Orthopediatrics Corp ((KIDS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for OrthoPediatrics Corp presented a mixed sentiment, reflecting both optimism and caution. The company showcased strong growth in its core segments, such as Trauma & Deformity and OPSB clinics, and reported significant improvements in adjusted EBITDA and free cash flow. However, these positive developments were tempered by challenges in 7D capital sales and the Latin American market, alongside increased operating expenses and impairment charges. While OrthoPediatrics is on a promising path toward profitability and cash flow positivity, short-term disruptions in certain business segments paint a balanced outlook.
Strong Revenue Growth in Core Segments
OrthoPediatrics Corp reported a robust 12% year-over-year increase in global revenue, driven by a 17% rise in trauma and deformity revenue and a 4% increase in scoliosis revenue. This growth underscores the company’s solid performance in its core segments, highlighting its strategic focus on these areas.
Significant Improvement in Adjusted EBITDA
The company achieved a remarkable 56% improvement in adjusted EBITDA, reaching $6.2 million compared to $4.0 million in the same quarter of the previous year. This improvement reflects OrthoPediatrics’ effective cost management and operational efficiency.
Successful Expansion of OPSB Clinics
OrthoPediatrics successfully expanded its OPSB clinics to over 40, marking its entry into new territories such as New York City, California, and internationally in Ireland. This expansion is a testament to the company’s commitment to broadening its reach and enhancing its service offerings.
High Gross Profit Margin
The company reported an increase in its gross profit margin to 74%, up from 73% in the prior year. This improvement indicates effective pricing strategies and cost controls, contributing to the company’s overall financial health.
Positive Trends in Free Cash Flow
OrthoPediatrics demonstrated a significant improvement in free cash flow performance, with usage decreasing to $3.4 million from $11.7 million in the prior year. This positive trend highlights the company’s progress toward achieving cash flow positivity.
Decline in 7D Capital Sales
The earnings call revealed a decline in 7D capital sales, with zero unit sales in Q3 2025 compared to strong sales in the same quarter of 2024. This decline has impacted the company’s overall growth trajectory.
Challenges in LatAm Market
OrthoPediatrics continues to face headwinds in the Latin American market, particularly in Brazil, due to stocking and set sales challenges. These issues have negatively affected the company’s growth in the region.
Intangible Asset Impairment and Restructuring Charges
The company recorded $2.3 million in impairment charges and $2.3 million in restructuring charges, which have impacted its overall financials. These charges reflect the company’s efforts to streamline operations and address underperforming assets.
Increased Operating Expenses
Operating expenses rose by 19% year-over-year to $54.7 million, reflecting investments in growth initiatives and expansion efforts. While these expenses have increased, they are aligned with the company’s strategic objectives.
Forward-Looking Guidance
Looking ahead, OrthoPediatrics provided optimistic guidance for future performance. The company expects full-year revenue to range from $233.5 million to $234.5 million, with adjusted EBITDA projected between $15 million and $17 million. Despite challenges from delayed 7D capital sales and issues in Latin America, the company remains on track to achieve positive free cash flow in Q4 and aims to break even in 2026.
In conclusion, OrthoPediatrics Corp’s earnings call reflected a balanced sentiment, with strong growth in core segments and significant financial improvements. However, challenges in certain areas, such as 7D capital sales and the Latin American market, present hurdles to overcome. The company’s forward-looking guidance remains optimistic, with expectations of continued revenue growth and progress toward cash flow positivity.