OrthoPediatrics Corp. (KIDS) Earnings Call Transcript & Summary

There we go. Just to start, you're going to learn a lot about how we intend to increase the total number of kids we've helped, which is our primary purpose always. And in that process, certainly grow top line revenue, the way we've grown top line revenue for a number of years, generate substantial EBITDA that ultimately produces cash in 2026. All the while taking a very dominant market share position in pediatric orthopedics overall. So we're done, I think. That pretty much summarizes what we're going to learn about. But now we'll take you a walk through the business in its entirety, all of the divisions. And I think over the course of the next few hours, this will be very valuable. So thanks for joining us, and welcome to New York. I think the thing that I might be most excited about is being able to showcase our people actually. I think it's very unique at OrthoPediatrics that we have a leadership team, some who are in the audience, some who are on stage that have largely been together for 10 years or more. And I think in MedTech, in corporate America, a group of people that have banded together for a common cause, to do something as significant as helping children is a really fantastic thing. It is an amazing competitive advantage. So while most of you in the room and online have the good fortune, I suppose, of talking a lot to Fred and to me, I'm really excited for you to have the opportunity to talk to some of our colleagues that have -- that are leading the business -- leading these businesses day in and day out, but also have more knowledge than anybody else in the entire pediatric orthopedic industry. And I think that is a very unique aspect of OrthoPediatrics. So excited for you to meet really good people, excited for you to meet people that have a true heart for children. My name is David Bailey. I'm the President and CEO of OrthoPediatrics and I've had a good fortune of being with OrthoPediatrics since its inception. Like my colleagues, I have had the good fortune of seeing the first implant that got put into a pediatric patient almost 18 years ago. And many of my colleagues on stage also have the opportunity to see that implant as well as the several -- over a million implants that we've placed in today. So today, we're going to do a walk through each one of our businesses. First, led -- first with our Trauma and Limb Deformity business led by Joe Hauser, who's the President of that division and Joe will come back up and talk a little bit about OPSB and our expansion strategy within OPSB. Greg Odle, who has been my colleague now for almost 18 years. He's the President of the Scoliosis franchise. Greg will walk you through the scoliosis business and some of the new technologies that exist within our scoliosis franchise, how we feel like the next 18 months really looks like in terms of new product development there. Then we have the great fortune of having two fantastic KOLs, who have joined us, one from Yale, Dr. Dom Tuason, who has come into the city today; and Josh Hyman here, who is local. And the gentlemen will introduce themselves and have an enormous experience in pediatric spine surgery as well as pediatric trauma, limb deformity and bracing and we'll give you their perspective on OrthoPediatrics in the marketplace. And then we're going to close out with Kevin Unger, who's been with our business as a Board member for over 11 years and now is leading the start-up really within OrthoPediatrics, our enabling technology franchise. And so Kevin will walk you through that business. And then last, but certainly not least, we'll hear from Fred from a financial perspective, outline what the next three years are going to look like and then we'll open it up for question and answer. So as I said, OrthoPediatrics as a company dedicated to improving the lives of children. We rally around the cost of improving the lives of these kids. And most of us here have had the opportunity, like I said, from being together to see us from very earliest days where we helped the first patient, then we helped a few thousand patients now to this year, hoping, aspiring to help 122,000 patients with orthopedic conditions. And I can say that I'm extremely proud to have been a part of the journey that has now helped nearly 1.1 million kids. When we started this company nearly 18 years ago, we found there was a number of substantial unmet needs in pediatric orthopedic health care. Our patients have unique clinical conditions. And I'm not going to steal the thunder of our good surgeons here, but I think they would tell you that not -- kids bones are not just smaller but the conditions that they treat on a day in and day out basis are just much different than what we see in the adult world. And so a lot of the adult orthopedic companies don't treat the types of conditions that our customers treat. Up until 17 years ago, most of the product lines that existed were just modified adult implants. Small adult implants, we joke that surgeons often have to MacGyver their way through these particular procedures. There had historically been extremely limited development in pediatric orthopedics. And there had never been a specialized sales force. And for those of you who don't know, very widely recognized in the orthopedic space in the adult world, sales reps locking into the operating room with physicians to make sure that the instrumentation is functional, that the