Change: In 2023 and in 2024, we have sizable set deployment. As a result, the usage of prior set deployments is increasing and contributing to growth in meaningful ways.

Speaker Change: In the quarter, we saw very strong revenue growth of trauma products led by rapid adoption of PMP Utibia, and cannulated screws, and DF-2.

Speaker Change: Additionally, we launch several sets of PMP Tibia. With more expected to launch in the second quarter, as PMP Tibia will continue to be a solid growth driver for the next several quarters, if not several years.

Speaker Change: Once again, DF-2 continues to exceed our expectation, as demand accelerates and we are seeing rapid surge in adoption. This product is differentiated within the pediatric femur fracture management.

Speaker Change: is benefiting from expanded indications for use and is quickly becoming the new gold standard of care.

Speaker Change: As of today, we have achieved approval for this product in 33 countries internationally within just a few months.

Speaker Change: And we're just starting to sell in many of these countries [inaudible]

So we are very early in this successful launch.

Speaker Change: Further, we are pleased to report that we have mended the short term supply issues and are now working on several longer term solutions.

Speaker Change: On the R&D front, as you may have seen in our recent press release, we are proud to announce that we have received FDA approval for our 3P Pediatric Plating Platform HIP system.

Speaker Change: With this approval, the 2025 beta launch of the first 3p system 3p hip will begin in earnest this summer and we look forward to providing more updates as that product is launched and rolled out.

Speaker Change: As a reminder, 3P HIP is the first of several systems in a long line of coming product launches from the new 3P family, and will result in a complete transformation of our Platon Screw product portfolio, giving us the most robust and modern plating portfolio in pediatric orthopedic history.

Speaker Change: Additionally, we are continuing the process of EUMDR compliance and expect to launch new products into Europe , starting in the second half of 2025, followed by more next year.

Speaker Change: Overall, T&D remains a strong contributor to our performance as we capitalize on our scale, expand market share, and introduce innovative products that address unmet needs and support sustained growth across all areas. Our path to market share dominance within T&D is clear. Thank you.

Speaker Change: Most notably, on the territory expansion side, we have hit our initial guidance for 2025. We have now entered North Carolina, our fourth territory in 2025.

Speaker Change: As we previously discussed, not every territory or clinic will be equivalent, and their size, ramps and impacts will vary.

Speaker Change: So while we are pleased with the pace with which we have been able to achieve this territory expansion the North Carolina clinic is currently a smaller but strategically important opportunity and we want to take that into account when we look at our overall goals for 2025 we are going to take that into account when we are able to achieve this territory expansion the North Carolina clinic is currently a smaller but strategically important

Speaker Change: With that being said, we believe there is potential to add additional territories in the second half of 2025. The opportunities for clinic expansion are immense. The demand for our customers is high and our funnel for clinic expansion is very large.

Speaker Change: Notably, we are in very early discussions on multiple opportunities for OPSB internationally.

Speaker Change: When we first looked into OPSB territories, our initial focus was on the US and getting the ball rolling here.

Speaker Change: The early expansion clinics in the US are progressing well, and we are creating a repeatable playbook that serves as a strong growth driver with considerable long-term potential, and we are looking at various ways to bring OPSB to international markets.

Speaker Change: Importantly, the international markets are not included in our $500 million tan, so these clinics would offer an opportunity for tan expansion. We're pleased with our progress toward the launch of four new territories and anticipating sharing further updates of the year unfold. We're pleased with our progress toward the launch of four new territories and anticipating sharing further updates of the year unfold.

Speaker Change: On the OPSB R&D side, in the first quarter, we launched two distributed product lines, including Thrive, Carbon Fiber Braces, and Unfo, Metatarsis Abductis Brace.

Speaker Change: through OPSB. These product lines complement our existing OPSB portfolio and expand options available within the OPSB clinic.

Moving to the Scoliosis Business [inaudible]

Speaker Change: Our strong growth of 34% seen in Scoliosis Discord was driven by more share-taking, both in the US and US markets, with increasing demand for new markets in the EU.

Speaker Change: US scoliosis growth was very strong due to 70 placements and new users adopting orthopediatric technology, including apophics, response, as well as our commitment to new solutions for U.S. patients.

Speaker Change: We saw healthy 70 unit placements in the first quarter and anticipate more to come throughout 2025.

Speaker Change: OPSB 3D patient-specific scoliosis braces also contributed to the strong growth

Speaker Change: International Scoliosis was strong due to solid revenue in our direct markets, including Canada and Australia, where we are seeing new users come on board. We are very happy with the progress made in 2024 and it continues through the first quarter.

Speaker Change: The coming EUMDR approvals will further positively impact our EU spine franchise.

Speaker Change: As we've discussed since our analyst day last year, our scoliosis portfolio is rapidly evolving to meet all the needs of our customers

Speaker Change: Recently, our EOS product portfolio took a massive step forward with the FDA approval of Vertigoide in the first quarter.

Speaker Change: We expect the first cases to be completed in the coming weeks and we are already seeing requests from customers at large US accounts where we historically have had little scoliosis revenue.

Speaker Change: Ellie, our mechanical growing spying implant product development, continues to move forward, and we are having frequent positive interactions with the FDA. At this point, our goal is to make an Ellie regulatory submission in late 2025 or early 2026.

Speaker Change: With response, ribbon pelvic launched, murder glide, FDA approved, and L.E. progressing, we have a clear line of sight to having far and away the most robust set of the OS solutions available for our customers to treat this very complex patient population.

Speaker Change: and that fact alone is driving more adoption of our total scoliosis offerings.

Speaker Change: Moving on to International, while we saw double-digit growth internationally, our strength was again offset by pressure from Latin and lower set sales.

Speaker Change: General International Replenishment Demand across the entire TND and Scoliosis portfolio was strong, especially in our agency markets, where during the quarter we saw strong procedure growth.

Speaker Change: In fact, TND replenishment growth was nearly 20% and scully grew greater than 20% highlighting extremely strong underlying demand.

Speaker Change: We are also seeing very strong adoption trends in Canada and Australia.

Speaker Change: Higher International Growth was impacted by Brazil, and our conscious decision to limit new set sales to South America in an effort to focus on improved cash metrics.

Speaker Change: We will continue to focus on profitable growth, improved profitability, and improving free cash low coming out of our international business as we deliver our overall performance.

Speaker Change: Within our international business, the EMDR approval remains a large catalyst for our future growth, and we are well positioned for approval.

Speaker Change: Once our EUMBR status is finalized, we plan to launch several waves of products into the EU. As a reminder, EUMBR approval for implants is an expensive process. We believe it is the right thing to do for kids who need these devices outside of the US and it strengthens our strategic position.

Speaker Change: In tandem, we are looking to further expand DF2 and expect surgeries for vertigo light to occur outside of the US in 2025.

That brings us to Surgeon Training and Education.

Speaker Change: In the first quarter we hosted 172 unique training experiences for over 2,245 healthcare professionals.

Speaker Change: Recently, we attended the annual meeting for E-Post, the European Pediatric Orthopedic Society held in France. Orthopediatrics was well represented, and we were excited that through our significant presence, we were able to highlight our products and interact with many surgeons and customers.

Speaker Change: Looking forward, we are excited for the upcoming pediatric orthopedic society of North America or positive meeting on May 13th through 17th in Las Vegas.

Speaker Change: This is a key industry event for OP, and we will again have a huge presence with multiple sessions, events, and new products on display.

Speaker Change: In mid-March, we announced our partnership with the Crossroads Pediatric Device Consortium, a multi-institutional initiative focused on accelerating the development, approval, and availability of medical devices designed specifically for pediatric patients.

Speaker Change: By collaborating with the consortium's network of experts, we aim to drive innovation and pediatric medical device technology and ensure children have access to the specialized treatments they need. Lastly, we are happy to announce that once again orthopediatrics was named as one of the best places to work in Indiana for 2025 marking the ninth time we have been included on this list.

Fred Hite: We've been able to help as many children as we have as a direct result of the hard work and dedication of our employees and we are incredibly proud of their work and how they continue to support our mission.

Thanks Dave.

Fred Hite: Taking a closer look at the PNL, our first quarter of 2025 worldwide revenue of $52.4 million increased 17% compared to the first quarter of 2024

Fred Hite: Growth in the Quarter was driven primarily by strong performance across trauma and deformity, scoliosis, and OPSB.

Flightly, Offset by Lower Growth in the International Business

Fred Hite: U.S. revenue was $40.9 million, a 19% increase from the first quarter of 2024 representing 78% of our total revenue.

Fred Hite: Growth in the quarter was primarily driven by our organic growth in trauma and deformity, scoliosis, and OPSB.

and 22% of total revenue.

Fred Hite: Growth in the quarter was primarily led by increased procedure volumes, strong scoliosis growth, and reduced trauma into formative set sales.

Fred Hite: In the first quarter of 2025, trauma and deformity global revenue of $37.9 million increased 14% compared to the prior year period. Growth was primarily driven by trauma, Pega products, X-Fix, and OPSB.

Parsley Offset by Lower OUS Set Sales [inaudible]

Fred Hite: In the first quarter of 2025, Scoliosis Global Revenue of $13.7 million increased 34% compared to the prior period.

Growth was primarily driven by increased sales of response .

Fred Hite: ApeFix non-fusion system, revenue generated from 70 technology, as well as increased 3D patient-specific

Fred Hite: Finally, sports med other revenue in the first quarter of 2025 with $0.9 million compared to $1.2 million in the prior year period.

Fred Hite: Turning to Set Deployment, $3.6 million of sets were consigned in the first quarter of 2025 compared to $4.3 million in the first quarter of 2024.

Touching briefly on a few key metrics.

Fred Hite: For the first quarter of 2025, gross profit margin was 73%, compared to 72% for the first quarter of 2024.

Fred Hite: The increase in gross profit margin was primarily driven by higher domestic growth, which generates higher gross margin, as well as lower international set sales.

Fred Hite: Total operating expenses increased $7.3 million or 18% compared to the prior year period to $49.2 million in the first quarter of 2025.

Fred Hite: The increase was primarily driven by incremental personnel required to support the ongoing growth of the company, including increased non-cash stock compensation, as well as the addition of OPSB clinics.

Fred Hite: Sales and marketing expenses increase $2.4 million or 17% compared to the prior year period to $16.6 million in the first quarter of 2025.

Fred Hite: The increase was mainly driven by increased sales commission expense and an overall increase in volume of units sold.

Fred Hite: General and administrative expenses increased $5.5 million or 22% year over year to $30.3 million in the first quarter of 2025.

Fred Hite: The first quarter increase was driven primarily by the addition of personnel and resources to support the continued expansion of the business increased non-cash stock compensation as well as the addition of OPSB clinics.

Fred Hite: Research and development expenses decreased $0.6 million in the first quarter of 2025 to the timing of product development third-party invoice during the first quarter of 2025.

Fred Hite: Total other income was $0.5 million for the first quarter of 2025 compared to $0.6 million of other expense for the same period prior year.

Fred Hite: Adjusted EBITDA was a loss of $0.4 million in the first quarter of 2025 over 50% improvement when compared to a loss of $1.1 million for the first quarter of 2024.

Fred Hite: In the first quarter of 2025, free cash flow usage was $8.4 million, representing a significant reduction of 36% when compared to the same period in the prior year.

Fred Hite: We expect additional cash usage in the second quarter as we continue to deploy sets to support the overall growth of the business.

Fred Hite: followed by reduced cash usage in the second half of 2025 and we expect positive free cash and flow in the fourth quarter of 2025.

Fred Hite: We ended the first quarter with $60.8 million in cash, short-term investments, and restricted cash, and we still have $25 million available to us on our new term loan.

Turning to Guides [inaudible]

Fred Hite: We are increasing our expectation for the full year of 2025 revenue to 236 to $242 million representing year-over-year growth of 15% to 18%

Fred Hite: We are reiterating the guidance that our full-year gross margin will be within the range of 72 to 73%.

Fred Hite: We also continue to expect to generate between $15 to $17 million of adjusted EBITDA in 2025.

Fred Hite: 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 break even by 2026.

Fred Hite: and we anticipate delivering our first quarter a three cash blow positivity in the fourth quarter of 2025.

Dave Scully: I'm now turn the call over to Dave for closing remarks.

Dave Scully: Thanks, Fred. We are encouraged by how we've carried our business momentum into 2025. Our success this year will be driven by our execution and scaling of OPSB,

Dave Scully: We are completely committed to helping more children than ever, aggressively growing our top line, making step-function improvements to our adjusted EBITDA and materially improving our cash usage in 2025 and beyond.

Dave Scully: I hope you can tell from my tone how encouraged we are by our Improving Profitability and Cash Flow.

Dave Scully: We are on a mission to help one million kids every year, and we believe that building a very profitable and cash-generative business is vital to getting us there.

Dave Scully: It is well documented that pediatric health care is underserved, largely due to underfunding from industry.

Dave Scully: which is resulted in a requirement for government support. It has been our long-held belief that creating a successful, profitable business that self-funds the future of pediatric technology development is the answer.

Dave Scully: O.P. is clearly on that track. In closing, I'd like to thank my associates, our partners and pediatric health care and you as investors for standing with us in this important course. Operator, let's open the call for Q and A.

Speaker Change: Thank you. At this time, we'll conduct the question answer session. As a reminder to ask the question, you'll need to press star one one or your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please send me yourself to one question in the follow-up. Please stand by when we compile the Q&A roster.

Speaker Change: Now, first question, because some line of Matthew Bryan from Pupper's Handler, your line is now open.

Matthew O'brien: Thank you for taking the questions. Maybe just to be off on this fine business here. I mean, there's a phenomenal, good quarter.

Speaker Change: and what's typically a seasonally software quarter for that business. So, David Fred, can you just talk a little bit about what's going on there? How does Vertical Eye really contributes going forward, plus all the other US products you have come in. And then, you know, just maybe the OP. [inaudible]

Speaker Change: OPSB Business and how that's contributing to that franchise because I think about things that I think you're probably, I don't know, like, you know, a couple percent market share, maybe three, four percent market share. I guess kind of where can that go, just given all the momentum there. [inaudible]

Yeah, thanks, Matt.

Speaker Change: Yeah, really, really strong quarter on the scoliosis side of our business, both implants as well as the specialty biracing side, really pleased to see that.

Speaker Change: You know, I guess I would point you back to commentary we made really throughout this second half of last year where we had very substantial adoption rates. I said a higher adoption rate than we've ever had in terms of scoliosis fusion surgeons coming on board. [inaudible] I'm sorry, I'm sorry, I'm sorry

We opened up some pretty substantial new accounts.

Speaker Change: and some of that was driven by apathics, some of that was driven by just the notion that we are moving forward down this EOS path that I think is really important to our customers. And then a lot of it was 7D placements that really opened up some new big accounts for us that were using our trauma into formative products.

Speaker Change: But I hadn't converted yet to Scoliosis. And I think what you're seeing here in the first quarter on all of that is really just [inaudible]

Speaker Change: The continuation of the momentum that we add in the back half of the year and you can imagine, you know, we haven't seen the summer schedules yet, but you can imagine that [inaudible]

Speaker Change: Having those surgeons and those accounts on board, even before we get to our seasonally high months of June , July and August feels really good as we move into the summer.

Speaker Change: The synergies we're seeing with our commitment to helping them do that.

Speaker Change: as well as adding products in EOS, as well as Fusion products. Thanks.

Speaker Change: I think that's leading to a search and adoption. I mean, we're putting our money where our mouth is in terms of treating the entire continuum of care of scoliosis. And I think we're the only company in the world that's doing that.

Speaker Change: Yeah, it makes total sense. And then, you know, I don't want to make them not out of a modular, but, you know, the, the low end of the range on the top line came up by about a million bucks by my model, you beat by about a million six.

Speaker Change: So I guess the midpoint wouldn't quite go up by you know that million six obviously given the range so anything to call out there. [inaudible]

Speaker Change: that you're a little bit more cautious about, you know, I guess through the first four months of the year, versus just traditional, you know, conservativeism that you guys typically chart the year with. Thank you.

Speaker Change: No, I don't think, I don't think so. I think, you know, we haven't got into the summer. We're always nervous. We, you know, we, those are big months in June , July and August and until we start seeing that, you know, we tend not to be too aggressive there. And so I would say that's

kind of generally with you to that principal. Thank you.

