OrthoPediatrics (KIDS) Q3 2026 Earnings Call Transcript

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DATE

Oct. 27, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - David R. Bailey
• Chief Operating and Financial Officer - Fred L. Hite

TAKEAWAYS

• Total Revenue -- $72.7 million, representing 19% growth driven by strong demand across implants and specialty bracing products.
• Trauma and Deformity Revenue -- $52.6 million, an increase of 19% reflecting share gains in the legacy implant portfolio and demand for new systems.
• Scoliosis Revenue -- $19.2 million, growing 18% year over year primarily due to increased adoption of the VerteGlide and RESPONSE systems.
• Adjusted EBITDA -- $6.9 million, a record for the third quarter reflecting 10% margins and improved operating leverage.
• Free Cash Flow -- $1.6 million, an improvement from the usage of $3.4 million in the third quarter of 2025.
• U.S. Revenue -- $57.9 million, a 19% increase that accounted for approximately 80% of total revenue.
• International Revenue -- $14.8 million, up 18% year over year driven by robust performance in European markets.
• Full Year Revenue Guidance -- $270 million to $273 million, raised from the prior range of $265 million to $269 million.
• Full Year Adjusted EBITDA Guidance -- $25 million, which management reiterated as a target for the current fiscal year.
• Full Year Set Deployment -- $10 million, reflecting a disciplined focus on higher-return systems and capital efficiency.
• OPSB Clinic Expansion -- 60 clinics, marking more than double the clinic footprint from several years ago.
• OPSB Product Portfolio -- 34 systems, an increase from 31 systems at the start of the year and now representing more than one-third of the total product portfolio.
• Sales and Marketing Expenses -- $23.1 million, a 24% increase driven by higher sales commission expenses as top distributors achieved performance quotas.
• General and Administrative Expenses -- $32 million, representing a 10% year-over-year increase due to personnel supporting clinic expansion and acquisitions.
• Research and Development Expenses -- $2.5 million, up from $2.3 million in the third quarter of 2025 to support the ongoing product cycle.
• Children Helped -- nearly 42,000 children during the quarter, bringing the company's total historical impact to over 1.4 million kids.
• Cash Balance -- $44.9 million in cash, short-term investments, and restricted cash as of Sept. 30, 2026.
• GAAP Net Loss Per Share -- $0.25, a reduction from the $0.50 net loss per share reported in the prior year period.
• Non-GAAP Net Loss Per Share -- $0.23, compared to $0.24 in the third quarter of 2025.
• Intangible Asset Impairment -- $600,000, related to an annual analysis determining that the fair value of two trademark assets was below their carrying values.

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RISKS

• CEO Bailey stated, "We restricted set sales, particularly to Brazil... where we do not wanna have larger AR balances," noting that this strategic decision tempered international growth during the quarter.

SUMMARY

OrthoPediatrics Corp. (NASDAQ:KIDS) reported record third quarter revenue, supported by growth in surgical implants and specialty bracing clinics. Management stated that the company achieved positive free cash flow during the period, reflecting improved adjusted EBITDA and disciplined set deployment. The company raised its full year revenue guidance while reiterating its profitability and cash flow targets. Strategic focus remains on a multiyear product development cycle, with several new pediatric-specific systems entering market release phases to address clinical needs in trauma, deformity, and scoliosis.

• Management characterized the current product development phase as an "innovation super cycle," noting that most of the new products are in early stages and not yet significantly contributing to growth.
• CEO Bailey stated, "Those products in the limited launch phase are not yet meaningfully contributing to growth. But many of these products combined with our recent full launches set us up well for multiple years of growth."
• The company surpassed 60 specialty bracing clinics, more than doubling its footprint over the last few years as part of a strategy focused on sales growth and clinic expansion.
• The specialty bracing division's TRAXIO halo gravity traction system sold out of its initial limited units, with management accelerating the 2027 build to meet market demand.
• Management reported that the DF2 hip brace is now utilized in nearly half of all children's hospitals in the U.S. as a gold standard for femur fracture care.
• The company projected remaining free cash flow breakeven or better in 2026 and expects to turn free cash flow positive in 2027 and beyond.

INDUSTRY GLOSSARY

• 3P Platform: Pediatric Plating Platform, a comprehensive system for pediatric trauma and deformity.
• OPSB: OrthoPediatrics Specialty Bracing, a division focused on non-surgical orthopedic care.
• PNP: Pediatric Nailing Platform, used for trauma and deformity correction in long bones.
• VerteGlide: A surgical system designed for complex pediatric spinal deformities.
• 7D System: 7D Flash Navigation System for spine surgery.
• EU MDR: European Union Medical Device Regulation.
• ASP: Average Selling Price.
• eLLi: An electromechanical growing implant for pediatric scoliosis.
• RESPONSE Fusion: A surgical system used for the treatment of scoliosis.
• DF2: A modular hip brace system for femur fractures in young children.
• TRAXIO: A halo gravity traction system for pediatric spine care.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to OrthoPediatrics Corporation's Third Quarter 26 Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Trip Taylor from the Gilmartin Group. For a few introductory comments.

Trip Taylor: Thank you for joining today's call. With me from the company are David R. Bailey, president and chief executive officer and Fred L. Hite, chief operating and financial officer. Before we begin today, let me remind you that the company's remarks include forward-looking statements within the meaning of federal securities laws including the safe harbor provisions of the Private Securities Litigation Reform Act of 2000. These forward-looking statements are subject to numerous risks and uncertainties and the company's actual results may differ materially. For a discussion of those risk factors, I encourage you to review the company's most recent annual report on form 10 k which was filed with the SEC on 03/04/2026.

And its subsequent quarterly reports on Form 10 Q. During the call today, management will also discuss certain non-GAAP financial measures. Which are supplemental measures of performance. The company believes these measures provide useful information for investors in evaluating its operations period-over-period. For each non-GAAP financial measure referenced on this call, the company has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in its third quarter earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for OrthoPediatrics financial results prepared in accordance with GAAP.

In addition, the content on this conference call contains time sensitive information that is accurate only as of the date of this live broadcast today, 10/27/2026. Except as required by law, the company undertakes no obligation to revise or update any statements to reflect events or circumstances taking place after the date of this call. With that, I would like to turn the call over to David R. Bailey president and chief executive officer.

David R. Bailey: Thanks, Trip. Good afternoon, everyone, and thank you for joining us today. This was an outstanding quarter for OrthoPediatrics. I want to begin with the metric that matters most to us. During the quarter, we helped nearly 42 thousand children. Bringing our total impact to over 1.4 million kids helped. I am proud of what our team and our clinical partners continue to accomplish. We are reaching more patients each day with our pediatric focused products, increasing the quality of care, and improving outcomes for kids around the world. For the third quarter, we delivered record revenue of $727 million up 19% over the prior year. With substantial growth across all of our businesses.

Ongoing share gains across our legacy product portfolio served as a key driver alongside robust implant demand, a rapidly growing OPSD franchise and strong overall international results. Our existing portfolio continues to deliver. While the super cycle is starting to contribute growth. With additional product launches on the horizon. The combination of top line performance and improving profitability gives us a solid foundation as we enter our next chapter of growth. As a result, we are raising our full year revenue guidance to $270 million to $273 million representing growth of 14% to 16%. Beyond the top line, we continue to make significant progress on margins and profitability. With record adjusted EBITDA and positive free cash flow in the quarter.

We are very pleased with our continued ability to grow the business while strengthening its financial profile and driving leverage. At the same time, it is clear we are investing in innovation while staying focused on expenses, working capital, and capital deployment. Now let's talk briefly about our performance in the context of our innovation super cycle. We are extremely encouraged by the revenue contributions of our recent product launches. Such as 3P Hip, Traxeo, and VerteGlide to the third quarter performance. As utilization ramps, we are beginning to see the positive impact of these products both in clinical settings and in our P&L.

Which is proving the value of our work for the kids and clinicians who rely on our technology. That said, many of the products within our super cycle are still in the very early stages of full market release. With limited customer availability, or in their limited launches. Those products in the limited launch phase are not yet meaningfully contributing to growth. But many of these products combined with our recent full launches set us up well for multiple years of growth. The bottom line here is that we are still early in the multiyear cycle. And we believe the largest opportunities for market expansion deeper portfolio penetration, revenue impact, and leverage are still ahead of us.

We are being thoughtful with our set deployment strategy. Bringing sets to market at a steady pace as we move multiple innovations from development into the hands of surgeons and clinicians while ensuring that we manage the free cash flow implication to ensure we remain free cash flow break-even or better in 2026 and free cash flow positive in 2027 and beyond. Importantly, we are not just innovating new versions of products. These products address substantial clinical needs our surgeon partners experience every day. And our engineering and commercial teams are working with clinicians to turn those needs into pediatric specific solutions that cannot be addressed by any other products or companies in orthopedics.

We continue to focus on platform and product family development. And each additional innovation creates another opportunity to serve patients with unique clinical conditions, and deepens our role across pediatrics. As the super cycle progresses, the opportunities we have with these differentiated pediatric specific technologies are extending beyond revenue growth. Many of these systems are designed to support attractive product economics with higher ASP, ROI, and more efficient capital deployment. Additionally, they are generating negotiating power in contracting while driving pull through of legacy products. With our commercial infrastructure already in place, we can better serve the market with greater sales force efficiency and improve operating leverage. Our Osseo partnership, which continues to do well, highlights these efficiencies in action.

Osseo's biointegrative technologies broaden our portfolio. Alongside our complementary biotech partnership. While leveraging our existing commercial infrastructure. Overall, we see the super cycle as a multiyear growth margin, and capital efficiency story. As we advance our pipeline, we continue bringing products to market in a measured fashion balancing cash usage. This plan positions the super cycle as a long term sustainable growth driver. And allows us to best support our customers along the way. Moving to our businesses. Trauma and deformity delivered revenue of $52.6 million, up 19%. Continued share gains within our legacy implant portfolio, and healthy demand for Super Cycle products together with OPSB's growth drove this strong performance.

Our established systems remain an important growth engine, we are building on that position of strength as new pediatric technologies expand the opportunities our teams can pursue. Our pediatric plating platform, also known as 3P, is off to an extremely promising start. We continue to see success with the 3P Hip system, which has progressed from limited to a full commercial launch and is already contributing early revenue. Moving down the 3P pipeline, 3P Small, and 3P Mini are currently in limited launch, We are pleased to see the 3 p platform move beyond its initial offering toward a broader range of solutions designed for pediatric anatomy, and procedure needs.

With more to come, as we develop the full platform to become the most comprehensive pediatric plating product platform in the history of pediatrics. We continue to advance our super cycle. With teams focused on careful rollout surgeon support, and feedback as these systems progress. In addition to the progress with 3 p, we also recently reached important milestones in our pediatric nailing platform. In September, we announced that we had surpassed 1 thousand PNP Tibia nail implantations elsewhere following FDA clearance in late September PNP Retrograde Limited launched, and we had our first successful cases in October with very positive surgeon feedback. The system includes anatomic nails for trauma, and straight nails for deformity.

And builds on our ongoing success with PNP Femur and PNP Tibia and leverages existing PMP instrumentation. We are planning full commercialization for PNP Retrograde while continuing the ongoing deployment of PNP Tibia in 2027. Taken together, 3P Hip, 3P Small. 3P Mini, PNP Tibia, and PNP Retrograde, in addition to our Osseo partnership, show how much opportunity is in front of us in 2027 and beyond. Some of these products are not expected to contribute significant revenue in 2026. Their release shows that the super cycle is progressing as planned. And we expect the bigger growth opportunity to come in 2027 and beyond as we move toward full launches and wider adoption.

Our focus is now on training, service, and clinical feedback. To support those introductions. Turning to specialty bracing. OPSB once again delivered an outstanding quarter. With growth above 20%. Similar to the prior quarter, new products, same-store sales growth, and clinic expansion continue to drive this rapidly growing franchise. And we are very pleased that our bracing offerings continue to broaden our reach outside the operating room. OPSD has become an increasingly key part of our pediatric orthopedic platform and our long term growth strategy. Within OPSB, the super cycle of new product launch and development and hit. Is hitting a fever pitch with no end in sight.

In September, we completed the full marker release of the PD Hip rigid brace also known as the hippo. This product expands our hip care offering for children 3 years of age and younger including developmental dysplasia of the hip and postoperative stabilization. It addresses a significant pediatric need within our growing hip care portfolio. In October, we also announced the limited launch of the OPSB Knee TractorFIX contracture management orthosis. This knee product is designed to address preexisting or developing contractures in children and young adults undergoing tibial external fixation. By connecting directly to ORTHEX, and external fixation technologies, Knee TractorFIX, demonstrates the breadth of our portfolio across the continuum of care.

These launches build on a portfolio that has been transformed over the last few years and now includes DF2, homodular hip braces, MACU4, and the recently launched TRAXIO halo gravity traction system. As a reminder, TRAXIO supports halo gravity traction therapy in pediatric spine care. And illustrates the connection between OPSB and our surgical systems. Together, these offerings expand the range of solutions we provide for our customers. For example, of hospital interest in TRAXIO, we have already completely sold out of the initial limited units and are accelerating our 2027 build to meet the market demand. As we move to full market release. As our OPSB products continue to grow, we now have 34 OPSB systems.

Up from 31 at the start of the year, representing more than a third of our total product portfolio. Notably, our bracing product development is having a large impact on OPSB growth overall. We also extended our clinic footprint this quarter, and we are pleased to report that we now have over 60 clinics. More than double our clinic total just a few years ago. These key metrics show solid progress across our 3 pillar OPSB strategy. Including sales rep growth, new product development, and clinic expansion. We are encouraged by the momentum we are building in OPSB. We are bringing new products to market, while our clinic and commercial teams expand access to grow the business.

Connections to our surgical portfolio create additional opportunities to serve our clinical partners and support long term growth. And our consistent execution makes us highly confident in where the franchise is headed. In scoliosis, global revenue increased 18% to $1.92 billion in the third quarter. Continued share gains with the RESPONSE Fusion system were an important driver of that growth. Our established Fusion products continue to win business and drive our exceptional performance. While newer systems enhance our ability to support pediatric spine surgeons additional needs, OrthoPediatrics is the only provider offering a full range of solutions to treat scoliosis across the entire continuum of care.

Including the most complex and severe pediatric spinal deformities, both inside and outside of the Operating Room. While we placed 1 7D unit this quarter, compared with no units sold in the third quarter of 25, it was not a major growth driver. And the recurring utilization revenue was similar in both periods. With this in mind, our scoliosis results this quarter primarily reflect strong underlying implant demand. We are also seeing growing surgeon adoption of VerteGlide, and we remain excited about its role in expanding treatment options EOS patients with complex spinal pathology. That adoption is contributing to our scoliosis growth and broadening the range of solutions we can offer surgeons.

Our deep scoliosis portfolio, including VerteGlide, ApiFix, RESPONSE Fusion, TRAXIO, Firefly, 7D, and our pediatric bracing products and services, not to mention the ongoing development and first inpatient procedure of our electromechanical growing implant, eLLi, early 27 and the limited launch of our next generation fusion system, Veraxis, reinforces our ability to support patients across this continuum of care. Inside, and outside of the Operating Room. The setup for our scoliosis business over the next several years is very good. And we continue to develoP&Launch solutions that meet unmet needs for this very complicated condition. Moving to our international business. Revenue increased 18% to $14.8 million in the third quarter.

We saw very strong growth in EMEA across trauma and deformity, scoliosis, and bracing. LATAM also delivered solid underlying performance excluding the headwinds from lower set sales. Overall, our international teams are executing well with meaningful portfolio demand supporting the quarter's results. Product launches into EMEA enabled by recent EU MDR approvals are ongoing, and we are still in the early stages of the rollout. We are thrilled about the opportunity to bring these products to European clinicians helping to close significant clinical gaps for kids in those regions. And the recent strength of our international business only adds to our confidence. In summary, we are proud of our third quarter results.

Record revenue reflects continued share gains across our legacy portfolio, broad based implant demand, strong momentum at OPSB, and solid international execution. Our results demonstrate the strength of the pediatric platform we have built and we are still early in our product development super cycle. The full impact of our recently limited launch product is still ahead of us, as we move toward full commercial launches. We believe we are strongly positioned to deliver growth at scale, and we look forward to building on this quarter with the goal of helping more children. Than ever before. With that, like to turn the call over to Fred to provide more detail on our financial results. Fred?

Fred L. Hite: Thanks, David. Taking a closer look at the P and L, our third quarter of 26 record revenue of $72.7 million increased 19% compared to $61.2 million in the third quarter of 25. The increase in revenue in the third quarter was driven by strong demand across implants and OPSB. Growth in both trauma and deformity, and scoliosis, solid international performance, and continued execution across the business. US revenue was $57.9 million, a 19% increase compared to $48.7 million in the third quarter of 25. Representing approximately 80% of total revenue. Growth in the quarter was driven by strength in trauma and deformity, scoliosis, and continued OPSV performance.

Total international revenue was $14.8 million, representing growth of 18% compared to $12.5 million in the third quarter of 25, and approximately 20% of total revenue. International growth was underscored by robust European sales, partially offset by set sales timing in LatAm. In the third quarter of 26, trauma and deformity global revenue of $52.6 million increased 19%. Compared to $44.1 million in the prior year period. Growth was primarily driven by strong growth across numerous product lines. Specifically our cannulated screws, campy femur, PD plates, the addition of 3P Hip, as well as continued OPSV growth.

In the third quarter of 26, Scoliosis global revenue was $19.2 million, representing growth of 18% compared to $16.3 million in the prior year period. Scoliosis performance was primarily driven by increased revenue generated from VerteGlide, as well as RESPONSE. Finally, sports medicine other revenue in the third quarter of 26 was $900 thousand compared to $800 thousand in the prior year period. Looking at a few key metrics. For the third quarter of 26, gross profit margin was 74%, in line with the prior year period. Total operating expense was $58 million in the third quarter of 26, up 6% compared to $54.7 million in the prior year period.

The increase was mainly driven by increased sales commission expense, as well as additional personnel supporting clinic expansion and small scale acquisitions. Sales and marketing expenses increased $4.4 million or 24% compared to the prior year period of $23.1 million driven largely by increased sales commission expense and an overall increase in volume of units sold. General and administrative expenses increased $2.9 million or 10% year over year to $32 million in the third quarter of 26, primarily due to the additional personnel supporting clinic expansion, small-scale acquisitions, as well as increases in noncash stock comp, depreciation, amortization.

Intangible asset impairment was $600 thousand in the third quarter of 26, related to our annual impairment analysis where we determined the fair value of 2 trademark assets were below their respective carrying values. During the third quarter of 26, there were no restructuring expenses. As compared to $2.3 million of restructuring expenses in the third quarter of 25. Research and development expenses were $2.5 million in the third quarter of 26 up from $2.3 million in the prior year period. Total other expense was $1.8 million for the third quarter of 26 compared to $2.5 million for the same period last year.

The year over year change was primarily driven by a $800 thousand non-cash fair value adjustment of contingent consideration. GAAP net loss per share for the period was $0.25 per basic and diluted share compared to $0.50 per basic and diluted share for the same period last year. Non GAAP net loss per share for the period was $0.23 per basic and diluted share compared to $0.24 per basic and diluted share for the same period last year. Adjusted EBITDA was a record $6.9 million in the third quarter of 26 compared to $6.2 million in the third quarter of 25. This represents an adjusted EBITDA margin of approximately 10% driven by revenue growth and operating leverage.

As we balance growth investment with expense discipline. We ended the third quarter with $45 million in cash, short-term investment and restricted cash, and we still have another $20 million of term loan available to us. Debt deployment was $2.5 million in the third quarter of 26 compared to $4.1 million in the third quarter of 25. We continue to focus set deployment on higher return systems and remain disciplined in allocating capital to support growth. Free cash flow generated in the third quarter of 26 was $1.6 million compared to $3.4 million used in the third quarter of 25. This $5 million improvement was driven by growing adjusted EBITDA disciplined set deployment, and working capital improvements. Turning to guidance.

We are raising our full year 2026 revenue guidance to be in the range of $270 million to $273 million, representing growth of 14% to 16%. We are also reiterating our adjusted EBITDA guidance of approximately $25 million. We continue to expect to deploy approximately $10 million in sets and to achieve free cash flow break-even or better. In 2026 and beyond. Overall, we are executing well against our strategy to translate strong revenue growth into robust financial performance. Through expense discipline and a deliberate focus on selective growth investments with high returns. This quarter's results support our strategy and further reinforce durable long term value creation across our businesses. Operator, let's open the call for Q&A.

Operator: Thank you. [Operator Instructions]. If your question has been answered and you would like to remove yourself from the queue, press 11 again. Our first question comes from Caitlin Roberts with Canaccord Genuity. Your line is open.

Caitlin Roberts: Hi, great. Thank you so much for taking the questions. And congrats on the quarter. Great. Yeah. Maybe just starting off with the adjusted EBITDA and the free cash flow expectations for the rest of the year? Seems like with the set spend, you have maybe a similar amount of set spend left for the Q4. I mean, where's the leverage in the business do you expect to come from to hit that the guidance from an adjusted EBITDA and free cash flow perspective?

Fred L. Hite: Yeah. Absolutely. So in the third quarter, we did have some higher sales and marketing expenses. So it is 31.5% of sales. As compared to 30.5% of sales last year. The good news is all 6 of our top partners, sales partners, distributors achieve quota. And so their year to date ticker, on the performance kicked in and generated higher commissions for us. We will claw back some of that in the fourth quarter, so some of this is timing. But that was 1 driver. The second driver is just I think, continued investments in the start up clinics and rolling out the new products that we have been talking about and focusing on delivering future revenue.

But if you look at the business, you know, year to date, we are at $16 million of EBITDA. Compared to $10 million at this time last year. So that is a 60% improvement year over year and the revenue was up 16%. So we are overall very, very pleased with how we perform. And how we are managing the balance of revenue growth additional EBITDA and then cash flow? For the third quarter, we did turn positive. So it is the second quarter. The business has been positive free cash flow. $2 million compared to using 3 last year, so a $5 million improvement. Year to date, we are at about $6 million of usage.

So we need to generate $6 million of positive in the fourth quarter to get to the breakeven or better for the year. And in the fourth quarter of last year, we generated $10 million. So very, very confident that the free cash flow will absolutely get to breakeven or better for the year.

Caitlin Roberts: Wonderful. And, you just a question on the procedural environment and seasonality. I mean, what did you see in the Q and what are you seeing heading into the Q4?

David R. Bailey: Yeah. We have had very healthy procedure volumes I think the environment in children's hospitals, at least for pediatric orthopedics, has been very strong. I know there is been some mixed commentary out there from other companies, but least so far, what we have seen certainly throughout Q3 with the revenue growth that we posted, you can expect that we saw very, very nice volumes. Send great volumes in our clinics. And I think we do not see anything that would put that in jeopardy heading into Q4 and as we move into 2027. So very positive outlook, I think, as we go forward. Great. Thanks so much.

Operator: Thank you. Thank you. Thank you. Our next question comes from Rick Wise with Stifel. Your line is open.

Frederick Wise: Good evening, gentlemen. Great to see another solid quarter across the board here. Maybe talk to us a little about the fourth quarter a little more. You raised obviously low end, high end by roughly in line with the beat. But in the fourth quarter, and I appreciate the seasonal element here, but as you said, David, you are gaining share More of the products that are launched are picking up steam more are launching, OPSP doing great. Why would not we imagine that the c. You know, just thinking about the midpoint of your range, putting the fourth quarter something roughly like $69 million. Why could not that prove conservative given all those elements? Or is that too optimistic?

Well, I think that you know, we are trying to make sure that we do not get ahead of ourselves here as we do. You know, Fred holds us back. In all of these things, so, we are we are gonna try to stay keep our guide in check. I also would point out that in Q4 of last year, we had set sales to Brazil. And it is not it is possible that will not happen here again in Q4. We also did have pretty substantial 70 unit sales in Q4. And so I think a measured approach with some conservatism built into Q4 and built into the guide here is called for.

And, you know, we could get a number of 70 units in Q4. We will see. But I do not think we want to bank on those, and that is why we have set the guide the way we have throughout the year. And we will continue to keep the guide where it is for Q4.

Fred L. Hite: Yeah. And I am gonna stay for now focused on the guidance And help us think.

Frederick Wise: I know if you are you were ready to give 2027 guidance, would do it. You have not, but still got to ask about it. Help us think through, though, just some of the puts and takes as we think about 2027. Again, you are executing well. You are saying, David, that demand is strong. But I am particularly focused on the new products and the impact of this super cycle moving into ever fuller launch with each passing quarter. I mean, you started this year, I think, guiding us to 11% to 13%. Now we are up to 14% to 16% growth.

Why would not the setup for next year be more in this kind of a mid teens or better range as opposed to on the more conservative end. And maybe, again, talk about some of the puts and takes that we should be thinking about. Thank you.

