OrthoPediatrics (KIDS) Canaccord Genuity's 46th Annual Growth Conference summary

Key business highlights

• Achieved record Q2 results in revenue, EBITDA, and number of patients served, marking a significant inflection point and setting up for further records in the second half of the year.

• Raised guidance for the year, targeting $25 million in adjusted EBITDA and positive or breakeven free cash flow.

• Strong summer scheduling and volumes, with no negative macro trends impacting patient volumes or reimbursements.

• New product launches, including the 3P Hip System and VerteGlide, are expected to drive further growth as adoption ramps up.

• Enhanced asset utilization and higher ASP products are improving margins and free cash flow.

Product innovation and pipeline

• Current product pipeline described as the most clinically relevant in company history, with new launches enabling procedures not previously possible in pediatrics.

• Newer products are driving higher asset utilization, with sales-to-inventory ratios increasing from 1:1 to as high as 4:1.

• Super cycle of product launches expected to continue over several years, supporting sustained growth.

• Early feedback on 3P Hip and VerteGlide is strong, with high demand and a halo effect benefiting other product lines.

• Upcoming launches like Veraxis aim to address unmet needs and further strengthen the competitive position.

Financial performance and outlook

• Revenue growth of 15.5% in Q2, with OPSB division growing over 20% and contributing positively to cash flow.

• Gross margin for OPSB is slightly below the rest of the business, but contribution margin remains strong.

• Set deployment is becoming more efficient, with $10 million targeted for 2024 versus $20 million in 2022, while maintaining growth.

• Capital allocation will prioritize growth opportunities, with continued investment in inventory as EBITDA improves.

• Positive free cash flow and improving EBITDA are expected to continue, supporting further expansion.