What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-29 compared with 2025-08-06 · 67 added, 68 removed, 125 unchanged (52% of the section changed)

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In order to further enhance our operations in Europe, we established operating companies in the Netherlands and Germany in March 2019 and April 2022, respectively.

In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customers and opened warehouses in Germany and Australia in 2024.

In 2023 and 2024, we hired operating and sales representatives in Germany as salaried employees to better serve our customers and opened warehouses in Germany and Australia in 2024 and the Netherlands in 2025.

These arrangements have generated an increase in revenue and gross margin.

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Revenue is recognized only upon implantation, at which point an invoice is issued.

For the six months ended June 30, 2025, consignment sales accounted for approximately 68% of our total net sales.

Inventory held on consignment at sales agencies, distributors, or other customers is 61% of gross inventory.

For the nine months ended September 30, 2025, consignment sales accounted for approximately 70% of our total net sales.

Inventory held on consignment at sales agencies, distributors, or other customers is approximately 60% of gross inventory.

Social Impact

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Fair value is based on our current assessment of the expected future cash flows based on recent results and other specific market factors.

During 2024, 2023, and 2022, we determined that a triggering event had occurred indicating it was more likely than not the fair value of the ApiFix trademark was 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 $1.8 million, $1.0 million and $3.6 million were recorded in 2024, 2023, and 2022, respectively.

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 trademarks was 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 impairment losses of $1.9 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.

In 2023 and 2022, there was a significant and unprecedented increase in cases of respiratory syncytial virus, or RSV, and other respiratory illnesses.

RSV is a common respiratory virus that follows a seasonal pattern.

The typical season shows an increase in mid-September, peaks in late December and drops around mid-April;

however, in 2022 the United States experienced a significant increase during the summer and fall months and in 2023 the United States experienced a significant increase in January and February as well as October through December.

The volume of elective procedures utilizing our products were negatively impacted as a significant percent of hospital capacity was absorbed to cover the increase in RSV-related hospitalizations.

This had a negative impact on our sales volume in 2022 and 2023 and may continue to do so into the future.

We are unable to accurately determine exactly how this will impact us in the future, but we will continue to monitor this dynamic as we get closer to the traditional peak of RSV season.

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 5, 2025 and in other reports filed with the SEC that discuss the risks and factors that may affect our business.

Summary of Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024

The following table sets forth our results of operations for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Summary of Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

The following table sets forth our results of operations for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Increase

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General and administrative expenses 29,155 26,299 2,856 11 % 89,878 78,358 11,520 15 %

Intangible asset impairment 2,268 — 2,268 100 % 2,268 — 2,268 100 %

Restructuring 2,294 — 2,294 100 % 5,305 — 5,305 100 %

Research and development expenses 2,333 2,577 (244) (9) % 6,843 8,118 (1,275) (16) %

Other (income) expense, net (3,593) 381 (3,974) (1043) % (4,111) 994 (5,105) (514) %

Provision for income taxes (benefit) 49 (18) 67 372 % 245 (2,549) 2,794 110 %

Other expense (income), net 2,470 3,571 (1,101) (31) % (1,641) 4,565 (6,206) (136) %

Provision for income (benefit) taxes (125) (1,218) 1,093 90 % 120 (3,767) 3,887 103 %

Net loss $ (11,773) $ (7,919) $ 3,854 49 % $ (29,545) $ (21,753) $ 7,792 36 %

The following tables set forth our net revenue by geography and product category for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following tables set forth our net revenue by geography and product category for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Product sales by geographic location:

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Total $ 61,250 $ 54,573 $ 174,743 $ 152,060

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Product sales by category:

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Total $ 61,250 $ 54,573 $ 174,743 $ 152,060

Net revenue increased $8.3 million, or 16%, from $52.8 million for the three months ended June 30, 2024 to $61.1 million for the three months ended June 30, 2025.

Net revenue increased $16.0 million, or 16%, from $97.5 million for the six months ended June 30, 2024 to $113.5 million for the six months ended June 30, 2025.

The increase during the three and six months ended June 30, 2025 was primarily driven by strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.

Trauma and deformity sales increased $3.9 million, or 10%, from $37.8 million during the three months ended June 30, 2024, to $41.7 million for the three months ended June 30, 2025, and sales increased $8.4 million, or 12%, from $71.1 million for the six months ended June 30, 2024 to $79.5 million for the six months ended June 30, 2025.

