Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors

You're looking at OrthoPediatrics Corp. (KIDS) and trying to map the growth story against the bottom-line reality, and honestly, the Q3 2025 numbers give us a clear, two-sided picture. On one hand, the core business is defintely surging, with quarterly revenue hitting a record $61.2 million, up 12% year-over-year, and the high-margin Trauma & Deformity segment spiking 17%. Plus, the operational efficiency is showing up big, with Adjusted EBITDA jumping 56% to $6.2 million. But here's the quick math on the risk: full-year revenue guidance was cut to the $233.5 million to $234.5 million range due to lumpy capital sales and international headwinds. We need to dig into how they plan to hit the reiterated $15.0 million to $17.0 million Adjusted EBITDA target and what the path to positive free cash flow in Q4 2025 looks like, especially with a net loss per share of $(0.24) in Q3. It's a classic growth-vs-profitability story, and your next move depends on which of those numbers you trust more.

Revenue Analysis

You need to know where OrthoPediatrics Corp. (KIDS) is making its money, and the simple answer is that the core business is still firing, but some capital sales are slowing the overall top-line growth. The company's revised full-year 2025 revenue guidance is now between $233.5 million and $234.5 million, which still represents a solid year-over-year growth of 14% to 15% over 2024, but it is a step down from earlier projections.

The primary revenue stream remains the sale of specialized orthopedic implants and devices for children, segmented into three main categories. For the third quarter of 2025, OrthoPediatrics Corp. generated a record $61.2 million in total revenue, a 12% increase from the same period last year.

Here's the quick math on how the product segments contributed to that Q3 2025 revenue:

• Trauma & Deformity: The largest segment, bringing in $44.1 million, up 17% year-over-year.
• Scoliosis: Generated $16.3 million, a more modest 4% increase, despite strong sales of the Response and ApiFix non-fusion systems.
• Sports Medicine/Other: The smallest segment, which saw revenue drop to $0.8 million, a 35% decrease from the prior year.

The Trauma & Deformity segment is defintely the workhorse, driven by products like the PNP Femur and Tibia systems, plus the growth of the OPSB (OrthoPediatrics Specialty Bracing) franchise.

Regional and Segment Shifts

Regionally, the US market is the clear driver. Domestic revenue for Q3 2025 was $48.7 million, making up 80% of total revenue and growing at 14% year-over-year. International revenue was $12.5 million, growing at a slower 6%.

The significant change in the revenue mix is the decline in capital equipment sales, specifically the 7D Surgical System unit sales, and lower stocking orders to Latin and South America (LATSAM). This is why the overall guidance was lowered in October 2025. To be fair, if you look at the core implant business-excluding 7D capital sales-the Q3 2025 revenue growth was actually much stronger at 17%.

The management is still on track to hit its adjusted EBITDA target of $15 million to $17 million for 2025, so the drop in revenue guidance isn't translating to a proportional hit on profitability, which is a key sign of a well-managed cost structure. This is important: the company is maintaining its profitability outlook even with the reduced top-line expectation. You can read more about the full picture in Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors.

Here is a snapshot of the Q3 2025 performance by segment and region:

What this estimate hides is the volatility of capital sales; they are lumpy and hard to forecast, which is why management is now projecting minimal sales growth from those segments for the near-term. Your action here is to focus your valuation model on the implant and bracing revenue, which is the more predictable, high-growth core.

Profitability Metrics

You're looking at OrthoPediatrics Corp. (KIDS) because of its strong revenue growth-and you're right to be laser-focused on its path to true profitability. The direct takeaway is this: OrthoPediatrics maintains a superior gross margin compared to its peers, but high operating expenses mean it remains unprofitable on the net income line, a critical risk that must be mapped against its $233.5 million to $234.5 million full-year 2025 revenue guidance.

The company's gross profitability is defintely a bright spot in the medical device sector. For the first three quarters of 2025, OrthoPediatrics consistently delivered a gross profit margin between 72% and 74%. This is an impressive figure, especially when you consider the Trailing Twelve Months (TTM) industry average gross margin is around 57.11%. That 15-point spread shows the pricing power and specialized nature of their pediatric-focused product portfolio.