Speaker Change: I do think you obviously saw us once again managing the international business a little differently.

Speaker Change: We're not going to continue to get out over our skis there. I think we have an opportunity for better cash collection, particularly in Latin America.

Speaker Change: And so we continue to be judicious, I think, about how aggressive we are in some of those markets where we could have orders, but we may push those orders to help improve cash flow. And so I guess those are two areas but nothing I think that we would call out any different than prior years.

Got it. Thanks so much.

You bet.

Thank you, one moment for our next question.

Speaker Change: Our next question comes online of Ryan Zimmerman, of BTIG, your line is not open.

Hey, Dave Fred, thanks for taking our questions and

definitely hurt your tone there. Appreciate that. Thank you.

and the impact that has on adoption of...

Yeah, I mean...

Speaker Change: Certainly in places, Ryan, where we didn't have any business, obviously we're seeing a lot of uptick and I think what we saw

Speaker Change: particularly in Lake Q3 and throughout Q4, where some of those placements were in locations where we had nearly zero pedical screw sales.

Speaker Change: and we had a lot of trauma and limb deformity sales. And so the 70 units

Speaker Change: Essentially, everything that we're getting in terms of response fusion sales there is all growth to the top line [inaudible]

Speaker Change: There are other locations where we have pretty substantial share and you know, we may not be getting as much [inaudible]

Uplift in those accounts. [inaudible]

Speaker Change: But you can imagine the sales force is pretty aggressively targeting locations where we need to break through in terms of you know getting getting some movement on on response fusion. And I think that's what you're seeing in the growth numbers is that largely adoption by surgeons who have been exposed to our response system. [inaudible]

for the 7D Deployments. [inaudible]

Speaker Change: You know, the future is pretty bright when you see that the growth of our fusion business with a system that's been out there for a while is as robust as it is. And then the technology that we have coming behind that here over the next, let's say, six quarters. Pretty substantial. So I think we, you know, we like the tailwinds that we have within that business.

Speaker Change: and in-day to follow up on Scully for a minute. I mean. Thank you very much.

Speaker Change: Your portfolio is now very, you know, wide. You have this breath between response and ethics and vertiglides. I'm curious, you know, where you see.

Speaker Change: How do you think about any gaps that maybe you had before? How we, as investors, should think about, you know, the scoliosis, breast?

Speaker Change: and also like the interplay between devices. I mean, if you didn't have vertic light, I don't think someone's using response, but is there any kind of

Speaker Change: Yeah, great question. I think what investors really need to understand about our scoliosis business is that it's very different than an adult spine business and that we essentially treat one indication, right? It's it's purely scoli. We're not doing a lot, you know, we don't do a lot of interbody work. We're not we're not treating a number of the indications that are seen in adults.

Speaker Change: And why that benefits us, obviously it's a smaller tan, but why that benefits us is that is we have this intense focus on all of these solutions that accommodate the complexity associated with scoliosis [inaudible]

And so I think that before to glide, the ribbon pelvic. Thank you.

Speaker Change: Obviously, we haven't done a case yet with Vertigoide, but we're just getting started [inaudible]

and Ellie, those products are designed to treat.

I would say far and away the most complex complex.

Speaker Change: Early on, set scoliosis or syndromic patients that are treated at the major children's hospitals by some of the top pediatric orthopedic surgeons in the world.

Speaker Change: They're historically dominated by some of the larger adult spine companies that have just had a head start on us.

Speaker Change: And so as we make investments where other people are unwilling to make investments in these maybe slightly smaller markets, it really shines a positive light on what we're doing as a company to meet the unmet needs of those very specific patients and by default, those surgeons.

and we're already seeing that simply by doing the work.

Speaker Change: in that area of early onset scoliosis. I really believe that when you see the combination of Rib Pelvic, Ellie and Vertiglide, there's nobody else who will have anything close to what we have on the EOS side and I think that will be very well recognized by customers at the largest institutions.

Yeah, very helpful, Dave. Thank you Thank you.

Thank you for a moment for our next question.

Thank you.

Speaker Change: In our next question, comes from line up, Rick Wise of Speedfolio, your line is now open.

Rik Wise: I'm going to ask him to both not to see the solid quarter here. I wanted to

Rik Wise: Tackle a couple things. One of the the Gross Margin guide, you know Fred, he said 72 73 73.

Rik Wise: But it just helped us think through it from two vantage points [inaudible]

Rik Wise: One, why wouldn't we why wouldn't it be 73 plus just? [inaudible]

thinking about it.

You'll keep adding all these.

New Attractive Compelling Products Thanks, sir.

You just outperformed strong US sales. I don't [inaudible]

Rik Wise: I don't know that the U.S. Dynamics is gonna change. [inaudible]

Rik Wise: Radicaly, just help us think through both the cadence for the quarters and maybe how we should think about the outlook as well. Thank you very much.

Rik Wise: Yeah, absolutely. Obviously very pleased with strong first quarter here. Great start to the year. Only 11% growth and very limited set sales on the international side.

Two biggest contributors there. [inaudible]

Rik Wise: Assuming international, we do sell sets internationally in the future that will pull it down a little bit.

Number 4th as well

Rik Wise: So as Dave said, we're still anticipating a strong summer. We haven't seen it yet. It'd be great when it gets here but we obviously don't want to get ahead of ourselves. And so we'll stick with what we have for right now and kind of let the performance speak for itself going forward.

OK, um,

Speaker Change: Maybe turning to the specially bracing clinic expansion part of the story, David obviously, you sound particularly excited there and all the progress and opening North Carolina, etc.

Speaker Change: and I just wanted to, I thought it might be instructive for a thought to hear about your. [inaudible]

Speaker Change: Clinic expansion efforts in Florida and Colorado. It's been like something like six months, if I recall, since they happen to any incremental details you can, or color you can share about the ongoing ramp to being fully productive. Where are we there? How does that? How might that? I don't know, I don't know. I don't know.

Suggest we should think about future. Thank you.

Speaker Change: Clinic expansion efforts, how are you thinking? And can you talk a little bit more about your plans over the next?

Speaker Change: not just the next quarter to bet over the next six, 12 months, even for further expansion in the US and internationally.

Speaker Change: Sure, well, you could assume Rick that we have no plans to slow down the clinic expansion strategy here. We're not gonna call out

Speaker Change: Specifically, how many more we think we can get done, but it's reasonably likely that in the second half we could...

Speaker Change: Expand, I think what we're also seeing is in places like Colorado or Florida really seeing this in Ohio where we have a new clinic starting to see more throughput from those clinics. So I think Fred and I are both really pleased.

Speaker Change: with the increases in volume we see, we're seeing, you know, the usage of our sales force, both the surgical sales force as well as the addition of [inaudible]

Speaker Change: OPSB members that are helping make surgeons aware of how they can have a clinician that is 100% focused on pediatrics and so see nice uptick generally in those clinics. So I'm really pleased with the not only the territory expansion. Thank you very much.

Speaker Change: and I think when those clinics are set and we're moving forward we're going to continue to see growth from the locations we've already set up.

Speaker Change: and then that becomes a bit compounding when you start adding new clinic opportunities in new jurisdictions or new territories.

Speaker Change: I think now a year into it and we've done several expansions so far.

Speaker Change: The pipeline is very full and as we kind of knock out one, we three more continue to add. And so I think we have several years of expansion and growth ahead of us for this section of our business. This is the end of this section of our business.

Speaker Change: and, you know, what, we're 34, 35 clinics at this stage. I mean, I'm not going to call out what you're going to see in the next six to 12 months. But I think, you know, over the course of our time here, three to five years, our intent would be to dominate this, the market share in this space.

Speaker Change: and there's 300 children's hospitals so we have a lot of work to do to to continue to scale. Thank you very much.

Speaker Change: What is still a fairly limited scoliosis portfolio due to lack of EU and DR approval on our small stature system, but we're having success already with our implants in certain pretty key

Speaker Change: in Europe , and seeing growth still small, but the growth is large.

Speaker Change: and that is also then leading to conversations that we maybe didn't expect to have.

Speaker Change: Pediatric Spine Surgeons, who are now using our fusion devices about how we could serve them on the scoliosis bracing side. And so there's a few opportunities for us there that are good ones and don't require MDR approval. And so I think, you know, it would be fair to say that if we got good opportunities for expansion. And so, I think we're going to have a lot of opportunities for the future. I think we're going to have a lot of opportunities for the future.

Speaker Change: and certain, particularly markets in Western Europe that we're going to take those opportunities, and I think it's going to be good business for us.

Appreciate the color. Thank you

You bet.

Thank you, one moment for our next question.

Speaker Change: Our next question comes online, the 10 Hainer of Lake Street Capital Markets, the line is not open.

Ben Hainer: Good afternoon, gentlemen. Thanks for taking my questions. First off for me is it's great to hear the productive conversations that you've had with the FDA on Ellie. It's just wondering if there's any more color you can share there on, you know, maybe what you're understanding is presently on what a submission could look like there or really anything you can share on that front. Thank you very much.

Speaker Change: Yeah, I guess without getting too detailed, I think that our concerns early on would be that we would have to do some a big PMA, some type of multi year study.

Speaker Change: I think at this stage we think that it's a very, very small likelihood that that would occur. And so I would say the FDA recognizes the need for this device in the marketplace. The FDA recognizes the need for the FDA recognizes the need for this device in the marketplace.

Speaker Change: and the patients that need that and are working with us the way they should be, particularly with the device that has breakthrough device designation.

Speaker Change: to make the pathway for that approval rational and cost effective, but also, you know, one in which we do need to collect data, you know, on some levels to make sure that we, you know, the devices safe and effective. Thank you, David.

Speaker Change: and I'm just really, really pleased with the way the FDA has operated here in the last five months, four months, and we've seen

Speaker Change: Maybe a change of tone on vertiglyde because I think we told you all that we were a little concerned that vertiglyde could drag on and then, you know, through productive conversations that didn't [inaudible]

Speaker Change: Excellent, very encouraging obviously there. And then secondly for me on the EU and the MDR, you know, what is kind of that first bolus of

Speaker Change: Products that you're taking through there and you know what sort of case mixes the right word but what sort of market share of procedure volume do those sorts of products hit in these European markets.

Speaker Change: That makes sense. Yeah, so I would say the first few approvals will be on the trauma limb deformity side. So we have a number of products there. You know

Speaker Change: We just don't have available. And what's also interesting then is that we have...

Speaker Change: We have a number of products that are within the number of individual SKUs or instrumentation or sizes.

Speaker Change: that are included in the US sets that make those sets more competitive and far more useful to a surgeon.

Speaker Change: that are available to U.S. customers, but not available to U.S. customers or customers in Europe . And so it's not only just a bolus of literally new systems.

Speaker Change: It's a bolus of different products that could modernize some of the other systems that we already have in market and could take additional share as a result of having some of the more modern instrumentation and influence some of the systems that we've been selling in Europe have been unchanged really for 15 years. [inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry

Speaker Change: and that wouldn't be the case or the experience that you would see if you were in Indiana or Ohio utilizing our products. There's kind of been a constant upgrade. And so the European surgeons haven't seen some of those upgrades. So I think the first things you're going to see are that. [inaudible]

Speaker Change: Those types of devices that will help drive share through kind of our legacy products and some of the products we already have on shore in Europe .

Speaker Change: and then I think the bigger ones are, we have half of our portfolio, Scoliosis products available in Europe . We've launched the business there. It's still small, but if you can't launch your small stature system. [inaudible]

Speaker Change: and you're a pediatric orthopedic implant. I mean, that's a tough go, right? In terms of trying to capture market share there. We're doing that with the 556O response right now, but having the 455O fusion system, as well as some of the other devices that make the response system very unique. I think you're going to be a bigger catalyst, maybe than anything. Thank you.

Speaker Change: Excellent, that makes a lot of sense. Thank you gentlemen for taking the questions.

Hey, thank you then.

Thank you, Balloomit, for our next question.

Speaker Change: Our next question comes from a line of Mike Matson of Needle & Company. Your line is not open.

Speaker Change: Hey Fred, hey David, this is Joseph Andre Mike today.

Hey, hey, maybe just to start off with DF2.

Speaker Change: The expanded indication there and post-operative management. I don't think you guys have maybe the market with that.

Speaker Change: I was wondering if you could maybe tease that out a little bit and...

Speaker Change: just maybe talk about if you've had any traction there with that indication, I guess maybe what's your expectation for postoperative use in 2025, and then just on OPSB, I think you guys called out too long to choose on this call so far in the year.

Speaker Change: and I believe your slide deck says the goal is for this year so I was just wondering if you could maybe talk about those other two launches coming if that information's correct.

Yeah.

Good question. So I guess...

Let's just start with the bracing launches.

Speaker Change: I think, you know, the likelihood that we would get to four launches, if not more, is very high. I mean, the untold product as well as thrive are both products that...

Speaker Change: We have experience with our clinics and now are able to sell, you know, through those two companies and expand into all of our clinics as well as clinics that we don't own and so we have

Pretty Constantly Seeing In

Speaker Change: We are working on a couple interesting new products as well. We did the first bracing sensor for scoliosis. I don't think we called that out, but we have launched that product, just done a few cases here. I guess in April . [inaudible]

Speaker Change: with a bracing sensor, so that has moving forward and has been well received. And then a lot of what we're working on right now on the OPSB side is around the pediatric hip.

Speaker Change: Children with developmental hip dysplasia, a big market opportunity there for us and so we're working on a couple of different products there. Thank you very much.

Speaker Change: And then we are working on a product that is connected to one of our our our or effects devices as well. And we're starting to see the potential for interplay between some of the implant systems that we have.

Speaker Change: and how those implant systems could potentially be married with post-operative bracing.

Speaker Change: in the X-6 case, it actually could be inter-digitated into the device itself. And so that's the primary things that we're working on. And I think, you know, we'll likely cruise to at least four products on the OPSB side, OPSB side for sure.

Speaker Change: Just regarding the DF2 market size, you know, there's no data for that but it's actually converting their

Speaker Change: We're converting what today is basically a spike of cast, typically, which is just below the nipples all the way down to just above the knee.

Speaker Change: and that spikakast, which as you can imagine, is difficult to put on that with the patient under. And for a parent to deal with that is very, very difficult. We're replacing that spikakast with that brace.

Speaker Change: and so there's really no market data that tells us the size of that but what I can tell you is that this phrase is quickly becoming the new standard of care. .

and is absolutely winning over surgeons left and right.

Speaker Change: It's just so much better than what they had to deal with before. Not only the surgeons, but the parents as well.

Speaker Change: So we're very excited about that. Unfortunately, we don't have any data that we can point to to tell you the size but we're creating a market with this brace, which is absolutely what we want to do in many of our situations here with this pricing opportunity. Thank you very much.

Speaker Change: Okay, oh you're great. Yeah, it's fair enough that makes sense. Definitely understand how it can be a transformational product given with being used now. But I guess it's a layer on, you know, you have all of these launches.

Speaker Change: You know, you're expecting here in 2025 and the second half potentially in Europe .

Speaker Change: OPSB ramping. I'm just curious how you guys are thinking about manufacturing capacity and potential extension there.

Speaker Change: You know, whether it be this year, next year, I know you guys have, you know, product launches for the next three years. So just kind of wondering how you're thinking about all that.

Yeah.

which is increasing capacity.

Speaker Change: Ship that's available to us, but we, you know, starting really when we first...

Speaker Change: acquired this business back in January of 2024, Expo expected to have increased demand and have been working on increasing capacity, both in the short term, but also in the longer term as well. So good brand to have. We're working on it and don't see that as a limiting factor for us right now.

Okay, perfect. You got some strong border, you guys. Thank you very much.

Thank you. Thank you much.

Speaker Change: Thank you. I'm showing all for the questions at this time. I'll now turn it back to David Bailey for close remarks.

David Bailey: Great, thanks operator, thank you all for joining us on the Q1 call. I look forward to talking to you all over the course of the next several months. Have a great great evening and we'll talk you soon.

Speaker Change: Thank you for your participation in today's conference. This concludes the program. It may not disconnect.

Q1 2025 OrthoPediatrics Corp Earnings Call

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