staff has everything that they need and at the surgeon would happen to have any questions, they can be there for as a resource. But in pediatric orthopedics, until we existed, there really was no company -- no reps that were walking in with the clinical knowledge necessary to hopefully help a better outcome for pediatric patients. And last but not least, there was very limited support from a clinical education standpoint in pediatric orthopedics. And I think that was probably made -- that was exacerbated further during the acquisition by J&J of Synthes, which hit that point had been the primary provider of clinical education and training from an industry perspective. So we set out to tackle these challenges. And I think we've done quite well over the course of the last nearly 20 years. Five things we do extremely well. We do a number of things quite well, but these are the things that we focused on really over the last 20 years and not very sexy sounding, but we intend to continue to do these things. These things are critical and continue to be the basis of the strategy for OrthoPediatrics. We have a laser focus on the high-volume children's hospitals that treat the majority of pediatric orthopedic patients. And what that means is that we focus on about 300 or so children's hospitals where about 1,500 or so pediatric orthopedic surgeons who are fellowship trained in this space treat patients. We are not at least in the United States, out in the community, taking care of patients who are being treated by generalist orthopedic surgeons. Outside of the United States, there are nearly a similar number of pediatric orthopedic surgeons. And so we -- and they congregate and take their patients to specialized children's hospitals. That is our location, that is our focus, and that's where we intend to focus across the planning horizon. We provide an extremely broad product portfolio, designed to really surround the pediatric orthopedic surgeon with all the products they could use. We aspire for a surgeon to be able to wake up in the morning, go to the operating room, know that they have a number of different types of surgeries, and our surgeons may be doing a spine in the morning and a hip osteotomy in the afternoon. And we want to have representation as well as products available to those physicians so that their day goes well, the patient is well treated, and we have somebody knowledgeable there that can help. And if we don't have the product they need, we would have somebody that could point them in the right direction to the product they could use. At this stage, we have over 70 products available to pediatric orthopedic surgeons in the United States and slightly less than that outside of the United States. We also aspire to continue to deploy instrument sets. So before our IPO in 2017, I would say one of the largest challenges that we faced as a company was a lack of access to capital required to get inventory available to our surgeons, particularly on the trauma side, where if you break your femur, you need to be able to be taken to the operating room within a few hours, and we needed to make sure that, that inventory was available to the surgeons in the hospital. And so we said that historically, we had more of a supply problem as opposed to a demand problem, which was a good thing. And through the IPO process and then subsequent raises, we have been able to generate the cash necessary to populate a great majority of the children's hospitals in the United States with our products. And that has probably peaked. And so we'll listen here from Fred about our plans to continue to deploy inventory but probably not at a higher rate as we've deployed in the past. We continue to expand the addressable market through both R&D and fairly aggressive M&A. I think it is well documented that we have been prolific in the M&A space. We have had a strategy of creating an ecosystem around our business that would attract inventors, small companies, even large adult companies with a product or two in pediatrics that would recognize us as a clear path to market in children's hospitals. And so I think we've been very successful since our -- since the IPO and conducting a number of partnerships as well as a few acquisitions. And we intend to continue to invest heavily in R&D. And I think you're going to hear a lot from the gentleman here on the stage about the opportunities we have, where there is a lot of blue ocean and a lot of unmet needs in pediatric health care, and we intend to continue to make heavy investments on the R&D side. The last thing, we aspire to continue to help the pediatric orthopedic surgeons train the next generation of pediatric orthopedic surgeons. When we started this business in 2007, there, I believe at that time, were less than 10 fellows going into pediatric orthopedics. Now there's in excess of 50, almost every fellowship is full. And so we aspire along with our pediatric orthopedic surgeon partners to be able to continue to fund the development of young surgeons so that we are training in the next generation. All of this, obviously, has produced very, very consistent year-over-year revenue growth and is now starting to produce consistent and growing and meaningful profit that ultimately will generate cash for the business. As I mentioned, we went public in October of 2017. And since we went public, we have -- we've done quite well. The business has grown, on average, 22%. We have enjoyed a compounding annual growth rate of 22% since 2016, almost entirely due to market share gains. We have had a very aggressive cadence in new product development. When we went public in 2017, we had 17 products available to the market. Now we have over 70 products in counting. We had less than 100 field sales representatives. And I'm not sure at that time that we served every children's hospital in the United States. But at this stage, we serve every major children's hospital in the United States, every children's hospital in Canada, and we would say 90-plus percent of children's hospitals in the developed world. And we do that through more than 200 field sales representatives here in this country and 14 independent sales agencies. And so we have gone from 0 to 14 in terms of markets outside of the U.S. where we sell directly to the hospitals, and we now sell our implant products in over 70 countries in our nonsurgical products in, as many as, 90 countries. We have continued our investment in clinical education and training. We conduct, I think, 300 it says here, but I would guess it's far more in terms of new clinical education opportunities that aren't primarily non-commercial. So not just representatives there trying to sell more products, but to help support things like grand rounds and support Sawbones labs for young physicians who are in their training. As mentioned, we've completed a number of successful acquisitions starting shortly after the IPO with the Orthex acquisition and continuing through a number -- and more recently, the announcement of Boston O&P that has really set us up for a fantastic growth story within our OPSB business. We -- before the IPO, we're deploying about $3 million worth of inventory to the market. And so again, we had far more hospitals and surgeons, who wanted to utilize our products, then we could afford to supply. I believe last year, we deployed about $22 million. And so we have gotten to a point in the business where we believe that the majority of our legacy implant systems have been deployed in the children's hospitals. And so we're pretty aggressively moving towards other very cost-friendly or cash-friendly sources of growth. And then lastly, we have moved through a path of generating positive EBITDA that we think in the coming several years becomes very meaningful and ultimately starts to produce cash. This is just a walk of our revenue. So again, less than $1 million in 2008, pretty consistently up into the right, and we would expect this to continue up into the right for a number of years going forward and a very significant progression in our profitability or adjusted EBITDA since the IPO. And this is not a thing that we just started. Fred was very diligent in advising us post-IPO that it would be smart to not only focus on top line revenue growth but continuing to improve the profitability of our business, and that's what we've done. And we expect to see that to continue over the course of our planning horizon. Last few slides here, just this slide, this circle on the left represents what we had historically talk to you all about our TAM, so a little under $0.5 billion market opportunity in the United States for trauma and limb deformity products, $280 million in scoliosis products. And more recently, we announced our movement into the OPSB business -- sort of the specialty bracing business. This expanded our TAM by $500 million. And again, Joe will walk you through how we intend to attack that segment of the market. Just this morning, we announced the formation and launch of our enabling technologies business led by Kevin Unger. And we believe that is the absolute minimum. This is a $300 million opportunity for OrthoPediatrics for enabling technologies within children's hospitals. And so -- and Greg will also talk to you a little bit about the expansion we're seeing in this fusion -- in the scoliosis business, particularly led by product development in the early onset scoliosis space. So before I turn it over to Joe, I think you're going to hear a lot about product development and these catalysts for near-term growth within the T&D business, a lot about our P3 plating system that we've talked a little bit about on earnings calls and the formation and development of our intramedullary nailing portfolio. Within scoliosis, we've made heavy investments in early onset scoliosis. And we are three products that are very compelling, and Greg will walk you through that as well as the product development we have going for our next-generation fusion system. Both of those businesses are influenced heavily by international growth opportunities that will be available to us once the EU MDR is completed. And so that is woven throughout the day. From a specialty bracing standpoint, I think, we've been asked by all of you to talk about our territory and clinic expansion strategy as a huge growth opportunity for us in the future. And so Joe has big pressure to tell us all about how that's going to work. But nonetheless, regional clinic expansion, a lot of R&D that's happening in that space and then our sales force expansion that's driving that growth. And then we'll finish with Kevin talking a little bit about Playbook and IotaMotion what we announced this morning and how those businesses will be getting started in 2025 and starting to produce meaningful revenue in the future. So I think I'm beyond my allotted time here, but thank you very much for spending time. And Joe, welcome.

All right. Thanks, Dave. I don't know when my mic will come on but I'm sure it will jolt everyone awake when it does, but I'll get started. So I'm Joe Hauser. I'm the President of the Trauma and Deformity business as well as the OrthoPediatrics Specialty Bracing business. I'm very excited to be here today to share more about both of these global businesses, but we're going to start with T&D. So there is three key core growth drivers that will be necessary to take the T&D business from where it's at today to our next phase of growth. I'm going to walk through all three of these with you and go through the examples of how we're going to get there. So let's talk about the beginning. Dave just showed in 2008, we had released our first system in trauma, which was our cannulated screw system. That system in the T&D business has always represented the entryway -- the gateway for OrthoPediatrics to now become present at our children's hospitals. In the beginning, those days, which I know Dave and the group remember finally, it was about going and just getting one customer to say yes to one case. And you can imagine scale at that point was not on our side, and we were just trying to get another surgeon and another surgeon to use that same product. As the company evolved, as T&D move forward, we chipped away at that, which brings us to eight years later in 2016, estimated that we had somewhere around 2% to 5% global market share and at that point, we were somewhat present, if not present, at 100 different children's hospitals within the U.S. And then we had about 13 systems that we believe had about 40% product coverage so products that our surgeons could use. So we got from there to there by going one surgeon at a time, developing more systems and then being able to bring in the scaling of a sales force in order to do so. Fast forward eight more years, and you see that we have today, which we think we're somewhere between 15% and 20% of our global market share. We are absolutely present at 300 children's hospitals in the U.S. We're also present at a handful of very important international children's hospitals, 41 systems, and now we estimate that we do about 80% product coverage. Over the next expanded time horizon, we think we -- we know we will get to 1/3 of the market share -- the global market share. In order to do that, we believe it will be around 55 systems, and that's when we have 100% product coverage. And the key here is that there's a long runway of growth ahead of us. And we're in this phase of the business now. We have to leverage all of our scale, the representation because of the relationships with surgeons, the huge amount of education you heard Dave speak about, we do all that today. So now when we launch a new system or deploy a new set, it instantaneously ends up in the hands of our surgeons because we're there, we're present. And as I speak right now, I can almost guarantee that all of our 200 representatives are in an OR somewhere around the country. So how do we get there? We have a slight enhancement to our strategy. So we have been focused on providing pediatric orthopedic surgeons with every system necessary to do the cases they do every day. The enhancement to that is now we're going to surround the hospital -- the children's hospitals with everything a children's hospital needs to perform optimal pediatric orthopedic care. We'll still continue on very closely to close that 20% gap of developing the new systems around surgeons. But what this means to us is think about the surgeons logging in from a software perspective to do preoperative planning before they get into the OR. And then being able to take that plan into the OR through our system called Playbook, which you'll hear a little bit about from Kevin and today and be able to have workflow optimization and the preplanning all right in front of them. In addition to that, we'll continue our education and training. I think we had this 300 that we're at today. We'll see this grow 300 to 400 to 500 educational moments that we provide as the leader in the space. And certainly, we will continue our product development focus. So thinking about our product development. I'm absolutely biased. I'm sure I'm biased to this. Having been in the orthopedic industry for 20 years, I believe we've got the strongest and most productive orthopedic engineering team out there. And this team of 32 people across 2 countries spend 100% of their time focusing on pediatric development with our key customer partners. We have 42 different systems, implants, instruments that have been launched over the last 6 years, and there is still a huge pipeline left. We've categorized all of our products into three different families, external fixation franchise, plates and screw franchise and an intermediary nail franchise. This portfolio that you see a picture of is without a doubt, the world's largest pediatric orthopedic and adolescent focused portfolio. And the team has been very productive to get us to this spot. Let's talk about the international -- or the intramedullary nailing franchise. So in 2016, we had a first-generation nail, a femoral nail for intramedullary nails called PediNail. It did a nice amount of revenue for us. We realized in 2016, in order for that franchise to grow to its next phase of growth, we had to do something more radical with the system. And we started a journey to launch the pediatric nailing platform, PNP, to overhaul the entire system. New instrumentation, better trade layouts, more implants that got us into adolescent smaller sizes, more ranges of sizes to cover a far vast more indications and patient demographics. From there, we launched that late in 2017 and with the PNP Femur and it did very, very well. It easily passed PediNail in a very short amount of time, and now it exceeds well over $10 million of annualized revenue. And we still think we have about 1/3 of the market, and so there's still room to grow there. Everyone here probably remembers late fall last year, we launched our PNP Tibia. So building off that same platform process, we launched our tibia system, we got to our revenue goals with the tibia system six months faster or in half the time than we expected. That might have been the most well-received system that we launched in the Trauma and Deformity business. We launched more sets earlier this year, and I see this as a major -- a significant driver of growth in the future for many years to come. And the pipeline is not done. We've got more projects on the heels here that we're going to work on in this franchise. Which leads me to -- and here some pictures of the PNP systems and the Tibia system that you may have seen from last year. But that brings us forward to this discussion for today and something that a journey that we started about 1.5 years ago, where we're walking through a complete overhaul of our plates and screw franchise, and we're calling this the pediatric plating platform or P3. And you've probably heard Dave and Fred say P3 many times. And this is -- this will be -- we will be the only company that has a third generation of development of a plate and screw system. This will consist of around six launches that we expect over the next five years. And there's three key ingredients to these launches for us to expand on our leadership position in the plates and screw market. I'll walk through all three of these. So the first one is we need to fill some of these product gaps. So you heard me talk about that 80% product coverage we have today. So we've got this 20% gap we need to close. So there's different plates that we'll come out with that will be growth from [ dollar 1 ] that are in new indications. A good example is the picture you see on your far left. That is a picture of a plate with a screw that will be -- that's going to come out with our P3 hip system, which will be the first installment of the P3 family, and it's specifically for pediatric hip fractures, and adolescent hip fractures. We don't have a product like that today, and so it will begin to be a new indication we're able to go after. Some of the plates in the middle there are from our second installment -- a second launch, which will be P3 mini, small fragment. And there's a couple of plates within there that are very anatomically specific that we believe might actually expand our TAM, maybe not in a material way but providing some new procedures and new implants that maybe haven't been seen before. The second key ingredient to the system is bringing quality-centric and major improvements to what we have today. So the whole purpose of doing an overhaul to a system isn't to make these small incremental improvements, it's to change the whole look and feel and a new platform and that look and feel the platform needs to be consistent across all the launches. So as our key partners -- our key surgeon partners go to use one system to the next system, it's very seamless for the staff that helps set up the OR, it's very seamless. When you look at the picture on the very left, we need to bring some innovation into the space. So our P3 hip, you're seeing an instrument that is designed to help have better precision to put that guidewire up into the head of the femur. In addition to that, more intricacies that you can see maybe not as well, you're going to be able to dial in the calibration of the exact degree or angulation of the cut you want to make and have a more precise cut. The picture on the right, we've been at this for 15 years. OrthoPediatrics has been at this for 15 years, developing products for our surgeon partners. We have learned more than any other company about what is necessary to take care of these kids and to help our partners. We've also learned over that time that the demand on our implants have changed, as surgeons' protocols have changed, getting to weight bearing faster if they've changed. And so now our engineers are designing in certain features to help increase the strength to help meet our customers where the market is going. And then last but certainly not least, we're going to bring this forward into the digital world and sterile packaging. And that picture I showed you on the left that had that hip calibration measurement, it was always our goal to get into this flywheel to do preoperative planning, a surgeon be able to log in to do preoperative planning and translate that into intraoperative precision. And so part of our digital launch with the P3 system is that you'll be able to do that and then you can get that instrument calibrated to the plan that you were planning to do before going into the OR. And then when you bring that instrument into the OR, it now can have the exact readings that you did in your planning, so you don't have to guess what you were doing in your plan. On the very right side, you see a bunch of sterile boxes. So this is a sterile packaging. This is a requirement. It's become a growing requirement internationally and even in the United States. P3 systems will all be launched with sterile packaging, big benefits in our management of our inventory, better ROI, set utilization, and we also think there will be a slight margin increase with the premium of having these sterile products out there. So this is it. This is the P3 time line. By mid-2025, we'll launch the P3 -- or expected to launch the P3 hip system. And then subsequently, every year, we will have another launch of one of these systems over the next four to five years with the P3 small and mini system coming right after that. Last, but certainly not least, the third driver of our business is our international markets. The international business is about four to five years behind where the U.S. business is. And what I mean by that from the first slide that you saw, they're in a different phase of growth. We estimate that we have about 25% to 30% market share in the U.S., and we also estimate that we have somewhere between 5% and 10% market share in our international business. On the heels of some unbelievable momentum we have in completing out our process for the MDR to get our certificate, there's about to be a -- we were expecting many more launches of new products in the European market and also other international markets. So as we go forward, we expect the international business to have a disproportionate amount of growth for the T&D franchise. So these are our three plans. These are the three drivers. One is we've got to leverage our scale in order for us to double our revenue over the next extended time horizon. Two is we need to bring P3 to the market and innovate around that, expand out some of our TAM and three is the international markets have to have additional penetration within current markets but some disproportional growth across the board. Thank you so much.

All right. Good to be with you all this morning. My name is Greg Odle, and I'm President of the Scoliosis business. It's been a great privilege of mine to have been with the business when it was just an idea. And to see where we are now and where the business is headed, to have the opportunity to work with surgeons like Dr. Hyman and Dr. Tuason, has been a real privilege and I would encourage you to spend some time talking with them today as well. The only thing I'll warn you about is that you may come away feeling less good about yourself because pediatric orthopedic surgeons in my opinion, are some of the most impressive people that you will ever know. So we have been able to develop a strong position in the pediatric spine market with our response Fusion system, which has put us in a position to capture about 15% of the U.S. market share in children's hospitals. Going forward, our intention to grow off of that is to invest in early onset scoliosis, which you're going to hear more about as well as developing a next-generation fusion system. And those two things in conjunction, really strengthening our position in some of the top-tier high-volume children's hospitals that treat these complex deformities. We're going to continue to leverage our outcomes with ApiFix, as we learn more about the optimizing the patient selection for those patients and also expanding potential for expanded indications of that device and then our focused investment in the international markets, as we continue to build a global scoliosis business. So a little bit about early onset scoliosis, which is known as EOS. This is a pathology in a condition that affects kids that are generally younger, generally under 10 years old. And there is so much deformity in many of these kids that their breathing is compromised. And as their lungs and internal organs can get squeezed and it can also compromise other body systems like digestion, these kids are in a tough, tough circumstance. Generally, these are deformities that are treated in top-tier children's hospitals where also the majority of fusion procedures are completed. But surgeons, as we have traveled around the world and talked with surgeons as we've learned more about EOS, this is an area that is certainly underserved by industry, and surgeons are really, really looking for solutions. It also is an area that happens to have favorable financials with higher average selling prices than a lot of products, lower capital investment, and that's due to the fact that more the technology is in the implants versus the instrumentation. And we are also able to move these sets around and gain more efficiency from an inventory perspective. So the three systems that we're going to talk about, the rib and pelvic system was a system that has already launched earlier this year and is designed for chest wall expansion and opening up the chest cavity so that patients can start to breathe a little bit easier and get some relief from some of their deformities, setting the stage for future growth-friendly implants. VerteGlide, which is currently under review by the FDA is a different concept that allows for a sliding or a gliding of the screws on the rod to accommodate the growth of the child. And then eLLi, which is our powered growing rod system, which is an electromechanical lengthening implant, and we're going to talk more about that as well. So a little bit more about VerteGlide. This is called a guided growth concept and you can see here in the boxes, the blue boxes that at the top and bottom of the construct -- the implant construct, those screws are allowed to slide along the rod. So as the child grows, the screws actually travel along the road, but it harnesses the child's growth capacity, as the child grows and corrects the spine. And we have taken great care with the design of these implants to accommodate that sliding. And so you'll see these highly polished surfaces on both the implant, the screw as well as the rod so that as you get that travel on that motion, we're minimizing wear debris, which was one of the major concerns of previous attempts at this type of concept. Transitioning then into the powered growing rod, and we're going to talk a little bit about eLLi. So this concept was introduced back in 2009 in Europe and then subsequently in 2014 in the United States. But this concept allows for an external controller to be remotely connected to an implant that then lengthens in the body. It quickly became the standard of care in EOS around the world and grew to nearly $50 million in annual sales, but usage started to drop off significantly as previous systems had challenges with quality. And so things like corrosion and wear debris and a lack of power became a real issue. And so we've attempted to address all of those issues with previous systems. But I will say that from what we are hearing from surgeons, they are certainly almost desperate for a new technology that would be reliable, a reliable alternative in this space. So eLLi, again, is an electromechanical called lengthening implant for the treatment of EOS. And these are some of the outputs of this system that we have looked to achieve to address some of the challenges with previous systems. So it has an adjustable force that the control module can deliver to the implant remotely up to 500 newtons, which is about 2 to 3x what other systems that have been developed previously have seen. It is a radio frequency transmission, not a magnetic transition. So that allows for a more reliable connection from the controller to the implant. It is also a smart implant. So it actually is talking to the control module, and we're able to collect data for the surgeon in terms of when the lengthening occurred, how many millimeters, even sub millimeters, were lengthened in a particular treatment, how many times that treatment has done