Good morning. Thanks for joining us again at the 25th Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech and Diagnostics Equity Research team at Needham & Company. I'm pleased to introduce OrthoPediatrics. Presenting from the company today, we have President and CEO, David Bailey, and CFO and COO, Fred Hite.
Instead of a standard presentation, we are going to do a Q&A or fireside session. If you do have questions you would like to ask, you can submit them electronically through the conference website, or feel free to email them to me at mmatson@needhamco.com and I'll do my best to fit them in. Again, thanks for joining us, David and Fred. I'm just going to go straight into the questions here. Given all the headlines, I want to start with some macro topics. Can you start by maybe commenting on your exposure to oil prices? I'd assume it's mainly through freight, but I don't know if there's any kind of raw materials impact or anything like that.
Yeah. First, Mike, thanks for having us. We appreciate Needham and attending this conference, so thank you for that. Related to macro oil prices, you are correct. So freight, a small impact there on the freight side. We haven't seen it just yet, but I'm sure it'll be coming. And very, very little impact on the material cost of goods sold. So most of our products are metal, instruments, implants, cases, and trays. A little bit on the bracing side, but a very, very small portion of our overall cost of goods sold. So we're not anticipating that having any significant impact, and we'll manage through the freight as it comes. Hopefully, it won't be lasting long, and we'll get back to normal.
Okay. You're not concerned about any sort of knock-on effects of the war, like shortages of other materials like metals or anything like that, or just generalized inflation affecting the business?
No. We continue to monitor it like everybody else, obviously, but at this point, we don't see that having any negative impact on our business.
Okay. All right. Well, with that out of the way, I want to move on to talk more about the specific businesses here. Starting with OPSB, I was wondering if you could give us an update on the clinics. How many clinics have you opened since the Boston OP acquisition, and what's your target for the rest of this year in terms of the number you're planning to open?
Yeah. Thanks, Mike. If you remember correctly, when we acquired Boston a couple of years ago, they had about 25 clinics, primarily clustered in the Northeast around Boston, Philadelphia, that area. At this stage, we have north of 45 clinics. That number changes sometimes. Sometimes we're consolidating smaller clinics into bigger clinics.
Sometimes we're actually setting up satellite clinics in locations where we already have a bigger clinic. I'm not sure that the specific number is as relevant as the number of territories. If you remember a few years ago, we talked about scaling into what we view as 80 territories in the United States that would encompass about all 300 children's hospitals. We expect by the end of this year to be in 27 of those at minimum, which was our target a few years ago.
I think we're on pace, if not a little bit ahead of pace in terms of clinic expansion. We continue to see the demand for locations probably is a little higher than we have the capacity to open them. We're trying to be judicious in terms of how many we open simultaneously, but it's all been very positive so far. We continue to see that business grow really nicely, and I think we're probably a little ahead of schedule from where we expected in terms of revenue growth and profitability for that business.
Okay. Got it. Can you talk about the sales team in that business? Is it kind of based on the territories, as you mentioned? Is it one per territory or something like that? What are your plans to kind of grow that group?
Yeah. We generally are scaling our sales team as we scale clinics. It's a small group right now. I think it's north of 10 or so at this stage. You can imagine that we have more than 200 commercial people here in the United States selling the implant products. Mike, that involves staying in the operating room. Being the service component of that is very heavy.
It involves a lot more people than we'll require to ultimately scale on the OPSB side. As we continue to grow, we continue to add a few people. You could imagine our aspiration to cover all 300 children's hospitals. That'll be a decent sized sales team eventually. It certainly isn't something that we're obligated to invest in before we have clinics in those particular regions.
Yeah. Okay. That makes sense. How are you sort of prioritizing the areas of the country or the children's hospitals where you're opening your clinics, I guess the territories as you mentioned?
Yeah.
How do you decide where to go next?
