ORTHOPEDIATRICS CORP

Previous wording

The description of our business included in this quarterly report is summary in nature and only includes material developments that have occurred since the latest full description. The full description of the history and general development of our business is included in "Item 1. Description of Business" section of the Company's Annual Report on Form 10-K filed with the SEC on March 4, 2026, which section is incorporated herein by reference.

Current wording

The description of our business included in this quarterly report is summary in nature and only includes material developments that have occurred since the latest full description. The full description of the history and general development of our business is included in "Item 1. Description of Business" section of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 4, 2026, which section is incorporated herein by reference.

Previous wording

sports medicine. We manufacture the majority of our orthopedic bracing products and we rely on a broad network of third parties to manufacture the components of our surgical products, which we then inspect and package. We believe our innovative products promote improved surgical accuracy, increase consistency of outcomes and enhance surgeon confidence in achieving high standards of care. In the future, we expect to expand our product offering within these categories, as well as to address additional categories of the pediatric orthopedic market.

Current wording

We currently market over 90 surgical and specialized bracing systems that serve three of the largest categories within the pediatric orthopedic market: (i) trauma and deformity correction, (ii) scoliosis and (iii) sports medicine. We manufacture the majority of our orthopedic bracing products and we rely on a broad network of third parties to manufacture the components of our surgical products, which we then inspect and package. We believe our innovative products promote improved surgical accuracy, increase consistency of outcomes and enhance surgeon confidence in achieving high standards of care. In the future, we expect to expand our product offering within these categories, as well as to address additional categories of the pediatric orthopedic market.

Previous wording

The majority of our revenue from implants, instruments, and specialized braces has been generated in the United States. Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. We sell our implants and instruments through a network of multiple direct sales representatives as well as over 30 independent sales agencies employing 230 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performance bonuses. We do not sell our products through or participate in physician-owned distributorships, or PODs. The revenue generated in the United States is from selling our bracing products directly to orthopedic surgeons, orthotists, physical therapists or, at certain times, directly to the end customer.

Current wording

The majority of our revenue from implants, instruments, and specialized braces has been generated in the United States. Our global sales management organization leads a network of sales agencies, stocking distributors as well as direct sales representatives. We sell our implants and instruments through a network of multiple direct sales representatives as well as over 30 independent sales agencies employing 240 sales representatives specifically focused on pediatrics. These independent sales agents are trained by us, distribute our products and are compensated through sales-based commissions and performance bonuses. We do not sell our products through or participate in physician-owned distributorships, or PODs. The revenue generated in the United States is from selling our bracing products directly to orthopedic surgeons, orthotists, physical therapists or, at certain times, directly to the end customer.

Previous wording

third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties. The majority of this inventory is non- sterile, metallic implants and instruments that do not have an expiration date or shelf life. We continuously monitor our global inventory for excess or obsolete items in relation to estimated forecasted product demand and product life cycles. Revenue is not recognized at the time of consignment, as we maintain control over the inventory. Revenue is recognized only upon implantation, at which point an invoice is issued. During 2026, the Company recorded adjustments to revenue related to finalization of payer reimbursement rates applicable to prior-period services. For the three months ended March 31, 2026, consignment sales accounted for approximately 60% of our total net sales. Inventory held on consignment at sales agencies, distributors, or other customers is approximately 60% of gross inventory.

Current wording

third-party independent sales agencies or distributors, or consigned directly with hospitals, are considered finished goods and are purchased from third parties. The majority of this inventory is non- sterile, metallic implants and instruments that do not have an expiration date or shelf life. We continuously monitor our global inventory for excess or obsolete items in relation to estimated forecasted product demand and product life cycles. Revenue is not recognized at the time of consignment, as we maintain control over the inventory. Revenue is recognized only upon implantation, at which point an invoice is issued. During 2026, the Company recorded adjustments to revenue related to finalization of payer reimbursement rates applicable to prior-period services. For the six months ended June 30, 2026, consignment sales accounted for approximately 60% of our total net sales. Inventory held on consignment at sales agencies, distributors, or other customers is approximately 60% of gross inventory.

Previous wording

OrthoPediatrics was founded on the cause of impacting the lives of children with orthopedic conditions. Since inception we have impacted the lives of 1,336,000 children, when including those served by our acquired companies. We believe we should continue to expand our social impact, create an inclusive culture, and ensure good corporate governance practices.

Current wording

OrthoPediatrics was founded on the cause of impacting the lives of children with orthopedic conditions. Since inception we have impacted the lives of 1,382,000 children, when including those served by our acquired companies. We believe we should continue to expand our social impact, create an inclusive culture, and ensure good corporate governance practices.

Previous wording

From time to time we acquire, make investments in or license other technologies, products and business that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. As a result of these transactions, we may record certain intangible assets, including goodwill and trademarks, which are subject to annual impairment testing. Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors. During 2025, 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of certain of our trademark assets were less than the associated carrying value. Subsequently, the Company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and partial impairment losses of $4.2 million, $1.8 million, $1.0 million and $3.6 million were recorded in 2025, 2024, 2023, and 2022, respectively. We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.

Current wording

From time to time we acquire, make investments in or license other technologies, products and businesses that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. As a result of these transactions, we may record certain intangible assets, including goodwill and trademarks, which are subject to annual impairment testing. Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors. During 2025, 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of certain of our trademark assets were less than the associated carrying value. Subsequently, the Company completed a quantitative analysis and concluded that the fair value was in fact less than the carrying value and partial impairment losses of $4.2 million, $1.8 million, $1.0 million and $3.6 million were recorded in 2025, 2024, 2023, and 2022, respectively. We believe that the expected future cash flows in the most recent calculations represent management’s best estimate; however, if actual results differ materially from these estimates, we could record an additional impairment charge which could be material to our consolidated financial statements and have an adverse impact on our results of operations.

Previous wording

We encourage the readers of this document to read our risk factors in their entirety contained in Item 1A “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 4, 2026 and in other reports filed with the SEC that discuss the risks and factors that may affect our business.

Current wording

We encourage the readers of this document to read our risk factors in their entirety contained in Item 1A “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 4, 2026 and in other reports filed with the SEC that discuss the risks and factors that may affect our business.

Previous wording

Summary of Statements of Operations for the Three Months Ended March 31, 2026 and 2025

Current wording

Summary of Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025

Previous wording

The following table sets forth our results of operations for the three months ended March 31, 2026 and 2025 (dollars in thousands):

Current wording

The following table sets forth our results of operations for the three and six months ended June 30, 2026 and 2025 (dollars in thousands):

Previous wording

The following tables set forth our net revenue by geography and product category for the three months ended March 31, 2026 and 2025 (dollars in thousands):

Current wording

The following tables set forth our net revenue by geography and product category for the three and six months ended June 30, 2026 and 2025 (dollars in thousands):

Previous wording

Net revenue increased $7.0 million, or 13%, from $52.4 million for the three months ended March 31, 2025 to $59.4 million for the three months ended March 31, 2026. The increase during the three months ended March 31, 2026 was primarily driven by strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.

Current wording

Net revenue increased $9.4 million, or 15%, from $61.1 million for the three months ended June 30, 2025 to $70.5 million for the three months ended June 30, 2026. Net revenue increased $16.4 million, or 14%, from $113.5 million for the six months ended June 30, 2025 to $129.9 million for the six months ended June 30, 2026. The increase during the three and six months ended June 30, 2026 was primarily driven by strong performance across global Trauma and Deformity and OP Specialty Bracing.

Previous wording

Trauma and deformity sales increased $5.2 million, or 14%, from $37.9 million during the three months ended March 31, 2025, to $43.0 million for the three months ended March 31, 2026. The increase for the three month period ended March 31, 2026 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlate, external fixation and Pega systems. Scoliosis sales increased $1.8 million, or 13%, from $13.7 million during the three months ended March 31, 2025, to $15.4 million for the three months ended March 31, 2026. The increase for the three month period ended March 31, 2026 was primarily driven by increased sales of our RESPONSE 5.5/6.0 and VerteGlide systems and revenue generated from 7D Technology. Sports medicine / other decreased $5 thousand, or 1%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Nearly all the change in each category was due to an increase or decrease in the unit volume sold and not a result of price changes.

Current wording

Trauma and deformity sales increased $11.0 million, or 26%, from $41.7 million during the three months ended June 30, 2025, to $52.6 million for the three months ended June 30, 2026, and sales increased $16.2 million, or 20%, from $79.5 million for the six months ended June 30, 2025 to $95.7 million for the six months ended June 30, 2026. The increase for the three and six month periods ended June 30, 2026 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PediPlates, and Pega systems, the addition of 3P Hip, as well as continued OPSB growth. Scoliosis sales decreased $1.6 million, or 9%, from $18.5 million during the three months ended June 30, 2025, to $16.9 million for the three months ended June 30, 2026, and sales remained relatively flat for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease for the three month period ended June 30, 2026 was primarily driven by decreased revenue generated from 7D Technology as well as lower set sales to our international stocking distributors. These declines were partially offset by increased Response fusion revenue as well as the addition of Verteglide. Sports medicine / other increased $0.1 million, or 10%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025, and $0.1 million, or 5%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Nearly all the change in each category was due to an increase or decrease in the unit volume sold and not a result of price changes.

Previous wording

Cost of revenue increased $1.8 million, or 13%, from $14.1 million for the three months ended March 31, 2025 to $16.0 million for the three months ended March 31, 2026. The increase was due primarily to sales volume. Gross margin was 73% and 73% for the three months ended March 31, 2026 and March 31, 2025, respectively.

Current wording

Cost of revenue increased $1.1 million, or 6%, from $17.1 million for the three months ended June 30, 2025 to $18.1 million for the three months ended June 30, 2026. Cost of revenue increased $2.9 million, or 9%, from $31.2 million for the six months ended June 30, 2025 to $34.1 million for the six months ended June 30, 2026. The increase was due primarily to sales volume. Gross margin was 74% and 72% for the three months ended June 30, 2026 and June 30, 2025, respectively. Gross margin was 74% and 72% for the six months ended June 30, 2026 and June 30, 2025, respectively.

Previous wording

Sales and marketing expenses increased $1.9 million, or 11%, to $18.5 million for the three months ended March 31, 2026 from $16.6 million for the three months ended March 31, 2025. The increase in the three months ended March 31, 2026 was due primarily to increased sales commission expenses and an overall increase in volume of units sold.

Current wording

Sales and marketing expenses increased $2.2 million, or 11%, to $21.3 million for the three months ended June 30, 2026 from $19.1 million for the three months ended June 30, 2025. Sales and marketing expenses increased $4.1 million, or 11%, to $39.8 million for the six months ended June 30, 2026 from $35.7 million for the six months ended June 30, 2025. The increase in the three and six months ended June 30, 2026 was due primarily to increased sales commission expenses and an overall increase in volume of units sold.

Previous wording

General and administrative expenses increased $0.7 million, or 2%, from $30.3 million for the three months ended March 31, 2025 to $31.0 million for the three months ended March 31, 2026. The increase for the three months ended March 31, 2026 was primarily due to the additional personnel supporting clinic expansions and small-scale acquisitions. Stock compensation increased $0.1 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to the increase in personnel.

Current wording

General and administrative expenses increased $2.4 million, or 8%, from $30.4 million for the three months ended June 30, 2025 to $32.8 million for the three months ended June 30, 2026, and increased $3.1 million, or 5%, from $60.7 million for the six months ended June 30, 2025 to $63.8 million for the six months ended June 30, 2026. The increase for the three and six months ended June 30, 2026 was primarily due to the additional personnel supporting clinic expansions and small-scale acquisitions. General and administrative stock compensation decreased $0.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Previous wording

In 2024, the Company initiated a global restructuring plan aimed at improving operational efficiency, reducing costs by integrating the ApiFix product into the broader OP Scoliosis portfolio, and reducing staff across all of OrthoPediatrics Corp (the "2024 Restructuring Plan"). In connection with the 2024 Restructuring Plan, the Company recorded no restructuring expenses for the three months ended March 31, 2026 compared to less than $0.1 million for thethree months ended March 31, 2025.

Current wording

In 2024, the Company initiated a global restructuring plan aimed at improving operational efficiency, reducing costs by integrating the ApiFix product into the broader OP Scoliosis portfolio, and reducing staff across all of OrthoPediatrics Corp (the "2024 Restructuring Plan"). In connection with the 2024 Restructuring Plan, the Company recorded nominal restructuring expenses for thethree and six months ended June 30, 2026 compared to $3.0 million for thethree and six months ended June 30, 2025.

Previous wording

Other expense was $2.5 million for the three months ended March 31, 2026 compared to other income of $0.5 million for the three months ended March 31, 2025, a change of $3.0 million or 587%. The change for the three months ended March 31, 2026 was primarily driven by a decrease in foreign exchange gains.

Current wording

Other expense was $2.9 million for the three months ended June 30, 2026 compared to other income of $3.6 million for the three months ended June 30, 2025, a change of $6.5 million or 180%, and other expense was $5.4 million for the six months ended June 30, 2026 compared to other income of $4.1 million for the six months ended June 30, 2025, a change of $9.5 million, or 231%. The change for the three and six months ended June 30, 2026 was driven by additional interest expense in 2026 compared to 2025 and less interest income earned due to having less cash invested in 2026 compared to 2025, as well as changes in foreign exchange gains and losses. We incurred a foreign exchange transaction loss for the six months ended June 30, 2026 driven largely by the strengthening of the US Dollar against the Euro, whereas we incurred a foreign exchange transaction gain for the six months ended June 30, 2025 when the US Dollar weakened against the Euro.

Previous wording

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $3.3 million and $4.2 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $285.9 million. We anticipate that our losses will continue in the near term as we continue to expand our product portfolio and invest in additional consigned implant and instrument sets to support our expansion into existing and new markets. Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. At March 31, 2026, we had cash and cash equivalents, restricted cash and short-term investments of $50.9 million.

Current wording

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $2.4 million and $14.6 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $293.1 million. We anticipate that our losses will continue in the near term as we continue to expand our product portfolio and invest in additional consigned implant and instrument sets to support our expansion into existing and new markets. Since inception, we have funded our operations primarily with proceeds from the sales of our common and preferred stock, convertible securities and debt, as well as through sales of our products. As of June 30, 2026, the Company is in compliance with all debt covenants. At June 30, 2026, we had cash and cash equivalents, restricted cash and short-term investments of $47.9 million.

Previous wording

Net cash used in operating activities was $3.3 million and $4.2 million for the three months ended March 31, 2026 and 2025, respectively. The primary use of this cash was to fund our operations related to the development and commercialization of our products in each of these periods. Net cash used for working capital was $3.4 million for the three months ended March 31, 2026 compared to $1.2 million for the three months ended March 31, 2025. The decrease in cash used in operating activities was primarily driven by lower inventory purchases as well as changes in accounts receivable and accounts payable associated with the increased sales and acquired inventory, respectively.

Current wording

Net cash used in operating activities was $2.4 million and $14.6 million for the six months ended June 30, 2026 and 2025, respectively. Net cash used for working capital was $3.5 million for the six months ended June 30, 2026 compared to $14.6 million for the six months ended June 30, 2025. The decrease in cash used in operating activities was primarily driven by lower inventory purchases as well as strong accounts receivable collections compared to the six months ended June 30, 2025.

Previous wording

Cash Used in Investing Activities

Current wording

Cash Provided by (Used in) Investing Activities

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026 was $3.8 million compared to $6.0 million for the three months ended March 31, 2025. Net cash used in investing activities for the three months ended March 31, 2026 consisted primarily of the acquisition of LOC and purchases of property, plant and equipment of $1.8 million, offset by $5.0 million of proceeds from the sale of short-term marketable securities.

Current wording

Net cash provided by investing activities for the six months ended June 30, 2026 was $1.2 million compared to cash used in investing activities of $9.5 million for the six months ended June 30, 2025. Net cash used in investing activities for the six months ended June 30, 2026 consisted primarily of the acquisitions of $5.9 million, purchases of property, plant and equipment of $5.8 million, offset by $13.0 million of proceeds from the sale of short-term marketable securities.

Previous wording

On August 5, 2024, the Company signed a $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Credit Agreement, (ii) Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders. Terms of the financing include a $50 million term loan and $50 million of convertible notes. The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions. The interest rate on the term loan is SOFR + 6.50% with the Company having the option to make a payment-in-kind interest payment equal to 1.00% per annum of the rate. Payments are interest only until the maturity date in August 2029. Included in the term loan are financial covenants to maintain cash in certain pledged accounts of at least 25% of the outstanding principal amount of the loan and to maintain certain minimum net product sales during the loan period.

Current wording

On August 5, 2024, the Company signed a $100 million term loan and private placement arrangement with Braidwell LP by and among (i) the Company and other borrowers party to the Credit Agreement and Guaranty, (ii) Braidwell LP, and (iii) the financial institutions or other entities from time to time party thereto as Lenders. Terms of the financing include a $50 million term loan and $50 million of convertible notes. The term loan consists of an initial term loan of $25 million and access to a delayed draw term loan facility for an additional $25 million, subject to certain terms and conditions. The interest rate on the term loan is SOFR + 6.50% with the Company having the option to make a payment-in-kind interest payment equal to 1.00% per annum of the rate. Payments are interest only until the maturity date in August 2029. Included in the term loan are financial covenants to maintain cash in certain pledged accounts of at least 25% of the outstanding principal amount of the loan and to maintain certain minimum net product sales during the loan period.

Previous wording

On March 31, 2026, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into a First Amendment (the “Amendment”) to that certain Credit Agreement and Guaranty (the “Term Loan Agreement”) dated August 5, 2024, by and among the Credit Parties, any additional borrowers from time to time party thereto, any guarantors from time to time party thereto, one or more funds managed by Braidwell LP, as lenders, the other lenders from time to time party thereto, and Wilmington Trust, National Association, as agent. The Amendment provides the Company with incremental committed financing capacity by establishing a new delayed draw term loan facility in an aggregate principal amount not to exceed $20.0 million, which, subject to certain conditions set forth in the Amendment, may be drawn until June 30, 2027, in minimum $10.0 million increments. The delayed draw structure allows the Company to access capital only as needed, supporting disciplined liquidity management and capital deployment. The facility features similar terms to those previously contained in the Term Loan Agreement, including: interest at a rate per annum equal to the SOFR Interest Rate (with a floor of 3.25%) plus 6.50%; a Company election to make a payment-in-kind interest payment equal to 1.00% per annum of the interest rate; interest-only until the August 5, 2029 maturity date; and certain financial covenants. The Company believes these terms provide an efficient and flexible source of capital while preserving near-term cash flow and is not required to draw on the delayed draw facility in connection with the Amendment. The Company is also obligated to pay a 1.00% upfront fee, a 0.05% per annum delayed draw ticking fee, and certain exit fees and prepayment fees generally consistent with those contained in the Term Loan Agreement.

Current wording

Company with incremental committed financing capacity by establishing a new delayed draw term loan facility in an aggregate principal amount not to exceed $20.0 million, which, subject to certain conditions set forth in the Braidwell Amendment, may be drawn until June 30, 2027, in minimum $10.0 million increments. The delayed draw structure allows the Company to access capital only as needed, supporting disciplined liquidity management and capital deployment. The facility features similar terms to those previously contained in the Term Loan Agreement, including: interest at a rate per annum equal to the SOFR Interest Rate (with a floor of 3.25%) plus 6.50%; a Company election to make a payment-in-kind interest payment equal to 1.00% per annum of the interest rate; interest-only until the August 5, 2029 maturity date; and certain financial covenants. The Company believes these terms provide an efficient and flexible source of capital while preserving near-term cash flow and is not required to draw on the delayed draw facility in connection with the Braidwell Amendment. The Company is also obligated to pay a 1.00% upfront fee, a 0.05% per annum delayed draw ticking fee, and certain exit fees and prepayment fees generally consistent with those contained in the Term Loan Agreement.