OrthoPediatrics Sees ‘Inflection Point' as New Products Fuel Record Quarter

OrthoPediatrics reported a record second quarter, with approximately 15.5% revenue growth, improved adjusted EBITDA and lower cash usage.

Management is targeting $25 million in adjusted EBITDA and break-even to positive free cash flow for the year.

New products, including the 3P Hip System and VerteGlide, are expected to contribute more meaningfully in the second half as additional sets are deployed.

The company also anticipates potential first cases for its Veraxis fixation system later this year, pending an FDA decision.

Growth opportunities include specialty bracing, international expansion and reduced competition in pediatric categories, while the company is tightening capital discipline by lowering new instrument-set deployments and restructuring its Brazilian operations to improve margins and cash collection.

OrthoPediatrics NASDAQ: KIDS reported record revenue, adjusted EBITDA and number of children helped during the second quarter, as the pediatric orthopedic device company began to see early contributions from its newer “super cycle” products, Chief Executive Officer Dave Bailey said at the Canaccord Genuity Growth Conference.

Bailey said the quarter represented an “inflection point” for the business, citing approximately 15.5% revenue growth, improved profitability and lower cash usage.

The company is targeting $25 million in adjusted EBITDA for the year and free cash flow that is break-even to positive.

Bailey said OrthoPediatrics has experienced strong scheduling and procedure volumes during the summer, a historically busy period as children are out of school.

While the broader market has included discussion of patient volumes and reimbursement, he said the company has not identified macroeconomic trends that have materially affected its business.

The company launched most of its 3P Hip System sets in the final weeks of June, meaning the product had limited impact on first-half results.

Bailey said the company expects implant revenue contributions from 3P Hip and the VerteGlide system to begin increasing as additional sets are deployed in the early part of the third quarter.

Early surgeon feedback on both systems has been strong, according to Bailey.

He said the products are designed to address procedures where children’s hospitals may not have comparable alternatives, potentially creating a pull-through effect for the company’s other technologies.

Bailey said newer products generally carry higher average selling prices and require more efficient inventory deployment than legacy offerings.

Historically, OrthoPediatrics targeted roughly one dollar of annualized sales for every dollar of deployed assets, but he said the company is now seeing figures in the range of two to four dollars of sales per dollar of inventory for certain newer products.

The company is also preparing for potential first cases of its Veraxis fixation system later in the year, subject to an FDA decision.

Bailey described Veraxis as an adjunct rather than a full replacement for the company’s RESPONSE fusion system, which he said continues to grow at a double-digit rate.

Veraxis is intended to support more modern techniques used by surgeons to reduce pediatric spinal conditions, while strengthening OrthoPediatrics’ positioning at leading children’s hospitals, Bailey said.

In specialty bracing, Bailey said the OrthoPediatrics Specialty Bracing, or OPSB, business supports the compa...