Yeah, you can imagine locations where we have incredibly strong commercial relationships already on the implant side are natural fits for us. We serve all 300 children's hospitals, but the places where we are maybe more deeply penetrated, I think, is generally a good barometer for where we're going to see the fastest uptick.
I also think that we've learned some lessons over the course of the last few years in that if we can get clinics inside the children's hospital versus starting with a satellite and then getting one inside the children's hospital, then that's normally a benefit to us in terms of revenue and profitability. We tend to prioritize these opportunities where there's a hospital that's asking as well as the physicians, they're going to have space available to us.
In some cases, we're even slowing down a particular region because we could set up a clinic maybe six months earlier, but if we wait six months, we'll have kind of a choice location inside a children's hospital. I think it makes more sense for us to wait in those instances and have our physical location directly in the children's hospitals. We've seen the economics of that work really well for us. The uptick in revenue works really well for us. Those are ways that we're prioritizing where we select locations.
Yeah. Okay. That makes sense. I think in the Investor Day, maybe you talked about the return on investment in new clinics. I think it was pretty rapid payback there. What are you seeing in the real world compared to what you expected in terms of the investment required and the payback period for those new clinics that you're opening?
Yeah, I think it's very consistent with what we thought. We see a payback faster on these clinics that are, again, inside children's hospitals. Certainly, when we do an acqui-hire, some of those acqui-hires, they're certainly almost all profitable from the very beginning, so it impacts top line and impacts profitability. The greenfields, while less of an investment, take a little bit longer to ultimately cash flow those businesses.
I think what I'm really excited about is when we greenfield in particular, and it's greenfield inside a children's hospital, the revenue generation is literally day one. There's no build it and then wait. It's more about the six months to a year ramp up and the cost associated with that to get a greenfield location up and running. The day that greenfield's up and running, particularly if it's in a great location inside a children's hospital, starts to generate really strong revenue. The payback is very solid for us. I think we're very pleased with our early assessments of how fast these things would pay back.
Certainly, you know we're working hard to improve cash flow for the business and driving this year to break even at minimum. I think the OPSB strategy was one that we felt like we could drive top-line revenue growth, help an enormous amount of patients with our customer base, and it had positive implications on cash flow, and I think we're seeing that. I think Q4 showed that out pretty well in terms of the cash generation that we produced.
Yeah. Okay. Can you talk about how OPSB compares to the implant business in terms of gross and EBITDA margins and then cash flow?
Yeah, absolutely. The OPSB business does have a slightly lower gross margin than the implant business. There is a much lower selling cost on that side of the business than there is on the implant side of the business, where we're actually standing in all the surgeries. The additional benefit is there's no consigned inventory to deploy, and no real significant capital expenditure per revenue dollar that's driving growth on that side of the business.
As a result, the contribution margin of that business is actually higher than the implant business. The business is also generating positive cash flow dynamics, which is great in that it doesn't have this big capital-intensive way the implant business does. We're really encouraged on how things are dropping through on that side of the business, as well as the tremendous leverage we're getting on the implant side of our business.
Yeah, got it. Is there potential to expand this clinic model outside the U.S., and if so, what areas or regions do you think would be appropriate?
Yeah, certainly an opportunity to do that. You heard us announce at some point last year that we expanded our clinic in Ireland, where we have a very rapidly growing scoliosis implant presence, and so we see opportunities there. I think there are opportunities in other Western European markets, certainly. Certainly, we'll be smart about that.
We've got opportunities in our own backyard, so it's not maybe the thrust of everything we're doing, but we'll be opportunistic in markets like Ireland, potentially U.K., Germany, some of these Western European markets where we have a strong presence, and particularly where we have a strong scoliosis presence, because I think those markets, there's a real opportunity, particularly for scoliosis bracing in certain countries in Western Europe.
Okay. Got it. Moving on to enabling technologies. Maybe you can give us an update on some of the navigation system, and I don't know if there's any kind of metrics you could share in terms of installed base or utilization or things like that.
Yeah. We've never disclosed a specific number, but I think it's fair to say there's north of 20 units in the field in the United States at this stage, and 300 children's hospitals. We have a huge opportunity there still. Not every hospital is a candidate for 7D, dependent upon volume. In a lot of those hospitals, we're also selling our FIREFLY navigation with our 3D-printed guides.
That remains a growth driver for us. The combination of FIREFLY as well as 7D has been very positive for the business. I think in locations where we've had installations, we see our scoliosis volume ramp, which is exactly what we had hoped for. I think we still have a very large pipeline. Now, we talked a while ago about our guide, and we don't know exactly when some of these units might close.
Some quarters it could be several, some quarters it could be none. We've tried to dampen at least the impact of that kind of rollercoaster in terms of the capital side of our business. We remain quite bullish on 7D, especially with the MRVision, which now essentially surgeons can offer radiation-free scoliosis surgery.
That's wildly important to pediatric patients and pediatric orthopedic surgeons, given the little body is accepting so much radiation. I think we've got a good opportunity throughout this year and into the next few years to continue to commercialize 7D. It's that and kind of the build with all the new scoliosis products we have are creating a nice momentum within that business.
Yeah. 7D is kind of aimed at the higher volume customers, and then FIREFLY would be more suitable for kind of lower volume customers potentially?
Yeah, I think that's fair. I think that there's certain pathologies and indications where FIREFLY works a little better. We do have accounts that have 7D units that also use FIREFLY for specific patients. FIREFLY is incredibly unique. We have people who are super dedicated to FIREFLY. They get fantastic results, and now we think FIREFLY can move to radiation-free as well.
That's an opportunity for accounts that if you're not doing 50 or 100 scoliosis cases or if you have some form of navigation, but can't access it because maybe it's an adjacent to an adult hospital, FIREFLY is a nice option, and it's great to see. FIREFLY grew very nicely last year as a product family. We think the move to navigation and less radiation overall is driving adoption of these kinds of radiation-free technologies and is lifting both FIREFLY as well as 7D. Obviously then it's lifting our RESPONSE portfolio and the other devices within our scoliosis implant portfolio.
Okay. The other thing you have in enabling technology is Playbook. I think you're starting to launch that now. Can you give us an overview of Playbook and kind of talk about the business model there? How does it work? Is it a subscription? Is it an annual fee, etc ?
Yeah. Playbook is a digital tool really designed to enhance workflow for pediatric orthopedic surgeons in children's hospitals. We're also adding a preoperative planning component to it that I think will be central to the launch of our new scoliosis fusion system, where there'll be some predictive portions of Playbook that'll allow for a predictive analysis of what levels to fuse, how to balance the spine, both in all three dimensions.
I think we're just starting with Playbook. We have a few beta sites that we're getting ready to start in and we'll see. It's not a huge portion of our revenue in 2026, but we think, as we go out, it can become a bigger and bigger portion of our revenue. Within Playbook, surgeons can have specific digital workflows for not just scoliosis procedures, but for any of their procedures.
You can imagine, Mike, we talked in the past, particularly post-COVID, where you have all of these surgical workflows, surgeons doing very complex pediatric scoliosis or pediatric limb reconstruction surgery, and when staffing becomes a challenge, if you don't have staff in there that really understands the instrumentation, the procedures, having a tool like Playbook where a surgeon has a custom workflow for you, I think is really critical. We've gotten very positive feedback so far. We're working through some implementations there.
That's why we've projected pretty low revenue. I think as you look out over the next five years, these digital tools become really a big part of our story. From a revenue modeling standpoint, there's a small piece of hardware that goes with the Playbook unit, and then the opportunity to access certain features of Playbook that's based on a monthly fee or an annual fee. As more users are using Playbook, then that annual fee can grow over a period of time.
Okay. You've also got this cochlear implant robotic system called iotaMotion. Can you give us an update on that? When do you think you'll launch it? How will you sell it, and how big is that market opportunity?
Yeah. We think that, we're not 100% certain, but maybe you could think about this as a U.S. market. It's not huge, but maybe it's $20 million opportunity for these units in children's hospitals. It's an opportunity for us to leverage our existing sales force. Our pediatric orthopedic reps are kind of omnipresent in children's hospitals, so they know the ENT surgeons, the surgeons who are putting in cochlear implants as well.
Generally speaking, that's using our sales force to make the introductions to our enabling technology team and then working towards implementation. In Q4, we launched the first iotaMotion robot inside Cincinnati Children's Hospitals, top 10 children's hospital in the U.S., and that implementation has gone well. We're learning from that, obviously. We wanted to get a few of these under our belt before we went kind of full launch.
You could assume that sales team is learning a lot right now. We are educating our sales team and starting to talk to a number of physicians. Again, small numbers this year, but certainly will have an impact and probably more of an impact on revenue in Q3, Q4, as we start to place more and more of these units.
Okay. Great. Shifting to the implant part of the business, on your last quarterly call, you talked about this super cycle of new products across the different categories and implants. Can you just highlight some of the products there that you're excited about?
Yeah, absolutely. Mike, I have to say, I'm not up on the common lingo, so apparently my super cycle was not original, that other people have talked about super cycles, but I thought I was being quite original in terms of the volume of new things and what this looks like over the course of the next few years. I will say just broadly, I couldn't be more excited about the products that we are launching over the course of the next three years. I've been here 19 years. I have seen a welter of products we've launched since our earliest days of Cannulated Screws and small plates and screws, all of which have impact on kids' lives.
I would say we're finally to a point as a company where the types of devices we are launching are so clinically relevant and so needed, and I don't want to call them moonshots, but they're certainly more complex in terms of the pathway to get a product approval, both through FDA as well as surgeon adoption and products like 3P, eLLi, our VerteGlide system, the next generation of our Scoli system, Halo-Gravity Traction, you name it. There is just a huge volume of projects. Yeah, they're all coming starting very early here. We'll start to launch some projects here in the first half of the year that will impact us in second half. I think this is a 3+ year run for us of some of the most compelling, clinically significant products.
On the 3P side, we beta launched that at the end of last year, second half of last year. In the beta launch, I think we had, I don't know, 10 sets or less, so got a lot of feedback. The feedback has been extremely positive, and so we're hoping this summer to go kind of full tilt on the 3P Hip. I'd just remind you that 3P is a whole platform of plating products. Right now we've launched 3P Hip.
We've recently gotten approval for the 3P Small-Mini, and there's a series of additional systems that we'll launch off of this 3P platform. I think it's the most substantial thing we've done, from a R&D perspective, in the trauma and limb deformity business in our company's history. I think that we'll see that'll be borne out in revenue, particularly as we get into Q3 and Q4 and we have a reasonable volume of set inventory out there on the street.
Yeah, okay. Got it. Just with regard to 3P that you talked about, I know it's a comprehensive system kind of throughout the body, I guess. Maybe just highlight kind of the different versions that you have launched and what you still have coming.
Yep. So far, we have beta launched the 3P Hip. Full release is kind of in process, so we hope to have sets out in the market in the back half of Q2. 3P Hip is a comprehensive fracture and osteotomy system for pediatric hips. It builds on some of the LCB system we have, as well as the Locking Proximal Femur plate. I think it's, from a technological standpoint, just far more advanced. Surgeons can perform procedures that they hadn't been able to perform procedures before. It's also in a segment of pediatric orthopedics where some of the large competitors have more recently abandoned. It kind of enters into a space with almost no competition whatsoever.
I think the technology profile of 3P and how it's being used, particularly for very emergent trauma procedures where it is absolutely urgent that it's available to the surgeon, that's leading rapid adoption, I would say. We like the ASP. I think you've heard us talk about our efforts over the course of the last few years in R&D is to not only develop more clinically relevant products, but more cost-effective or cash-conservative types of systems. We see high ASP, high margin with a little less capital deployment required here. Our asset utilization metrics on 3P are, I would just say, dramatically better than what we had seen with some of our other plating systems.
Next will be the Small and Mini, so a whole host of anatomically appropriate plates for pediatric patients, some that not only we don't have but aren't available from any company in the world, specific to peds. We'll work on the 3P knee and femur system, which should come out probably, you're talking 2027. Beyond that, there's a series of kind of implant specific systems for specific indications throughout the body. This will be our bread and butter kind of plate and screw system for the next 10 years, I would say.
Okay. Got it. Just on the fusion side, I think you've got a new kind of comprehensive pedicle screw or fusion system coming. Can you just talk about that and the timing and then how it compares to the RESPONSE system that you currently have?
Yeah. RESPONSE has been out, you may know, we've probably had that out now 14 summers, so it has been around for a long time. Certainly, we've adapted it. We've expanded its opportunity with neuromuscular, with RESPONSE Rib and Pelvic. RESPONSE continues to grow, so it has been a hard one to kind of think about developing another system when it's grown so well. I think that there's certain techniques, more modern surgical techniques for scoliosis that allow for very complex vertebral body derotation, helping balance the spine more appropriately that I think surgeons are interested in. That system will accomplish that.
It'll also be connected to an AI-based platform called 7D that will be able to give surgeons a very specific roadmap for what implants they're going to need and hopefully be able to run simulations to show surgeons what outcome they should get based on their choice of implants, where they choose to place those implants, what rod stiffnesses they use.
The new system also offers a whole host of different stiffness opportunities for surgeons with the rods, which has become a big hot topic. To be able to control the spine, you need very stiff but strong rods, and so that'll have that as well. I think just a host of very low profile implants that can accept large, strong rods with very, very complex derotation and rod reduction instrumentation. What we've done is also tried to develop the system in a personalized way.
We have seen so frequently when we bring our trays in to do a fusion procedure that at times upwards of 50% of the instruments and implants aren't used by a specific surgeon. They just don't need it because their technique is slightly different. What we're working towards is a customization of each set, so a surgeon can go through a whole host of different instrumentation and implants, and we can be very specific about building a set for that specific surgeon.
Obviously that drives some adoption, that drives down our costs obviously, and it helps the efficiency in the OR, particularly when you compare that to AI-based preoperative planning. Again, I think on the Scoli side, that comes on the heels of launch of VerteGlide, that comes on the heels of our first inpatient with eLLi. The success we've had over the course of the last 14-15 years in fusion, I think this just steps us up another level.
Okay, great. You mentioned eLLi and VerteGlide. I did want to touch on the EOS category. Maybe just tell us more about VerteGlide and eLLi, where do they fit? eLLi, I know is probably the more complex product. When do you think you'll be able to launch that, and what is it going to take from a regulatory standpoint to get that through the FDA?
Yeah. I would just say first with VerteGlide, we're in the process of starting to launch VerteGlide now. We did some cases in fourth quarter. They went well. We've done some cases here in Q1. We are extremely pleased with the outcomes we're seeing with VerteGlide. The demand for VerteGlide, I think is a little higher than we had suspected.
We're in a spot where we got to get inventory to the street. They're all elective procedures, so we can manage them without a huge influx of inventory. We got sets coming in, and we've got surgeons trying to schedule cases that we've been able to shuffle the deck about every week, every day to make sure that we get cases covered. We're training a lot of surgeons, and we're going to have to get some sets out there to be able to extinguish the demand.
It's very encouraging. What we're seeing with eLLi is it being used in locations where we have historically not had as strong of a presence with our fusion system, or maybe we were off contract. This is definitely propelling our fusion system as well, RESPONSE. That was the strategy. It's incredibly gratifying to help some of these kids, Mike. These are tiny kids. I mean, a lot of our patients we're treating are under four years old with, well, they're very bad deformities, and they need a treatment like this. Encouraging to see, and I think it's going to have a big impact, particularly back half of this year, e LLi, you're right.
eLLi is a more complex pathway from a regulatory perspective, but we do have approval from the FDA to start to do procedures here. We think in probably first in-patient in Q4, and we can bill for those procedures, so that is always a positive. We're going to run a minimum of 50-patient study there, and we will probably back and forth with FDA in terms of after we do so many of these procedures and they go well, what's the endpoint before we can go live and start to expand?
I think eLLi is more from a revenue perspective, a 2027-2028 story, at least in the United States. There is opportunities for us to launch eLLi in markets outside of the United States that will probably impact revenue a little bit sooner. We are on a good path and very excited about first inpatient here in this year.
Okay. ApiFix. It's been a few years since you launched that. Maybe give an update there and where does that kind of fit? I guess that's not EOS per se, but where does that fit relative to some of your other products?
Yeah. I mean, when you think about ApiFix and you think about our aspiration to take care of the entire continuum of care in Scoli. Now that we got scoliosis bracing, you start with bracing, then you may move to a non-fusion opportunity with ApiFix, and that's what we're seeing. We've got the Early Onset Scoliosis for these more congenital complex procedures, and then you move to fusion. I think the portfolio is, over the course of the next few years, as robust and as complete as any company in the history of pediatric spine surgery.
I think ApiFix is-- what we are seeing with ApiFix is as the results of our study come in, I think surgeons are narrowing their indications. There is a certain segment of the patient population where ApiFix works extremely well, and that was the goal of the study, which is the highest probability patient to avoid fusion. We have seen extremely low fusion rates across the entire indications, but certainly very low revision rates and low fusion rates in a kind of a more narrow band.
What we're seeing is that more surgeons adopting ApiFix, but in a more selective approach, which is kind of where this is going. Again, super high ASP for us, really good margins, really good asset utilization, and more and more surgeons using it. Not going to be $100 million product line for us, but certainly it is a perfect fit within our scoliosis portfolio. You're right, it isn't EOS, but there are surgeons who are using it as a tool even in that patient population.
Okay. All right. Just want to move on to some more financially oriented questions. Last year, I think it was the third quarter, you had some challenges in the Latin American business and with some replacements. What did you learn from that, and what are you doing to avoid those sorts of issues in the future?
Yeah, absolutely. Great question. Specifically the Latin America, it comes down to set sales. As we're selling sets at our cost, no margin, into our stocking distributors, the timing of those creates a lumpiness. What we've done is in the fall, last fall, November of 2025, we have purchased Our largest distributor in Brazil, we have about 15 or 16 distributors down there. We've purchased our largest distributor, and so now we've transitioned from a pure distributor model to a direct ownership model that's selling directly to the hospitals.
It improves our visibility, it improves our cash flow collections, which is a huge impact for us, and allows us more of a normalized ordering pattern as surgeries are happening, as opposed to lumpiness of sales of sets. It positions us for more sustainable growth in Brazil over time, kind of takes us from wholesale to retail sales, if you will. Very positive move for us in the fall of last year, and we look forward to that smoothing things out for us going forward. We also, on the 7D side of things, that's a capital sale, tons of demand from the surgeon.
As Dave mentioned, radiation-free navigation system, so the surgeons all love it. Difficult to work through all of the legal documentation with the hospitals. Sometimes they have a different timeframe than we do. Doesn't always match up exactly with our quarter end, if you will. That, in the past, has created some lumpiness in our sales. What we did back in the third quarter is we removed any anticipated growth from that business out of our guidance.
That eliminates some of the lumpiness from our revenue forecast going forward. Again, tons of demand for the product. We're going to continue to sell that product, but the timing of it can come and go in different months and different quarters. To eliminate that lumpiness in our forecast, at least, we've just removed that piece of the cycle. We think we are in a very good place in both of these challenges that we had last year, for 2026 and beyond.
Okay. Just with regard to gross margin, what's the outlook there? You've got some moving pieces in terms of OPSB, the implants, you've got some higher margin implants. You're launching EOS. You're also growing pretty rapidly outside the U.S., which is probably lower gross margin. I think your margin was up last year. I can't remember what you guided to this year, but just thinking over the next few years, is it going to be flat, up, down generally?
Yeah, it's a great point. A lot of moving pieces, to your point. We did improve margins slightly, half a basis point in 2025, about 73% for the full year of 2025, and that's where I've indicated it should be in 2026 and 2027. OPSB growing faster does put a little pressure on it. Going to retail in Brazil helps that improve our margins. As you said, these new product launches, small today, but as they grow, they will come in at higher gross margins as well, which definitely helps offset a little bit of the OPSB pressure that we're seeing. You mix all that together, and we've got plans in place to maintain that kind of 73% for the next couple of years.
Okay. In terms of set placements, you're planning, I think, $10 million for this year, and it's down from $17 million last year and $20 million the year before. It's kind of a double-edged sword, I guess, because on the one hand, it's good for cash flow, but on the other hand, I think people may be a little reading into it that it's not a positive indicator. I know that's not the case, but maybe you can explain why you don't need to spend as much on sets right now?
Yeah, absolutely. Three years ago, it was revenue at all costs, and as Dave said, we've changed that a bit to be aggressive revenue, but improving Adjusted EBITDA and dramatic improvements on the cash flow. Getting to positive cash, free cash flow in the fourth quarter of last year was a big deal. We'll be negative here in the first half of this year because of set deployment, but definitely getting to free cash flow breakeven, maybe even slightly positive in 2026. Improved EBITDA is a piece of that. The second piece of that is reduced deployment of sets from $17 in 2025 down to $10 in 2026, and then improved working capital performance.
On the sets specifically, if you look at the efficiency, the revenue we're going to generate from this $10 million set deployment in 2026, it's all brand-new products, effectively, as opposed to legacy systems. As Dave mentioned, we're getting higher prices, lower set costs on these new technologies. Effectively, with this $10 million of deployment in 2026, it's probably the same revenue growth equivalent of $20 million about four or five years ago when we were deploying that amount of capital.
It's double, or maybe a little better in some cases, of our legacy system on the return on investment revenue to investment dollars. Very excited about that, and it has very significant clinical unmet needs and includes premium pricing, which helps the gross margin, helps our return on asset, and helps our free cash flow utilization improve dramatically. We're excited to see that not only in 2026, but in 2027 and 2028 as well.
Okay, just final question. I know you've done a fair bit of M&A over the years, but it does seem like you've got a pretty comprehensive offering, at least in orthopedics at this point. One, would you look at doing any additional M&A in orthopedics? Two, I think you've talked about starting to branch out of orthopedics into other pediatric medical devices. Would that be something where we're more likely to maybe see some M&A outside of the orthopedics area?
Yeah, I think that we would still be interested in acquisitions within pediatrics, particularly maybe you would see us continue on the OPSB side, where there's opportunities for products, and certainly interested on continuing acquisition on the clinic expansion side. I think from an implant standpoint, it's pretty hard to see that.
There's not really any other pediatric orthopedic assets that we're aware of, at least at this stage. To answer your question about expanding, I think the aspiration over time is to continue to be able to surround the pediatric surgeon and the children's hospital with all the devices that they could use, and to be able to leverage our commercial channel and our infrastructure in other pediatric subspecialties.
Certainly not going to happen overnight, but I think you could expect that when we do that, if we get more aggressive, it would probably be through acquisition. If you've seen us in the past, we didn't start OPSB ground up. We started with MD Orthopaedics, a well-known name, and then we built off of and grew off of that. I think that playbook would probably be what you'll see when we start to expand into other subspecialties.
All right. Well, that was my last question. I don't see any questions from participants. I think we're going to have to wrap up there. Thanks, guys. Appreciate it. Hope you have some good meetings today.
Great. Thanks, Mike. I appreciate you.
Thanks, Mike. Appreciate it.