ORTHOPEDIATRICS CORP Q4 FY2024 earnings call

• Patient Impact: Helped over 34,000 kids in Q4 2024 and over 138,000 kids in full year 2024, setting record highs.
• Market Leadership: Market leader in pediatric orthopedic implants, aiming for dominant share in trauma, deformity correction, and scoliosis implants in the next 5 years.
• OPSB Franchise: Significant capital-efficient growth, with clinic expansion in multiple locations, R&D driving new products, and licensing/distribution agreements.
• Product Launches: PMP tibia, cannulated screws, and Boston OMP sales driving T&D growth; DF2 femur fracture brace growing rapidly; pediatric plating platform 3P progressing with beta launch of 3P hip anticipated.
• Surgeon Training: Hosted 132 unique training experiences for over 2,700 healthcare professionals, prioritizing clinical education.

T&D Business: Fourth quarter 2024 revenue was $36.4 million, a 35% increase from the prior year. Driven by Pega products, Trauma x fix, OPSD, and the addition of Boston O&P. Scoliosis Business: Fourth quarter 2024 revenue was $15.6 million, up 62% y-o-y, driven by increased US growth across response, ApiFix nonfusion system, and the addition of Boston O&P. OPSB Business: Experiencing rapid growth, with the DF2 femur fracture brace growing quickly. Clinic expansion in Indianapolis, AquaHire, Florida, and Colorado; R&D launched multiple products. International Business: Fourth quarter 2024 international revenue was $9.8 million, up 5% y-o-y. Affected by shipping holds in South America, but scoliosis delivered strong growth. EU MDR approval is a catalyst for future growth.

• Revenue: Expected 2025 revenue of $235 to $242 million, representing 15-18% annual growth.
• Adjusted EBITDA: Expected $15 to $17 million in 2025, greater than $15 million of set appointments.
• Free Cash Flow: Anticipates first positive free cash flow in Q4 2025.
• Set Deployments: Expect ~$15 million of sets deployed in 2025, highly focused on new products; 2026-2027 to be concentrated on new product launches.

• Supply Chain: Need to expand supply chain to meet demand for products like DF2.
• Regulatory: EU MDR approval process is expensive but necessary; currency fluctuations impacting international receivables.
• Macroeconomic: Potential impact of Medicaid coverage changes, tariffs, and other government actions, though minimal impact expected.

Q: Talk about seasonality and pacing?

A: June, July, August are typically the biggest months, with December also a big month. The first quarter tends to be a slight step down from Q4, with scaling into Q2 and Q3. EU MDR approval is expected to positively impact 2025 and beyond.

Q: Elaborate on OPSB pipeline and growth?

A: OPSB has high clinic expansion potential with multiple locations, high demand, licensing/distribution agreements, and DF2 growing faster than expected. R&D is driving new products, creating a duplicative effect for revenue.

Q: Discuss gross margin and adjusted EBITDA?

A: Adjusted EBITDA remains unchanged. Gross margin range is 72-73% due to reclassification of expenses, but there are opportunities for upside with new products and consolidation.

Q: Talk about instrument set deployments?

A: 2025 expected ~$15 million of sets deployed, focused on new products. The right number for 2026-2027 hasn't been determined yet, but will be highly concentrated on new product launches.

Q: Impact of Medicaid coverage changes?

A: Uncertain, but shielding expected via endowments and rational impact on care costs, with minimal expected impact on the business.