Good afternoon. Thanks for joining us again at the 23rd Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech Equity Research Team at Needham & Company. I'm pleased to introduce OrthoPediatrics President and CEO David Bailey and CFO and COO Fred Hite. Instead of a standard presentation, we're gonna do a Q and A session. If you do have any questions that you'd like to ask, you can submit them electronically through the Needham Conference website, or you can feel free to email them to me at mmatson@needhamco.com, and I'll do my best to fit them in. So as I noted, we're gonna do Q and A. We're just gonna dive right into the questions here. So just as a kind of intro, I wanna start talking about some of the macro things here.
So, you know, I know that you've had some kind of periodic challenges around the respiratory infections, flu, RSV, COVID. So I wanted to start out just by seeing if you could talk about, you know, what you saw, you know, last year in the fourth quarter, and then to the degree you're able to talk about it, you know, what you've seen here in the first quarter of 2024.
Yeah. Thanks, Mike. And thanks for having us. Really appreciate the opportunity. Busy day today. Yeah. So, yeah, obviously, you know, we have been affected in a little different way than a lot of the adult companies. Post-COVID, RSV was kind of our COVID in a lot of ways. In the late in third quarter, early fourth quarter, throughout fourth quarter of 2022, had a lot of disruption in our business, particularly on the elective side where hospitals were just jammed with record numbers of patients due to RSV, something we had never seen in the lifetime of our business. You know, we headed into 2023 a little bit apprehensive that we could see repeat of 2022. Fortunately, in the fourth quarter, we were spared a lot of that, although RSV was the second highest on record in 2023.
We weathered fourth quarter really well. We really think the hospitals managed this better. Staffing was better. The degree of, while the numbers were high, I think the severity was much lower. We think Q4 was probably impacted pretty substantially in the last two weeks of December, which is pretty busy for us. Kids are out of school. But that was about all. We still posted, you know, 21% growth in Q4 regardless of losing a couple weeks at the end of December. We saw that kinda spill into Q1, and you heard us talk about that on our Q4 call that we saw a little bit of that in Q1.
But, you know, it kinda spiked really fast and seems to get to be back to normal, which I think is a testament to the normalization of the surgical environment overall in pediatric orthopedics. So kind of hoping that this is behind us and, not counting on, you know, on, you know, 2024 kind of mishaps with RSV and staffing.
Okay. That's good. And then the other thing you've kind of dealt with is, I maybe it's interrelated a little with the respiratory infections, but there's been some capacity challenges in the pediatric hospitals. So can you just talk a little bit about that? You know, I don't know if it's staffing or the infections or just something else that was going on. Maybe there's just not enough children's hospital beds out there. But maybe just give us your thoughts on that.
Yeah. Good question. Well, historically, you know, the I think first off, it's important to note that the majority, like 98% of our surgeries are inpatient surgeries. These are very complex surgical procedures. Nearly a third of our patients have cerebral palsy, for example. So even our elective procedures, you know, these aren't an overnight stay or certainly not an outpatient. So while, again, you saw a lot of the adult marketplace moving elective procedures outpatient where there was, you know, more of an abundance of staffing, our procedures were happening inpatient, and they still do. And so, yeah, historically, over the last few years, we've been fighting a bit of a capacity battle where we noticed that our hospitals just don't have the same throughput as they did in a pre-COVID environment.
I think 2023, Fred and I indicated we felt like we were 80%- 85% to, to normal capacity or pre-COVID capacity. You know, it's primarily related to staffing. Then once a hospital started staffing, you know, it takes a lot of staff, Mike, to be able to do these complex patient cases as well as manage the postoperative ramifications, specialized everything, right? Specialized anesthesia, for example. So, we were seeing that throughout 2023 improve kind of month-to-month, quarter-over-quarter. Again, I think the testament to where we're at now is how well the hospital environment handled RSV in the back half of this back part of the year and in the early part of 2024.
You know, we're signaling to the market that we think we're 90%-95% to full capacity with the intent and kind of in our model forecasted to be at 100% capacity by midsummer. What was kind of a headwind for us, we think, maybe is, the winds are blowing in the right direction for us as the marketplace generally improves.
Okay. Great. And then you've given your guidance for 2024, $197 million-$200 million. I think that included $25 million from the Boston Orthotics and Prosthetics acquisition. So that sort of implies 16%-18% organic growth. I think you did about by our math because I don't think you're giving us exactly the organic growth, but we come up with about 16% for last year. So I and I think you've kinda been in that high teens range for a while now on an organic basis. So does this sort of imply that OrthoPediatrics is more like a high teens organic grower versus 20%+ that you were kind of a few years ago?
Yeah. I think if you look at the fourth quarter of 2023, we do feel like it's kind of a turning point for us. We put guidance out there, as we have done in years past. We have been burned a little bit in the past two years by these unknown, I guess, if you will, environmental impacts, staffing being the first one and RSV being the second one. We feel like we're now in a better position. We feel like the environment, particularly on staffing, is much, much better, as Dave mentioned. We better understand the RSV environment. We're not counting on it being tremendously better in the fourth quarter of 2024, but we think it can at least be the same. So, starting the year, we put out guidance of that 16%-18%.
I think we would expect pretty high confidence level in those numbers, in the year of 2024. We had some stuff that impacted us last year that we now think is gonna help us this year. And so you may see that get closer to or above that 20% rate, into the future. But we think it's the right level to come out of the year with. Let's see what the summer selling season looks like for us where we have our highest volume, and then we'll kinda update it as we go throughout the year.
Okay. All right. And then, just given the macro environment and the rise in interest rates, it seems like you've shifted a little bit more in favor of in, you know, focusing on the bottom line as opposed to just driving the absolute strongest revenue growth, that you could if you spent more. So is this correct, and can you provide your your view on that?
Yeah. I think our business has had the same strategy for the last 5 years-7 years. That is to grow the top line of the business and improve the bottom line of the business year after year after year, which we have done and demonstrated, and eventually get the business to a cash flow break-even where we're generating enough Adjusted EBITDA to fully fund the annual set deployment amount that we're investing in the business to drive growth. We've seen improvements on the bottom line of the business. We're not trying to maximize the profit of the business at this point in time. We're still reinvesting in the business. But in 2022, full year 2022, we had break-even Adjusted EBITDA. It was $5 million positive in 2023. We're projecting $8 million-$9 million of Adjusted EBITDA in the business.
So in our minds, we have not really changed our strategy because of the interest rate. It's the exact same strategy we've been demonstrating for the past 5 years-7 years. I do think that the strategy is more valuable today than it was even 7 years ago when the interest rate, which was much, much lower.
Sure. Okay. That makes sense. And then I wanna talk a little bit about some of your recent acquisitions, more recent acquisitions. So, in January, you announced acquisition of Boston Orthotics and Prosthetics, or O&P. This deal seems somewhat different than prior deals you've done, just given the service aspect of this business. So just can you quickly provide an overview of Boston O&P and sort of how it fits with OrthoPediatrics?
Yeah. Sure. So, yeah. Super excited about the opportunities with Boston. I think you probably heard and a number of people questioned why we were saying, you know, even six months ago that we're out to build a $100 million franchise in pediatric specialty bracing. You might assume that we were working diligently with the folks at Boston to get a deal done here in January. So, you know, listen, we think the combination of Boston and MD Orthopedics with our past organic product developments of DF2 that just launched, the Rhino product line that's launched, the Orra Medical product line that's launched, I think, four different products that launched in MD Orthopedics really provides us with a great base case, about a $40 million business or so, in an effort to build a $100 million plus specialty bracing business.
You're right in that Boston is a little different. They generate revenue from two sources. The smallest of the sources, about 10% of their $25 million, is 17 they have 17 products that they sell, not just inside their own clinics, but also sell to multiple other clinics around the United States and some outside of the U.S. They do that word of mouth. There's no sales channel. So you can imagine. You know, we think we can scale that pretty rapidly with our sales channel. And then 90% of the revenue comes from the billings and the service, both of the product as well as the service of applying that product through these 26 clinics that are largely focused on the upper northeast in the upper northeast surrounding Boston Children's Hospital and Children's Hospital of Philadelphia.
Just in short, it is a bit different, right, in our business. Number one, it's not implants. Number two, there's nobody standing in the operating room for these types of procedures. But it is very similar in that it's exactly the same customer. It's our surgeon customer we know extremely well. And in our surgical business, you know, we have 200+ salespeople that spend time making sure that our customer is being well served in the operating room. And it's Boston's aspiration and ultimately our aspiration to be able to provide that same level of service that we provide historically in the operating room to what our surgeons do outside of the operating room. So there is more similarities than you might think.
Huge opportunity for us here, Mike, and couldn't be more excited about the surgeons' responses to this acquisition so far.
Okay. I think when you announced the deal, you said that they have that Boston O&P had around 26 clinics and $25 million of revenue. So, that works out to about $1 million per clinic per year. I mean, is that the right way to think about that business? And I mean, if as you scale it up, I mean, can you, you know, as you add more clinics, can you, I mean, maybe not year one, but can those clinics ultimately get to $1 million per clinic per year?
Yeah. So good question. So we first off see that TAM in the U.S. and then in the Children's Hospital in the U.S. is about a $500 million opportunity here. So this was a big TAM exercise for us expansion TAM expansion exercise for us. And, right now, these 26 clinics, your math is right, they're about a $1 million per clinic. One of the things, though, that is fairly unique that I don't think is gonna carry forward for the rest as we expand the business is that in the jurisdictions where Boston has all these clinics, they're a little bit more complicated logistically. And Boston Children's, for example, has a multitude of different satellite hospital locations where patients can be seen. So they have a number of different clinics serving just Boston and just Philadelphia.
And so that's probably driving what we think the overall number per clinic could be down a little bit right now.
Sure.
So when we go into markets, you know, we're starting a clinic in at Nationwide Children's in Columbus, Ohio, for example. Nationwide is the highest volume children's hospital in the United States. We'll have a clinic in that hospital. We won't need five clinics to serve that market, right? I mean, so we expect that most likely kinda low end would be $1 million in revenue per clinic, maybe high end $3-$4 million. And, you know, if you think about that in context of the TAM, you know, do the math and multiply that across 300 children's hospitals, you know, it's about $500 million in opportunity for us. And you're right. Our aspiration would be to cover all 300 children's hospitals with clinics. And right now, we cover 15.
It's, you know, a lot of growth in front of us with this strategy.
Okay. And so then how are you thinking about, you know, expanding this business and opening more clinics? Do you have a target for opening a certain number every year? And then, you know, can you talk about the capital requirements to opening a clinic? I don't think it's all that much, but.
Yeah. I'll start just and then the capital requirements to Fred. The way we see this business growing first is being able to, through our sales channel, scale product usage and kinda the wholesale of both MD Orthopedics products, the full other OPSB products, as well as Boston to clinics all around the United States. We think they can happen fairly rapidly, as we scale our sales channel. Number two and probably the bigger is, as you pointed out, scaling these clinics into, you know, the other 285 children's hospitals. We don't expect that to have really strong contribution in 2024. It's gonna take us a little bit of time to get our arms around that. We also haven't given specific guidance yet as to what, the pace with which we think that can happen.
But what I will say is I think by end of summer, early fall, we'll be in a better spot after we get our arms around this business a little bit to be able to give some guidance as to what the funnel looks like. Right now, Mike, we are being bombarded from children's hospitals, from surgeons who are asking, "When can I get a Boston clinic in my area?" We know what they do in Boston. We know what they do in Philadelphia. We want that. And that's fantastic news for us. But we recognize it takes a little bit of time, takes a little bit of capital to do that. And so we're building a big funnel, evaluating which markets we wanna go into first.
I think, you know, into Q3, maybe we'll be able to reveal a little bit more about what we think how we think the pace of that's gonna look like into 2025. One thing I will say, though, is that it's very clear, and I think you can count on a big chunk of growth from the OPSB franchise in 2025 will be clinic expansion. A lot of that work maybe not the revenue flowing through, but a lot of that work will be done in the back part of 2024 getting us ready for that. I don't know, Fred, maybe you'd comment on the capital needs.
Yeah. So capital needs, if you think about opening a new clinic, number one, it does take time, as Dave mentioned. There's registration. There's hospital approval and other things. But once that is in place, it's maybe $500,000, round-ish. So we have to lease a facility, build out a facility, which is not a big deal. And then we're gonna hire a couple of clinicians and make sure they're fully trained. So Boston has modules for each of their different segments that they serve, and there's training modules they can get certified in. So we're gonna make sure that the clinicians are fully certified and trained in all of those modules. And then we'll start booking revenue. And so, you know, within several months, it'll start generating revenue, and we see it being cash flow positive pretty quickly.
So it's dramatically better, I would say, than the other side, or the implant side of the business where we have consigned inventory that has to be deployed. That takes time to get utilized and fully utilized, which could be 12 months-18 months. So we like the financial metrics of this side of the business and see it growing faster than the overall average of our business.
So you mentioned inventory. So do these clinics have to have a lot of product, you know, on the shelf, or you ship it in as needed?
No. So if you think about the scoliosis brace that they provide, it's about 30% of their overall business. Those are 100% custom.
Okay.
So a patient comes in. They do a scan. That scan goes to Boston. Boston manufactures that custom brace, sends it back to the clinic, and then it's applied and trained for the patients and their parents on how to use it and proper adjustments and whatnot. So, there's not much inventory at all in these clinics or back at Boston.
Okay. Yeah. I guess that makes sense. It's that the whole point of having the clinic is to customize everything, so. Okay. And then what about OUS? Is there an opportunity for this business outside the U.S.?
Yeah. We think there is. We're working on that, but it's not a first priority here. But we definitely have had inbound already. One of the things that we see from the MDO business, the Rhino product line, DF2, all those things is a huge demand outside of the U.S. So we've been able to when we acquired MD Orthopedics, they had 70 distributors outside of the U.S. selling in 90 markets. And so you can imagine when we develop a product, and then it's fairly easy to get those products approved outside of the U.S. in these markets, there's a really nice expansion opportunity to sell through to our distributors, OUS.
You know, with 17 products in the bag for Boston and really no sales force, you could assume that, yeah, there's some pretty good opportunity for us to sell some of the less customized products that Boston manufactures now and to sell them to our distributors that are already in place outside of the U.S.
Okay. Got it. And then, just wanted to, I mean, you mentioned MD Orthopedics and Pega Medical. I know it's been a little bit longer since you did those deals, but can you just give us a quick update there? Are those now fully integrated? And, you know, to what degree have they benefited from OrthoPediatrics ownership?
Yeah. So, we'll start with MDO, which we bought now over, probably two years ago, just under two years. And it's very similar to Boston, and it was very similar to Pega in that, family-owned. They were not investing a lot of cash into those businesses, and so they weren't growing tremendously fast. But they all three, MDO, Pega, and Boston, were profitable businesses, positive net income and positive cash flow. Bringing those businesses into our environment, into our portfolio, has been tremendous for all of them. So MDO, number one, created additional products with them, launching new products. That obviously takes some cash. But then bringing it into our network of products that we offer, drove tremendous growth in that business. Pega, we moved from their sales force. They were selling through a distribution network into our sales force. And domestically, the sales have exploded.
I think they doubled within the first year. I think they were up 59% year-over-year here in the fourth quarter of last year. Internationally, that business grew, I think, 32% in the fourth quarter of last year. Bringing those products into our sales channel is driving tremendous growth, number one. Then number two, particularly on the Pega side, they had a lot of products that they had launched in a very limited fashion that we're now able to really launch globally and have all of our global surgeons have access to those products, which are very innovative. And we're seeing tremendous response to those product launches, which is really a new launch or a relaunch of those products. So couldn't be happier. They're all fully integrated. They were pretty quickly within the first 12 months.
The revenue growth has just been tremendous, and we expect the same from Boston.
Okay. Got it. I wanna ask a few on your sales force. So can you give us an update on the U.S. sales force? How big was it at the end of 2023? And then, you know, how much are you planning on expanding it in 2024?
Yeah. So U.S. sales force, just over 200, maybe 205 something around there. Generally, Mike, the sales channel, particularly on the surgical side, grows a little slower than sales growth. So, you know, I think it would be rational to think that it would be up, you know, 10% something something in that range. We did add some, specialty bracing salespeople, and we expect to have about 20, what I would call more clinical sales-based, people that aren't standing in the operating room but are definitely working, in partnership with our surgical sales force, to build relationship with customers. So yeah, probably a 10% growth number this year. Again, it's not something we gnash our teeth over, but we like to see it grow at least similar, if not a little slower than the overall company growth rate.
Okay. And then similar question on international sales agencies. How many did you have at the end of last year? And, you know, what's the outlook for 2024? Are you planning on doing any additional distributor conversions this year?
Yeah. Well, 14 last year, probably 14 this year. We don't have anything major. I mean, we've essentially converted the major markets in Western Europe, Australia, New Zealand. Unlikely that we'll be very aggressive in South America and some of the markets in the Middle East and Asia. It's possible we can do a small deal, but it's not built into our strategy right now for 2024.
Okay. Understand. And then the just international markets, I mean, now with agencies, I guess, just given what you just said, but, you know, your stocking distributors, are you still expanding into new countries, or is that largely stable at this point?
It's fairly stable. Although what really did happen, and I think probably we didn't even appreciate as much when we did the acquisition of Pega, Pega had more, had 30 more distributors. So because of the unique nature and almost the orphan nature of these fibers or the FD rod for osteogenesis imperfecta, Pega had developed a series of distributors in a lot of markets that we hadn't participated in yet. And so obviously, we had converted the Pega sales force internationally to our sales force, particularly in agencies, and there we were covering 43 markets. But you've got, give or take, 30 markets now where we have Pega distributors that are now interested in taking on certain OrthoPediatrics Pega products. And so there is some nice opportunity for us to launch products in markets that we haven't launched before.
Those are fairly minor markets, but certainly, you know, a nice to have. And, you know, Mike, I mean, international tends to outgrow the domestic business. It's smaller. It's newer for us. There's demand for our products in every country. And so, it's certainly a tailwind to be able to expand some of our products in some of these other markets.
And then what about emerging markets, I guess, particularly China? I can't remember if you're in China yet or not, but would you consider going there if you're not?
Yeah. So not on the short term, but certainly something that we have in, more of a long term. I think India is a good market for us. And we have, we've started, not selling, but we've started to make some intros there. We are very pretty well connected to surgeons there who are, you know, oftentimes very well connected to North American colleagues. And so that could be an opportunity. Again, not something that we expect to be a 2024 story, but we got some large markets, India, China, Japan, some of the largest healthcare markets in the world. We right now have very, very little sales if known in some cases.
I would say, too, that the OPSB franchise probably is likely the first to expand into markets, like India and certain markets in Africa where there are very high rates of congenital abnormalities that produce limb deformities and, frankly, low access to surgical solutions. So the demand for non-surgical solutions in those markets is very high. You know, I I think you can assume we would try to exploit that over time.
Okay. All right. Moving on to HypaFix, you know, just wondering if you could give us an update there. I don't know if you have any kind of metrics you're willing or able to share in terms of adoption, but and then, you know, is it, if you can't give us more specific numbers, is it safe to assume that HypaFix is still accretive to your overall revenue growth? In other words, growing faster than your corporate growth?
Yeah. I think what you can assume is that it is growing faster than our corporate growth. It's definitely growing faster than our fusion business, you know, the base fusion business. Coming out of 2024 or 2023, we have 27% more users of HypaFix than we did going into 2023. So really good in terms of user capture in 2023, going into 2024. But we also had 25% more users on our fusion products. So that bodes well for, you know, what that business will look like for us, in 2024 and beyond. I mean, we just keep getting more new users of the product. And they're symbiotic, right? People start to use HypaFix, do a few cases, like it, and that exposes them to our fusion product portfolio.
And so both of these are kind of helpful drivers to the overall scoliosis growth rate as well as 7D, where we have, you know, now a number of units that have been placed that are on earnouts that are gonna drive growth for us in 2024.
Okay. And I think I've asked this before, but I'll ask it again, just HypaFix. You know, I think I had sort of hoped that there would be some kind of an inflection point where it would kinda just take off, but, you know, it seems to be that that's not that likely. I mean, not to say it's not gonna have good growth, but, it's gonna be more of a slow and steady build over time versus some kind of overnight success story, I guess, if you will. So, I mean, can you just give your perspective on that?