Fred L. Hite: Yeah. Thanks, Rick. I think I would say we will probably be consistent in our methodology. You know, we did sell a couple of units. Of 70 in 2026. We may sell a unit or 2 here in the fourth quarter. And we are not going to count on that and put that in our guidance in future periods. We did sell some sets here in 2026, although lower than we did in 2025. Again, we are not gonna count on that and include those dollars in our guidance. As we continue to try to manage the profitability of the business, and improve the cash flow of the business.

Offsetting those, obviously, is the good news, from the new product launches. And as David said, it is still early, Those will be developing in 2027. They will not be in full force but we will definitely see a favorable impact from those in 2027, which will drive growth for the business. Thanks so much. Thanks, Ray.

Operator: Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Matthew O'Brien: Hi, David. Hi, Fred. This is Anna here on for Matthew today. Thanks for taking our questions. I wanted to ask again on the super cycle. Obviously, got a lot of new products coming down the pike over the next few years. We are all excited about clearly. But I was wondering beyond the benefit to the top line, how you expect the innovation pipeline to really contribute from a profitability standpoint? And what those main drivers of any profitability improvements would be, whether it is mix, pricing, more efficient use of instrument sets, scale, all of the above. Yeah. Anything there would be helpful, and then I have a follow-up.

David R. Bailey: Great. Well, I think you have hit the nail on the head. A little bit of all of the above. Each 1 of these products, have a higher ASP. You can assume that the implant margin of the business is improving. And we continue to get leverage on the on the contracting with all of these products, which is pulling through our existing, legacy products. So I think the impact of super cycle products certainly contributing to top line revenue, will contribute nicely in 2027 and beyond. But the fact remains that these sets are more efficient, They are far more capital efficient with higher ASPs, higher margin, and they return cash faster.

And, again, they have the benefit of pulling through a number of the other products that in large part are already deployed sitting in children's hospitals, and we get more usage of those products. Which obviously has impact on free cash flow. So I think, again, super cycle having positive impacts across the business overall I would also point to the fact that within OPSB, the super cycle products there are contributing really nicely. I mean, certainly, the clinic expansion is in same-store sales are driving top line, but I think we are very, very pleased with the output that we are getting from the R&D team on the OPSB side. Products like DF2, are really, really growing.

I think we have nearly half of all the children's hospitals in The US have already adopted DF2 here just over the last few years. And those are nice margin products that do not require any inventory deployment on our side. And so all of these products combined, I think, will benefit the P&L, certainly benefit free cash flow over the course of the next several years.

Matthew O'Brien: Got it. that is helpful. And then I guess just on that second point there, on the OPSB clinic expansion, I do not know if you mentioned how many territories you are in today. I know you said 60 clinics total. And you know, the long term target has been 27 territories by the end of 27. I was looking at my notes. It seems like you were in 13 territories since you last said anything. So just wondering how you are planning on, you know, maybe roughly doubling your territory exposure over the next 15 months or so.

And what the main criteria guiding decisions about opening or acquiring these new clinics is and your confidence in your ability to reach those target in a cash effective manner. Thanks.

David R. Bailey: Good question. what is really exciting on the clinic expansion side is just the demand opportunity for us. I would say we are well ahead of our territory expansion And at 60 plus clinics, we probably have more clinics now than we thought we would have at this time. So I am very pleased with what the team has been able to uncover there in terms of both greenfield opportunities and a few of the acquihire opportunities. I think as we continue to open more clinics, it is providing more opportunities. Surgeons are talking.

Hospitals are talking, talking about the experiences they have with our OPSB clinics, because they are focused exclusively on the pediatric bracing side, pediatric bracing care, And, there just seems to be more and more demand, more and more opportunity for us to open clinics and, we want to continue that momentum. We are probably maybe a little ahead of where we thought we would be, and we certainly do not want to slow that back. It does have a bit of an impact on the P&L.

Because we, opportunities to grow clinics come and there is an expense associated with that, but we really do not wanna slow down I think we want to extinguish as much of the demand as possible. And with 60 clinics and 300 children's hospitals, there is an enormous runway of growth opportunities for us. And when you combine that, with surgeon access to all of these new products, that are sometimes used sold directly to the hospital, in other cases, sold through our clinics. it is just a really exciting setup for the next several years. Awesome. Thanks. Thank you.

Operator: Thank you. Our next question comes from Ryan Zimmerman with the U. S. Bancorp. BTIG. Your line is open.

Analyst: Hi. This is Izzy on for Ryan. Thanks for taking the question. I just wanted to go back to the super cycle if we could for a while. David, I know you talked about the number of products that are just beginning limited market release. So I was hoping if you could provide some commentary on timing as to when we might see these move into full launches. And what do you like to see prior to fully launching a product.

David R. Bailey: Yeah. Good question. So at this stage, we are in full market release of the 3P hip. So that is the only product within the 3P family right now that is in full market release. We will be launching more and more sets of the 3P Hip over the course of the next several quarters. So growth we will see in the trauma and deformity business from 3P hip will be very similar to kind of the long tail of growth you see with all of our products. I mean, at this stage, we are still launching 3. Or the PMP Tibia, and it is been out a few years, but still driving very, very strong growth.

So 3P Hip, 3 p tibia is still, you know, in commercial release. But very early at least for 3P Hip in commercial release. The 3P Small and mini we have very few sets out there. Or starting to do procedures at some of the KOL hospitals the key opinion leader hospitals where, we have designed the products. We are getting very positive results. And we like what we have seen so far. I think the small mini is probably a first half to middle. You know, first half of next year type of story when we move into full market release. On the scoliosis side, VerteGlide is moving.

Really from early adoption and just having a few sets to getting more and more sets VertiGlyde out there. We have now some 125 surgeons or so trained. Upwards of 40 hospitals that have been utilizing Vertiglyde. So it is really moving into full commercial release. But, again, a long tail of growth opportunity for us there. So I think VerteGlide will be a story for us in 2027. As well as the 3P Small mini, 3P Hip, On the PNP Retrograde side, we have not talked as much about that.

With you all over the last, 6 months or so, but I think we did point that we thought we were gonna get first cases, by the end of 26. Very pleased that went through FDA very rapidly. Our suppliers had product available to us. We put a few sets and started doing first cases here in October. Those results look very good and are giving us confidence we can, you know, get sets on order, and that is probably a full market release sometime mid next year. So we have got a really nice setup with the products that are just now in full release. We will start releasing more products in 2027.

