OrthoPediatrics Corp. Q2 FY2025 earnings call

• Helped treat over 37,000 children in the second quarter alone, with a total impact on over 1,217,000 kids since inception. • Q2 2025 had record revenue with 16% global growth, strong procedure and clinic volumes in June and July. • OPSB business grew over 20%, expanded into New York City, California, Denver, Ohio, and Ireland with new clinics and acquisitions. • Scoliosis business grew 35%, with share gains in U.S. and OUS markets, and EOS product portfolio progressing. • International sales were solid due to strong surgical volume in Europe and scoliosis set sales, with EU MDR approval achieved. • Hosted 182 unique training experiences for over 3,420 health care professionals.

In the second quarter of 2025, the T&D business grew 10% with global revenue of $41.7 million. The Scoliosis business saw a 35% increase, with global revenue reaching $18.5 million. The OPSB business grew by over 20%, operating over 40 clinics worldwide and expanding into 6 territories. T&D growth was driven by U.S. Trauma, PNP Femur and Tibia, cannulated screws, etc., partially offset by lower T&D set sales in Brazil. Scoliosis growth was fueled by RESPONSE, ApiFix non-fusion system, and 7D technology. OPSB's growth was due to territory expansion and clinic openings.

• Raised revenue guidance range for 2025 from $236 million - $242 million to $237 million - $242 million. • Reiterated adjusted EBITDA guidance of $15 million - $17 million for 2025. • Expect to deploy approximately $15 million of new sets in 2025. • Anticipate first quarter of positive free cash flow in Q4 2025 and full year free cash flow breakeven in 2026.

• Market risks such as international market fluctuations and product approval delays. • Operational risks like higher clinic expansion costs than expected and sales falling short of projections.

Q: Talk to us a little bit about the clinic strategy, Dave. What are you seeing out of the existing clinics? How are those doing? How are those tracking from a production standpoint? And with all these new clinics announced today, kind of when you expect those newer clinics to contribute to growth?

A: Yes. Great question, Ryan. So I think the existing clinics that we acquired, so we had 26 clinics when we acquired Boston. I think generally speaking, we see growth in those clinics. So let's say, same-store sales kinds of growth. There's more patient flow and largely due to the investments that we've made on the sales side. Our newer greenfield clinics, as you know, take a little bit more time to kind of peak. I would say none of the greenfields we've done so far are -- they're not at max volume, but certainly, they are contributing to revenue because it's all growth that we're getting from those clinics, but they're not -- there's none of them at this stage, I think, are maxed out. Potentially, what we have going at Nationwide Children's, which is, as you know, embedded in a super high-volume children's hospital. That one, I would say, is growing extremely rapidly, and we have, I would say, a multitude of the share there. But the greenfields grow different dependent upon whether we have them in the hospital. The ones we have in hospital obviously grow much more rapidly and I think start to turn a profit much more quickly. The ones where we can't get in the hospital, but they're around the hospital or in a suburb, obviously, those take a little bit more time to drive patients to. But overall, I think we're very pleased with the way the growth is coming through the clinics we acquired, the clinics we've greenfield and the Acquihire clinics. And I think the Acquihire clinics, obviously, there were some revenue attached to some of those clinics, but using the sales force to drive more volume through those clinics and more of our products through those clinics, that's working as well. So -- and I think to answer your last question, you'd hopefully hear the bullish tone in my voice and obviously, talking about what we think we're going to see in H2. A lot of that is driven by the fact that we do have more clinics. We're ahead in terms of our territory expansion from 6 to 4. And we hinted in the script, obviously, that there's more opportunities for us. And so I think that's part of the cause for our bullishness as we see -- as we head into the second half here.

Q: Maybe just sticking with T&D for a second here. I don't know if -- Fred or Dave, if you can talk a little bit about the, I guess, the limb deformity case, elective case slowdown, what caused that? And maybe if you can quantify that plus the set sales that you missed internationally? Because that business just was a bit softer than we were modeling, although Complex Spine was very good.

A: Yes. We commented in the script, and I wish I had a better answer for you, Matt. But our business, especially a business like that where we have extremely high share on the Deformity side of our T&D business. I mean, there's -- we do a large percentage of the overall sales of -- in the United States and children's hospitals with those products. I mean, it kind of ebbs and flows with some of the volume that we see from some of our major accounts. And for whatever reason in the first, I would say, 6 weeks or so of Q2, the volume was just a little lighter. And then we saw that come back pretty aggressively in the back 6 weeks, certainly June, very strong overall. And not entirely sure why we saw that. And certainly, there's nothing that is long term and problematic about it because it rided itself very rapidly. But it did contribute to a slightly lower growth rate, I think, on the T&D in the U.S. than we had expected. And then obviously, you have some of the set sales, which we control a little bit more in terms of the set sales that we're not taking in Brazil. So I don't think there's anything I'm too concerned about there. I wish we knew exactly why that volume ebbed and flowed a little bit like that, but it did contribute a little bit. But on the other side of that, the Trauma side of the T&D business was extremely strong and it seemed like the Trauma volumes in the quarter were as strong as they have ever been, particularly U.S.-based. And great to see products like PNP Tibia, DF2, those things really taking a lot of share. And so it was a bit of a tale of 2 cities in terms of those 2 businesses. But again, nothing long term that we can point to here. It was just a little slower in the first part of the second quarter on that business.