All right. I think we're ready to go. Thank you so much for joining us. Just by way of background, my name is Matthew Blackman. I am a member of the TD Cowen MedTech research team. It's my great pleasure to have with us today senior leadership from OrthoPediatrics. To my left, we have David Bailey, President and CEO. To my far left, Joe Hauser, President of Trauma and Deformity, as well as OPSB, which is the bracing business. Thank you guys for joining us. Really appreciate you making the trip. I think this is your first TD Cowen conference.
It is.
It is mine as well. I appreciate you being here. Maybe if we could start. You just reported full 4Q results. I'm gonna add my two cents in here, but I think the big highlight, was a very strong free cash flow number in 4Q, and particularly relative to a pre-announced, range that you gave. Maybe if you could take a step back and just, hit the quarter highlights, you know, what stood out, and then we'll take the conversation, look ahead a little bit, and talk about the outlook for 2026.
Sure. Great. Matt, thanks for having us. It's been a good conference so far, really appreciate your coverage and an opportunity to be here. Yeah, I think when we look at Q4, business performed really well across all of the sectors of our business. We saw strong demand for T&D implants in the United States, you see numbers outside the United States were very strong. Scoliosis remained very strong, I think on the heels of some of the historic deployments of 7D, where we're seeing volume come through on the scoli side, and some of the early first few procedures with VerteGlide, which has been very positive and I think will impact positively 2026. Like we've seen since we've entered into the OPSB business, that business has performed extremely well.
You know, I think you could assume growth in excess of 20% for the OPSB business and likely that to continue into 2026. Business performed well. It was good to see that flow through on the EBITDA side. You know, business nearly doubled on an annualized basis from an EBITDA perspective. As you said, $10 million in FCF for the fourth quarter, which is our first quarter of positive free cash flow and had been something that we set out to do and committed to investors early in the year. I guess I would argue that, from my perspective, I think there's questions potentially on investors' mind that can this business, you know, generate a credible amount of EBITDA, particularly in 2026, enough to generate positive or at least break even cash flow.
If you look at the second half of 2025, where, you know, we were cash flow positive for the full second half of 2025, I think, hopefully we put to bed any concerns that with that kind of performance, we wouldn't be able to follow that up with a very strong 2026, get it minimum to break even from a free cash flow standpoint, and then build from there in 2027 and 2028.
That's a good segue. Talk about the guidance that you provided. You gave some of the bottom line metrics, there, but, the top-line outlook, margin performance, any of the key metrics, just so we have a base to build off of here.
Yeah. Yeah. 11%-13% on the top line from a growth perspective, talking about $25 million in positive adjusted EBITDA for 2026 and at minimum, break even from a cash flow standpoint. We also talked about deploying $10 million worth of inventory in 2026. That would be down from $17 million in 2025. That is certainly not an indication of demand. I think more over an indication of the efficiency we see in our new products in terms of that return on assets, which has been a focus of ours to help drive FCF positive. I think we got a really nice setup here, particularly with some of the products that are launching in 2026, the expansion on the OPSB side. I think we're gonna continue to take share in our legacy business.
You know, one thing we didn't talk as much about is very strong international growth in Q4. Maybe a little stronger than we even expected. I think we're gonna see continued, you know, not 33% growth quarter to quarter necessarily in 2026, but I think we're starting to see, you know, nice pull through of some of the products in Europe, really high demand in our agency markets in Europe and Latin America as well as APAC. I would expect to see really strong, you know, growth there as well in 2026.
Correct me if I'm wrong, you also got some EU MDR approvals recently.
We did.
How does that feed into the sustainable growth trajectory internationally?
I think, you know, people may or may not know, but we have essentially been growing the European business with one arm tied behind our backs, particularly on the scoli side. We launched our scoliosis business in Europe just a few years ago, and that was with really one size of our scoliosis product. We had about half of the product availability. Pretty difficult to convert surgeons when, you know, if you have a smaller patient, we can't offer our small stature size. We got that approval in Q4, and that business was already growing, but I would expect that to continue into the future. Same thing with our products on the trauma and limb deformity side. I would say about half our portfolio hasn't been available due to just the change in regulation from an MDR perspective.
We got those products approved. I like the future in Europe. I think, you know, we would probably expect to see the international business grow a little faster as a result of EU MDR and we have lower share there. Obviously, higher share in the US, but a little lower share in those markets outside of the US.
It's not a fair question 'cause Fred's not here, but I'm gonna ask you to speak to.
I can say anything now.
Yeah. I know. Exactly. The leash is off. If Fred was here, how would he characterize the guide for 2026? I sort of snuck this question in. It feels like sort of a base case...
Yeah
... as we think about the 2026 outlook.
Yeah. I think that's. You said it, not me. Yeah, I think that's a nice base case. We recognize there's volatility in terms of timing for 7D.
We've talked extensively about our work towards improving the AR metrics and some of the working capital metrics in our markets outside of the United States where we're still wholesalers, where we're selling to distributors. You know, in an effort to balance both top line as well as bottom line and free cash flow, we're working really hard on processes inside the business to reduce working capital and drive this business to generate, you know, more cash. We've chosen to moderate certain areas of our business that have historically been more consumers of capital and consumers of cash, and that includes growth in parts of the world like Brazil and Latin America.
I think our guide is taking into account a balance between, you know, the opportunities we have against what we think is right for the business from a profitability perspective, as well as doing things that ultimately drive this business to generate its own free cash.
Great.
Yeah
is what we're talking about.
That's right.
... at the end of the day. All right, let's transition, and we'll sort of punch through some of the different franchises. We're very lucky to have Joe with us here, who heads up T&D and OPSB. Is that correct?
Yeah, that's correct.
That acronym is OrthoPediatrics Specialty Bracing. I got that correct.
We love the acronyms.
Yes. Everyone does. Maybe if we could we start on T&D? It might be helpful just giving the audience if we sort of just give a bit of a background on that end market, what it is, the growth trajectory, competitive intensity. Then we'll sort of laser focus on your positioning there.
Yeah. The T&D business, which stands for Trauma and Deformity Correction, or limb deformity, as Dave will put it actually was OP's first product to the market, so it's the roots. It's the beginning of what OrthoPediatrics was. The first system we came out with, system 1 was a Cannulated Screw System. The whole premise strategically behind that was, how do we start to gain more access to these major children's hospitals across the U.S. and eventually across the globe and give our people excuses and reasons to be there? That every time we add a new product system, a new portfolio of products for our surgeons, and that's ultimately been the strategy for the last 10 years, is how do we surround all pediatric orthopedic physicians with everything they need to treat the kids that they treat?
Every time we add a new system to that, once we have the access and the right salespeople there, it's pretty easy to see how we grow every time. Now fast-forward, we're over 40 systems in across the marketplace. We're essentially in every major children's hospital, definitely within the United States, and certainly most pediatric centers around the globe with at least one of our systems, if not more. As we chip away at the remaining part of the market that we don't have today, the products that we don't have that they want, you can see how now our access, our people that are there, every time we add a system, it's pretty easy to turn on. You're already approved in the hospital.
Same call point, same physician.
Same call point, now you're just bringing a new novel technology. Basically a system that every surgeon's asked for, now we bring it to the market and almost instantaneously it can be adopted. I think we do have the favor of the competitive landscape in this market has been pretty benign. Not a lot of people are focused at all in pediatrics only. Any of the competitive companies that we see typically have large adult products and franchises, where oftentimes some of their smaller sizes might make their way into a children's hospital. Some of those were okay, high quality products from an adult standpoint, but don't quite fit the bill of what you need from a pediatric side.
I think more interestingly, and the EU MDR that Dave mentioned is a really important component, the requirements for regulatory demands, not only in the U.S. but abroad, have required companies to take a look at their portfolios and say, "Hey, what are we gonna rationalize out of?" Unfortunately, I think the kids, the kids' pediatric products are the first ones to go because they do have a smaller... for each individual product, it's a smaller market space for that one product. The cost to actually keep these products alive from a regulatory perspective is a lot. If you don't have the entire portfolio like a company like OrthoPediatrics has, it really is a struggle to actually just bring one or two products into a niche space already.
Yep.
Even with the large TAM that we have left, within the U.S. and definitely internationally, we see a lot of our competitors continue to withdraw certain aspects of their portfolios. Also it reaches its way from a channel perspective, where even if you did have a competitive product in the ped space, the channel that was selling it is now focused on other adult related products, which makes it another challenge to be servicing what most reps and people have called our children's hospitals or almost the flyover hospitals...
Yeah
... where the big adult centers do the vast majority of volumes, and we stick to our focused children's and pediatric centers.
I have to think you layer on top of that just the dislocation that you're seeing in orthopedics broadly, but certainly in some of the companies that you would be bouncing up against, you know, spinning out businesses or selling to private equity. Just another layer, another tailwind potentially for the business over the next several years.
Yeah, if you're one of those great organizations, if you're one of those organizations, you double down on your core competency.
Yeah.
You grow what you're good at, and some of these other ancillary things that sat on the fringes, which happens to be where our business lies, you probably take some focus away from there.
Yeah.
Makes a lot of sense.
Maybe talk about the new product cadence in T&D, you know, It's always challenging in orthopedics. There's always a lot of different products, always hard to isolate what to focus on. In 2026, some new products coming in particular. Can you give us some flavor of what we should be sensitive to? What are the key growth driving incremental new products coming in 2026?
Yeah. Dave says it well. I don't know when the term came up, super cycle.
I don't either.
... it got put in, it got put into the last report. Super cycle, here we are. Actually it's probably the most accurate way to describe our excitement about what's about to come to the marketplace. Specifically, I try to break the Trauma and Deformity business down into three categories: Plates and Screws, IM nails, and XFIX. Within our Plates and Screws franchise, the 3P Hip System, which is what was launched at a limited basis last year, is now gonna make its way to a full launch this year. When you can add a significant amount of sets there, we see that to provide a bunch of tailwinds from a growth standpoint.
The $10 million, I apologize for interrupting, the $10 million in set investments, largely for some of these new products, is that the way to think about it?
I think the way to think about it is that we've worked really hard over the course of the last several years from a development perspective to maximize both the technological profile, so these are kind of very unique. They command high average sales prices as well as minimize the economic footprint, so to speak, that requires to put this inventory on the street. Historically, we would argue that we get about $1 of annualized revenue to have $1 of deployed set. We've been working from an internal development perspective to move that number to double, if not triple. So we think about using $10 million in capital that again, is almost entirely VerteGlide on the scoli side and 3P hip on the T&D side. Those assets just get dramatically higher asset utilization metrics.
Yes.
You are gonna see more of that over the course of the super cycle here.
Okay. Sorry. Apologize.
No, no, you're fine.
You're all right.
Yeah, the 3P is so part of the Plates and Screws portfolio. We just began what we'd call a massive reenergizing of that entire portfolio. It includes a little bit of an upgrade standpoint, but I think it has much more to do with stuff that we've never done before.
Can you just give us what 3P is?
Yeah
... fundamental.
Yeah. 3P is super creative on my part, right? The Pediatric Plating Platform so 3P and the whole premise behind it was basically a massive movement from an internal R&D standpoint to develop almost a system per year for the next three or four years, which we started this journey a few years ago, which is now why we're in the launch phase. The whole key to it was that you weren't just going to launch three, four independent systems that don't have a synergy, don't use similar instrumentation, don't bring the cost of our sets down, don't bring the margin profile up in terms of the unique variations that we can offer. The first system was launched last year with 3P hip. The full launch will occur this year.
Soon enough, here in the first half of this year, you'll see the next installment of 3P, which will be the Small-Mini System, which is a little bit more of a utilitarian system, but is almost growth from $1 in terms of something we have.
These are all incremental.
Yeah.
Largely.
Yep.
Yes.
Correct. That'll go to a limited launch here this year, which then you can expect that there's a compounding effect into 2027, where we'll do the full launch. Still expected to have a meaningful impact in this current year and certainly out years. Then we have a 3P Knee/F emur system. I don't know what we'll call that yet. Certainly development has already started. That'll be the last of the systems that'll be the major installment. Then when you think about future systems, it's all going to use the same instrumentation, the same drill bits, all the same base systems. We'll just be adding implant sets. You can see is it'll be less cost from a deployment standpoint 'cause it will only be implants we would be deploying at that point.