Yeah. I think your assessment of that is right, Mike. I mean, I think early in this process, I think a lot of people felt like, and we were certainly there, that the non-surgical or the non-fusion side of scoliosis was gonna be rapidly adopted, driven by patient demand. And certainly, the results that we've seen across the board, our results have been very strong. Certainly, tethering results have been up and down, although I think they're getting better over time. There's no question that adoption of non-surgical non-fusion techniques is on the rise by customers. I think customers are trying to weigh, you know, the risk-reward benefits of these types of techniques against the gold standard spinal fusion. And patients are demanding it, but you know, it's probably not a hockey stick for any of these non-surgical or these non-fusion types of products.
But we feel like, given our data and as our data matures, it's maturing really well. And so we're publishing that data to our customers, the user group. And I think people get more and more confident about where HypaFix fits into their portfolio or into their indications for use. And I think what we're moving towards over time here is that HapaFix is a product that would be in essentially every spine surgeon or every pediatric spine surgeon's bag. Some of them will use that far more aggressively. And some of them, you know, will use it, you know, only in the instance where a patient is absolutely demanding a non-fusion option. And so, yeah, probably not a spike, but pretty steady up into the right and contributing really nicely to growth.
Okay. And then you have ZimVie, selling their spine business. And, I mean, they're really your only competitor to HypaFix with their tether product. And I understand where you're coming from. There's been some challenges at times with that product. But, I mean, do you think that transaction could cause any disruption that would somehow help HypaFix, or is it just not really relevant?
Yeah. I don't know if it's gonna help HypaFix a lot. I think the transactions in general, not just ZimVie, but a lot of the transactions just highlight to a lot of our customers the unstable nature of partnering with companies that aren't focused exclusively in pediatric orthopedics. And I think we are benefiting both in terms of credibility as well as user base by making clear that, you know, we're a company that's dedicated exclusively to this space. And I think that is what's actually benefiting us more in this kind of M&A environment that we've seen, you know, particularly in adult spine over the last, you know, several quarters.
Okay. Yeah. That makes a lot of sense. Then I wanna talk about some of your other products. So, you know, just within your trauma and deformity business, can you talk about some of the newer products there that you're excited about and that you're driving growth?
Yeah. Great. Well, obviously, we've talked about all the specialty bracing. A lot of that falls in the T&D business. So a lot of new products there that have come out, really in H2 of last year. So gonna see nice growth as a result in 2024. I think PMP Tibia, really positive. So we launched that last I think the last month of Q3 in a beta release. I think we had 10 or 15 sets. We only had that many sets throughout Q4. And we saw the surgeon usage of that at a much higher rate, frankly, than we had expected. So we're really excited about the full release of PMP Tibia. I think that's gonna impact trauma growth, and deformity growth. Actually seeing PMP Tibia used in deformity indications more than we expected. So that's good.
As well as the Gyro product, we did a similar kind of thing where we had beta launch in the fourth quarter of last year, full launch here in the first part of 2024. And that product is growing a little faster, moving a little quicker than we thought. So those are two good ones. DF2, the DF2 brace, really, we worked on that for a while, and it's just been extremely well received by customers. So really excited ultimately. I mean, those businesses, those product lines are they're special ones for us. They're going well.
And we have, we're in the midst and, you know, starting to get in the back part of, probably our biggest product development on the trauma limb deformity side, which is a project we call P3, which is an entirely new plating system, pediatric-specific kinda ground up. And I think that is, you know, that's probably the biggest one that we'll have launched on the trauma portfolio. And, you know, again, we're still probably a year away, but it's good to see the progress we're making.
So, on that plating system, is that something where it's a replacement for an existing product, or is it a completely new category that you're entering?
Yeah. Some of the plating will be an update to some of our existing. I think a lot of our plating products right now were pre-IPO products, when the company was a little less sophisticated. And the products weren't as complete and maybe as novel. And so, you know, this will be a marked upgrade to what we have as well as expand into certain indications within pediatric deformity and fracture management that we really can't provide anything short of maybe a commoditized plate and screw type of product, if that makes sense.
Yeah. Sure. So kind of a packaging together what you have with a more comprehensive offering.
Yeah.
Maybe some, you know, additional innovation.
Absolutely.
Okay. All right. And then similar question on scoliosis. So, you know, we talked about HapaFix, obviously, but, you know, on the fusion side, you know, what do you have that's new?
Yeah. So last year launching just at the end of last year, launching the Response cannulated screws as well as Response Power, both been really well received. I think probably more than those, what we're excited about is the work we've done in early-onset scoliosis. So about 15% of all scoliosis procedures are in patients that are, let's say, under 10. And these are kids that are generally in need of some type of growing construct or a construct that helps them because they're having cardiothoracic compromise. Their lungs are being crushed by the weight of their thoracic deformity. And so we just recently announced the launch of the Response Ribbon Pelvic System. So that's our first entry into EOS.
That will be followed by the launch of our VertiGlide system, which is actually a product line that we licensed the technology from Medtronic, and are now preparing to hopefully get this in front of agency here in the next few months, hoping to get that out in the back half of 2024. And then 2025, we're aspiring to launch our first electromechanical growing technology. So really three unique products that fit what we think all indications with early-onset scoliosis. And we don't see any company that has anything close to that kind of offering. So next 18 months on the EOS side, super exciting for us. And again, I think it cements that we're the company that are doing such things that are really hard and really unique. And that pulls through the rest of our fusion portfolio, HypaFix, all the other products.
Okay. Got it. And then, you know, you do have a couple enabling technologies, Firefly and 7D. So maybe you could just give us an update there.
Yeah. Both of those technologies still going well for us. We like both of the technologies. I think, you know, 7D has its place, particularly with surgeons who are doing really complex stuff and are in a place where they may not have access to robotics or access to navigation, I should say. And then, 7D, you know, we had a number of placements in 2023. We have a very large funnel in 2024. And, you know, some of those are capital sales, but the majority of these are earnout opportunities for us that produce growth into the future. And so we like both technologies. Both technologies seem to be well accepted by our customer base. And, they're driving growth in our Scoli franchise.
Okay. Great. And then, we're almost out of time, but I'm gonna try to squeeze a couple more in here, some financial questions. So, you've done a lot of M&A, really, since the IPO, and in the last few years in particular. Is there anything left out there that would fit, or do you feel like you've built out kind of a pretty comprehensive, you know, business at this point? And, you know, obviously, you've got some internal things you're working, you know, working on too, like the early-onset stuff, but.
Yeah. Listen, we've done some great transactions that have really, I think, changed the strategic nature of our business. I would say short term, it's, you know, really focused on Boston and all of the growth drivers that can provide. There may be some new technologies, kinda single product, innovation that doesn't have a channel to market that we would look at, but there's not a boatload of other assets, that are big, I would say, in this space that we could add on. I think it'll be for the next, I don't know, 12 months, 18 months, growing what we have and then looking at, you know, how do we continue to expand the TAM of the market? So Boston expanded the TAM very nicely by an incremental $500 million. So it gives us room to play.
Then, you know, as we start making deeper penetration into that space, we may look at other areas that could expand the TAM.
Okay. All right. I did have one question that was submitted. So can you maybe just comment on how the Boston O&P deal changed your path to your longer-term EBITDA margin targets? I don't know if you've ever told us what those targets are, but I imagine you have some, so.
Yeah. I would just say it's accretive, right? So, as I mentioned before, Boston, Pega, and MDO, all three of those businesses were positive net income and positive cash flow when we bought them. So, we can take some of those funds and invest it in the business to drive growth and still be positive at the bottom line of the business. And so that helps us, helps us on the EBITDA side. And it'll help us get to our ultimate goal of being very similar to the large OEMs. The large OEMs have 35% kind of EBITDA, and we have equal to or better gross margins than they do and think we'll be there. The issue is it's not gonna be in the next 3 years-5 years. It's a ways down the road.
It's improving the bottom line but not maximizing it for the next 5 years-7 years as we continue to drive significant revenue growth.
Yeah. Understand. All right. That's probably a good stopping point. We're at the 40-minute mark here. So thanks, guys. Appreciate the time and the answers to all my questions.
Thanks, Mike. Good questions. We really appreciate you hosting us. It's been a great day. And, yeah. Thanks a lot. This was great.
Thanks, Mike.
Yep.