OrthoPediatrics (KIDS) Q1 2026 Earnings Transcript

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DATE

Thursday, April 30, 2026, at 4:30 p.m. ET

CALL PARTICIPANTS

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

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TAKEAWAYS

• Patient Impact -- 45,000 children were treated in the quarter, extending the company’s cumulative reach to nearly 1.4 million pediatric patients to date.
• Total Revenue -- $59.4 million, reflecting a 13% increase over 2025, led by Trauma and Deformity, Scoliosis, and OPSB segments.
• U.S. Revenue -- $45.3 million, up 11%, accounting for 76% of total revenue.
• International Revenue -- $414.1 million, up 22%, representing 24% of total revenue, with notable growth in EMEA and Brazil.
• Trauma and Deformity (T&D) Global Revenue -- $43 million, up 14%, primarily driven by TRON, X-Fix, and OPSB products.
• Scoliosis Global Revenue -- $15.4 million, up 13%, fueled by higher sales of Response and Vertiglyde systems, and 7D technology revenue.
• Sports Medicine/Other Revenue -- $900,000, consistent from the prior year.
• Gross Profit Margin -- 73%, unchanged from the prior year.
• Total Operating Expense -- $51.7 million, a $2.5 million or 5% increase, mainly due to sales and marketing growth, and personnel additions for clinic expansion.
• Sales & Marketing Expenses -- $18.5 million, up $1.9 million or 11%, due to higher commissions and volume.
• General & Administrative Expenses -- $31 million, up $700,000 or 2%, attributed to personnel and partially offset by restructuring savings.
• Research & Development Expense -- $2.2 million, a decrease of $100,000 or 5%.
• GAAP Net Loss Per Share -- $0.45, an improvement from a $0.46 loss per share in the prior-year period.
• Non-GAAP Net Loss Per Share -- $0.42, compared to a $0.39 loss per share in 2025.
• Adjusted EBITDA -- $2.2 million, reversing a $400,000 loss last year.
• Cash, Short-term Investments, and Restricted Cash -- $50.9 million at quarter end.
• Set Deployment -- $2.3 million, down from $3.6 million; new launches generate higher revenue per deployed dollar than legacy systems.
• Free Cash Flow Used -- $5 million, a 40% reduction from the $8.4 million used in 2025, driven by stronger EBITDA, reduced set deployment, and working capital gains.
• Credit Facility Expansion -- Amended agreement with Braidwell LP adds a $20 million delayed-draw term loan, enhancing liquidity through June 2027 while avoiding dilution.
• 2026 Revenue Guidance -- Raised to $263 million-$267 million (11%-13% growth), with expectations for ~$25 million adjusted EBITDA, ~$10 million set deployment, and full-year free cash flow breakeven.
• OPSB Segment Growth -- Delivered over 20% revenue growth, fueled by new products, clinic expansion, and territory growth initiatives.
• 3P Hip and Vertiglyde Product Updates -- Beta launches have generated "strong demand" and higher ASPs; management expects scaling to drive further margin and capital efficiency improvement as set deployment increases in upcoming quarters.
• International Regulatory Milestones -- Full EU MDR approval received for key portfolios, enabling access to additional markets in Europe and accelerating second-half growth potential.

SUMMARY

Management emphasized OrthoPediatrics Corp. (NASDAQ:KIDS)'s entry into a multi-year innovation cycle, with recent product launches, including 3P Hip and Vertiglyde, beginning to contribute to financial results and operational metrics. The OPSB segment showed meaningful progress with product commercialization and expanded clinic presence, supporting both revenue and margin targets. The company highlighted its cash position, improved cash flow usage, and increased access to capital through an expanded credit facility as key enablers of long-term growth initiatives and new market penetration. International growth outpaced domestic performance, with early EU MDR-related launches and Brazilian operations signaling further upside in the coming quarters.

• Management stated, "we are positioned well for more meaningful impacts in each of the upcoming quarters," as product launches scale and set deployment rises.
• The launch of the Traxio Halo Gravity Traction System has generated immediate quote requests, enabling OrthoPediatrics Corp. to engage in more bundled contract discussions with children's hospitals.
• The first-in-patient procedures for the Ellie spinal implant and the Veraxis next-generation fusion platform are both targeted by year end, with Ellie expected to reach the market in late 2026 and Veraxis dependent on a 510(k) submission.
• Adjusted EBITDA improvement and R&D spend reduction reflected operating leverage as new products contributed; management noted quarterly seasonality in cash flow remains, with negative quarters possible but full-year breakeven targeted.
• Latin America (LATAM) is anticipated to shift from headwind to tailwind, as the new Brazilian subsidiary enhances cash collection and logistics, although no additional distributor acquisitions are currently planned.
• OPSB clinic expansion strategies combine greenfield openings and acqui-hires, with penetration also deepening within active territories to leverage same-store growth potential.
• Management outlined a plan to introduce four to five new OPSB products annually, reinforcing a consistent stream of innovation for future growth.
• Artificial intelligence investments are advancing, with targeted deployment of six to eight AI agents in 2026 to improve clinical and operational efficiency across platforms and clinics.
• China and India are cited as future international expansion opportunities, though not yet built into guidance or near-term strategic plans.

INDUSTRY GLOSSARY

• OPSB: OrthoPediatrics Specialty Bracing, the company’s segment focused on pediatric bracing solutions and associated clinics.
• Set Deployment: The process of placing instrument and implant sets with hospitals and clinics, critical for driving sales in medical device businesses.
• EU MDR: European Union Medical Device Regulation, representing a stringent approval standard for medical devices required for European market access.
• 3P Hip: A proprietary pediatric plating system for hip procedures, part of OrthoPediatrics Corp.'s advanced implant product lineup.
• Vertiglyde: An early onset scoliosis system introduced by OrthoPediatrics Corp. to enable guided spinal growth in pediatric patients.
• Traxio: OrthoPediatrics Corp.'s Halo Gravity Traction System for non-surgical management of complex scoliosis cases in children.
• Veraxis: The company’s next-generation pediatric spinal fusion platform, designed exclusively for treating pediatric spinal deformity.
• Ellie: An electromechanical smart spinal implant for early onset scoliosis, using RF power transmission for non-fusion spinal lengthening.
• 510(k): A U.S. Food and Drug Administration (FDA) premarket submission pathway for demonstrating that a new device is substantially equivalent to a marketed device.
• EMEA: Europe, Middle East, and Africa geographical region, a key international market for OrthoPediatrics Corp.
• PMP Tibia: A recent OrthoPediatrics Corp. product for tibial repair within the Pediatric Nailing Platform (PMP) family.
• Response: OrthoPediatrics Corp.'s proprietary spinal fusion system for pediatric scoliosis correction.
• 7D Technology: Navigation and robotic tools supporting complex spine procedures in OrthoPediatrics Corp.'s scoliosis product portfolio.

Full Conference Call Transcript

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 1995. These forward-looking statements are subject to numerous risks and uncertainties, and the company's actual results may differ materially. For a discussion of risk factors, I encourage you to review the company's 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 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 first 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 Corp. financial results prepared in accordance with GAAP.

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, 04/30/2026. 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. Afternoon, everyone, and thank you for joining us today. We are pleased to begin 2026 by highlighting our most meaningful metric, patient impact. In the first quarter, we supported the treatment of a record 45,000 children, extending our cumulative impact to nearly 1.4 million kids helped. Pediatric patients have long been underserved by solutions not tailored to their needs. We at OrthoPediatrics Corp. are dedicated to changing that through focused innovation and a continued commitment to this most important patient population. 2026 started strong with 13% first quarter revenue growth, further highlighted by significant improvements in adjusted EBITDA and free cash flow over the prior year.

We look closer at the quarter, we saw a softer start to the first quarter due to weather-related shutdowns in many of our OPSB clinics in January and February, but trends rebounded in March. Since then, momentum remains strong and is carrying into the second quarter. Growth remains solid across the business, with particular strength internationally, and continued 20% plus expansion in OPSB driven by new products and clinic growth. Importantly, we are at the earliest stages of the multiyear innovation super cycle consisting of what we believe is the most clinically significant and technologically advanced series of product launches in our history.

During the quarter, we began to see small contributions from recent beta launches, including 3P Hip and Vertiglyde. These products are generating strong demand, and we are confident that as we move into full market release and increase set deployments in the second quarter, we are positioned well for more meaningful impacts in each of the upcoming quarters. Early trends are reinforcing our expectations for higher ASPs, margin expansion, and improved capital efficiency as each of these products continues to scale. As we expand our portfolio and reinforce our core orthopedic platform in this unassailable position, we see a clear opportunity for continued growth.

Our consistent execution underpins our confidence in sustained revenue growth, expanding profitability, and achieving free cash flow breakeven in 2026. We continue to gain share across each of our businesses with our legacy product portfolio, and the share gain will only continue to accelerate as we execute our super cycle and further expand OPSB. Our powerful competitive position is becoming increasingly dominant and will only grow stronger as we further execute our strategy and demonstrate both top and bottom-line expansion in a way that is unique in our industry. We remain focused on enhancing shareholder value while advancing our cause of helping 1 million kids per year in the future.

Accordingly, we are raising our 2026 revenue guidance to a range of $263 million to $267 million, representing 11% to 13% growth, and reaffirming our expectations for approximately $25 million in adjusted EBITDA and full-year free cash flow breakeven driven by continued share gains, OPSB expansion, and execution of our multiyear new product launch cycle. Turning to our T&D business, in 2026 the T&D business grew by 14%, driven by increased sales of our flagship trauma and deformity systems and early returns from the beta launch of new implant and OPSB systems.

We continue to see success in case volume growth as we move deeper into the launch of PMP Tibia, and we will pick up additional share as we launch 3P Hip. We are also pleased to advance toward the beta launch of the next 3P system, 3P Small Mini, beyond those products, which should kick off late in Q2. We are advancing the next system within the 3P family as well as the next TMP system, PMP Retrograde. Looking closer at 3P, our 3P Hip system has exceeded early expectations. With limited set availability in Q1, we will increase supply of 3P Hip in Q2 and commence the beta launch of 3P Small Mini.

We expect a more meaningful impact on growth in the second half of the year. We will also continue advancing additional systems over the next several years. The 3P platform is building strong momentum, and we believe it will become the most advanced and comprehensive pediatric plating system in our field. Overall, T&D remains a key growth driver for the business supported by consistent execution and a pipeline that is both highly clinically relevant and increasingly robust. We believe the depth and quality of our development efforts position us well to sustain innovation, drive future revenue growth, and reinforce our leadership position in the market.

Looking at our specialty bracing business, OPSB remains a key growth driver and delivered over 20% growth in the quarter, contributing meaningfully to both revenue expansion and profitability. Our clinic expansion strategy continues to progress ahead of plan, supported by both greenfield openings and selective acqui-hires. Same-store sales growth remained strong, reinforced by ongoing new product introductions and continued sales force expansion. Overall, we are on track to meet or exceed our goal of expanding to 27 territories by 2027. Within OPSB, we are seeing the impact of our new product development engine. We have recently advanced the modular hip brace portfolio into commercial release and initiated the beta launch of the Traxio Halo Gravity Traction System.

Early feedback for Traxio has been strong, with initial customer engagement including multiple requests for quotes for this differentiated system. In addition, we remain on track to beta launch the OP contracture management brace, which is designed to integrate directly with our Orthex external fixation platform, further enhancing synergies across our surgical and nonsurgical offerings. OPSB is progressing as planned toward our goal of delivering four to five new product introductions annually, reinforcing a consistent cadence of innovation going forward. We continue to execute effectively across our three-pillar OPSB strategy, which includes sales force expansion, targeted product innovation, and disciplined clinic growth.

Overall, we are very pleased with the performance of the business and its increasingly important role within our broader growth strategy. In scoliosis, we experienced 13% growth in the first quarter 2026, driven by increased sales of Response and Vertiglyde systems, and revenue generated from 7D technology. During the quarter, we continued our push into the EOS space with Response Ribbon Pelvic and the Vertiglyde systems, which we believe provide a promising new growth-friendly treatment option for young scoliosis patients. Looking more closely at this progress, we continue to see strong demand for Vertiglyde despite very limited set availability.

With approximately 80 surgeons now trained and additional training sessions scheduled, this success is triggering our move to full market release of this important system in the second quarter supported by additional set deployment to meet the rising demand. This growing adoption, along with 7D placements, is driving higher utilization of our Response fusion system, all ahead of the anticipated limited release of our next-generation scoliosis fusion platform, Veraxis, purposely built exclusively for the treatment of pediatric spinal deformity.

Designed from the ground up for growing patients and the surgeons who treat them, Veraxis represents a step change in fusion technology by combining advanced implant design, streamlined instrumentation, and integrated digital planning into a single cohesive platform with first surgeries by year end. In addition, we remain on track for first-in-patient procedures with Ellie, our third and most complex EOS product, in the fourth quarter. As a reminder, Ellie is a next-generation smart electromechanical lengthening spinal implant designed to deliver consistent, reliable power through RF power transmission. We expect the first implantation of the Ellie device in late 2026.

We are proud of how far our EOS products have come, and they further bolster our belief that our EOS strategy is working. We believe that OrthoPediatrics Corp. is continuing to establish an unmatched portfolio of pediatric scoliosis technology enabling clinicians to treat even the most complex and severe pediatric spinal deformities with a comprehensive set of advanced solutions. Moving to our international business, OUS had a strong first quarter, with growth in excess of 20% highlighted by great sales in EMEA and a nice performance in Brazil under our new agency structure. Continued success in EMEA is being driven by increased sales of legacy T&D products in our agency markets and a small but rapidly growing scoliosis franchise.

We are pleased to have received full EU MDR approval for our T&D portfolio, scoliosis products, and most recently, our external fixation devices. We are now actively working to make these long-anticipated products available across our European markets, and we expect this expanded access to support improved EMEA growth in 2026. LATAM is building on our structural improvement in Brazil. While we are still cautious, we do believe an improvement is on track, and over the next several quarters, we expect to turn this headwind into a potential tailwind.

The structural improvements we have made in Brazil through the purchase of one of our Brazilian distributors will improve our cash collection and, over time, will normalize ordering patterns and allow for additional growth and market penetration. In addition, we were once again the largest sponsor of the European Orthopedic Society meeting in Seville, Spain. In early April, we showcased a broad range of new products that had previously not been available in Europe under prior regulatory constraints. These offerings were well received by both surgeons and distributors and are expected to contribute to revenue growth in the second half of the year.

Lastly, looking beyond our traditional segments, we are building on the success of our 7D experience and are kicking off the launch of our digital preoperative and intraoperative workflow management platform, Playbook, and expect deployment of beta launch sites in 2026. Beyond that, we completed the deployment and the first cases with the Iota Motion robot for pediatric cochlear implant placement and expect additional deployments throughout 2026 and beyond. OrthoPediatrics Corp. is also making deliberate, focused investments in artificial intelligence to drive meaningful clinical and operational impact. We are advancing multiple AI initiatives, including embedding intelligence into our Playbook platform, leveraging AI-enabled tools to support presurgical planning, and evaluating opportunities to enhance patient care and efficiency across our OPSB clinics.

Earlier this year, we completed an internal AI flight school to build organizational readiness, and we have established a corporate objective to deploy six to eight targeted AI agents to drive tangible efficiencies. After prioritizing data security and foundational controls last year, our focus in 2026 is firmly on execution, moving from experimentation to scaled implementation that delivers real value to surgeons, clinicians, and our teams. In summary, we believe the company is entering its most compelling phase of expansion to date, supported by a multiyear product launch super cycle that will increasingly shape results over the coming years.

These new technologies are meaningfully more advanced and clinically differentiated, addressing significant unmet needs and supporting higher ASPs, improved gross margins, and stronger returns on invested capital. They also enhance our ability to bundle solutions across accounts, supporting broader contract opportunities in pediatric hospitals and reinforcing share gains across our legacy portfolio. At the same time, OPSB continues to scale through both new product introductions and disciplined clinic expansion via greenfield openings and acqui-hires, a trajectory we expect to sustain over the coming years. Collectively, these initiatives are expected to drive significant improvement in profitability and cash flow generation over the long term.

More broadly, we believe our hospital and surgeon partners increasingly recognize the value of working with a dedicated, self-sustaining pediatric platform focused exclusively on improving care for children. Together, we are advancing innovation in a historically underserved area of health care and building a stronger long-term outlook for patients and the business. With that, I would like to turn the call over to Fred to provide more detail on our financial results.

Fred L. Hite: Thanks, Dave. Taking a closer look at the P&L, our 2026 worldwide revenue of $59.4 million increased 13% compared to 2025. The increase in revenue in the quarter was driven primarily by strong performance across Trauma and Deformity, Scoliosis, and OPSB. U.S. revenue was $45.3 million, an 11% increase from 2025, representing 76% of total revenue. Growth in the quarter was primarily driven by Trauma, Deformity, Scoliosis, and OPSB. We generated total international revenue of $414.1 million, representing growth of 22% compared to 2025, or 24% of our total revenue. In 2026, Trauma and Deformity global revenue of $43 million increased 14% compared to the prior-year period.

Growth was primarily driven across numerous product lines, specifically our TRON product, X-Fix, and OPSB. In 2026, Scoliosis global revenue of $15.4 million increased 13% compared to the prior-year period. Growth was primarily driven by increased sales of Response and Vertiglyde systems, and revenue generated from 7D technology. Finally, Sports Medicine/Other revenue in the first quarter 2026 was $900,000, which stayed consistent year over year. Touching briefly on a few key metrics, for 2026, gross profit margin was 73%, which is consistent year over year. Total operating expense increased $2.5 million, or 5%, compared to the prior-year period to $51.7 million in 2026.

Sales and marketing expenses increased $1.9 million, or 11%, compared to the prior-year period, driven primarily by increased sales commission expense and an overall increase in volume of units sold, to $18.5 million in 2026. General and administrative expenses increased $700,000, or 2% year over year, to $31 million in 2026. The increase was due primarily to additional personnel supporting recent clinic expansion and other small-scale acquisitions, partially offset by savings being realized from prior restructuring actions. Research and development expenses decreased by $100,000, or 5%, in 2026 to $2.2 million. GAAP net loss per share for the period was $0.45 per basic and diluted share, compared to $0.46 per basic and diluted share for the same period last year.

Non-GAAP net loss per share for the period was $0.42 per basic and diluted share compared to $0.39 per basic and diluted share for the same period last year. Adjusted EBITDA was $2.2 million in 2026, compared to a loss of $400,000 in 2025. We ended the first quarter with $50.9 million in cash, short-term investments, and restricted cash. Set deployment was $2.3 million in the first quarter 2026 compared to $3.6 million in 2025.

As a reminder, although the amount of sets being deployed in 2026 is lower than historical years, these are primarily all new products being launched as part of our innovation super cycle and are generating a much higher level of revenue per deployed dollar than our previous legacy systems generated. Free cash flow used in 2026 was $5 million, a 40% improvement as compared to $8.4 million used in 2025. Increased adjusted EBITDA, lower sets deployed, and improved working capital metrics contributed to the year-over-year improvement. On March 31, we amended our existing credit agreement with Braidwell LP to add a $20 million delayed-draw term loan facility.

This amendment enhances our financial flexibility by providing on-demand access to additional capital through June 2027, while maintaining consistent economics and covenants within our existing term loan. Importantly, this structure allows us to preserve liquidity and avoid dilution, as the facility is fully discretionary and interest-only through maturity in 2029. We view this as a prudent addition to our capital toolkit that further strengthens our balance sheet and positions us to opportunistically fund growth or strategic initiatives while maintaining disciplined capital deployment. Turning to guidance, as Dave mentioned, we raised our expectation for full-year 2026 revenue to be in the range of $263 million to $267 million, representing year-over-year growth of 11% to 13%.

We also continue to expect to generate approximately $25 million of adjusted EBITDA, deploy approximately $10 million in sets, and to achieve free cash flow breakeven in 2026. We would expect EBITDA and free cash flow to exhibit similar quarterly seasonality patterns to 2025. It is important to note some periods of free cash flow will be negative and others positive but still cumulatively tracking to our annual guidance metrics. Operator, let us open the call for Q&A.

Operator: Thank you. Press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. And our first question comes from Matthew Blackman with TD Cowen. You may proceed.

Matthew Blackman: Great. Can you hear me okay?

Operator: Sounds good. Yes.

Matthew Blackman: Great. Well, thank you for taking my questions. Good afternoon, guys. I am going to start with a question for Fred, and then I have one for you, Dave. I heard you talk about the impact of weather in January and February. Is there any way to quantify the impact on T&D from the OPSB weather-related headwinds? And is that revenue that you recapture, or is it just lost? And then I have a follow-up question for Dave.

Fred L. Hite: Yes. So that comment was specific to our clinics, which were shut down a week during January and a week in February. Typically, those appointments get rescheduled. So as Dave mentioned, we saw a nice rebound across the entire business in the month of March, and that has continued in April. I would say that the vast majority of those got cleared in the month of March and now here in April, and it is all behind us by now.

Matthew Blackman: Okay. But some of it did sort of scoot into the second quarter, lost in the first quarter, though. That is some of the takeaway, right?

Fred L. Hite: Correct.

Matthew Blackman: Fair enough. And then, Dave, on the 3P platform, I heard you loud and clear, early days but very encouraging. You are going to ramp from here. It sounds like in 2026, you will be in a more scaled launch with 3P, maybe gaining some 3P Small Mini momentum. Do you think that translates into a visible, at least to us, uptick in T&D second-half growth? Or do we need more sets, more pieces of the platform beyond 3P and 3P Small Mini to inflect U.S. T&D growth? And does that happen in 2027? Just trying to think about the moving parts here and when perhaps we see a visible inflection in that franchise.

David R. Bailey: Yes, Matt. Good question. We have very few sets available on the 3P side at this stage. In fact, we have some opportunities to sell sets that we have not done yet just because we want to make them available to more and more users as we are moving those around through our loaner pool. Additional sets, hopefully coming here at the back half of Q2 and certainly Q3, will impact results as we add sets. It is not a huge volume of sets, so I do think that it is going to have some meaningful impact on the implant side of our T&D business. But these rollouts take years.

As you have seen over the last several years, even products like PMP Tibia, which I think now have been out two and a half years, are still being rolled out and still impacting top-line revenue growth. What we really like to see about the early days of 3P is very strong ASP in addition to extremely high demand, very strong margins, and consistent with what we have been telling the Street for a while, this new product—and Vertiglyde as well on the scoliosis side—are dramatically more capital efficient.

They require less capital deployment to drive top line, so their impact is not just in the back half of the year on top-line revenue but also on profitability and cash usage. We will see more of that from the Small Mini and more of that from PMP Retrograde and the new systems on the scoliosis side. It is very encouraging what we are seeing early on with 3P and these other systems. I think it will probably start to impact the growth of the implant side of our business here in the second half and really in 2027 and 2028.

Matthew Blackman: Okay. Thank you, guys. Really appreciate it.

Operator: Thanks, Matt. Thank you. Our next question comes from Rick Wise with Stifel. You may proceed.

Rick Wise: Good afternoon to you both, and it really is great to see that despite the challenging start to the quarter and weather and everything, you finished strong and that momentum is continuing. Now that I have paid you a compliment, I was hoping to, at a high level, understand your thinking: despite the outperformance in the first quarter and everything we are hearing just on the execution front that just sounds so great, each part of the business working well, some of last year's challenges worked through, resolved, turning into potentially a tailwind, and the new product launches clearly well set up for installing second half. Why leave top-line guidance unchanged?

Is there any particular reason other than just being careful as you set up the year, or is there anything that we should understand about maybe some challenges ahead as you start the rollout here? Just help us think about the rest of the year—you left the rest of your guidance unchanged, basically.

Fred L. Hite: Yes. We increased the full-year guidance by the amount that we did. Dave continues to talk about the super cycle, which is awesome, and we have more sets coming, which is great. Those sets will be here in the second half, or really the end of the second quarter, to help the second half of the year. But as normal, we like to wait for those things to show up and to show up in the numbers before we get too far ahead of ourselves. So in traditional fashion, we will continue to stay conservative and let the numbers speak for themselves when they show up.

Rick Wise: Alright. Sounds good. I am sure it is a similar answer to the very strong performance on the adjusted EBITDA line. I heard what you said, Fred, about some quarters a little better or stronger given the demands of the business. But it seems like you are set up well there with higher-margin products coming on and volume and leveraging the fixed cost base. It just sounds like you are well positioned to do even better.

Fred L. Hite: Yes. We were very pleased with the leverage that showed up through the P&L here in the first quarter. Thirteen percent sales growth, G&A grew 2%, and that to us was very encouraging. Typically, first quarter is the lowest sales quarter that we will see for the year. If you add on some incremental revenue in the second and third quarter in particular, which are typically our strongest, that should drop through very nicely to the bottom line.

Rick Wise: Gotcha. Thank you very much, and great to see the excellent start to the year.

Operator: Thank you. Our next question comes from Ryan Zimmerman with BTIG. You may proceed.

Analyst: Hi, everyone. This is Izzy on for Ryan. Thanks for taking the questions. I just wanted to start with the international. I saw that strong 22% growth for the quarter, and I was wondering if that is the right baseline to be at for the rest of the year, or if it could potentially be a little bit stronger as you start to see more contributions from the new products, especially as that EU MDR comes online?

David R. Bailey: Good question, Izzy. I am not sure we are going to get too far ahead of ourselves on 22% growth—very pleased to see it. It was certainly an acceleration of growth over 2025; I think we came in at 19% in 2025. The headline here is that we are seeing very consistent performance and consistent growth in these agencies with a lot of the legacy products. As Fred mentioned, we do not want to get ahead of ourselves in terms of set deployment and how much revenue that set deployment of some of these new products generates.

But it is safe to say that we have a really nice opportunity in the second half of the year as we start to deploy some of the sets that are now approved in Europe through EU MDR. The timing of those sets coming into our warehouse and then getting out to our customers is a bit of the rate limiter—certainly not demand. As we see some of those sets come in, I think we will be able to give some updated guide as to what we think we can see in the second half of the year.

It is early; we are not going to get ahead of ourselves there yet, but it was certainly good to see that kind of acceleration in growth led by our agency markets. Of note, there were very limited set sales. We have been challenged over the last several years to balance margin and top line against some of the lower-margin set sales. Most of that revenue, I would say, in this quarter and hopefully in future quarters is primarily just replenishment orders coming through our agencies and coming through our hospitals in Europe.

The acquisition of our Brazilian distributor we called out certainly started to stabilize the markets in Brazil, and we hope over the course of the next several quarters to create a bit of a tailwind in a market where there is extremely high demand, but we needed to adjust our model to be able to extinguish some of that demand. As we see that develop, it is possible that growth could accelerate, but 22% growth is very strong—we are very pleased with that—and if we could stay in that ballpark, it would be a great year.

Fred L. Hite: With that said, we do expect international to outgrow the domestic market for each quarter for the rest of the year. While it might not be 22%, we think it will continue to grow very nicely and probably outperform domestic growth for the rest of this year and starting into next year.

Analyst: Appreciate it. Thank you. And then I saw the press release today and heard your comments about the launch of Traxio. Could you talk a little bit more about your plans there for the rollout and what we can look forward to?

David R. Bailey: Yes. Traxio is a halo gravity traction product. It is primarily designed to help children and physicians who are taking care of very complex early onset scoliosis patients. The initial launch is of a few sizes of the traction device. Those devices are sold as a capital purchase, and then there is replenishment of different components of that device inside the children's hospitals. Eventually, we will launch the surgical component of Traxio, which will be the actual halo itself that attaches to the skull of these kids. What is exciting is, number one, there is very high demand. We have a lot of hospitals that have called us for quotes. There is really nothing like it available in the market.

Most hospitals that do traction are having to build a lot of these devices in-house. You can imagine the demand from a pure risk management standpoint to have an FDA-approved device that can take care of that patient population. It is also really encouraging to see its connection to our EOS business and ultimately the fusion business. We have talked about treating the entire disease state of scoliosis, not just the end state for fusion. You can see Traxio and how that fits in—patients may be going from bracing to halo gravity traction, to our suite of early onset scoliosis products, to potential non-fusion products like ApiFix, and then ultimately, final fusion if required.

It creates a portfolio that is unlike any in the spine space, and it is a very strong adder in terms of our value proposition to children's hospitals within scoliosis.

Operator: Thank you. Our next question comes from Mike Matson with Needham & Company. You may proceed.

Analyst: Hey, guys. This is Joseph on for Mike. Given the rapid growth you have been calling out in OPSB, just being an increasing part of revenue for the whole company, I am wondering if you can provide more color on SG&A expenses as a percentage of revenue from here. Should we expect maybe some small gross margin improvement moving forward, with the real margin expansion coming on operating leverage?

Fred L. Hite: Absolutely. Just like we saw in the first quarter, the true leverage down to the EBITDA line is coming from G&A. This year, it is both on the cash and the non-cash portion of G&A. I think the leverage we saw in the first quarter will be similar in the rest of the year in each of those quarters. A little bit on sales and marketing, but that is not our focus—it is all really on the G&A side of the business. The dollars may go up a little bit on G&A as the business grows in the second and third quarter pretty dramatically, but the leverage will come through very nicely.

Analyst: Okay, that is great. And then, on pull-through for the scoliosis products, I know it may be early days, but you called out great beta launches generating demand and Response growing really well. How does that compare to expectations prior? I believe you said the real pull-through driver for scoliosis would maybe be driven by Ellie. Is that still the case?

David R. Bailey: Certainly, Ellie is the most complex and probably the largest opportunity on the early onset scoliosis side. But we have seen remarkable interest in Vertiglyde—maybe more interest in that particular type of technique for the EOS indication than we had expected when we launched. We have nearly 80 surgeons already trained, and at this point we are having to have surgeons notify us well in advance when they schedule cases just to move inventory around. On pull-through, a number of surgeons and children's hospitals that are not historically large users of our fusion platform, Response, are the main users of the EOS product, Vertiglyde. That is exactly part of the strategy.

We want to grow into this blue ocean growth opportunity in early onset scoliosis with Vertiglyde and Ellie and Ribbon Pelvic, and it also brings opportunities to show just how good we are on the scoliosis side to major institutions where they may use a lot of our trauma and deformity products but have not had much experience with Response and our fusion system. We are picking up pull-through already. You can imagine it is fairly small given the limited access to Vertiglyde, but we are certainly involved with children's hospitals and physicians that historically were not as exposed to our fusion platform.

As the EOS portfolio more fully launches—more sets available on Vertiglyde, Ellie launching, followed by continued deployment of Response and the launch of our next-gen fusion system, Veraxis—that is a very compelling set of technologies and a value proposition for the hospital. Not to mention bracing on top of that providing halo and synergies, as well as now the Traxio system on the EOS side. It is a really good setup for us in the coming several quarters and really several years as those products roll out.

Analyst: Maybe one quick one. Now that you are finished with EU MDR approval in Europe, are there other geographies you are targeting for further catalog expansion? Is it time to be thinking about moving into China?

David R. Bailey: We have a very small presence in Japan, essentially no presence in India, and no presence in China. Historically, we have spent our dollars focusing on EU MDR. There is remarkable demand for our products in some of those markets, particularly India, where we have strong surgeon connections. While it is not part of guidance right now, in time it would be natural to extend into some of those bigger markets. Over the coming years, that could be a real opportunity for us.

Analyst: Okay, makes sense. Well, congratulations on the strong quarter.

Operator: Thank you. Our next question comes from David Turkaly with Citizens. You may proceed.

David Turkaly: Hey. Good evening. I just wanted to follow up on that last one. Did you give timing for the Veraxis system?

David R. Bailey: We expect first surgeries for both Ellie and Veraxis by the end of the year.

David Turkaly: And does that mean that domestically that is cleared? What is your approval process with that device? Is that a 510(k)?

David R. Bailey: Yes. It is a 510(k). We are working towards that at this point; it is not yet cleared, but we would expect it in the back half of the year. Certainly, timing is a bit of a wildcard, but our success with these 510(k) products has been very strong. Generally, with all the testing, we get these things through pretty rapidly. I do not expect Veraxis to have a huge impact on revenue in the second half of the year—more of a 2027–2028 rollout. Our goal is to get surgeons access to that product so we can start getting feedback at some point in the fourth quarter, and I think we are on track for that.

David Turkaly: Great. And I think you said OPSB grew 20% in the quarter, and I am looking back at notes—I think you said six territories maybe this year. Can you give any color if you have done any of those and what you expect in terms of greenfield or acqui-hire specifically for 2026?

David R. Bailey: So far, the guide has been by 2027 we would be at 27 of these markets. I think we are at or a little ahead of that. I would expect we would reach the necessary six markets in 2026 for sure. There is continued demand and opportunities for both greenfield as well as acqui-hire. There are also opportunities within some of the existing open territories to expand our clinic presence. Same-store sales in clinic locations where we have had a presence for a year are going extremely well. We are seeing increased revenue there. There are opportunities to more fully penetrate territories we are already in while we balance that against opening new territories.

Deeper penetration in existing territories does not take as much expense, and when we have opportunities to accelerate patient care and revenue where we already are, we weigh that against how much we would want to accelerate into new territories. It is very safe to say we are on track, if not ahead of track, in 2026, and will meet or exceed our objectives for 2027.

David Turkaly: Thank you.

Operator: Thank you. Our next question comes from Caitlin Roberts with Canaccord Genuity. You may proceed.

Caitlin Roberts: Hi. Thanks for taking the questions. In LATAM, you noted you purchased your largest distributor in Brazil. How much of the LATAM business does this distributor encompass, and would you look to the same formula and acquire more distributors down there to drive more consistency in the region?

Fred L. Hite: Historically, we have had about 15 stocking distributors. This was one of the larger, but not the majority of the sales down there—roughly one-fifteenth of our sales in Brazil. The good news is we now have a legal entity and an operating entity down there, and all of our other sales into Brazil are going through this legal entity, which dramatically enhances our ability to collect cash in Brazil, to deliver inventory on a more timely basis because we are now stocking inventory in Brazil, and to better serve those other stocking distributors. We do not, at this time, have big plans to buy additional distributors.

It is all about the ability to collect cash more efficiently and to better serve our partners down there so we can continue to grow that entire region in more and more procedures.

Caitlin Roberts: Understood. And just on Veraxis, what are your thoughts on the competitive landscape in pediatric spinal deformity as you look to launch?

David R. Bailey: The pediatric spinal fusion portion of our business is the most competitive—it always has been. Most companies on the adult side have good deformity correction systems that kind of dual-function in pediatric deformities. With Veraxis, we have a system that is built from the ground up with pediatric spine surgeons, not a system designed for adults. When physicians see the development work done by their colleagues from major children's hospitals, the competitive position of that product, in conjunction with products we offer that are not offered by really any other competitors, creates a value proposition that is hard to beat. We are excited. It is early—we have not done first case—but I am excited to see how it stacks up.

Response, which has been in the market for a number of years, continues to take share. Leapfrogging our own best-in-class technology will hopefully accelerate further the share taking we have experienced over the last several years.

Caitlin Roberts: Great. Thank you.

Operator: Thank you. Our next question comes from Benjamin Charles Haynor with Lake Street Capital Markets. You may proceed.

Benjamin Charles Haynor: First off, on the almost 80 Vertiglyde surgeons trained, can you talk about the number of folks that are doing these sorts of procedures—kind of an 80/20 where X surgeons are doing 80% of procedures? What does the total look like in terms of people doing these procedures?

David R. Bailey: Great question. This is a tough one because the technology that surgeons have had access to for some of these procedures has been so limited that the technology itself has been a limiting factor to who would actually use guided growth for spinal deformity correction. It is fair to say that every children's hospital that does spinal deformity correction—which is, say, 300 procedures—has at least one physician there, if not more, who would be willing to take care of these EOS patients. Certainly, places like Children's of Philadelphia, Boston Children's, Wash U, and several others are doing higher volumes of those very complex procedures.

In total, between Ellie and Veraxis, it is a sub-$100 million, maybe $80 million market opportunity with essentially very limited competition and a deep unmet need. Our customers recognize we are willing to take on these complex things they care about, and that is what we are seeing from the pull-through already on Response.

Benjamin Charles Haynor: Thanks for the color there. And then on Traxio, obviously it would improve the economics versus MacGyvering these sorts of things. What do the economics look like for the hospitals that make these capital purchases? And how did the relationship with Syntech Group come about?

David R. Bailey: We got connected to Syntech through partnerships we have in Montreal. As you know, we have an operation there after the acquisition of Pega, and we formed a nice relationship as they have helped us with different products on the nonsurgical side through specialty bracing. On economics, this is one of those products that, if you do this procedure, it is almost a must-have for children's hospitals. Not all children’s hospitals perform the procedure—you need hospitals that can have patients stay inpatient for several weeks. Often these kids get halo and literally live in the halo device for as long as six weeks before they ultimately have a surgical procedure.

The economics are probably pretty strong for children’s hospitals; they have these patients in the hospital and then are doing multiple surgical procedures thereafter. Traxio is not a $1 million PO the hospital has to issue, so it is not such a large capital purchase that we are seeing resistance. There is an opportunity to partner Traxio with 7D, Vertiglyde, Response—these very novel systems that you just cannot get from any other company—to leverage opportunities to bundle our services and products. We are in more of those bundling discussions now at major children's hospitals than we have ever been in the history of the company.

As more differentiated products like Traxio launch, our position in those negotiations strengthens and, again, hopefully drives accelerating revenue in the next few years.

Benjamin Charles Haynor: Lastly, thinking about opportunities outside of orthopedics within pediatrics—any updates there? Any conversations that are happening? Anything that folks should expect the remainder of the year?

David R. Bailey: We have long walked alongside a number of technologies in other subspecialties in pediatric health care. We like to think of ourselves as a beacon for entrepreneurs who could help us meet unmet needs in pediatric health care. When the time is right—the right company with the right culture where we could help scale revenue globally—we would be opportunistic, but nothing is pending at the moment. We will continue to be good partners with companies like Iota Motion, which is a little bit outside of our call point, and help those companies commercialize. When the time is right, we will probably step into some of these other subspecialties.

Benjamin Charles Haynor: Excellent. Thanks for taking the questions, and congrats on all the progress.

David R. Bailey: Absolutely. Thanks, Ben.

Operator: And as a reminder, to ask a question, please press 1-1. Our next question comes from Ravi Misra with Truist Securities. You may proceed.

Ravi Misra: Hi. Thank you for taking the questions. Good evening. Maybe a philosophical question here. I would love to understand the thinking at the company around balancing this 11% to 13% growth outlook amidst what appears to be a pretty significant product cycle. You have talked in the past about competitors leaving the space, giving you opportunities as a pure play focused on pediatrics. Then again, at the same time, set deployment is around $10 million this year. Why not really accelerate the set deployment to capture revenue? Are we underestimating the leverage potential from sets out in the field, or is it just something you are being conservative and measured about?

David R. Bailey: That is a great question. There is certainly a healthy tension within the organization as we think about how fast we want to accelerate revenue versus generate positive free cash flow, and then, when we generate positive free cash flow and that becomes a bigger number, how much of that we would want to use to accelerate growth. You are right—we have a great opportunity in front of us to launch these new products and continue to scale legacy products, given the evacuation in the market of some quasi-competitors. We have been on a quest over the last few years to deliver increasing EBITDA and to deliver free cash flow breakeven.

Our commitment is unwavering there, and nothing will knock us off that path to deliver that in 2026. As we think about 2027, 2028, and through 2030 as the super cycle ramps, I am not sure our strategy will be to maximize the capital that the business would ultimately generate. We would probably start utilizing some of the additional free cash flow to scale some of these products—that would be the smart competitive thing when you have the opportunity we have. In the short term, delivering on our commitments, balancing top-line revenue growth against profitability expectations, as well as the drive to free cash flow breakeven, is what we have in front of us.

Then we will have bigger decisions to make—good opportunities to execute and maybe put out a little more inventory when we get more into the first, second, and third inning of the super cycle. At this stage, we are in the batter’s box. As we get into 2027 through 2030, it is likely we would want to put more inventory on the street, particularly inventory that has the kind of margin that products like 3P and Vertiglyde have and the return on capital that is so much better than our legacy systems.

Ravi Misra: Thanks. And then just one last one. On the roughly 80-surgeon base around Vertiglyde, should we think of that as seeding the field for Ellie once that comes in, or is that a different subset of pediatric specialists?

David R. Bailey: Very astute. We talk about Ellie—in theory, since it is not approved yet—and the potential features with surgeons when we go through training. Any surgeon who is training or interested in training on Vertiglyde is most certainly a candidate for the use of Ellie as well as our Response Ribbon Pelvic, which is great news. You will also see increased sales of our small stature systems on the Response side because these are very young patients and surgeons who treat those patients. Ellie is not a substitute for Vertiglyde, and Vertiglyde is not Ellie. There are different indications within this very complex patient population that require Ribbon Pelvic, Vertiglyde, and Ellie.

Capturing mindshare within the surgeons who treat that patient population is very good for our prospects in the future.

Operator: I would now like to turn the call back over to David R. Bailey for any closing remarks.

David R. Bailey: Great. Thanks, operator. We appreciate all of your time, and we will be at a number of conferences over the course of the next several weeks. We look forward to meeting with you all there. Thanks, and have a great evening.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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