Here's the quick math on the operating side: In the third quarter of 2025, OrthoPediatrics generated $45.3 million in gross profit on $61.2 million in revenue, but total operating expenses hit $54.7 million. That leaves an operating loss of about $9.4 million for the quarter, translating to a negative operating margin of roughly -15.36%. This is where the rubber meets the road; your investment thesis needs to account for this gap.

The net result of these high operating costs-driven by increased personnel, non-cash stock compensation, and set deployment to support growth-is that OrthoPediatrics is still posting net losses. The TTM Net Profit Margin sits at -20.06%, starkly contrasting with the industry average of 7.65%. Honestly, the net loss has been increasing over the past five years at an annualized rate of 11.1%, so it's a long-term trend, not a one-off event.

To understand the operational efficiency, you need to look at the gross margin trends and cost management. The margin has been volatile quarter-to-quarter in 2025, a classic sign of product mix impact:

• Gross margin compressed to 72% in Q2 2025 due to higher sales of lower-margin products like 7D technology and international Scoliosis set sales.
• It expanded to 74% in Q3 2025, thanks to a favorable product mix from lower 7D capital unit sales.

Management is clearly trying to manage this, reiterating a full-year 2025 Adjusted EBITDA guidance of $15.0 million to $17.0 million. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a non-GAAP metric, but it shows the core business is cash-positive before accounting for non-cash items and interest. They expect to hit positive free cash flow in the fourth quarter of 2025, which is a huge milestone for a growth company like this. You can find more detail in the full post: Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors.

Here's a snapshot of how OrthoPediatrics stacks up on key TTM profitability ratios against its Medical Equipment industry peers:

What this table hides is the operational efficiency trade-off: they are spending heavily on sales, general, and administrative (SG&A) costs to capture market share, which is a necessary evil for a growth stock. The question for you is whether the superior gross margin can eventually absorb the high operating costs as revenue scales. If they can maintain that 72%+ gross margin while hitting their $15.0 million to $17.0 million Adjusted EBITDA target, the path to net profit in 2026 becomes much clearer.

Debt vs. Equity Structure

OrthoPediatrics Corp. (KIDS) is financing its rapid growth with a measured, but increasing, reliance on debt, though equity still dominates the capital structure. As of the most recent quarter in 2025, the company's debt-to-equity (D/E) ratio stands at 28.4%. That's a manageable level, but it is a noticeable shift from their historical, near-zero debt profile.

This D/E ratio, which measures how much of the company's assets are financed by debt versus shareholder funds, tells you that for every dollar of shareholder equity, there are about $0.28 in liabilities. For a medical device company, which typically has a lower D/E ratio than capital-intensive sectors, this is on the higher side of the general healthcare industry average of around 16.1%. It's a clear sign they're using debt to fuel their expansion, particularly the OrthoPediatrics Specialty Bracing Division (OPSB) clinics.

Here's the quick math on their balance sheet composition, based on the latest figures:

• Total Debt (MRQ 2025): Approximately $99.34 million.
• Total Shareholder Equity (MRQ 2025): Approximately $349.31 million.

The company's debt levels are primarily long-term, stemming from a significant private financing arrangement. This isn't the kind of high-interest, short-term debt that keeps an analyst up at night. The company has a good handle on its current liabilities, which is defintely a plus.

The most crucial recent activity was the August 2024 private financing deal with Braidwell LP, which provided up to $100 million in capital. This was a strategic blend of debt and equity-linked funding, specifically a $50 million term loan and $50 million in convertible notes. The proceeds helped repay about $10 million of older, outstanding debt, plus it provided capital for general corporate purposes and their aggressive OPSB clinic expansion.

This move shows OrthoPediatrics Corp. is balancing its financing needs intelligently. They chose convertible notes-a form of hybrid financing-which gives them immediate capital like debt, but offers the lender the option to convert it into common stock at a premium, essentially diluting equity later if the stock price rises above the conversion price of $40.98. This structure allows them to delay the full impact of equity dilution while getting growth capital now. It's a pragmatic approach to funding high-growth initiatives without immediately stressing the balance sheet with pure debt. If you want to dive deeper into who's backing this growth, check out Exploring OrthoPediatrics Corp. (KIDS) Investor Profile: Who's Buying and Why?

The term loan itself is interest-only until its August 2029 maturity, with an interest rate tied to SOFR + 6.50%. This gives the company five years of breathing room to generate the cash flow needed to service the principal. That's smart treasury management.

Liquidity and Solvency

You're looking at OrthoPediatrics Corp. (KIDS) because you know pediatric orthopedics is a growth area, but you need to know if they have the cash to fund that growth. The short answer is they have strong near-term liquidity, but they are still burning cash as they invest heavily in surgical sets, which is the core of their business model. They are managing this well, though, with a clear path to cash flow breakeven.

As of the most recent data (Trailing Twelve Months, or TTM, ending in Q3 2025), OrthoPediatrics Corp. shows a remarkably healthy current position. This is the first line of defense against unexpected expenses or a slowdown in receivables (money owed to them).

Current and Quick Ratios Signal Strength

The company's liquidity ratios are defintely a source of strength. The Current Ratio is the measure of current assets (cash, receivables, inventory) over current liabilities (short-term debt, payables). A ratio over 1.0 is good; a ratio over 2.0 is excellent. OrthoPediatrics Corp. is far beyond that.

Here's the quick math on their short-term health:

• The TTM Current Ratio sits at a very high 7.40. This means they have $7.40 in current assets for every $1.00 in current liabilities. That's a massive buffer.
• The TTM Quick Ratio (or Acid-Test Ratio), which is more stringent because it excludes inventory, is 3.52. This is still exceptionally strong, signaling they can cover all their immediate obligations even if they couldn't sell a single new product set.

These figures show the company is not at risk of defaulting on its short-term debt. The high ratio is largely due to their business model, which requires a substantial inventory of surgical sets (implants and instruments) to be placed at hospitals, classified as property, plant, and equipment, and also a large amount of accounts receivable (money owed by hospitals).

Working Capital and Cash Flow Trends

The company's Net Current Asset Value (a proxy for working capital, which is current assets minus current liabilities) was approximately $101.67 million (TTM). This positive figure is a good indicator, but the real story is in the cash flow statement, where we see the cost of growth.

The management team is keenly focused on improving working capital utilization. The nature of their business requires constant investment in new surgical sets, which is why their cash balance has decreased, even with strong revenue growth. As of September 30, 2025, their cash, cash equivalents, short-term investments, and restricted cash totaled $59.8 million, down from $70.8 million at the end of 2024.

The cash flow statement overview for 2025 shows a company in a planned, capital-intensive growth phase:

The key takeaway here is the significant improvement in Free Cash Flow (FCF) usage. The Q3 2025 usage of $3.4 million is an $8.2 million reduction in cash burn compared to the prior year. This is a massive step forward.

Liquidity Outlook and Actionable Insight

The company is targeting the first full quarter of positive free cash flow in the fourth quarter of 2025. This is the critical inflection point for investors. It means the cash generated from operations will finally be enough to cover the capital expenditures, primarily the new set deployments. This shift from cash-consuming growth to self-funding growth is what matters most.

The potential concern is that the high current ratio is inflated by inventory and receivables, but the improving FCF usage shows they are getting better at converting those assets to cash. Their strategy is to meaningfully reduce cash burn as they aim for free cash flow break-even in 2026.

If you want to dive deeper into the full picture, you can find more analysis on Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors.

Actionable Insight: Monitor the Q4 2025 earnings release closely for confirmation of that positive free cash flow. If they hit it, the market will likely re-rate the stock, moving it from a high-growth, cash-burning company to a self-sustaining one.

Valuation Analysis

You're looking at OrthoPediatrics Corp. (KIDS) and trying to figure out if the current price of around $17.85 (as of November 2025) is a bargain or a warning sign. The direct takeaway is this: OrthoPediatrics is a high-growth, unprofitable company trading at a discount to its industry peers on a sales basis, but its valuation ratios are complex because it is not yet generating net income.

This is a classic growth stock scenario. You have to look past the typical metrics and focus on the path to profitability, plus the enterprise value relative to adjusted earnings.

Here's the quick math on key valuation multiples based on the most recent data:

• Price-to-Earnings (P/E): Not applicable (N/A).
• Price-to-Book (P/B): 1.39x.
• Enterprise Value-to-EBITDA (EV/EBITDA): -59.10x (Trailing Twelve Months).

The Unprofitable P/E and EV/EBITDA Nuance

The P/E ratio is N/A because OrthoPediatrics Corp. remains unprofitable, reporting a net loss in the second quarter of 2025 of $7.1 million. Similarly, the Trailing Twelve Months (TTM) EV/EBITDA is a negative -59.10x as of November 2025, which is what happens when a company has a positive enterprise value but negative earnings before interest, taxes, depreciation, and amortization (EBITDA). You can't use a negative multiple to compare value, so you have to look at the forward-looking, adjusted numbers.

What this estimate hides is the company's progress on its adjusted earnings. Management reiterated its full-year 2025 adjusted EBITDA guidance in the range of $15.0 million to $17.0 million. This non-GAAP (Generally Accepted Accounting Principles) metric strips out things like stock-based compensation and restructuring costs, giving you a cleaner view of core operations. We defintely need to see that adjusted EBITDA turn into real net income soon.

Stock Price Volatility and Book Value

The stock has seen significant volatility over the last year, with a 52-week range spanning from a low of $15.28 to a high of $31.25. The recent price of approximately $17.85 is near the lower end of that range, suggesting a discounted entry point if you believe in the long-term growth story. The Price-to-Book (P/B) ratio of 1.39x is quite low for a medical device company, meaning the stock is trading at only about 1.4 times its net asset value (assets minus liabilities). This suggests investors are not paying a massive premium for the company's balance sheet, which is unusual for a high-growth medical technology firm.

You should also note that OrthoPediatrics Corp. is not a dividend stock. The company does not pay a dividend, which is standard for a growth-focused business that reinvests all its cash back into expansion, like its full-year 2025 revenue guidance of $233.5 million to $234.5 million.

Analyst Consensus: Overvalued or Undervalued?

The market consensus from analysts leans heavily toward the stock being undervalued right now. The average rating from 7 analysts is a Strong Buy. Their collective 12-month stock price target is $24.86, which implies a potential upside of 47.36% from the current price. This target suggests that Wall Street sees the near-term losses as temporary and is valuing the company on its strong revenue growth-forecasted to be 16% to 18% over 2024 revenue for the full year 2025.

The valuation picture is mixed, but the growth narrative is strong. For a deeper dive into who is betting on this growth, you might want to check out: Exploring OrthoPediatrics Corp. (KIDS) Investor Profile: Who's Buying and Why?

Here is a summary of the valuation metrics you should be tracking:

Risk Factors

You're looking at OrthoPediatrics Corp. (KIDS), a company with strong top-line growth, but you must be a realist about the underlying financial risks. The direct takeaway is that while their core product demand is solid, volatility in capital sales and a persistent net loss are the near-term anchors on the stock. They are defintely a growth story, but not yet a profitability story.

Operational and Strategic Volatility

The biggest operational risk OrthoPediatrics Corp. highlighted in its Q3 2025 earnings is the unpredictable nature of high-value, non-recurring sales. They had to revise their full-year 2025 revenue guidance down to a range of $233.5 million to $234.5 million from the previous $237.0 million to $242.0 million. This cut was largely due to delayed sales of their 7D capital equipment and lumpy stocking orders in the Latin and South America (LATSAM) segment. This shows a vulnerability to the timing of big-ticket purchases and specific international markets.

To mitigate this, management is strategically de-emphasizing these lower-margin and volatile segments. The silver lining is that this focus shift helped expand the gross margin to nearly 74% in Q3 2025, up from 73% in Q3 2024, by prioritizing higher-margin core products.

The Core Financial Challenge: Persistent Unprofitability

The most critical financial risk is the company's ongoing unprofitability. For Q3 2025, the reported net loss was $11.8 million, a significant increase from the $7.9 million loss in the same period last year. This sustained net loss is a core concern for investors, despite the company's double-digit revenue growth.

Here's the quick math on their cost structure: total operating expenses for Q3 2025 jumped to $54.7 million, a 20% increase year-over-year, which is outpacing net margin improvement. This tension between high growth and high operating costs is what keeps the stock's valuation in check.

Key Financial Risks for 2025:

• Sustained net loss: $11.8 million in Q3 2025 alone.
• Margin pressure: Gross margin was 72% in Q2 2025, down from 77% in Q2 2024, due to product mix shifts.
• High operating expenses: Up 20% in Q3 2025 to $54.7 million.

External Headwinds and Mitigation Actions

Beyond the internal financial structure, external risks loom. As a medical device company, OrthoPediatrics Corp. is continually exposed to regulatory changes, such as the costs and complexity associated with complying with the new European Union Medical Device Regulation (EU MDR) and various FDA clearances. Also, the general 'Risk Factors' cited in their March 5, 2025, 10-K filing still include the impact of widespread health emergencies like COVID-19 or RSV on surgical procedure demand.

The company's mitigation plan is clear and action-oriented:

• Cost Restructuring: A global restructuring plan initiated in late 2024 resulted in $3.0 million in restructuring charges in Q2 2025, aimed at reducing operating costs and improving efficiency.
• Cash Flow Focus: Management is committed to generating positive free cash flow by Q4 2025, setting the stage for full-year free cash flow breakeven in 2026.

This is a company betting on operational efficiency and a more profitable product mix to finally cross the cash flow line. For a deeper dive into the company's valuation, read our full analysis: Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors.

Growth Opportunities

You are looking at OrthoPediatrics Corp. (KIDS) and seeing a pure-play medical device company in a niche market, and that focus is its greatest strength. The company's trajectory for 2025 is still one of solid, double-digit top-line expansion, even with some recent headwinds. They are not chasing every market; they are dominating the one they know best: pediatric orthopedics.

The revised full-year 2025 revenue guidance sits between $233.5 million and $234.5 million, which still represents a healthy growth rate of 14% to 15% over 2024 revenue. This growth is not accidental; it's driven by a few clear, actionable levers that are already in motion. Honestly, this is a growth story, but you need to watch the path to profitability very closely.

The core of their growth comes from product innovation and market penetration. Their comprehensive product offering-over 80 products-is a significant competitive moat (a long-term structural advantage) because it makes them the only true one-stop-shop for pediatric surgeons.

Here are the key growth drivers fueling the 2025 outlook:

• Trauma & Deformity: This segment, which includes products like the PNP Femur and DF2 systems, saw strong performance, growing 17% in the third quarter of 2025.
• Scoliosis: Growth here is fueled by the Response and ApiFix non-fusion system, plus the early-onset VerteGlide™ System launched in Q1 2025.
• Specialty Bracing (OPSB): The rapidly expanding OrthoPediatrics Specialty Bracing franchise is a key strategic initiative, generating higher contribution margins than the traditional implant business.
• Enabling Technology: The 7D technology platform, despite some capital sales delays, is a long-term driver, enhancing surgical planning and execution.

The company is also pushing hard on strategic initiatives to improve the bottom line. They have a global restructuring plan, started in late 2024, aimed at improving operational efficiency and reducing costs. This is defintely a necessary step, as the net loss has been increasing. The goal is clear: achieve free cash flow positivity by the fourth quarter of 2025.

For earnings, the company reiterated its full-year 2025 adjusted EBITDA guidance to be between $15.0 million and $17.0 million. What this estimate hides, though, is the pressure on gross margin, which dropped from 77% in Q2 2024 to 72% in Q2 2025, due to a mix shift toward lower-margin products and increased international sales.

Global expansion is another critical component. They are actively expanding into new markets, with Europe and the Middle East being key targets, and specifically expanding into new territories like Ireland. This geographic growth, coupled with new product adoption, is how they plan to sustain their growth momentum. It's a smart move to diversify revenue streams, but it also increases compliance and operational complexity.

For a deeper dive into the company's valuation and risk profile, you can read the full analysis here: Breaking Down OrthoPediatrics Corp. (KIDS) Financial Health: Key Insights for Investors

Here's the quick math on the 2025 outlook: