OrthoPediatrics (NASDAQ: KIDS) posts 13% Q1 revenue rise but remains unprofitable
Filing Impact
Filing Sentiment
Form Type
10-Q
OrthoPediatrics Corp. reported first-quarter 2026 net revenue of $59.4 million, up 13% from $52.4 million a year earlier, driven by growth in trauma and deformity, scoliosis and specialty bracing across U.S. and international markets. Gross margin remained strong at 73%.
The company posted a net loss of $10.7 million, similar to the prior-year loss of $10.7 million, with loss per share of $0.45. Operating cash outflow improved to $3.3 million, and cash, restricted cash and short-term investments totaled about $50.9 million. Total debt was $106.7 million, including term loans and a 4.75% convertible note, and OrthoPediatrics added a new $20 million delayed draw term loan facility to expand future liquidity while continuing clinic acquisitions that increased goodwill to $115.2 million.
Positive
- None.
Negative
- None.
Key Figures
Net revenue: $59.4 million
Net loss: $10.7 million
Net loss per share: $0.45 per share
+5 more
8 metrics
Net revenue
$59.4 million
Three months ended March 31, 2026 (vs. $52.4 million in 2025)
Net loss
$10.7 million
Three months ended March 31, 2026 (similar to 2025)
Net loss per share
$0.45 per share
Basic and diluted for Q1 2026
Gross margin
73%
Three months ended March 31, 2026 and 2025
Cash and investments
$50.9 million
Cash, restricted cash and short-term investments at March 31, 2026
Total debt
$106.7 million
Term loan, convertible note, mortgage and acquisition notes at March 31, 2026
Goodwill balance
$115.2 million
Goodwill at March 31, 2026 after clinic acquisitions
U.S. vs international revenue
$45.3M U.S.; $14.1M international
Product sales by geography, Q1 2026
Key Terms
delayed draw term loan facility, convertible note, goodwill, contingent consideration, +1 more
5 terms
delayed draw term loan facility financial
"The Amendment establishes a new delayed draw term loan facility in an aggregate principal amount not to exceed $20,000..."
A delayed draw term loan facility is a committed loan that a borrower can tap in one or more installments at specified future times after meeting agreed conditions, rather than receiving the full amount upfront. For investors it matters because it provides a ready source of cash that can change a company’s financial strength, leverage and interest costs when drawn—similar to having a reserved credit line you can use later, which affects liquidity and the risk profile of the business.
convertible note financial
"Long-term convertible note | 48,644 | 48,486"
A convertible note is a type of loan that a company gets from investors, which can later be turned into company shares instead of being paid back in cash. It matters because it helps startups raise money quickly without setting a fixed value for the company right away, making it easier to grow and attract investors.
goodwill financial
"Goodwill | 115,173 | 109,269"
Goodwill is the extra value a buyer pays for a company above the measurable worth of its buildings, inventory and other tangible items, reflecting things like brand reputation, customer loyalty and expected future profits. Think of paying more for a café because of its famous name and regulars rather than its furniture alone. It matters to investors because changes in goodwill — for example a write-down if expected benefits don’t materialize — can reduce reported earnings and signal that past acquisitions aren’t delivering as hoped.
contingent consideration financial
"The Company's Level 3 instruments consist of contingent consideration."
Contingent consideration is an additional payment agreed when one company buys another that will be paid later only if specific future targets are met, such as revenue, profit, or regulatory milestones. It matters to investors because it shifts risk between buyer and seller and affects the acquiring company's future cash flow and reported value — like promising a bonus after results are proven.
restructuring plan financial
"In 2024, the Company initiated a global restructuring plan aimed at improving operational efficiency..."
A restructuring plan is a company’s roadmap for reorganizing its operations, debts, or assets to improve financial health and efficiency; think of it as rewriting a household budget and chores when income changes. Investors care because the plan can affect a company’s ability to repay loans, generate profits, and sustain growth—successful restructuring can restore value, while a poorly executed one can signal continued trouble or reduced returns.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2026
OR
For the transition period from _______ to _______
Commission file number: 001-38242
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||
( | |||||
(Address of principal executive offices, including zip code) | (Registrant’s telephone number, including area code) | ||||
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
________________________________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | ☒ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 29, 2026, the registrant had 25,684,994 outstanding shares of common stock, $0.00025 par value per share.
OrthoPediatrics Corp.
Form 10-Q
For the Quarterly Period Ended March 31, 2026
TABLE OF CONTENTS
| Page No. | ||||||||
Note Regarding Forward-Looking Statements | 3 | |||||||
| PART I. FINANCIAL INFORMATION | ||||||||
| Item 1 | Financial Statements (unaudited) | 4 | ||||||
Condensed Consolidated Balance Sheets - March 31, 2026 and December 31, 2025 | 4 | |||||||
Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2026 and 2025 | 5 | |||||||
Condensed Consolidated Statements of Comprehensive Loss - Three Months Ended March 31, 2026 and 2025 | 6 | |||||||
Condensed Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 2026 and 2025 | 7 | |||||||
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2026 and 2025 | 9 | |||||||
Notes to Condensed Consolidated Financial Statements | 10 | |||||||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||||||
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 32 | ||||||
| Item 4 | Controls and Procedures | 32 | ||||||
| PART II. OTHER INFORMATION | ||||||||
| Item 1 | Legal Proceedings | 33 | ||||||
| Item 1A | Risk Factors | 33 | ||||||
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 33 | ||||||
| Item 3 | Defaults Upon Senior Securities | 33 | ||||||
| Item 4 | Mine Safety Disclosures | 33 | ||||||
| Item 5 | Other Information | 33 | ||||||
| Item 6 | Exhibits | 34 | ||||||
Exhibit Index | 35 | |||||||
Signatures | 37 | |||||||
NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical facts, contained in this quarterly report, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. You can often identify forward-looking statements by words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "target," "ongoing," "plan," "potential," "predict," "project," "should," "will" or "would," or the negative of these terms or other terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors, such as the impact of widespread health emergencies, such as COVID-19 and respiratory syncytial virus, that may cause our results, activity levels, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements. Forward-looking statements may include, among other things, statements relating to:
•our ability to achieve or sustain profitability in the future;
•our ability to raise additional capital to fund our existing commercial operations, develop and commercialize new products and expand our operations;
•our ability to commercialize our products in development and to develop and commercialize additional products through our research and development efforts, and if we fail to do so we may be unable to compete effectively;
•our ability to generate sufficient revenue from the commercialization of our products to achieve and sustain profitability;
•our ability to comply with extensive government regulation and oversight both in the United States and abroad;
•our ability to maintain and expand our network of third-party independent sales agencies and distributors to market and distribute our products; and
•our ability to protect our intellectual property rights or if we are accused of infringing on the intellectual property rights of others.
We cannot assure you that forward-looking statements will prove to be accurate, and you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations expressed or implied by the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this quarterly report, 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. Other than as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this quarterly report.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
| March 31, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Short-term investments | |||||||||||
Accounts receivable - trade, net of allowances of $ | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Other assets: | |||||||||||
| Amortizable intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets | |||||||||||
| Other non-current assets | |||||||||||
| Total other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable - trade | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Current portion of long-term debt with affiliate | |||||||||||
| Current portion of acquisition installment payable | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Long-term term loan | |||||||||||
| Long-term convertible note | |||||||||||
| Long-term debt with affiliate, net of current portion | |||||||||||
| Other long-term debt, net of current portion | |||||||||||
| Acquisition installment payable, net of current portion | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See notes to condensed consolidated financial statements.
4
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Net revenue | $ | $ | |||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||||||||||||||
| Operating loss | ( | ( | |||||||||||||||||||||||||||||||||
| Other expense (income): | |||||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||
| Other expense (income), net | ( | ||||||||||||||||||||||||||||||||||
| Total other expense (income), net | ( | ||||||||||||||||||||||||||||||||||
| Net loss before income taxes | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Income tax (benefit) charge | ( | ||||||||||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||||||||||||||
| Net loss per share | |||||||||||||||||||||||||||||||||||
| Basic and diluted | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements.
5
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) (In Thousands)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Unrealized (loss) gain on short-term investments | ( | ||||||||||||||||||||||
| Adjustment for realized gains | |||||||||||||||||||||||
| Other comprehensive loss, net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | |||||||||||||||||||
See notes to condensed consolidated financial statements.
6
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In Thousands, Except Share Data)
| Three Months Ended March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders' | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements.
7
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In Thousands, Except Share Data)
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Capital | Deficit | Loss | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements.
8
ORTHOPEDIATRICS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In Thousands)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||
| Accretion of acquisition installment payable | |||||||||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||||||||
| Non-cash other | |||||||||||||||||||||||
| Changes in certain operating assets and liabilities: | |||||||||||||||||||||||
| Accounts receivable - trade | ( | ( | |||||||||||||||||||||
| Inventories | ( | ||||||||||||||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||||||||||||||
| Accounts payable - trade | |||||||||||||||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||
| Net cash used in operating activities | ( | ( | |||||||||||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||||||||||
| Other acquisitions, including clinics, net of cash acquired | ( | ( | |||||||||||||||||||||
| Sale of short-term marketable securities | |||||||||||||||||||||||
| Investment in private companies and purchases of licenses | ( | ( | |||||||||||||||||||||
| Purchases of property and equipment | ( | ( | |||||||||||||||||||||
| Net cash used in investing activities | ( | ( | |||||||||||||||||||||
| FINANCING ACTIVITIES | |||||||||||||||||||||||
| Payments on mortgage notes | ( | ( | |||||||||||||||||||||
| Payments on acquisition notes | ( | ( | |||||||||||||||||||||
| Net cash used in financing activities | ( | ( | |||||||||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||||||||||||||
| NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ( | |||||||||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of year | $ | $ | |||||||||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||||||||||||||
| SUPPLEMENTAL DISCLOSURES | |||||||||||||||||||||||
| Cash paid for interest | $ | $ | |||||||||||||||||||||
| Transfer of instruments between property and equipment and inventory | $ | ( | $ | ( | |||||||||||||||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | |||||||||||||||||||||
| Issuance of common shares in connection with LOC acquisition | $ | $ | |||||||||||||||||||||
| Issuance of common shares in connection with Boston O&P acquisition | $ | $ | |||||||||||||||||||||
| Debt issuance costs not yet paid | $ | $ | |||||||||||||||||||||
See notes to condensed consolidated financial statements.
9
ORTHOPEDIATRICS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars In Thousands, Except Share and Per Share Data)
NOTE 1 – BUSINESS
OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants, instruments and specialized braces for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs, including PediLoc®, PediPlates®, Cannulated Screws, PediFlexTM nail, PediNailTM, PediLoc® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSETM Spine, BandLocTM, Pediatric Nailing Platform | Femur, Devise Rail, Orthex®, The Fassier-Duval Telescopic Intramedullary System®, SLIMTM Nail, The GAP NailTM, The Free Gliding SCFE Screw SystemTM, GIRO™ Growth Modulation System, PNP Tibia System, ApiFix® Mid-C System, Mitchell Ponseti®, VerteGlideTM, and Boston Brace 3D® specialized bracing products to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation while our orthopedic bracing products are typically manufactured in-house. We also operate multiple O&P clinics delivering leading pediatric non-surgical O&P treatment.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated.
Unaudited Interim Condensed Consolidated Financial Statements
We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2025 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 4, 2026. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2025 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments,
10
necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period.
Use of Estimates
Significant Accounting Policies
There have been no changes in the Company's significant accounting policies as disclosed in Note 2 to the audited consolidated financial statements included in the 2025 Annual Report on Form 10-K.
Financial Instruments and Concentration of Credit Risk
Recent Accounting Pronouncements
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-06 "Disclosure Improvements - Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative". This amendment modifies the disclosure or presentation requirements of a variety of Topics in the Codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For entities subject to the SEC's existing disclosure requirements and entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. Amendments in this Update should be applied prospectively. The Company continues to analyze this ASU. The update is specific to disclosures and, therefore, is not expected to have a material impact to the condensed consolidated financial statements.
11
NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
Medtech Concepts, LLC
On May 1, 2023, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), by and among the Company, Kevin Unger, DINZE LLC, and the sole member of DINZE LLC, pursuant to which the Company purchased all of the issued and outstanding membership interest of Medtech Concepts LLC (“MedTech”). We agreed to pay the sellers of MedTech a purchase price of approximately $15,274 in the following manner: (i) cash in the aggregate amount of $3,000 which was paid on May 1, 2023, the transaction closing date (the “Closing Date”); (ii) 43,751 unregistered shares of the Company’s common stock, par value $0.00025 per share, representing approximately $2,274 (based on a closing share price of $51.98 on May 1, 2023), were issued on the Closing Date; and (iii) an aggregate of $2,500 payable 50 % in cash and 50 % in shares of unregistered common stock, will be paid on each of the first four anniversaries of the Closing Date, all subject to the conditions set forth in the Purchase Agreement. Under the Purchase Agreement, a number of future payments in the form of common stock are contingent on continued service through each applicable payment anniversary date. As such, these amounts were initially excluded from measuring the cost of the acquisition, and are being recorded as stock-based compensation expense in the post-combination consolidated financial statements. All future cash payments and stock issuances that are not contingent on continuous service were included in the calculation of consideration for this asset acquisition.
During the year ended December 31, 2024, we paid the first anniversary payment consisting of $1,250 in cash and issued 4,288 of our common stock approximating $133 , both of which reduced the amount of the acquisition installment payable on our consolidated balance sheet. In addition, we issued 38,594 unregistered shares of our common stock to one individual on the first anniversary date in exchange for their continued service through the vesting date which had been accounted for as stock-based compensation expense in the post-combination consolidated financial statements.
On May 9, 2025, as part of the Company’s ongoing efforts to preserve cash, we amended the Purchase Agreement (the “Amendment”) such that the fixed cash portion of all three remaining anniversary payments (with an aggregate gross value of $3,750 ) will now be settled through the issuance of unregistered shares of our common stock. The future equity issuances to one of the sellers (with an aggregate value of $2,250 ) is contingent upon their continuous service through the applicable third and fourth anniversary dates. The number of shares that is contingently issuable at the third and fourth anniversary dates is based on the volume-weighted average price over the thirty trading days ending on the second business day prior to the applicable anniversary date. As the monetary amount is fixed and known as of the date of the Amendment, the share-settled liability is being recorded on a straight-line basis over the service period as additional stock-based compensation expense.
During the year ended December 31, 2025, the Company paid the second anniversary payment by issuing 10,830 unregistered shares of our common stock approximating $226 to one of the sellers, which reduced the amount of the acquisition installment payable on our consolidated balance sheet. In addition, we issued 97,467 unregistered shares of our common stock, approximately $1,250 in value, of which 50 % had previously been recognized as stock-based compensation expense in the post-combination consolidated financial statements, and the other 50 % had been recorded within the acquisition installment payable on the consolidated balance sheet. We also recorded a capital contribution for $2,026 upon execution of the Amendment, which represented the present value of the fixed cash payments that would
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be paid at the third and fourth anniversary dates, and derecognized the related acquisition installment payable which had previously been recorded on our consolidated balance sheet.
As of March 31, 2026 and December 31, 2025, the Company has recorded a share-settled liability of $2,544 and $1,982 , respectively, related to the Amendment, of which $2,310 and $1,752 , respectively, is recorded as a current liability.
Boston Brace International, Inc.
In 2025, Boston Brace International, Inc. ("Boston O&P"), a wholly-owned subsidiary of the Company, purchased all the issued and outstanding membership interest or acquired the assets of multiple orthotic and prosthetic device clinics. Total consideration for all O&P clinics acquired was approximately $9,042 , which comprised of cash of $6,796 and promissory notes in the original principal amount of $2,475 , with a weighted average interest rate of 4.9 % per annum. The sellers may also be entitled to an earnout of up to $1,475 , if gross revenues exceed a threshold in the first year after closing. The seller promissory notes may also be subject to adjustments if gross revenue targets are not achieved in the first year after the applicable closing. We allocated $2,268 to customer relationship intangible assets and $5,680 to goodwill, and the rest to net working capital and other assets acquired and liabilities assumed. The allocation of the purchase price is considered preliminary.
OP EU B.V.
In July 2025, OP EU B.V., a wholly-owned Netherlands based subsidiary of the Company, purchased all of the issued and outstanding share capital of orthotic and prosthetic device clinics located in Ireland. Total consideration was approximately EUR 1,473 which comprised of cash of EUR 1,200 and a promissory note in the original principal amount of EUR 390 , with an interest rate of 4.0 % per annum. The seller promissory note may be subject to adjustments if net sales targets are not achieved. We allocated EUR 390 to customer relationship intangible assets and EUR 1,101 to goodwill, and the rest to net working capital and other assets acquired and liabilities assumed. The allocation of the purchase price is considered preliminary.
OrthoPediatrics EU Limited
In August 2025, OrthoPediatrics EU Limited purchased all of the issued and outstanding share capital of a designer and manufacturer of clubfoot bracing located in the UK. Total consideration was approximately GBP 3,537 , which was comprised of cash of GBP 2,506 and promissory notes in the original principal amount of GBP 1,100 , with an interest rate of 5.0 % per annum. We allocated GBP 695 to customer relationship intangible assets, GBP 766 to goodwill and the rest to net working capital and other assets acquired and liabilities assumed. The allocation of the purchase price is considered preliminary.
On February 1, 2026, the Company and OrthoPediatrics EU Limited entered into a Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders (the “Sellers”) of London Orthotic Consultancy Consolidated Ltd (“LOC”), pursuant to which OrthoPediatrics EU Limited acquired all of the issued and outstanding shares of capital stock of LOC. LOC has two subsidiaries which were acquired as part of the transaction: (i) The London Orthotic Consultancy Limited; and (ii) L.O.C. Manufacturing Limited.
Under the terms of the Purchase Agreement, OrthoPediatrics EU Limited paid to the Sellers: (i) GBP 5,220 in cash, after a customary working capital adjustment; (ii) GBP 600 pursuant to promissory notes with interest at the rate of 4.5 % per annum, payable in full on the 1-year anniversary of the closing. The Sellers may also be entitled to an earnout payment of up to GBP 1,700 , if certain financial performance metrics of LOC and its subsidiaries exceed a threshold in the first year after closing, for which the Company recorded a contingent consideration liability of GBP 420 at closing. We allocated GBP 4,480 to goodwill, GBP 840 to customer relationship intangible assets, and the rest to net working capital and
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other assets acquired and liabilities assumed. The allocation of the purchase price is considered preliminary.
Pursuant to the Purchase Agreement, the Sellers and one employee of LOC will also receive awards of restricted stock of the Company which will each vest over a three-year period. Restricted stock awards having an aggregate award value of $235 will be granted on January 2, 2027, and restricted stock awards having an aggregate award value of $168 will be granted on January 2, 2028.
Orthopediatrics do Brasil Ltda.
On November 25, 2025, Orthopediatrics do Brasil Ltda., a wholly-owned Brazil based subsidiary of the Company, purchased all of the issued and outstanding share capital of a local distributor. Total consideration was approximately BRL $41,552 which is comprised of BRL $23,128 of upfront cash, 14,594 shares of the Company's common stock representing approximately BRL $1,329 , and approximately BRL $24,023 in anniversary payments, or approximately BRL $17,043 after giving effect to the time value of money. The total consideration transferred, as calculated after discounting future payments to present value, is preliminary and subject to certain limitations and customary adjustments. The Company is obligated to make anniversary payments of: (i) BRL $2,762 on the first anniversary of the closing date, and (ii) BRL $5,315 on each of the subsequent four anniversaries of the closing date. All anniversary payments are to be made in a combination of cash and shares of our common stock. As of December 31, 2025, we recorded a current portion of these future anniversary payments of USD $442 within current portion of acquisition installment payable, and USD $2,668 within acquisition installment payable, net of current portion on our consolidated balance sheet. As of March 31, 2026 and December 31, 2025, we recorded a current portion of these future anniversary payments of USD $448 and USD $442 , respectively, within current portion of acquisition installment payable, and USD $2,727 and USD $2,668 , respectively, within acquisition installment payable, net of current portion on our condensed consolidated balance sheets.
We allocated BRL $6,990 to customer relationship intangible assets, BRL $1,440 to non-compete agreements, BRL $6,312 to goodwill, and the rest to net working capital and other assets acquired and liabilities assumed, including inventories of BRL $30,530 . The allocation of the purchase price is considered preliminary.
NOTE 4 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
Changes in the carrying amount of goodwill for the three months ended March 31, 2026 were as follows:
| Total | ||||||||
| Goodwill at January 1, 2026 | $ | |||||||
| Clinic acquisitions | ||||||||
| Foreign currency translation impact | ( | |||||||
Goodwill at March 31, 2026 | $ | |||||||
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Intangible Assets
As of March 31, 2026, the balances of amortizable intangible assets were as follows:
| Weighted-Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||||||||||||||
| Patents | $ | $ | ( | $ | ||||||||||||||||||||||
| Intellectual Property & Capitalized Software | ( | |||||||||||||||||||||||||
| Customer Relationships & Other | ( | |||||||||||||||||||||||||
| License Agreements | ( | |||||||||||||||||||||||||
| Total amortizable assets | $ | $ | ( | $ | ||||||||||||||||||||||
As of December 31, 2025, the balances of amortizable intangible assets were as follows:
| Weighted-Average Amortization Period | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | |||||||||||||||||||||||
| Patents | $ | $ | ( | $ | ||||||||||||||||||||||
| Intellectual Property & Capitalized Software | ( | |||||||||||||||||||||||||
| Customer Relationships & Other | ( | |||||||||||||||||||||||||
| License Agreements | ( | |||||||||||||||||||||||||
| Total amortizable assets | $ | $ | ( | $ | ||||||||||||||||||||||
Licenses are tied to product launches and do not begin amortizing until the product is launched to the market.
Trademarks are non-amortizing intangible assets which were $12,914 and $12,909 as of March 31, 2026 and December 31, 2025, respectively. Trademarks are recorded in Other intangible assets on the condensed consolidated balance sheets. The change in balance during the three months ended March 31, 2026 was driven by foreign currency translation adjustments.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures certain financial assets and liabilities at fair value. The accounting standards related to fair value measurements define fair value and provide a consistent framework for measuring fair value under the authoritative literature. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels.
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data; and
Level 3 – Significant unobservable inputs that are not corroborated by market data. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, and are based on the best information available, including our own data.
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The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025.
March 31, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Corporate Bonds | $ | $ | $ | $ | |||||||||||||||||||
| Treasury Bonds | $ | $ | $ | $ | |||||||||||||||||||
| Asset-Backed Securities | $ | $ | $ | $ | |||||||||||||||||||
| Exchange Mutual Funds | $ | $ | $ | $ | |||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | |||||||||||||||||||
December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Corporate Bonds | $ | $ | $ | $ | |||||||||||||||||||
| Treasury Bonds | $ | $ | $ | $ | |||||||||||||||||||
| Asset-Backed Securities | $ | $ | $ | $ | |||||||||||||||||||
| Exchange Mutual Funds | $ | $ | $ | $ | |||||||||||||||||||
The Company's Level 1 assets consist of short-term, liquid investments with original maturity of three months or less at inception and other short-term investments which are comprised of exchange traded mutual funds, US treasury bonds and marketable securities with a maturity date greater than 3 months.
The Company's Level 2 assets pertain to certain asset-backed securities, collateralized by non-mortgage-related consumer debt, or corporate bonds. These securities are predominately priced by third parties, either by a pricing vendor or dealer with significant inputs observable in active markets.
The Company's Level 3 instruments consist of contingent consideration. The fair value of the contingent consideration liability assumed in business combinations is recorded as part of the purchase price consideration of the acquisition and is determined using a discounted cash flow model or probability simulation model. The significant inputs of such models are not always observable in the market, such as forecasted annual revenues, expected volatility and discount rates. The change in the fair value of the contingent consideration liability since its initial recognition during the three months ended March 31, 2026 was not material.
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NOTE 6 - DEBT AND CREDIT ARRANGEMENTS
Long-term debt consisted of the following as of the dates indicated:
| March 31, 2026 | December 31, 2025 | ||||||||||
| Term loan and Final Payment | $ | $ | |||||||||
| Convertible note | |||||||||||
| Mortgage payable to affiliate | |||||||||||
| Acquisition note payable | |||||||||||
| Total debt | |||||||||||
| Less: debt discount and issuance costs | |||||||||||
| Less: current maturities | |||||||||||
| Long-term debt, net of current maturities | $ | $ | |||||||||
Braidwell Term Loan
On August 5, 2024, the Company and its wholly owned domestic subsidiaries, as borrowers (collectively, the “Credit Parties”), entered into that certain Credit Agreement and Guaranty (the “Term Loan Agreement”), 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 (“Braidwell”), as lenders, the other lenders from time to time party thereto (together with Braidwell, the “Term Lenders”), and Wilmington Trust, National Association, as agent (the “Term Agent”). The Term Loan Agreement provides for (i) an initial term loan facility in the initial principal amount of $25,000 , which was funded in its entirety on August 12, 2024 and (ii) a delayed draw term loan facility (the “DDTL”) in an aggregate principal amount not to exceed $25,000 , which, subject to certain conditions set forth in the Term Loan Agreement, may be drawn until August 5, 2025. On June 27, 2025, the Company withdrew the delayed draw on the term loan in the amount of $25,000 .
Loans borrowed pursuant to the Term Loan Agreement (the “Term Loans”) bear interest at a rate per annum equal to SOFR Interest Rate (as defined in the Term Loan Agreement and with a floor of 3.25 %) plus 6.50 %. The Company has the option to make a payment-in-kind interest payment equal to 1.00 % per annum of the interest rate. The Term Loans do not amortize and will be interest-only until the August 5, 2029 maturity date, at which time all unpaid principal and accrued and unpaid interest, fees and expenses due under the Term Loan Agreement will become due and payable. The Company is obligated to pay certain upfront fees and agency fees in connection with the Term Loan Agreement.
The Company may pay all or a portion of the outstanding principal and accrued and unpaid interest under the Term Loan Agreement at any time upon prior notice to the Term Lenders subject to (i) a repayment fee schedule of, depending on when the repayment is made, 3.00 % of the principal amount of any such repayment during the first 12 months of the Term Loan Agreement or applicable DDTL funding date, 2.00 % of the principal amount of any such repayment during months 13 through 24 of the Term Loan Agreement or applicable DDTL funding date, 1.00 % of the principal amount of any such repayment during months 25 through 36 of the Term Loan Agreement or applicable DDTL funding date, and 0.00 % thereafter and (ii) an exit fee equal to 2.00 % of the principal amount of any such repayment ("Final Payment"). The Term Loan Agreement contains customary mandatory prepayment provisions. Once repaid or prepaid, the Term Loans may not be reborrowed.
The Term Loan Agreement includes customary conditions to borrowing, representations and warranties and covenants, including affirmative covenants and negative covenants that restrict the Credit Parties’ and their subsidiaries’ ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. The Term Loan Agreement also has financial covenants requiring the Credit Parties to (i) maintain at all times unrestricted cash held in US accounts subject to Lenders’ first priority lien equal to
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at least 25 % of the aggregate principal amount of any outstanding Term Loans and (ii) maintain certain minimum net product sales over a trailing twelve month period as set forth therein.
The Term Loan Agreement also contains customary events of default, including among other things, the Credit Parties’ failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events, or the Credit Parties’ breach of the covenants under the Term Loan Agreement. Upon the occurrence of an event of default, the Term Lenders may, among other things, accelerate the Credit Parties’ obligations under the Term Loan Agreement.
As security for their obligations under the Term Loan Agreement, the Credit Parties granted the Term Agent a continuing first priority security interest in substantially all of their assets (including intellectual property), subject to certain customary exceptions.
On March 31, 2026, the Credit Parties entered into a First Amendment (the “Amendment”) to the Term Loan Agreement. The Amendment establishes a new delayed draw term loan facility in an aggregate principal amount not to exceed $20,000 , which, subject to certain conditions set forth in the Amendment, may be drawn until June 30, 2027, in minimum $10,000 increments. The facility features similar terms to those previously contained in the Term Loan Agreement, including: (a) interest at a rate per annum equal to the SOFR Interest Rate (with a floor of 3.25 %) plus 6.50 %; (b) a Company election to make a payment-in-kind interest payment equal to 1.00 % per annum of the interest rate; (c) interest-only until the August 5, 2029 maturity date; and (d) certain financial covenants. 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.
Braidwell Convertible Note
In addition to the Term Loans, on August 5, 2024, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Braidwell Transaction Holdings LLC – Series 10 (the “Purchaser”), whereby the Purchaser agreed to purchase $50,000 in aggregate principal amount of the Company’s 4.75 % Convertible Senior Notes due February 15, 2030 (the “Notes”) for an aggregate purchase price of $49,500 . The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of August 12, 2024, between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The Notes represent the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; and (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness.
The Notes accrue interest at a rate of 4.75 % per annum, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, beginning on November 15, 2024. The Notes will mature on February 15, 2030, unless earlier repurchased, redeemed, or converted. Before November 15, 2029, noteholders will have the right to convert their Notes only upon the occurrence of certain events, including, but not limited to, the Company’s common stock trading above 130 % of the conversion price for a specified period, the Notes per $1 in principal amount trading below 98 % of the product of the trading price of the Company’s common stock and the conversion rate, and certain fundamental changes to corporate structure. From and after November 15, 2029, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 24.4021 shares of common stock per $1 principal amount of Notes, which represents an initial conversion price of approximately $40.98 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of
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certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.
The Notes are redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after February 21, 2028 and on or before the 30th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if (i) the Notes are Freely Tradable (as defined in the Indenture) and any accrued and unpaid additional interest pursuant to the Notes has been paid as of the redemption date, and (ii) the last reported sale price per share of the Company’s common stock exceeds 140 % of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease, or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (iv) a default by the Company in its obligation to convert a note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if not cured within two business days after its occurrence; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $25,000 ; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $25,000 where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished; and (viii) certain events of bankruptcy, insolvency, and reorganization involving the Company or any of the Company’s significant subsidiaries.
If an Event of Default involving bankruptcy, insolvency, or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures
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by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50 % on the principal amount of the Notes.
Other Debt
In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron Capital, LLC ("Squadron"). Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5 % until maturity in 2028, at which time a final payment of remaining principal and interest is due. At March 31, 2026, the mortgage balance was $412 of which current principal of $172 was included in the current portion of long-term debt. As of December 31, 2025, the mortgage balance was $453 of which current principal due of $170 was included in the current portion of long-term debt.
The aggregate interest expense relating to the mortgage note payable to Tawani Enterprises Inc., the term loan with Braidwell, and the convertible note with Braidwell, was $1,682 and $1,269 for the three months ended March 31, 2026 and 2025, respectively.
Acquisition Promissory Notes
As a result of multiple acquisitions between 2024 and 2026, as part of the consideration transferred, the Company issued promissory notes to the previous owners. As of March 31, 2026 and December 31, 2025, we have recorded liabilities of $5,240 and $4,557 , respectively, related to these promissory notes, of which $2,049 and $1,696 , respectively, are classified as short-term within other current liabilities on our condensed consolidated balance sheets. The payments are paid in installments with interest rates ranging from 4.0 % to 5.0 % per annum. See Note 3 - Business Combinations and Asset Acquisitions for additional information.
NOTE 7 - INCOME TAXES
The Company utilizes an estimated annual effective tax rate to determine its provision or benefit for income taxes for interim periods. The income tax provision or benefit is computed by multiplying the estimated annual effective tax rate by the year-to-date pre-tax book income (loss).
For the three months ended March 31, 2026, the income tax benefit was $171 compared to expense of $196 for the three months ended March 31, 2025. Our effective income tax rate was 1.6 % and (1.9 )% for the three months ended March 31, 2026 and 2025, respectively. The higher effective rate compared to the prior period is primarily a result of pre-tax losses in foreign jurisdictions which do not have a full valuation allowance.
The deferred tax assets are offset by a valuation allowance at March 31, 2026, with the exception of certain deferred tax liabilities in Canada and in the UK. The Company has recorded tax benefit for income generated in Canada during the period ended March 31, 2026.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2026. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
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NOTE 8 - STOCKHOLDERS’ EQUITY
Restricted Stock
Our restricted stock activity and related information are summarized as follows:
| Weighted-Average | Weighted-Average | |||||||||||||||||||||||||
| Restricted | Remaining | Restricted | Remaining | |||||||||||||||||||||||
| Stock | Contractual Terms | Stock | Contractual Terms | |||||||||||||||||||||||
| Awards | (in Years) | Units | (in Years) | |||||||||||||||||||||||
| Outstanding at January 1, 2026 | ||||||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||||
| Forfeited | ( | ( | ||||||||||||||||||||||||
| Vested | ( | ( | ||||||||||||||||||||||||
Outstanding at March 31, 2026 | ||||||||||||||||||||||||||
At March 31, 2026, there was $24,183 of unrecognized compensation expense remaining related to our service-based restricted stock awards and restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.9 years or earlier upon an elimination of the restriction period as a result of a change in control event.
Stock-based compensation expense on restricted stock amounted to $3,982 and $3,859 for the three months ended March 31, 2026 and 2025, respectively.
In connection with its approval of the Term Loan Agreement, Purchase Agreement, the Indenture and Notes, on August 2, 2024, the Board of Directors of the Company also approved a stock repurchase program of up to $5,000 in aggregate investment of the Company’s outstanding common stock, contingent upon the closing of the Term Loan and the Notes. The stock repurchases may, at the discretion of management, be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan all as effected in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time. No shares have been purchased under this program as of March 31, 2026. The dollar limit on repurchases under the program after December 31, 2024 was reduced to $250 per annum.
NOTE 9 – NET LOSS PER SHARE
The following is a reconciliation of basic and diluted net loss per share:
| Three Months Ended | |||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | |||||||||||||||||||
| Weighted average shares outstanding for basic and diluted | |||||||||||||||||||||||
| Net loss per share - basic and diluted | $ | ( | $ | ( | |||||||||||||||||||
Our basic and diluted net loss per share is computed using the two-class method. For purposes of our equity disclosures and calculation of weighted average shares for basic earnings per share calculations, the two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and
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undistributed earnings or losses. Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities.
For the periods presented with a net loss, the weighted average shares outstanding remained consistent between basic and diluted as the effect of any outstanding common stock equivalents would have been anti-dilutive. The Company had 1,784,922 and 1,546,358 contingently issuable and convertible equity shares excluded from the calculation of diluted net (loss) earnings per share as of March 31, 2026 and 2025, respectively, because their effect would have been anti-dilutive.
The contingently issuable shares discussed in the previous paragraph do not include shares of our common stock associated with our obligation to issue a variable number of our common shares as a result of our acquisition of MedTech or a local distributor in Brazil as discussed in Note 3 - Business Combinations and Asset Acquisitions. We are obligated to issue additional shares of our common stock to Braidwell in the event that our convertible note is converted into shares of common stock. See Note 6 - Debt and Credit Arrangements for additional information.
NOTE 10 – BUSINESS SEGMENT
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one
Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No individual customer accounted for more than 10% of total product sales for the three months ended March 31, 2026 or 2025. No individual customer accounted for more than 10% of consolidated accounts receivable as of March 31, 2026 and December 31, 2025.
| Three Months Ended March 31, | |||||||||||||||||||||||
| Product sales by geographic location: | 2026 | 2025 | |||||||||||||||||||||
| U.S. | $ | $ | |||||||||||||||||||||
| International | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| Product sales by category: | 2026 | 2025 | |||||||||||||||||||||
| Trauma and deformity | $ | $ | |||||||||||||||||||||
| Scoliosis | |||||||||||||||||||||||
| Sports medicine/other | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
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NOTE 11 - RELATED PARTY TRANSACTIONS
We currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron (the Company's largest investor) and a supplier with which we maintain certain long-term agreements. We made aggregate payments to Structure Medical for inventory purchases of $377 and $132 for the three months ended March 31, 2026 and 2025, respectively.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Restructuring
In connection with the global restructuring plan that was initiated in the fourth quarter 2024, the Company had recorded a restructuring accrual of $656 and $808 as of March 31, 2026 and December 31, 2025 either within accrued expenses and other current liabilities or other long-term liabilities on its condensed consolidated balance sheet.
Legal Proceedings
From time to time, we are involved in various legal proceedings arising in the ordinary course of our business.
IMED Surgical - Software Ownership Dispute
On October 16, 2020, the Company, its wholly-owned subsidiary, Orthex, LLC (“Orthex”), the Company’s largest investor, Squadron, and certain other defendants, were named in a lawsuit filed by IMED Surgical, LLC, a New Jersey company ("IMED"), in Broward County, Florida Circuit Court. In the lawsuit, IMED claims, among other things, that it is the rightful owner of certain patented point-and-click planning software being used by the Company, Orthex and Squadron (specifically, U.S. Patent No. 10,258,377 (titled “Point and click alignment method for orthopedic surgeons, and surgical and clinical accessories and devices,” issued on April 16, 2019) (hereinafter, the “’377 Patent”).
In June 2019, the Company purchased all the issued and outstanding units of membership interests in Orthex, and all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as the Orthex Hexapod technology, a system of rings, struts, implants, hardware accessories, and the Point & Click Software used to treat congenital deformities and limb length discrepancies. On December 31, 2019, the Company divested substantially all of the assets relating to Vilex's adult product offerings to a wholly-owned subsidiary of Squadron, in exchange for a $25,000 reduction in a term note owed to Squadron in connection with the initial acquisition. As part of the sale, the Company also executed an exclusive license arrangement with Squadron providing for perpetual access to certain intellectual property, including the ‘377 Patent. According to the lawsuit, the other defendants, who are unrelated to the Company, assigned the ‘377 Patent to Orthex in violation of certain agreements with IMED. IMED, among other things, requests that the defendants be ordered to convey and assign to IMED all of their rights, title and interests in and to the ’377 Patent and seeks certain compensatory, consequential and unjust enrichment damages from Orthex and the unrelated defendants.
On May 13, 2021, the Court ordered the lawsuit stayed pending arbitration. To the extent IMED desires to further pursue the matter, it must first do so through a separate arbitration proceeding. In mid-November 2021, IMED initiated an arbitration proceeding; however, IMED failed to pay the fees it was required to pay for the arbitration to continue, resulting in the arbitration panel terminating the arbitration proceedings in mid-October 2022. In connection with the stay order, the Court also ordered the Company, Orthex and Squadron to give notice to IMED before any attempt to dispose, assign, sell or otherwise encumber the
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‘377 Patent. The Company, Orthex and Squadron filed an appeal of this component of the order, but the appellate court affirmed the lower court’s decision. The Company, Orthex and Squadron have not sought to further pursue an appeal of the subject order.
On February 3, 2023, the Court partially lifted the stay in this case for the sole purpose of, as clarified by the Court's order on March 7, 2023, "permitting any party to argue any motion challenging the events that occurred which led to the arbitration panel's termination order." No filing was made in response to that order. No further filings were made in this case until October 30, 2023, when defendants filed a motion to dismiss.
On December 12, 2023, the Court ordered IMED has until March 13, 2024, to appear before the Court and show cause why this case should not be dismissed for failure to pursue arbitration consistent with the Court’s orders. On March 13, 2024, a hearing took place to discuss the status of IMED’s effort to re-initiate arbitration. Thereafter, on March 25, 2024, the Court ordered, if, by April 27, 2024, IMED has not begun arbitration, resolved this case, or substantiated (in the form of an attorney and client declaration) that it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association and to re-instate the arbitration, the Court will dismiss this case without prejudice. On April 26, 2024, IMED informed the Court it has executed an agreement with a litigation funder to pay for arbitration proceedings, to pay the balance due to the subject arbitration association, and to reinstate the arbitration, and is in the final stages of resolving the balance due to the subject arbitration association.
On September 20, 2024, the Court dismissed IMED’s lawsuit, without prejudice, for failure to prosecute. However, contemporaneously, IMED re-initiated arbitration alleging Orthex: 1) breached a consulting
agreement between IMED and two third-parties, who are also a party to the arbitration; and 2) IMED's
request for declaratory judgment that the intellectual property rights held by Orthex concerning inventions,
including but not limited to the '377 Patent, should have been transferred to IMED under the subject
consulting agreement. On January 9, 2026, the arbitration tribunal granted Orthex's request to be given leave to file a dispositive motion. Orthex submitted its motion for summary judgment and supporting exhibits on February 10, 2026 seeking dismissal of both causes of action asserted by IMED against Orthex in the subject arbitration. On April 15, 2026, the arbitration tribunal determined both causes of action raised by IMED against Orthex should be dismissed and accordingly, dismissed Orthex with prejudice from the subject arbitration.
We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows.
Purchase Obligations and Performance Requirements
As a result of entering into a license agreement for the exclusive distribution of the 7D Surgical FLASHTM Navigation platform during 2021, the Company agreed to a minimum purchase commitment for the first twelve months of that agreement. Additionally, the contract requires future purchase commitments based upon a percentage of historical purchases. As a result and as of March 31, 2026, the remaining purchase commitments under the agreement were $1,092 for the year ending December 31, 2026 and $1,456 future purchase commitments are required for the year ending December 31, 2027.
On July 20, 2021, we entered into an amended license agreement, resulting in a five-year extension of our exclusive distribution rights of the FIREFLY Technology. As a component of the agreement the Company was required to meet minimum performance metrics, measured by the number of spine procedures in the fiscal year which used the FIREFLY products against the annual requirement in the agreement. This included any scheduled surgeries whereby the Company had committed to payment of the product. The number of required surgeries varied each year of the agreement. In 2025, the agreement was amended and extended through 2030. The amended agreement modified the minimum performance
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metrics to be based on a purchase requirement of $3,500 annually through 2030 instead of the number of spine procedures. The amended threshold of units purchased was met in 2025, so there was no shortfall recorded during 2025. We purchased $1,255 during the three months ended March 31, 2026, leaving a requirement of $2,245 left for 2026.
Royalties
As of March 31, 2026, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.25 % to 20 % of sales.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto contained elsewhere in this quarterly report, as well as the information under "Note Regarding Forward-Looking Statements."
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.
Overview
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. We design, develop and commercialize innovative orthopedic implants, instruments and specialized braces to meet the needs of pediatric surgeons or orthotists and their patients, who we believe have been largely neglected by the orthopedic industry. We currently serve three of the largest categories in this market. We estimate that the portion of this market that we currently serve represents a $6.2 billion opportunity globally, including over $2.8 billion in the United States.
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. 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. 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 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 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)
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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.
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.
We market and sell our products internationally in over 75 countries, through independent stocking distributors and sales agencies. Our independent distributors manage the billing relationship with each hospital in their respective territories and are responsible for servicing the product needs of their surgeon customers. In 2017, we began to supplement our international stocking distributors with sales agencies using direct sales programs in the United Kingdom, Ireland, Australia and New Zealand where we sell directly to the hospitals. We began selling direct to Canada in September 2018, Belgium and the Netherlands in January 2019, Italy in March 2020 and Germany, Switzerland and Austria in January 2021. 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 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.
We believe there are significant opportunities for us to strengthen our position in U.S. 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. 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.
Social Impact
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.
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•The Company and its associates regularly participate in philanthropic causes important to our local communities. We also partner with over 40 charitable organizations that provide pediatric orthopedic care around the world. In 2020, we were named as "Corporate Partner of the Year" by World Pediatric Project - with whom we work to provide access to medical care for children in developing countries.
•We are committed to fostering an environment that is respectful, compassionate, and inclusive of everyone in our community which is communicated in our diversity and inclusion policy. For nine years we have been recognized by the Indiana Chamber of Commerce - Best Companies to Work in Indiana.
We believe effectively managing our priorities, as well as increasing our transparency related to social impact programs, will help create long-term value for our stakeholders. We expect to continue to increase our disclosures and communicate our social impact efforts in future SEC filings.
Nothing on our website shall be deemed part of or incorporated by reference into this Quarterly Report on Form 10-Q.
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. 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.
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):
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | % | ||||||||||||||||||||||||||
| Net revenue | $ | 59,362 | $ | 52,411 | $ | 6,951 | 13 | % | |||||||||||||||||||||
| Cost of revenue | 15,972 | 14,149 | 1,823 | 13 | % | ||||||||||||||||||||||||
| Sales and marketing expenses | 18,470 | 16,572 | 1,898 | 11 | % | ||||||||||||||||||||||||
| General and administrative expenses | 31,024 | 30,280 | 744 | 2 | % | ||||||||||||||||||||||||
| Restructuring | — | 40 | (40) | (100) | % | ||||||||||||||||||||||||
| Research and development expenses | 2,231 | 2,351 | (120) | (5) | % | ||||||||||||||||||||||||
| Other expense (income), net | 2,523 | (518) | 3,041 | (587) | % | ||||||||||||||||||||||||
| Provision for income taxes (benefit) | (171) | 196 | (367) | 187 | % | ||||||||||||||||||||||||
| Net loss | $ | (10,687) | $ | (10,659) | $ | 28 | — | % | |||||||||||||||||||||
Net Revenue
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: | 2026 | 2025 | |||||||||||||||||||||
| U.S. | $ | 45,309 | $ | 40,891 | |||||||||||||||||||
| International | 14,053 | 11,520 | |||||||||||||||||||||
| Total | $ | 59,362 | $ | 52,411 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| Product sales by category: | 2026 | 2025 | |||||||||||||||||||||
| Trauma and deformity | $ | 43,045 | $ | 37,867 | |||||||||||||||||||
| Scoliosis | 15,442 | 13,664 | |||||||||||||||||||||
| Sports medicine/other | 875 | 880 | |||||||||||||||||||||
| Total | $ | 59,362 | $ | 52,411 | |||||||||||||||||||
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.
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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. 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 $18.5 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 $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 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 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 $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
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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.
Cash Flows
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (3,287) | $ | (4,156) | |||||||
| Net cash used in investing activities | (3,787) | (5,987) | |||||||||
| Net cash used in financing activities | (614) | (126) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 313 | (79) | |||||||||
| 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 $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.
Indebtedness
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. 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%
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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.
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 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 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
In August 2013, pursuant to the purchase of our office and warehouse space, we entered into a mortgage note payable to Tawani Enterprises Inc., the owner of which is a member of Squadron’s management committee. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $15,543, with interest compounded at 5% until maturity in August 2028, at which time a final payment of remaining principal and interest will become due.
See Note 6 - Debt and Credit Arrangements in Item 1 for further detail regarding our debt.
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Pediatric Orthopedic Business Seasonality
Our revenue is typically higher in the summer months and holiday periods, driven by higher sales of our trauma and deformity and scoliosis products, which is influenced by the higher incidence of pediatric surgeries during these periods due to recovery time provided by breaks in the school year. Additionally, our scoliosis patients tend to have additional health challenges that make scheduling their procedures variable in nature.
Critical Accounting Policies and Significant Judgments and Estimates
There were no material changes to our critical accounting policies that are disclosed in our audited consolidated financial statements for the year ended December 31, 2025 filed with the SEC on March 4, 2026.
Recent Accounting Pronouncements
See Note 2 - Significant Accounting Policies in Item 1 Financial Statements of Part 1 of this Quarterly report on Form 10-Q for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We consider our greatest potential area of market risk exposure to be interest rate risk related to our indebtedness and foreign currency exchange rate risk on our operating results. Quantitative and qualitative disclosures about exchange rate risk are included in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for 2025. There were no material changes from the information provided therein.
ITEM 4. CONTROLS AND PROCEDURES
a.Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) at the end of the period covered by this quarterly report.
Based on this evaluation, we concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We recognize that any controls system, no matter how well designed and operated, can provide only reasonable assurance of achieving its objectives, and our management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
b. Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this quarterly report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in various legal proceedings arising in the ordinary course of our business.
A discussion of certain of those legal proceedings is contained in Note 12 – Commitments and Contingencies (under the heading “Legal Proceedings”) of the notes to the condensed consolidated financial statements included in Item 1. Financial Statements of Part I of this quarterly report on Form 10-Q, which discussion is incorporated herein by reference.
We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 4, 2026. There have been no material changes to these Risk Factors since the filing of our Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
a. Sale of Unregistered Securities.
None.
b. Use of Proceeds.
None.
c. Issuer Purchases of Equity Securities.
None.
On August 2, 2024, the Board of Directors of the Company approved a limited stock repurchase program of up to $5.0 million in aggregate investment of the Company’s outstanding common stock, $0.00025 par value per share. The dollar limit on repurchases under the program after December 31, 2024 was reduced to $250,000 per annum. The program does not have an expiration date. However, it may be discontinued by the Board of Directors at any time. The Company has not yet repurchased any shares of its common stock pursuant to the repurchase program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
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a. Information required under Form 8-K.
None.
b. Modifications to nomination process.
None.
c. Insider trading arrangements.
During the three months ended March 31, 2026, no director or officer of the Company adopted terminated
ITEM 6. EXHIBITS
The following exhibits are included within this Report or incorporated herein by reference.
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Exhibit Number | Description | |||||||||||||
2.1 | Membership Interest Purchase Agreement, dated May 1, 2023, by and among OrthoPediatrics Corp., Kevin Unger, DINZE LLC, and the sole member of DINZE LLC (Incorporated by reference to Exhibit 2.1 of registrant's form 8-K filed on May 1, 2023) (SEC File No. 001-38242) | |||||||||||||
2.2 | First Amendment to Membership Interest Purchase Agreement, dated May 9, 2025 by and among OrthoPediatrics Corp., Kevin Unger, and DINZE LLC (Incorporated by reference to Exhibit 2.1 of registrant's Form 8-K filed on May 14, 2025) (SEC File No. 001-38242) | |||||||||||||
3.1 | Amended and Restated Certificate of Incorporation of OrthoPediatrics Corp. (Incorporated by reference to Exhibit 3.1 of registrant's Form 8-K filed on October 16, 2017) (SEC File No. 001-38242) | |||||||||||||
3.2 | Amended and Restated Bylaws of OrthoPediatrics Corp. (Incorporated by reference to Exhibit 3.1 of registrant's Form 8-K filed on November 8, 2023) (SEC File No. 001-38242) | |||||||||||||
4.1 | Specimen stock certificate evidencing the shares of common stock (Incorporated by reference to Exhibit 4.1 of registrant's Amendment No. 3 to Form S-1 filed on October 2, 2017) (SEC File No. 333-212076) | |||||||||||||
4.2 | Registration Rights Agreement, by and between the registrant and Squadron, dated as of May 30, 2014 (Incorporated by reference to Exhibit 4.2 of registrant's Form S-1 filed on June 16, 2016) (SEC File No. 333-212076) | |||||||||||||
4.3 | First Amendment to Registration Rights Agreement, by and between the registrant and Squadron, dated October 16, 2017 (Incorporated by reference to Exhibit 10.2 of registrant's Form 8-K filed on October 16, 2017) (SEC File No. 001-38242) | |||||||||||||
4.4 | Stockholders Agreement, by and between the registrant and Squadron, dated October 16, 2017 (Incorporated by reference to Exhibit 10.1 of registrant's Form 8-K filed on October 16, 2017) (SEC File No. 001-38242) | |||||||||||||
4.5 | Indenture, dated as of August 12, 2024, between OrthoPediatrics Corp. and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 of registrant’s Form 8-K filed on August 12, 2024 (SEC File No. 001-38242). | |||||||||||||
4.6 | Form of 4.75% Convertible Senior Notes due February 15, 2030 (incorporated by reference to Exhibit 4.2 of registrant’s Form 8-K filed on August 12, 2024 (SEC File No. 001-38242). | |||||||||||||
10.1♦ | Credit Agreement and Guaranty, dated as of August 5, 2024, by and among OrthoPediatrics Corp. and its wholly owned domestic subsidiaries, as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto, and Wilmington Trust, National Association, as agent (incorporated by reference to Exhibit 10.1 of registrant's Form 8-K filed on August 5, 2024 (SEC File No. 001-38242) | |||||||||||||
10.2♦ | First Amendment to Credit Agreement and Guaranty, dated as of March 31, 2026, by and among OrthoPediatrics Corp. and its wholly owned domestic subsidiaries, as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto, and Wilmington Trust, National Association, as agent (incorporated by reference to Exhibit 10.1 of registrant's Form 8-K filed on April 1, 2026 (SEC File No. 001-38242)) | |||||||||||||
31.1 | + | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||||
31.2 | + | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||||
32.1 | ++ | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||||
32.2 | ++ | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||||
| 101.INS | + | Inline XBRL Instance Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.) | ||||||||||||
| 101.SCH | + | Inline XBRL Taxonomy Extension Schema Document | ||||||||||||
| 101.CAL | + | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||
| 101.DEF | + | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||
| 101.LAB | + | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||
| 101.PRE | + | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) | |||||||||||||
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w The exhibits and schedules to the applicable agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a copy of any schedule omitted from such agreement to the SEC upon request.
+ Filed herewith.
++ Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| May 1, 2026 | By: | /s/ David R. Bailey | ||||||
| David R. Bailey President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| May 1, 2026 | By: | /s/ Fred L. Hite | ||||||
Fred L. Hite Chief Financial Officer and Chief Operating Officer | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||
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FAQ
How did OrthoPediatrics (KIDS) perform financially in Q1 2026?
OrthoPediatrics grew Q1 2026 revenue 13% to $59.4 million. Trauma and deformity and scoliosis products led growth, while gross margin held at 73%. The company still reported a net loss of $10.7 million, roughly flat versus the prior-year quarter.
Did OrthoPediatrics (KIDS) improve profitability in the first quarter of 2026?
Profitability remained challenged, with a Q1 2026 net loss of $10.7 million. This loss was essentially unchanged from $10.7 million a year earlier, and basic and diluted net loss per share were $0.45 compared with $0.46 in the prior-year period.
What is OrthoPediatrics’ cash and debt position as of March 31, 2026?
OrthoPediatrics held about $50.9 million in cash, restricted cash and short-term investments. Total debt was $106.7 million, including a $51.0 million term loan and a $50.0 million convertible note, providing liquidity but also creating ongoing interest expense obligations.
How did OrthoPediatrics’ segments and geographies contribute to Q1 2026 revenue?
U.S. sales were $45.3 million and international sales $14.1 million in Q1 2026. By category, trauma and deformity generated $43.0 million, scoliosis $15.4 million, and sports medicine/other $0.9 million, reflecting broad-based demand across the portfolio.
What new financing did OrthoPediatrics (KIDS) secure in early 2026?
On March 31, 2026, OrthoPediatrics added a $20.0 million delayed draw term loan facility. The facility, from Braidwell-affiliated lenders, can be drawn in $10.0 million increments through June 30, 2027 and carries interest at SOFR plus 6.50% with optional payment-in-kind.
How are acquisitions affecting OrthoPediatrics’ balance sheet in 2026?
Recent clinic and international acquisitions increased goodwill and intangible assets. Goodwill rose to $115.2 million at March 31, 2026, up from $109.3 million, reflecting deals such as London Orthotic Consultancy and other O&P clinics, alongside related acquisition notes and contingent consideration.