What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-01 · 69 added, 61 removed, 123 unchanged (51% of the section changed)

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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.

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.

We are the only global medical device company focused exclusively on providing a comprehensive trauma and deformity correction, scoliosis, sports medicine, specialty bracing and clinical services to the pediatric orthopedic market in order to improve the lives of children with orthopedic conditions.

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We sell implants, instruments and specialized braces to our customers for use by pediatric orthopedic surgeons, orthotists or physical therapists to treat orthopedic conditions in children.

We provide our implants in sets that consist of a range of implant sizes and include the instruments necessary to perform the surgical procedure.

We provide our

implants in sets that consist of a range of implant sizes and include the instruments necessary to perform the surgical procedure.

In the United States and a few selected international markets, our customers typically expect us to have full sets of implants and instruments on site at each hospital but do not purchase the implants until they are used in surgery.

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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 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 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.

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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 not recognized at the time of consignment, as we maintain control over the

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.

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.

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Trends and Uncertainties

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.

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.

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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.

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 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,

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.

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

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

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

2026 2025 Increase

(Decrease) % 2026 2025 Increase

Net revenue $ 70,508 $ 61,082 $ 9,426 15 % $ 129,869 $ 113,493 $ 16,376 14 %

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Other expense (income), net 2,861 (3,593) 6,454 180 % 5,385 (4,111) 9,496 231 %

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

Provision for income taxes 234 49 185 378 % 63 245 (182) (74) %

Net loss $ (7,163) $ (7,113) $ 50 1 % $ (17,850) $ (17,772) $ 78 — %

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,

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):

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

Product sales by geographic location:

2026 2025 2026 2025

$ 54,791 $ 48,147 $ 100,100 $ 89,039

International 15,717 12,935 29,769 24,454

Total $ 70,508 $ 61,082 $ 129,869 $ 113,493

Three Months Ended March 31,

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

Product sales by category:

2026 2025 2026 2025

Trauma and deformity $ 52,632 $ 41,655 $ 95,677 $ 79,521

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Total $ 70,508 $ 61,082 $ 129,869 $ 113,493

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.

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.

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.

Cost of Revenue and Gross Margin

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.

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 73% and 73% for the three months ended March 31, 2026 and March 31, 2025, respectively.

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.

Sales and Marketing Expenses

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.

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.

General and Administrative Expenses

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.

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.

Depreciation and amortization expenses increased $0.4 million, or 7%, from $4.9 million for the three months ended June 30, 2025 to $5.3 million for the three months ended June 30, 2026, and increased $1.0 million, or 10%, from $9.7 million for the six months ended June 30, 2025 to $10.7 million for the six months ended June 30, 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 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 .

In connection with the 2024 Restructuring Plan, the Company recorded nominal restructuring expenses for the three and six months ended June 30, 2026 compared to $3.0 million for the three and six months ended June 30, 2025 .

Research and Development Expenses

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.

Research and development expenses increased $0.1 million, or 8%, from $2.2 million for the three months ended June 30, 2025 to $2.3 million for the three months ended June 30, 2026, and slightly increased by 1%, from $4.5 million for the six months ended June 30, 2025 to $4.6 million for the six months ended June 30, 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.

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.

Liquidity and Capital Resources

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.

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.

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

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.

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities $ (2,359) $ (14,618)

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

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

Net cash provided by (used in) investing activities 1,213 (9,532)

Net cash (used in) provided by financing activities (1,351) 24,674

Effect of exchange rate changes on cash, cash equivalents and restricted cash (68) 304

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

Net (decrease) increase in cash, cash equivalents and restricted cash $ (2,565) $ 828

Cash Used in Operating Activities

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.

Cash Used in Investing Activities

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.

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.

Cash Provided by (Used in) Investing Activities

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.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the six months ended June 30, 2026 was $1.4 million compared to cash provided by financing activities of $24.7 million for the six months ended June 30, 2025.

The increase in cash used in financing activities was primarily driven by not drawing on debt compared to the six months ended June 30, 2025.

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.

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.

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.

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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.

On March 31, 2026, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into a First Amendment (the “Braidwell 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 Braidwell 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 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.

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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.

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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