The increase for the three and six month periods ended June 30, 2025 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PNP Tibia, DF2, and OPSB.

Scoliosis sales increased $4.8 million, or 35%, from $13.7 million during the three months ended June 30, 2024, to $18.5 million for the three months ended June 30, 2025, and sales increased $8.3 million, or 35%, from $23.9 million for the six months ended

June 30, 2024 to $32.2 million for the six months ended June 30, 2025.

The increase for the three and six month periods ended June 30, 2025 was primarily driven by increased sales of our RESPONSE 5.5/6.0 and revenue generated from 7D Technology.

Sports medicine / other decreased $0.4 million, or 33%, during the three months ended June 30, 2025, and $0.7 million, or 29%, during the six months ended June 30, 2025.

Net revenue increased $6.7 million, or 12%, from $54.6 million for the three months ended September 30, 2024 to $61.2 million for the three months ended September 30, 2025.

Net revenue increased $22.7 million, or 15%, from $152.1 million for the nine months ended September 30, 2024 to $174.7 million for the nine months ended September 30, 2025.

The increase during the three and nine months ended September 30, 2025 was primarily driven by strong performance across global Trauma and Deformity, Scoliosis and OP Specialty Bracing.

Trauma and deformity sales increased $6.5 million, or 17%, from $37.6 million during the three months ended September 30, 2024, to $44.1 million for the three months ended September 30, 2025, and sales increased $15.0 million, or 14%, from $108.7 million for the nine months ended September 30, 2024 to $123.7 million for the nine months ended September 30, 2025.

The increase for the three and nine month periods ended September 30, 2025 was primarily driven by strong growth across numerous product lines, specifically our Cannulated Screws, PNP Femur, PNP Tibia, DF2, and OPSB.

Scoliosis sales increased

$0.6 million, or 4%, from $15.6 million during the three months ended September 30, 2024, to $16.3 million for the three months ended September 30, 2025, and sales increased $8.9 million, or 23%, from $39.5 million for the nine months ended September 30, 2024 to $48.4 million for the nine months ended September 30, 2025.

The increase for the three and nine month periods ended September 30, 2025 was primarily driven by increased sales of our RESPONSE 5.5/6.0 and revenue generated from FIREFLY.

Sports medicine / other decreased $0.5 million, or 35%, during the three months ended September 30, 2025, and $1.2 million, or 31%, during the nine months ended September 30, 2025 due to a reduction of Telos revenue related to its closure.

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.

Cost of Revenue and Gross Margin

Cost of revenue increased $5.1 million, or 42%, from $12.0 million for the three months ended June 30, 2024 to $17.1 million for the three months ended June 30, 2025.

Cost of revenue increased $6.7 million, or 27%, from $24.5 million for the six months ended June 30, 2024 to $31.2 million for the six months ended June 30, 2025.

The increases were due primarily to sales volume as well as higher sales of 7D units and international set sales.

Gross margin was 72% and 77% for the three months ended June 30, 2025 and June 30, 2024, respectively.

Gross margin was 72% and 75% for the six months ended June 30, 2025 and June 30, 2024, respectively.

The lower gross margin was driven by a higher percentage of sales of 7D units as well as international set sales.

Cost of revenue increased $1.5 million, or 10%, from $14.5 million for the three months ended September 30, 2024 to $16.0 million for the three months ended September 30, 2025.

Cost of revenue increased $8.2 million, or 21%, from $39.0 million for the nine months ended September 30, 2024 to $47.2 million for the nine months ended September 30, 2025.

The increases were due primarily to sales volume.

Gross margin was 74% and 73% for the three months ended September 30, 2025 and September 30, 2024, respectively.

Gross margin was 73% and 74% for the nine months ended September 30, 2025 and September 30, 2024, respectively.

The lower gross margin was driven by a higher percentage of sales of international set sales and 7D units sold with a lower gross margin profit.

Sales and Marketing Expenses

Sales and marketing expenses increased $2.5 million, or 15%, to $19.1 million for the three months ended June 30, 2025 from $16.6 million for the three months ended June 30, 2024.

Sales and marketing expenses increased $4.9 million, or 16%, to $35.7 million for the six months ended June 30, 2025 from $30.8 million for the six months ended June 30, 2024.The increase in the three and six months ended June 30, 2025 was due primarily to increased sales commission expenses and an overall increase in volume of units sold.

Sales and marketing expenses increased $1.9 million, or 11%, to $18.7 million for the three months ended September 30, 2025 from $16.8 million for the three months ended September 30, 2024.

Sales and marketing expenses increased $6.8 million, or 14%, to $54.3 million for the nine months ended September 30, 2025 from $47.5 million for the nine months ended September 30, 2024.The increase in the three and nine months ended September 30, 2025 was due primarily to increased sales commission expenses and an overall increase in volume of units sold.

General and Administrative Expenses

General and administrative expenses increased $3.1 million, or 11%, from $27.3 million for the three months ended June 30, 2024 to $30.4 million for the three months ended June 30, 2025, and increased $8.7 million, or 17%, from $52.1 million for the six months ended June 30, 2024 to $60.7 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2025 was due primarily to the additional personnel though clinic acquisitions and increased lease expense.

Stock compensation increased $ 2.4 million for the six months ended June 30, 2025 due to the increase in personnel.

Depreciation and amortization expenses increased $0.1 million, or 3%, from $4.8 million for the three months ended June 30, 2024 to $4.9 million for the three months ended June 30, 2025, and decreased $0.1 million, or 1%, from $9.8 million for the six months ended June 30, 2024 to $9.7 million for the six months ended June 30, 2025.

General and administrative expenses increased $2.9 million, or 11%, from $26.3 million for the three months ended September 30, 2024 to $29.2 million for the three months ended September 30, 2025, and increased $11.5 million, or 15%, from $78.4 million for the nine months ended September 30, 2024 to $89.9 million for the nine months ended September 30, 2025.

The increase for the three and nine months ended September 30, 2025 was due primarily to the additional personnel though clinic acquisitions and increased lease expense.

Stock compensation increased $ 1.9 million for the nine months ended September 30, 2025 due to the increase in personnel.

Depreciation and amortization expenses decreased $0.2 million, or 4%, from $5.1 million for the three months ended September 30, 2024 to $4.9 million for the three months ended September 30, 2025, and decreased $0.5 million, or 3%, from $15.1 million for the nine months ended September 30, 2024 to $14.6 million for the nine months ended September 30, 2025.

Intangible Asset Impairment

During 2025, management completed a quantitative analysis as part of our annual impairment test, and determined the fair value of our ApiFix, MedTech, and Telos trademark assets were below their respective carrying values.

Additionally, in connection with our decision to exit our Telos regulatory consulting business, we wrote off the remaining carrying value of its customer relationship intangible asset.

We recorded an impairment charge of $2.3 million for the nine months ended September 30, 2025 compared to $0 for the nine months ended September 30, 2024.

Restructuring Expense

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 restructuring expenses of $3.0 million for the three and six months ended June 30, 2025 compared to $0 for the three and six months ended June 30, 2024.

In 2025, the Company made the decision to restructure Telos by dissolving the local operation and continuing staff reductions across the Company.

Restructuring expense increased from $0.0 million for the three and nine months ended September 30, 2024 to $2.3 million for the three months ended September 30, 2025 , and $5.3 million for the nine months ended September 30, 2025 .

The increase for the three and nine months ended September 30, 2025 was due primarily to the Telos goodwill write-off of $1.9 million and additional severance expenses.

Research and Development Expenses

Research and development expenses decreased $0.4 million, or 15%, from $2.5 million for the three months ended June 30, 2024 to $2.2 million for the three months ended June 30, 2025, and decreased

$1.0 million, or 19%, from $5.5 million for the six months ended June 30, 2024 to $4.5 million for the six months ended June 30, 2025.

The decrease for the three and six months ended June 30, 2025 was primarily due to the timing of product development during the first and second quarters of 2024 compared to the first and second quarters of 2025.

Total Other (Income) Expenses

Other income was $3.6 million for the three months ended June 30, 2025 compared to other expense of $0.4 million for the three months ended June 30, 2024, a change of $4.0 million or 1,043%, and other income was $4.1 million for the six months ended June 30, 2025 compared to other expense of $1.0 million for the six months ended June 30, 2024, a change of $5.1 million, or 514%.

The change for the three and six months ended June 30, 2025 was primarily driven by an increase in foreign exchange gain.

Research and development expenses decreased $0.2 million, or 9%, from $2.6 million for the three months ended September 30, 2024 to $2.3 million for the three months ended September 30, 2025, and decreased $1.3 million, or 16%, from $8.1 million for the nine months ended September 30, 2024 to $6.8 million for the nine months ended September 30, 2025.

The decrease for the three and nine months ended September 30, 2025 was primarily due to the timing of product development during the first, second, and third quarters of 2024 compared to the first, second, and third quarters of 2025.

Total Other Expenses (Income)

Other expense was $2.5 million for the three months ended September 30, 2025 compared to other expense of $3.6 million for the three months ended September 30, 2024, a reduction of $1.1 million or 31%, and other income was $1.6 million for the nine months ended September 30, 2025 compared to other expense of $4.6 million for the nine months ended September 30, 2024, a reduction of $6.2 million, or 136%.

The change for the three and nine months ended September 30, 2025 was primarily driven by an increase in foreign exchange gain.

Liquidity and Capital Resources

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $14.6 million and $12.8 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, we had an accumulated deficit of $253.3 million.

We have incurred operating losses since inception which resulted in negative cash flows used in operating activities of $15.2 million and $23.1 million for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, we had an accumulated deficit of $265.1 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.

At June 30, 2025, we had cash and cash equivalents, restricted cash and short-term investments of $72.2 million.

At September 30, 2025, we had cash and cash equivalents, restricted cash and short-term investments of $59.8 million.

The Company has engaged in ongoing efforts to preserve cash.

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The following table sets forth our cash flows from operating, investing and financing activities for the periods indicated (dollars in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities $ (15,199) $ (23,061)

Net cash (used in) provided by investing activities (9,532) 16,018

Net cash provided by (used in) financing activities 24,674 (4,842)

Net cash used in investing activities (36,370) (10,750)

Net cash provided by financing activities 24,392 53,676

Effect of exchange rate changes on cash, cash equivalents and restricted cash 284 153

Net increase (decrease) in cash, cash equivalents and restricted cash $ 828 $ (2,137)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (26,893) $ 20,018

Cash Used in Operating Activities

Net cash used in operating activities was $14.6 million and $12.8 million for the six months ended June 30, 2025 and 2024, respectively.

Net cash used in operating activities was $15.2 million and $23.1 million for the nine months ended September 30, 2025 and 2024, 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 $14.6 million for the six months ended June 30, 2025 compared to $10.3 million for the six months ended June 30, 2024.

The increase in cash used in operating activities was primarily

driven by inventory purchases to support sales growth as well as changes in accounts receivable and accounts payable associated with the increased sales and acquired inventory, respectively.

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the six months ended June 30, 2025 was $9.5 million compared to cash provided by investing activities of $16.0 million for the six months ended June 30, 2024.

Net cash used in investing activities for the six months ended June 30, 2025 consisted primarily of the purchases of property, plant and equipment of $7.7 million, along with the investment in private companies.

The increase in cash used in investing activities was primarily driven by no longer having cash provided by the sale of short term marketable securities to offset cash used in business combinations.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2025 was $24.7 million compared to cash used in financing activities of $4.8 million for the six months ended June 30, 2024.

Net cash for the six months ended June 30, 2025 consisted of proceeds from a draw on debt, offset by payments on clinic acquisition notes and installment payments.

Net cash used for working capital was $17.2 million for the nine months ended September 30, 2025 compared to $26.0 million for the nine months ended September 30, 2024.

The decrease in cash used in operating activities was primarily driven by fewer inventory purchases during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $36.4 million compared to $10.8 million for the nine months ended September 30, 2024.

Net cash used in investing activities for the nine months ended September 30, 2025 consisted primarily of the purchases of property, plant and equipment of $10.5 million, the purchase of short-term marketable securities of $15.0 million, and the investment in private companies and clinic and other acquisitions.

The increase in cash used in investing activities was primarily driven by a reduction in the cash provided by the sale of short term marketable securities to offset cash used in business combinations.

Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $24.4 million compared to $53.7 million for the nine months ended September 30, 2024.

Net cash for the nine months ended September 30, 2025 consisted of proceeds from a draw on debt, offset by payments on clinic acquisition notes and installment payments.

Credit Agreement

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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.

during the loan period.

On June 27, 2025, the Company withdrew the delayed draw on the term loan in the amount of $25.0 million.

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Using the closing price on August 2, 2024, of $29.56, the amount of common stock subject to the repurchase program represents approximately 169,000 shares or 0.7% of the Company’s outstanding common stock.

No shares have been purchased under this program as of June 30, 2025.

No shares have been purchased under this program as of September 30, 2025.

The dollar limit on repurchases under the program after December 21, 2024 was reduced to $250,000 per annum.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis