Executives from OrthoPediatrics (NASDAQ:KIDS) outlined clinic expansion plans, product launches, and efforts to improve cash flow during a fireside chat at the 25th Annual Needham Healthcare Conference.
Macro view: limited direct impact from oil and inflation
Asked about exposure to oil prices and broader inflation, CFO and COO Fred Hite said the company’s primary sensitivity is freight, with “very, very little impact on the material cost of goods sold.” Hite noted the firm’s products are largely metal-based—“instruments, implants, cases, and trays”—and said management had not yet seen freight impacts but expected some pressure could emerge. On potential knock-on effects from the war and broader shortages, Hite said the company continues to monitor conditions but does not currently see negative impacts on the business.
OPSB clinics: footprint grows past 45 locations, targeting 27 territories
Rather than focusing on a clinic count, management emphasized its longer-term plan to scale into approximately 80 U.S. territories covering roughly 300 children’s hospitals. The company expects to be “in 27 of those at minimum” by the end of this year, calling that goal consistent with targets laid out several years ago. Management said it believes it is “on pace, if not a little bit ahead of pace” in expansion and that demand for new locations may exceed the company’s capacity to open them simultaneously.
On sales coverage, management said the OPSB sales team is still small—“north of 10 or so” people—compared with more than 200 U.S. commercial employees focused on implant products. The company described implant sales as service-intensive due to operating room support and said OPSB should ultimately require fewer people per unit of growth. Management said it plans to add staff as it expands clinics, without investing ahead of openings in specific regions.
Management also explained its prioritization for new clinic sites, pointing to areas where it already has strong implant relationships as “natural fits.” The company said it has learned that locating clinics inside children’s hospitals—rather than starting with satellites—can improve revenue and profitability. In some cases, management said it may delay a clinic opening to secure a preferred in-hospital location.
Margins, cash flow, and Latin America: smoothing lumpiness and targeting stability
Hite said OPSB carries a “slightly lower gross margin” than the implant business, but also materially lower selling costs and less capital intensity. He added that OPSB does not require consigned inventory and has “no real significant capital expenditure per revenue dollar,” leading to a contribution margin that is “actually higher than the implant business” and favorable cash flow dynamics.
On Latin America, Hite said variability stemmed from set sales to stocking distributors, which are sold “at our cost, no margin,” and can create lumpiness based on timing. He said the company purchased its largest distributor in Brazil in November 2025, transitioning toward direct ownership and hospital sales. Hite said the shift improves visibility, cash collections, and ordering patterns, positioning the business for “more sustainable growth in Brazil over time.”
Hite also addressed lumpiness tied to the company’s 7D navigation system, describing demand as strong but acknowledging the timing of hospital legal documentation can vary. He said the company removed anticipated 7D growth from guidance in the third quarter to reduce volatility in the forecast.
Regarding profitability, Hite said OrthoPediatrics improved gross margin slightly in 2025 to about 73% for the full year and indicated that level is expected to hold in 2026 and 2027 despite mix shifts. He cited OPSB growth as a headwind, while the move to direct sales in Brazil and higher-margin new product launches are expected to help offset that pressure.
Hite said the company has moved from a “revenue at all costs” posture to prioritizing improving Adjusted EBITDA and cash flow. He pointed to achieving positive free cash flow in the fourth quarter of last year, while noting the first half of this year is expected to be negative due to set deployment. He said the company is aiming for “free cash flow breakeven, maybe even slightly positive in 2026.”
On planned set placements, Hite said the company expects about $10 million of deployment this year, down from $17 million in 2025 and $20 million the year prior. He attributed the reduction to greater efficiency from new products that carry higher pricing and lower set costs, saying the 2026 deployment—focused on “all brand-new products”—could generate revenue growth comparable to deploying $20 million several years ago.
Product and technology pipeline: 7D, FIREFLY, Playbook, iotaMotion, and scoliosis “super cycle”
Management highlighted ongoing growth in enabling technologies. The company said it has “north of 20” 7D navigation units in the field in the U.S., and described a continued pipeline for installations. Management said adoption of 7D and FIREFLY navigation, including 3D-printed guides, has supported scoliosis volume at installed sites. It emphasized the importance of radiation-free surgery, particularly with 7D’s MRVision, and said demand remains strong despite unpredictable closing timing.
The company also described Playbook as a digital workflow tool intended to enhance operating room processes, with preoperative planning features that management expects to be central to launching a new scoliosis fusion system. Management said Playbook is in early stages with beta sites and is not expected to be a major revenue contributor in 2026, but could become more meaningful over time. It outlined a model that includes a small hardware component and recurring access fees on a monthly or annual basis.
On iotaMotion, a cochlear implant robotic system, management estimated a U.S. opportunity of about $20 million for unit placements in children’s hospitals. The company said it intends to leverage its existing presence in children’s hospitals to make introductions to ENT surgeons. Management noted the first iotaMotion robot was launched in Cincinnati Children’s Hospital in the fourth quarter and said it expects a modest contribution this year, with a larger revenue impact likely in the second half as more units are placed.
In implants, management discussed what it called a multi-year “super cycle” of new products, naming platforms and systems including 3P, eLLi, VerteGlide, and a next-generation scoliosis fusion platform. On 3P, management said the company beta-launched the 3P Hip late last year with limited sets and described feedback as “extremely positive.” It expects a broader rollout this summer, with sets in the market in the back half of the second quarter, and said revenue impact should become more visible in the third and fourth quarters as inventory scales. Management said it has also received approval for 3P Small-Mini and described future additions including a 3P knee and femur system, which it said could come around 2027.
Management said it has begun launching VerteGlide, citing strong demand and early cases in the fourth quarter and first quarter. For eLLi, it said the FDA has granted approval to begin procedures and that it expects a first inpatient case in the fourth quarter, with the ability to bill for procedures. The company said it plans a minimum 50-patient study and expects eLLi’s U.S. revenue impact to be more of a 2027–2028 story, though international opportunities could contribute sooner.
Management also provided an update on ApiFix, positioning it within a continuum of scoliosis care that includes bracing, non-fusion, early onset scoliosis treatments, and fusion. It said surgeons are narrowing indications as study results come in, using ApiFix more selectively in patients where it performs best.
M&A outlook: continued interest in pediatrics, expansion likely via acquisition
On strategy, management said it remains interested in acquisitions within pediatrics, particularly in OPSB-related products and clinic expansion. It said it is harder to identify additional pediatric orthopedic implant assets. Looking beyond orthopedics, management reiterated an aspiration to leverage its channel and infrastructure across other pediatric subspecialties, saying that any more aggressive move would “probably be through acquisition,” similar to how the company entered OPSB through MD Orthopaedics.
About OrthoPediatrics (NASDAQ:KIDS)
OrthoPediatrics Corp., founded in 2007 and headquartered in Warsaw, Indiana, is a medical device company dedicated exclusively to providing orthopedic solutions for children. The company focuses on developing, manufacturing and marketing a broad portfolio of implants and instruments designed to address a wide range of pediatric conditions, including trauma, deformity correction, spine disorders and sports injuries.
The company’s product lines include locking plates and screws for upper and lower extremity reconstruction, intramedullary nails for femur and tibia stabilization, and specialized systems such as the MAGEC Magnetic Growth Rod for treatment of early-onset scoliosis.
