ORTHOPEDIATRICS CORP (KIDS)·Q2 2025 Earnings Summary

Executive Summary

• Record revenue of $61.1M (+16% y/y) with strong growth in Scoliosis (+35%) and Trauma & Deformity (+10%); non-GAAP diluted EPS loss improved to ($0.11) from ($0.23) y/y while GAAP diluted EPS was ($0.30) .
• Q2 revenue slightly below S&P Global consensus ($61.1M vs $61.4M*), but non-GAAP EPS beat materially (–$0.11 vs –$0.303*); prior two quarters also showed beats on revenue and EPS versus consensus* [Q4: $52.7M vs $51.2M*; –$0.29 vs –$0.313*] [Q1: $52.4M vs $51.7M*; –$0.39 vs –$0.45*] .
• Gross margin fell to 72% (from 77% y/y) on mix (higher 7D and international set sales), while adjusted EBITDA rose 58% y/y to $4.1M; operating expenses increased 18% y/y including $3.0M restructuring charges .
• Guidance raised at the low end: FY25 revenue now $237–$242M (from $236–$242M); gross margin 72–73%, adjusted EBITDA $15–$17M, set deployment ~$15M; management reiterated target for first positive FCF quarter in Q4’25 and FY26 FCF breakeven .
• Stock reaction catalysts: durable segment momentum (Scoliosis, Trauma, OPSB), guidance raise, and regulatory/product milestones (3P Hip launch; Vertiglyde cases starting; EU MDR approvals) .

What Went Well and What Went Wrong

What Went Well

• Scoliosis strength: +35% y/y on Response, ApiFix and 7D adoption; management expects above-company growth to continue into H2 and 2026 .
• Adjusted EBITDA +58% y/y to $4.1M; management “on track to achieve our adjusted EBITDA targets, and generate positive free cash flow by the fourth quarter of 2025” .
• OPSB expansion ahead of plan, entering California and Ireland, adding New York locations; “we remain confident in our outlook for the remainder of 2025 and beyond” .

What Went Wrong

• Gross margin compression to 72% from 77% y/y due to higher 7D and international set sales (lower margin mix) .
• T&D softness early in Q2 in elective limb deformity scheduling and lower Latin America set sales; management characterized it as timing/volume ebb-and-flow, with June strong .
• Operating expenses +18% y/y (stock comp, personnel for OPSB, restructuring charges $3.0M), reflecting cost to scale clinics and growth infrastructure .

Financial Results

Consensus values marked with * retrieved from S&P Global.

Segment revenue breakdown

Geography revenue breakdown

Additional KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered another solid quarter achieving 16% global revenue growth... standout performance in Scoliosis, Trauma, 7D... and our rapidly expanding OPSB franchise. We are on track to achieve our adjusted EBITDA targets, and generate positive free cash flow by the fourth quarter of 2025” .
• “We expect our business to continue to gain momentum throughout 2025 based on our success scaling OPSB... and the ongoing success of our innovative product launches” .
• “DF2 continues to outperform... creating a new standard of care” (referencing positive study outcomes and reduced resource utilization) .
• “We are increasing our expectation for full year 2025 revenue to the range of $237M to $242M... and continue to expect $15M to $17M of adjusted EBITDA” .

Q&A Highlights

• Segment trajectory: Management sees Scoliosis growth “on the stronger side overall” in H2 (though not necessarily at +35%), with 7D and EOS portfolio adding tailwinds .
• T&D early-quarter softness: Limb deformity case volumes were lighter in the first ~6 weeks then normalized; Brazil set sales weighed on international T&D; trauma volumes were “as strong as they have ever been” .
• OPSB strategy: Preference for greenfield in established states and acquihire to enter new jurisdictions; clinics ramping within expectations; demand supports continued acceleration without self-imposed constraints .
• International product rollout: EU MDR approvals expected “quarter by quarter” with European/Australian markets likely to grow faster than U.S. (from a smaller base) .
• Product pipeline: Vertiglyde first cases in August; 3P Hip launched with first case; 3P Small/Mini submission in coming months; EOS “Ellie” next major product with largest opportunity in early-onset scoliosis .

Estimates Context

• Q2 2025: Revenue $61.1M vs $61.4M consensus* (slight miss); non-GAAP EPS –$0.11 vs –$0.303* (beat). Drivers: strong Scoliosis/Trauma growth and OPSB expansion offset by gross margin mix (7D and international sets) and higher OpEx from scaling clinics/restructuring .
• Q1 2025: Revenue $52.4M vs $51.7M* (beat); non-GAAP EPS –$0.39 vs –$0.45* (beat), reflecting improving profitability and lower set sales internationally aiding margin .
• Q4 2024: Revenue $52.7M vs $51.2M* (beat); non-GAAP EPS –$0.29 vs –$0.313* (beat), despite gross margin pressure from reclassifications and mix .

Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Momentum intact: Core surgical segments plus OPSB are driving double-digit growth, with Scoliosis likely outgrowing the company average in H2 .
• Quality of beat: While Q2 revenue was in line to slightly below consensus*, the substantial non-GAAP EPS beat reflects operating leverage despite margin mix headwinds .
• Guidance credibility: Raised FY25 revenue low-end and reiterated gross margin and adjusted EBITDA targets; management reaffirmed Q4’25 positive FCF and FY26 breakeven, a key valuation inflection .
• Product catalysts: 3P Hip launch, Vertiglyde initial cases, and upcoming 3P Small/Mini submission plus EU MDR approvals provide multi-quarter pipeline visibility .
• OPSB optionality: Accelerating clinic footprint (including first international clinic) creates capital-efficient growth and synergies with implant business .
• Watch margin mix: Expect ongoing gross margin impact from 7D and international set sales; company still targets 72–73% full-year GM .
• Regional dynamics: Strong Europe/Middle East demand vs Latin America set sales softness; EU MDR approvals should underpin OUS growth .