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    OrthoPediatrics Corp (KIDS)

    Q3 2024 Earnings Summary

    Reported on Apr 3, 2025 (After Market Close)
    Pre-Earnings Price$27.49Last close (Nov 7, 2024)
    Post-Earnings Price$28.00Open (Nov 8, 2024)
    Price Change
    $0.51(+1.86%)

    What went well

    • OrthoPediatrics expects normalized hospital staffing levels and better management of flu and RSV seasons, which should support continued growth.
    • The 7D technology is gaining traction with positive surgeon feedback, multiple placements at large institutions, and a pipeline of opportunities, which will drive future revenue growth over the next 3 to 5 years.
    • Domestic trauma performance is extremely strong, as strong as they have ever seen, indicating robust demand in their core market.

    What went wrong

    • The Trauma and Deformity (T&D) segment experienced a deceleration in growth due to the absence of large one-time orders from the previous year, particularly in Latin America and Europe, where substantial Pega distributor conversions did not repeat. This has negatively impacted year-over-year comparisons.
    • There was a slowdown in specialty bracing and T&D performance in Q3 compared to prior quarters, which may indicate softer demand or reduced growth momentum in these segments.
    • The installed base for the company's 7D units remains low at approximately 20 units, suggesting slower-than-expected market penetration. The company acknowledged being "probably a little naive" in capital equipment sales, indicating potential challenges in scaling this aspect of the business.

    Q&A Summary

    1. Organic Growth and Guidance
      Q: What was the organic revenue growth and outlook for flu/RSV impact?
      A: The company reported that the Boston O&P acquisition added about $25 million, with approximately 25% showing up in Q3 2024. Of this, 70% is in Trauma and Deformity and 30% in Scoliosis, allowing investors to calculate organic growth accordingly. Regarding flu and RSV, the company assumes the same level of cases as last year in its guidance and expects hospitals to handle the influx similarly. Staffing levels have normalized in U.S. children's hospitals.

    2. Trauma and Deformity Performance
      Q: Why did Trauma and Deformity growth appear to slow in Q3?
      A: Management explained that last year they opened South America with multiple stocking distributor orders on the Pega side, a one-time large order that did not repeat in Q3 2024. This caused a year-over-year delta in the Trauma and Deformity business. Despite this, domestic trauma was extremely strong, and they are not concerned about the business.

    3. Boston O&P Performance
      Q: Was Boston O&P performance in line with expectations?
      A: Yes, Boston O&P performed as expected. The company is seeing early positive returns from patient flow into clinics, aiming to increase market share from 15% to 50% in their nine territories over the next several years. The impact on revenue growth is heading in the right direction but is not yet significant. The revenue mix between Trauma and Deformity and Scoliosis remains consistent.

    4. 7D Technology Adoption
      Q: Can you provide an update on 7D unit placements and feedback?
      A: Surgeon feedback on the 7D technology has been extremely positive. The company has learned to navigate capital equipment sales better and has a large funnel of 7D opportunities. The installed base is approximately 20 units, and they expect to place and sell units quarter-to-quarter. These placements are expected to drive growth in the Scoliosis fusion business over the next 3 to 5 years.

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