What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-01 compared with 2025-10-29 · 76 added, 84 removed, 108 unchanged (60% of the section changed)

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Accordingly, we must make an up-front investment in inventory of consigned implants and instruments before we can generate revenue from a particular hospital and we maintain substantial levels of inventory at any given time.

We operate approximately 40 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states.

We operate over 50 orthotic and prosthetic ("O&P") clinics in the United States serving children's hospitals in numerous states.

In the international markets where we sell to stocking distributors or in the case of our braces, we transfer control of our products to the distributor or customer when title passes upon shipment.

We currently market 82 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 currently market nearly 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.

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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 and the Netherlands in 2025.

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 2025, we opened a warehouse in the Netherlands.

In November 2025, we established a legal entity in Brazil to sell and distribute directly to the local market.

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

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and international markets by increasing investments in consigned implant and instrument sets, strengthening our global sales and distribution infrastructure, and expanding our product offering as well as our O&P clinic network.

Our global inventory, which primarily consists of implants and instruments held in our warehouses, with third-party independent sales agencies or distributors, or consigned directly with hospitals, are

considered finished goods and are purchased from third parties.

Our global inventory, which primarily consists of implants and instruments held in our warehouses, with

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.

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

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

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.

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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 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.

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;

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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.

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,

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

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

Three Months Ended March 31,

2026 2025 Increase

(Decrease) % 2025 2024 Increase (Decrease) %

Net revenue $ 59,362 $ 52,411 $ 6,951 13 %

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General and administrative expenses 31,024 30,280 744 2 %

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

Restructuring — 40 (40) (100) %

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Other expense (income), net 2,523 (518) 3,041 (587) %

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

Provision for income taxes (benefit) (171) 196 (367) 187 %

Net loss $ (10,687) $ (10,659) $ 28 — %

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,

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):

Three Months Ended March 31,

Product sales by geographic location:

$ 45,309 $ 40,891

$ 48,718 $ 42,714 $ 137,757 $ 118,269

International 14,053 11,520

Total $ 59,362 $ 52,411

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

Three Months Ended March 31,

Product sales by category:

2025 2024 2025 2024

Trauma and deformity $ 43,045 $ 37,867

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Total $ 59,362 $ 52,411

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.

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.

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.

Cost of Revenue and Gross Margin

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.

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.

Sales and Marketing Expenses

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.

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.

General and Administrative Expenses

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.

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.

Depreciation and amortization expenses increased $0.7 million, or 14%, from $4.8 million for the three months ended March 31, 2025 to $5.4 million for the three months ended March 31, 2026.

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 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.

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 the three months ended March 31, 2025 .

Research and Development Expenses

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.

Research and development expenses decreased approximately $0.1 million, or 5%, from $2.4 million for the three months ended March 31, 2025 to $2.2 million for the three months ended March 31, 2026.

The decrease for the three months ended March 31, 2026 was primarily due to the timing of product development during the first quarter of 2025 compared to the first quarter of 2026.

Total Other Expense (Income)

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.

Liquidity and Capital Resources

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.

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 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.

For example, the Board of Directors of the Company approved (i) the issuance of unregistered shares of the Company’s common stock representing an aggregate of approximately $3.8 million in value to the members of MedTech in lieu of the three remaining annual $1.3 million cash payments otherwise required under the MedTech Purchase Agreement on or about May 1st of each of 2025, 2026, and 2027;

and (ii) an Amended and Restated Non-Employee Director Compensation Policy that increases the total director compensation from approximately $180 thousand to $207 thousand per year and provides for the payment of the remaining director compensation for 2025 in shares of restricted stock in lieu of cash.

At March 31, 2026, we had cash and cash equivalents, restricted cash and short-term investments of $50.9 million.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities $ (3,287) $ (4,156)

Net cash used in investing activities (3,787) (5,987)

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

Net cash used in financing activities (614) (126)

Effect of exchange rate changes on cash, cash equivalents and restricted cash 313 (79)

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

Net decrease in cash, cash equivalents and restricted cash $ (7,375) $ (10,348)

Cash Used in Operating Activities

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.

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 $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.

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.

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

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.

Cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2026 was $0.6 million compared to $0.1 million for the three months ended March 31, 2025.

Net cash for the three months ended March 31, 2026 consisted of payments on acquisition notes and mortgage notes.

Term Loan Agreement and Convertible Notes

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.

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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.

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.

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

The $50 million of convertible notes will accrue interest at a rate of 4.75% per annum.

The $50 million of convertible notes accrue interest at a rate of 4.75% per annum.

Payments will consist of interest only until the maturity date in February 2030.

The notes are convertible into common stock of the Company at an initial conversion price of $40.98, which represents a 30% premium to the Company’s volume weighted average common stock price for the thirty trading days ended August 2, 2024.

The notes are convertible into common stock of the Company at an initial conversion price of $40.98, which represented a 30% premium to the Company’s volume weighted average common stock price for the thirty trading days ended August 2, 2024.

In connection with its approval of the financing, the Company’s Board approved a stock repurchase program of up to $5 million in value of the Company’s outstanding common stock.

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 September 30, 2025.

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

The proceeds from the financing will be used to repay the Company’s outstanding debt of approximately $10 million, transaction fees incurred in connection with the financing, potential stock repurchases under the program described above, and for general corporate purposes and working capital needs.

The debt facilities replace the $80 million Credit, Security, and Guaranty Agreement with MidCap Funding IV Trust and MidCap Financial Trust and other parties named therein.

There was approximately $10 million outstanding under the MidCap Credit Agreement and it was terminated in connection with the Term Loan Agreement.

No shares were repurchased under the program which reduced to $0.25 million on December 31, 2024.

The proceeds from the financing were used to repay the Company’s outstanding debt of approximately $10 million with MidCap, transaction fees incurred in connection with the financing, potential stock repurchases under the program described above, and for general corporate purposes and working capital needs.

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.

Tawani Mortgage

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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