Similar to that $10 million free cash flow, it's again, more efficient.
Built into it. Absolutely. Correct.
Talk about so just again, you don't have to give me specifics. You did. I appreciate that on the knee and the femur side. Just how do you think about the cadence of new product introductions, the super cycle, one, two products per year per franchise? What's the goalpost that you set for the team, Dave?
I think you're talking at least 1 major system launch annually in the 2 implant side of our business. When you think about OPSB, we expect four or five pretty substantial launches of every year. You're talking about a pretty serious volume of launches. I think, you know, we spent a number of years focused on EU MDR, and I think that maybe in years gone by, there was a bit of a gap between heads down focus on organic new product development. Then a few years ago, when we had done our work, we got back into very aggressive NPD. You're just starting to see literally we're in the batter's box here.
Yeah
... of the first inning of some of these new products. I think those have a compounding effect where it's not just two very substantial products in 2026, but those tend to ramp more aggressively in the second and third year of that product launch. In the second and third year of the product launches that are launching this year, you'll have the first and second years of the next generation. That's why we talk about this cycle. I think what's really compelling about the products is when we were younger, as a, you know, less, you know, more immature as a company, the clinical risks and the technology risks we were willing to take as a small company were much lower...
Small. Yeah.
much smaller. Now, I think when surgeons see the products and the work that we put into these, they're high technology, super high value, dramatically more clinically disruptive, and with that commands a higher price. In most cases, these are products that there is no threat of substitute. Our capacity then to walk in and, you know, ensure that we lock down contracts at some of these facilities that pulls through some of our less differentiated products is the strategy here. I think we're again, very early in that process, but I think over the next three years you're gonna see a lot from OP that is very significant.
What's the learning curve for some of these docs to these complicated systems with complicated procedures, or is it a typical, you know, five to 10 cases and they're facile with it? Or how does it sort of typically, and I assume it might vary from product to product, but in T&D in particular, the 3P system's challenging something new or no, it's bread and butter kind of stuff?
I don't think it's challenging at all for some of these orthopedic surgeons who have experience on an adult side before they even get into pediatrics. There's some new techniques that I think we're bringing to the table. They won't be challenging from a hands skill standpoint, in my opinion, but they offer different ways to go about doing the procedures that we think are more efficient, less time consuming, and less pieces and parts throughout the surgery. Maybe there'll be a little bit of a curiosity in terms of some interesting techniques, but nothing that's difficult.
Okay, let's now transition. We'll talk about the bracing business. You mentioned it, so it was a good segue just a couple minutes ago. I think maybe similar framework. What is it? I think importantly, how does it fit into sort of the ecosystem that is OrthoPediatrics? Maybe immediately not apparent why there are synergies, but there clearly are. Maybe help us understand.
Sure, yeah. The specialty bracing business is essentially us providing bracing care, which can be done in an O&P or orthotics and prosthetics service model or just an independent product that we can offer all to treat pediatrics and adolescents. When we strategized to get into this space, we did originally called it an adjacency, but it's really not an adjacency. It's pretty tight within our wheelhouse because it's the same customer base, the same surgeon or physician who does our surgical case earlier in the day, goes to a clinic in the afternoon and can prescribe bracing in that same front.
It's the front end of that sort of patient journey before there's some sort of invasive procedures.
It's actually both.
Okay. The back end as well.
The front end and the back end.
Yeah.
I think for us, as we looked at it, we knew number one, from a development standpoint, because it's majority Class I devices, it'd be a much faster development cycle. Two is we understood that from a capital standpoint, we don't need to deploy inventory assets to actually get to this market. The ability to preserve cash, but also still have revenue growth was very important. The customer base, the same. It's the same hospital, same places that all. When you realize that these pediatric orthopedic physicians, surgeons, 80% of what they do on a daily basis actually involves not taking a child into an operating room.
Right.
The highest volumes of what we can have access to, ultimately, I think we all would wish that not every child needs to have surgery, is there ways to treat them. Really it was us doubling down on our dedication to helping kids with musculoskeletal conditions. If you're not going to be in that 80% space, then you're missing a large portion of the market.
Yeah. In some ways, you're surrounding the patient, you're surrounding the physician, you're making yourself indispensable.
The hospital.
...in some respects. At the hospital as well. Can you put a little finer point on how to think about the addressable market opportunity for bracing specifically? I don't know, should we think about it relative, more of a, sort of a clinic number relative to the number of children hospitals out there in terms of, you know, how this ramps? Just any way to frame the opportunity.
Yeah. We estimate it to be about a $500 million TAM within our focused children's hospital market segment.
Within that $300.
Mm-hmm.
Okay.
Yep.
Where are we today, do you think?
What percentage of that?
Yeah, if the market is addressable of $500 million today, the run rate is $50 million. Are we 10% penetrated, 20% penetrated?
Yeah, I wish I had a great number for that as we try to.
We got a long way to go.
That's what I was gonna get to, is that we're barely getting started. If you figure there's 80 target markets that we have talked about, 80 geographical, you know, metropolitan cities that we know there's a very busy OrthoPediatrics implant children's hospital today. When we started on this journey, we were in nine of those. As Dave mentioned, we got to six of those here this last year. Now we're getting closer to the 20 target markets. We have 80 total, it's just a matter of time that we're gonna take it from the 20 to get to these 80 markets. It's not just for O&P care from a clinic perspective, it's also from the product perspective.
Okay. Interesting.
Big, big runway here, I think, for that business.
When I think about the growth here, it's a lot of greenfield opportunity or white space opportunity, however you wanna reframe it, versus sort of same store sales. That's the way to think about it.
100%. We're still very happy with how we can grow our same store sales just by connecting the OrthoPediatrics relationship to what was historically the Boston O&P relationship. That's great, the way to grow and the bigger piece of growth have to do with greenfields.
Have you seen, I know it's early days, but pull through of the portfolio more so in those particular accounts that have, you know, an attached bracing, clinic?
We have found that all the hospitals that have a clinic on-site or close to it, the approach from the administration of the hospital has been to ask us, "How do we package all of what OP has to offer so that it's not just clinic or it's not just Trauma and Deformity? If we don't have the Scoliosis business yet, is there a way for us to partner?" It's been extremely invigorating for us to take on these challenges to say, "Well, you've had these contracts in the past. We are the only one that can actually offer this entire portfolio. What can we do this a little more unique?
You're digging a deeper and deeper moat, even though there's competition.
Correct. Yep.
I've just been curious, just from the profitability standpoint, how it compares, relative to, let's say, corporate, OrthoPediatrics.
I think from a gross margin perspective, the OPSB business has a slightly lower gross margin, although not that much, and it has dramatically lower selling costs. As we think about contribution margin, OPSB is probably a little higher contribution right now than even the legacy implant business, and obviously, there's not capital deployment.
Right.
I think at the time when capital is expensive, you know, growing through the OPSB model is, I think, quite smart, and obviously, you've heard about the synergies that it's driving with the implant side of the business. I think our thesis is very well intact here in terms of what this could do, not just for the top line over the course of time, but you know, at maturity, what this can generate from a bottom line perspective.
How are you governing, you know, sort of measuring how, you know, quickly you get after these opportunities? How much of it is, you know, we wanna grow, we wanna grow profitably? How much is it, you know, got a long opportunity, let's leave some meat on the bone each year? How are you thinking about sort of selecting and sort of how aggressively you go after this, you know, highly underpenetrated opportunity?
Yeah, I think we're being pretty aggressive on the OPSB side. We're not going to try to be everything to everybody here. I think that we could certainly potentially grow faster. We are not leveraging the profitability of the OPSB. We're generally leveraging the implant profitability to feed the growth engine that is OPSB right now. We're not running that component of our business for, you know, the positive free cash and for profitability with the kind of growth rate.
Yeah.
You know, I think that you could expect this business to grow north of 20% for a long time. I mean, it's a, it's a lot of blue ocean in front of us here.
Okay. That was my next question, so I appreciate you checking that off the list. Let's now talk about Scoliosis.
Yeah.
You mentioned VerteGlide. Maybe though similar framework, the Scoliosis opportunity, competitive positioning...
Yeah
... VerteGlide would be a nice, sort of foray into what's new.
Yeah
What's gonna drive growth over the next couple of years.
Scoliosis is our, you know, the smaller business obviously than T&D. It represents about 25% of global revenue. A pediatric orthopedic surgeon that does T&D also generally does scoliosis, so we have that, you know, nice relationship. We've been in the market for about 14 years. We might have less than 20% market share inside Children's Hospital.
Your competitors there are?
Generally Medtronic, DePuy, primary competitors, and there's a long history of, you know, legacy products that have been used from those companies for 30 years.
Neither of them are investing.
Right.
It's the same sort of messaging.
Right.
Yep.
We continue to take share within our fusion business. I would say the fusion market is slightly less differentiated. There's a lot of good companies with good systems that are applicable in pedes, maybe not designed for pedes, but applicable. But we've chosen to invest in early onset scoliosis. We think there's a really nice probably $50 million-$80 million kind of blue ocean market for us here, where there's very limited technology, extremely limited technology development. No one's investing here. And these patients are, frankly, these are very difficult patients to treat, and they're treated by some of the most elite pediatric orthopedic surgeons in the world.
You know, where certain larger accounts, we may have not been taken as seriously as a scoliosis provider, even though we are very seriously taken on the T&D side, to be able to generate kind of one of the kind products that meet massive clinical needs for the pediatric orthopedic surgeons is placing us front and center in some accounts that, you know, I don't think have taken us as seriously maybe as some of the larger players like Medtronic.
Is that what VerteGlide is? Is that sort of that workhorse product? Is that that type of product to get you there?
I think this as well as, you know, our RESPONSE Rib and Pelvic and the LE device that's on its way. I think when you think about that complete portfolio, we have the most comprehensive early onset scoliosis portfolio ever. It demands a serious look, and I think we are definitely getting a serious look by, you know, some of the top children's hospitals on this front.
That's great. In these last three minutes, I wanna, you know, take a step back. This is a story that we know, we talk to people as much as we can about. There, you know, there seems to be misunderstanding, you know, gets lumped into the broader... You know, we're simple-minded folks, analysts, and everything. We paint with a broad brush because it's just easier that way. You know, it's either, "Oh, no, that's an orthopedics company," or, "Oh, no, that's a spine company." Maybe help us frame why you're not just a-
Yeah
... another orthopedic. We've sort of alluded it, to it, I think, in this conversation. Maybe put a finer point on what makes kids, a differentiated story with a long runway for growth and also improving profitability.
I think this is a lot of times a misunderstood notion by investors and even some and analysts over years to that are now really kind of uncovering our story that, you know, we're not a pure play orthopedic company that's competing in all these different verticals, total joint reconstruction, foot and ankle, whatever. We're not a spine company. I mean, only 25% of our revenue is spine, and we truly only have a spine product for a single or a single indication in pediatric spine deformity correction. I think OP is a pediatric company, and we're kind of an N of one in pediatric orthopedics. We've invested a lot to build the most powerful brand and commercial footprint in pediatric orthopedics globally, and we're leveraging that brand.
We have extremely long, product development and sales cycles for those products, long tails of growth because we're not in this constant bare knuckle struggle against competitors where the threat of substitute happens so very rapidly. Every three years, you've got to develop the next generation of product. That's just not what the pediatric orthopedic marketplace looks like. We're balancing deployment of resources against, you know, how fast we wanna grow the top line, but not encountering entrenched competitors there. I think that makes us very unique. I think it would be very difficult to supplant us. I think, you know, pediatric orthopedic surgeons really require OrthoPediatrics and some of our products that are so unique that it would be difficult to do some of these surgeries.
I think that's a very unique market position, and I'm not sure that you've seen that in other ortho names, much less even in other MedTech names. I think that's kind of misunderstood by the marketplace. We often get compared to small cap spine or small cap foot and ankle. Those companies are great companies, but that's just not what we do.
Yeah. Well, I told you we're simple-minded. We like to peg everything. All right. I think we'll wrap it there. Really appreciate. Thank you so much for making the trip. Great to meet you, Joe. Thank you so much everyone for joining us. Really appreciate it. Thanks so much.
Thanks, Matt.
Thanks.
This was great. Appreciate it.