And, again, you know how long this tail of growth these things have. We are prime. Trying to be judicious with how many sets we deploy at 1 time. Balancing the need for growth against positive free cash flow, and certainly projecting positive free cash flow in 2027. So there is a bit of a tug of war sometimes with our business leaders as to how many sets we wanna deploy. But I think we will continue to be I will not say conservative, but not overly aggressive in our use of cash.

And I think we have a really nice setup here for all of these so many of these Super Cycle products in 2027 that will not just benefit numbers in 2027, but for the next 2, 3 years in the future. there is more products that we are not even talking about yet that are in product development that next year will start to have beta launches. So the cycle is, again, just starting, and I like where this is heading over the next few years. that is really helpful. Thank you. And with that context in mind, how should we think about contributions to the OUS business? I know we saw that strong 18% this quarter.

Which came ahead of our own expectations. So will we continue to see a similar ramp in these international markets? How are the super cycle products contributing there? Thanks for taking the questions. Yeah. So at this stage, the super cycle products really are not contemplated for the international markets. We have so many products that we have not launched, particularly in Europe, yet that have been legacy products now in the US. That we just now have received EU MDR approval for.

I think the growth that you are seeing, particularly in EMEA, is as a result of continued market demand for a lot of legacy products, Some of the early you know, green shoots of EU MDR products that are getting to market really seeing really nice scoliosis growth in Europe. You may remember, but just a few years ago, we essentially did not have a scoliosis presence in Europe. And because of the work of our regulatory teams and getting several products on the scoliosis side approved through EU MDR, We now have the majority of the product portfolio, particularly the response product portfolio available in Europe. And that is driving a lot of growth.

I would point out too that a number of the products on the OPSB side are much easier to get approvals for, outside of the United States. And, again, they do not require us consigning inventory So we are planning and starting to sell products particularly like DF2, to international markets. Although, we are probably just barely in the batter's box in terms of our opportunities for some of those OPS products outside of the United States. I think you could expect us to see strong international growth throughout Obviously, you have seen it throughout 2026. I think there is, again, a nice setup for us outside of The United States as more and more of these products get there.

Our bracing business continues to grow outside of The US. But it is slightly offset by, you know, the work that we are doing in LATSAM. Once again in the quarter, we restricted set sales, particularly to Brazil. Most of those set sales were on the scoliosis side. Which actually makes our 18% scoliosis number look even more impressive. And, we are gonna be very smart and very conservative about how we, move some of those products into the market. Where we, you know, we do not wanna have larger AR balances. So think we are getting it right in Brazil. I think we are getting it right in LATAM.

But some of the growth that you are seeing on the international business is being tampered tempered by some of the performances we are getting out of LATAM in particular, Brazil. Thank you.

Operator: Our next question comes from Mike Matson with Needham and Company. Your line is open.

Michael Matson: Yes. Thanks for taking my questions. I guess I wanted to start with 1 on contracting. Made some comments there. I am just curious about how many of your hospital customers are under contract and how does that sort of affect your business in those facilities? You know, is it resulting kind of like market share gains or anything like that is Yeah.

David R. Bailey: So the majority of our hospitals are on some form of contract. Obviously, most are on Symbol pricing contracts related to the products that they have been using over the course of the last several years. You know, our sales team, company overall, commercial team is trying to get more and more usage of the products that are in the hospital already. Just because they are in the hospital does not mean that every surgeon in the hospital is utilizing that. When we bring a product like 3P Hip, admittedly, there is still limited volumes of sets. We do not want to use our cash as aggressively as maybe we would have in the past.

And so there is some scarcity for some of these, products. Particularly when we have seen some of the competitive products from other companies be pulled from the market. We have just frankly, so many 1-of-a-kind, no-threat-of-a-substitute products that it does allow us, Mike, to go into a hospital, and build on the contracts, the pricing contracts that we have hopefully convert some of those pricing contracts into either single vendor or, you know, maybe high dual-vendor contracts. That can get us 50, 60, 70, maybe even 80% market share.

And what that does is not only allows those hospitals to access the new products in the super cycle, which is great for them, great for their patients, great for us, but it also pulls through some of those legacy sets that are on the shelf oftentimes. So it does not require us deploying more capital.

Those sets are on the shelf, and then gets a higher compliance rate to some of the less differentiated technologies like cannulated screws, like flexible nails, and we are seeing growth in those product lines right now. that is why you hear me lead off every 1 of these calls with, you know, obviously, still the number 1 driver of growth for us is gaining market share within the legacy products And, again, I think what we really like about that is it is not requiring a bunch of additional set deployment. And so as those sets become better utilized, that has a very positive impact on free cash flow for us.

Michael Matson: Okay. Got it. And then just looking at kind of the P&L for the first 3 quarters of the year, you know, from an operating expense perspective, it looks like you know, R&D and G&A have been relatively flat year over year. But sales and marketing looks like it is tracking more in line with your sales growth. About 15% to 16% growth, if my math is correct. So not that is a bad thing, but I guess just wondering, is there any potential to generate leverage in sales and marketing? Or given the investments you are having to make, is that going to kind of grow more in line with sales in, you know, in future periods?

Fred L. Hite: Yeah. So in the first couple of quarters, we did get a little bit of leverage, sales in the second quarter were much higher than they were in the first quarter. Which drove the sales and marketing dollars up second quarter as compared to the first quarter. But the percentages was still pretty good. I would say the third quarter was a bit of an anomaly where it was a little higher than last year. And we do not expect that is going to repeat. So there will be some leverage that we will gain in the fourth quarter. And then some additional leverage that we will gain going into next year as well.

So I would call third quarter a bit of an anomaly and probably not expected to see that type of an increase in the future. Okay. Understand. Thank you. Thanks, Mike.

Operator: Our next comes from Benjamin Haynor with Lake Street Capital Markets. Your line is open.

Benjamin Haynor: Good afternoon, gentlemen. Thanks for taking the questions. First off for me, on OPSC, I mean, really sounds like that is going great guns. Just thinking back a couple of years, if you started talking about this, it really seems like the economics and maybe even the mix between Acquire and De Novo has kind of tracked to what you guys thought. I guess it is that a fair statement? And with how fast you have rolled these things out, should we think about this as kind of every opportunity that you get where there is an acquihire or a good location that you can get within a hospital that you kind of take it? Just big picture of what.

Any thoughts there?

David R. Bailey: Yeah. And I think you are right in terms of. This has gone extremely well. I think the unit economics or the location economics have worked as we thought they would work. Certainly, as we have said, Greenfield locations take longer. And there is more upfront expense before you drive revenue, So we are balancing how fast we want to greenfield more and more locations. We are not necessarily turning down any options, but I do think that we are trying to balance the best options that drive profitability most rapidly. And obviously, we are balancing goals with accounts where we have very, very solid relations on the implant side. You are hearing a lot of the OPSB new products.

They also tie out in some cases to some of the implant systems we sell. So TRAXIO is, you know, the halo gravity traction system. there is a surgical procedure that has hardware associated with it. We currently do not sell the hardware, but we will in the future. And that will be a new product for us, but that ties into usage of Vertiglyde. It ties into usage of our fusion system. And so you are seeing a nice synergy, between those systems. Same thing with the knee tractor fix where we are seeing the tile of hospitals who are using ORTHEX, and then utilizing those Orthex patients going to our clinics and getting the Tractor Fix system.

I think that is a perfect synergy And so, you know, some we are being fairly judicious about where we target new clinic opportunities. And a lot of those new clinic opportunities are in places where we have again, very strong relationships, already good contracting, high usage of our of our implant systems. And in those places, you can imagine there is an extremely high demand We are getting pulled into those conversations. By hospitals and by physicians, which is fantastic. I mean, that is what you would always hope for I just think there is some limit just from a total personnel, you know, that we cannot do them all at once.

And so that is probably the limiting factor here. And just the fact that we do not wanna get ahead of ourselves on the expense side. Got it.

Benjamin Haynor: That makes sense. And then just thinking about the DF2 being in, you know, half of children's hospitals now. Are there, I guess, any commonalities between those hospitals or maybe the ones that are. it is not in yet. And then you know, with a 30 odd other kinda OPSB products, do you see sort of adoption curves that look like DF2 in any of them or all of them for that matter?

David R. Bailey: Well, a number of the 30 you know, products that we started with came with the Boston o m p acquisition or the MDL acquisition. I would argue that particularly with our clubfoot bracing products, we have extremely high market share in the US. Well. And really outside of the United States. So adoption has been it is very, very high. Probably not a huge volume of growth there for some of those 30 products. But products like DF2 I mean, I have been doing this a long time, nearly 20 years. I am not certain I have seen a faster adoption of any product we have ever developed.

Really, a complete change to what now is the gold standard in terms of how you take care of these young children with femur fractures, and, you know, on the virtual elimination of spica casting. I think some of the pathway to adoption is, is. it is different in every account. I would say the first half of those places are places where we probably had know, maybe slightly better relationships on the implant side. And surgeons who heard about DF2 early and were very aggressively wanting their hospitals to stock.

I would guess over the course of the next you know, few years, that DF2 will become ubiquitous in every children's hospital in The United States and around the world. And so, it is still got growth ahead of it. I also think that you know, not every product on the OPSB side is going to be DF2. Completely changing the gold standard. But I do think we have some products in the pipeline that will. And if you look at the economics of a product line like DF2, it is very, very good. This has relatively high ASPs. Certainly not you know, that of a scoliosis procedure or a PNP Femur.

But relatively high ASPs, really nice margin, and no set deployment required. And so, you know, the more products like DF2 that we can develop, we can get to market. And, frankly, just the patient impact of a product like DF2 and some of these new products that the OPSB team is developing It is it is really remarkable. it is why we do this. And if we can do this and do this well, impact patients, in a very positive way, and do it in a very economically friendly way for the business, then we wanna do more of that. I think that is what you hear in my excitement on the R&D side of OPSB.

Just think we got more DF2s out there, and it is gonna be very exciting in the future. Excellent. Thank you very much for taking the questions, and congrats on the quarter. Thanks, Benjamin.

Operator: Thank you. Our next question comes from Matthew Blackman with TD Cowen. Your line is open.

Matthew Blackman: Hi, David and Fred. This is Drew on for Matthew tonight. David, a couple of product questions for you. And then Fred, I have a question on EBITDA. But David, you talked about that you mentioned this earlier that you are up to about 125 new surgeons trained on VerteGlide. I was wondering if you might be able to update that metric. I think that was the number from last quarter. And then curious where you are kind of seeing that growth from or that user base coming from. Is that existing users? Or de novo users? And any way to quantify the pull through that you are seeing today in the portfolio?

And then for eLLi, maybe timing might have slipped a little bit from what you were saying for the last quarter with first inpatient cases starting in 2027. Just maybe what has to happen for you to kind of get that across the finish line? what is left to do? And you said last quarter too that this could be a bigger product than VerteGlide. Could that actually happen in 2027? Or is it going to take time for this 1 to ramp up?

David R. Bailey: Yeah. Good questions, Drew. Lot to unpack there. So the 01/25 on the VerteGlide, I think, is the formal training that we have done We did not have any very large scale surgeons traveling to a specific location to be trained on VerteGlide in the quarter. We certainly are training surgeons every day at a local level. So I am not sure the total volume of surgeons that we now have trained, but I can get you a an updated number. I think what we have seen in terms of user base of Vertiglyde continues to grow. it is a combination of users who are using it more frequently because they had a great experience. Combined with completely new users.

We do not have long term data out, but I would say that, you know, we hope within the next year or so that we are gonna be getting patients to a few years out, which would be very impactful for the business, and we are tracking all these patients. So, you know, Vertiglyte is a complex procedure. there is not been very many good solutions for EOS over the course of many years. And so I think we are very pleased with the rate of adoption the user base.

And I will say that some of the accounts some pretty substantial accounts for us right now on the scoliosis side are as a result of the fact that surgeons had such great such a great user experience with VerteGlide. Always been our strategy to deliver these very complex surgical solutions in places where other companies are not willing to invest. And then obviously, drive the revenue and the patient impact from those procedures, but also drive pull through from response. And the underlying implant growth in the quarter was very strong. And I think that you could assume that is not all vertical.

A lot of that is pull through and new users of our of our response fusion side. With respect to eLLi, frankly, is going to come down to an FDA decision. I think we are doing the work that we need to do. We need to get our IDE approved. I cannot guarantee exactly when that timing is, but I think we are close. And, certainly, we will notify the market when we get that approved. I do think we will be doing surgeries you know, certainly does not look like we will be doing surgeries by the end of this year, but, looks like into early 27.

And we will continue to have an ongoing discussion with the FDA about how many of those procedures are required before we can move to full market release. Again, Ellie is a very complex device, as you know. And you are right in saying that we believe eLLi can be a substantially larger opportunity for us than VerteGlide. It will have some impact on 2027, but it will probably be in a limited release fashion. This is more a 2028, 2029 story. That said, when we get the device fully approved, we think this is gonna very. Have a very rapid surge in uptick.

When surgeons see this technology, when they see it in the lab, the feedback is extremely positive. We have a number of surgeons that are willing to travel to Warsaw for VIP visits, and 1 of the things they all wanna see is Ellie. Because I think it is so compelling. So it is a big opportunity when you partner eLLi with Veraxis or with VerteGlide. And then next year, we do the early release or the beta release of Veraxis, our new fusion system. Combined with TRAXIO and the surgical opportunity with TRAXIO as well. that is why I point that the next year, the next several years, really, on the scoliosis business look quite bright for us.

Matthew Blackman: Got it. Thanks, David. And Fred, for you on EBITDA. There any way that you might be able to and I know there is a few moving pieces, in the third quarter to the fourth quarter with sales and marketing and the fair value adjustment here. But is there any way to parse out kind of what you are spending? Or maybe said differently, how profitable the clinics are, and how that is driving EBITDA? And then fourth quarter, you are going to have 60% drop through kind of by my math.

Like, it is probably not sustainable, but maybe how do we kind of think about a sustainable drop through number as you are still focusing on growth, but also profitability? Thanks for taking the questions.

Fred L. Hite: Yeah. Absolutely. So, the growth in OPSB is kind of 2 sided. Right? So the ones that are up and running, have good volume, going through there. Look very, very good. The ones that are brand new, are similar to our models, but they are obviously costing money for the first 6 months as we get them established. We have got some models and some numbers we put in our investor deck for some time now, and I would say we are tracking towards those. Very favorably. But, clearly, when we are opening new Greenfield clinics in particular, there is an upfront.

So it is kind of a mixed bag, growing the ones that are there and established and then also investing for the future at the same time. So that is on the OPSB side. You know, there is there is probably, I do not know, $700 thousand maybe of timing that fell into the third quarter that is not going to repeat in the fourth quarter, so we will get that advantage. And as I mentioned earlier, you know, year to date, EBITDA is growing at 60%. Year over year compared to 16% revenue growth on a year to date basis.

And we think those are pretty impressive results, and, we would expect that level of performance to continue into the future. Thank you.

Operator: Our next question comes from Ravi Misra with Truist Securities.

Ravi Misra: Hey, good evening. Thanks for taking the question. So just a couple of questions on OUS. And then maybe 1, I will start first with gross margin. Just trying to figure out, nice solid gross margin, a beat even with 70 sales. So can you maybe parse out the benefit from kind of mix versus pricing and volumes here? And how we should be thinking about that in the fourth quarter? And then I will just ask the OUS questions upfront. First, just Osseo, are you thinking about any OUS? Distribution for that product? And second, just for OPSB, you mentioned it is not on consignment. Just curious what the go to market model is.

To make this a more substantial portion of the revenue going forward? Thanks.

Fred L. Hite: Yeah, absolutely. So very, pleased with the gross margin. 74%, equal to last year. This year, we did have, 70 units. Last year, we had none. And that obviously does drag it down a little bit. As we have mentioned in the past, the implant business has a stronger gross margin. Than OPSB. But the contribution margin from OPSB is equal to the implant business. So as the OPSB business is growing faster, that does put pressure on the gross margin. We were able to offset that pressure with favorable performance Also, having domestic growing faster than the OUS helps the business. And the contribution of the new products that we talked about definitely helps that gross margin rate.

I think 73% is probably the right number for the fourth quarter. Which will put us in a very strong position for the full year.

David R. Bailey: Yeah. On the international questions, Robbie, really have not contemplated Osseo outside of the United States. Not saying that is not possible at some point in time, but at this stage, you know, our focus has been rolling these products out in The US and we are extremely early in that process. And so have not gotten to how it could happen outside of The United States, but again, it is a possibility at some point in time in the future. You know, when we talk about the OPSV products, so we go to market with those products in a few different ways.

Some of those products simply get ordered directly either through our sales team through our implant sales team, or our OPSB teams, and we sell those directly to the We sell those directly to whether it is the emergency room or the hospital clinic. And so we literally manufacture them, in 1 of our locations and ship them directly and get paid shortly thereafter. And so, there is no stocking requirement from our perspective or on our side to consign that inventory. Then others of our implant. Of our OPSP products obviously get sold through our clinics. And so it is less of a wholesale transaction, and we manufacture it for a patient that comes into 1 of our clinics.

It gets fitted, the brace gets applied in our clinics, and then we bill in insurance directly for that, that clinic visit, which is, you can imagine, quite profitable for us in that instance. Either way, we like the go to market strategy of both. It gives us opportunities to sell to hospitals that may. We may not have a clinic or we may not even be contemplating clinics. And, you know, products like DF2 are placed oftentimes in the Operating Room. Or placed on a patient some cases even in the doctor's office or in the emergency room. And so they are not as applicable for 1 of our OPSB clinics.

TRAXIO is a product that is literally sold to the hospital it is a capital. Small capital sale within the residuals of some of the reusables. And eventually, Traxeo will have an implant component to it, hopefully, here in the next few quarters. And so that is OPSB product that is sold directly to the hospital. It does not touch any of our clinics. So it is a bit of a mixed bag in terms of how we go to market with those products. Each 1 of them has a unique, you know, sales strategy and go to market strategy.

And in any event, we like the demand profile of these products We like the margin of these products, and we like the fact that there is no inventory requirements. And so the more we do of those products, I think the better we will be. Thank you.

Operator: I am showing no further questions at this time. I would like to turn the call back over to David for closing remarks.

David R. Bailey: Great. Thanks, operator. Well, once again, thank you all for joining us this evening. I think we will be at a number of conferences upcoming. And so and I look forward to seeing you in the future. Thanks for your interest, and have a great evening.

Operator: Thank you for your participation. You may now disconnect.

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