and when. So there's a lot of really valuable feedback for the surgeon, which is a significant improvement. And it's, as I said earlier, really designed for safety. So biocompatibility reduced wear debris, the materials used, the sealing of the implant itself in terms of the gear mechanisms and the motor being safely sealed within the device again, another concern with other systems that we are addressing. This device was given a breakthrough device designation by the FDA, which we're very proud of, but it's reserved for the kinds of devices that are treating conditions and kids that can be life-threatening. And so the FDA has a special designation that allows for a more frequent dialogue with the FDA in the development process and leading up to submission. So we're encouraged by that sort of ongoing dialogue with the FDA, as this system gets developed. So as I mentioned earlier, the EOS, the early onset scoliosis systems, are treated in these hospitals that treat very complex deformity and that -- it puts us in a position to build a different kind of partnership with these hospitals. And in addition to what we're doing on the EOS side, we are also advancing a next-generation fusion system. A little bit about the fusion market dynamics, it's the most widely used surgical treatment in scoliosis. Over 85% of our revenue in spine comes from Fusion. Large players are in this space, like Medtronic and DePuy historically, but they have a limited investment and interest in the EOS space and a significant opportunity for us to grow our share and again, high ASP and strong margin profiles as well. But again, our strategy here is about creating a different level of partnership within these children's hospitals. With this next-generation fusion system, we're really focused on creating a different experience for the surgeon, right? So we want this to be the ultimate surgeon experience, where it's designed exclusively for pediatric surgeons by pediatric surgeons, which is not something that is typically done in the industry. We are also leveraging the full capacity of our enabling technologies, which you're going to hear more about from Kevin. So the experience a surgeon has from preoperative planning which is with AI-driven technology to help them understand and see where the curves might progress or how the deformity will be corrected, along with improving interoperative workflows with sophisticated instrumentation in addition to the enabling technologies, navigation and then on the back side, the ability to collect data. So it's a true digital platform, but really engineered as a system to optimize the entire continuum of care. And from the get-go with this, we have our intention is to develop a system that is truly differentiated from our competitors, a dramatic reduction in the tulip head profile, which is important to surgeons, transforming this experience with personalized cases and trade configurations and then the full suite of enabling technologies, as I mentioned, but really truly having this premier look and feel and something that sets us apart from the other companies in our space. Continuing on another area in scoliosis that continues to get a lot of attention and interest is the nonfusion space. You're all aware of the journey that we have been on with ApiFix and the ApiFix, we continue to learn from the outcomes. We now have patients that are over three years out from surgery that we're tracking very closely. And it continues to inform us and the surgeons on the ideal candidates based on age, severity and type of curve. We've recently launched a new high-strength version of this implant for lumbar curves in the lumbar region. The implant sees higher stress concentrations from more motion and load. And so that is a way that we continue to improve the device. And we expect that we'll see modest growth rates with ApiFix over the coming years, as patient selection and implant improvements continue to take hold. And we are also exploring the potential application for this implant in the EOS space. Many surgeons are interested because of the distraction capability of this device that it could be a really useful tool in the early onset space. Moving into the international side of the business. So historically, most of our presence internationally has been in Latin America through stocking distributors. So these distributors have been buying our big scoliosis sets, making big investments and then deploying them in the market. And over half of our scoliosis revenue has come from destocking distributors internationally, as we have built the business over the last 10 years. As we move forward, we anticipate distributing more through agencies that don't have to make these big investments and doing this in more traditional international markets that are more reliable, more stable and have a more straightforward regulatory pathways as well. So this is what we expect this to look like where over the next few years, about 70% of our scoliosis business will be driven through agencies, as opposed to stocking distributors. And so building off the momentum that we have in these key markets where we already have a strong Trauma and Deformity footprint, we have reliable representation. We have knowledgeable sales managers and leadership that is in place in these countries, in particular, the anticipation of the EU MDR certification in Europe, which for countries like the U.K. and Ireland and Germany, which are our target markets, we expect that will help expand the portfolio. And we also have an opportunity to redeploy our legacy response sets in the U.S., outside the U.S. as the next-generation fusion system takes hold in the U.S. So as you heard Joe talk about and it's a continuing theme for our business, generally, we are looking to surround the surgeon with the products and solutions that they need to treat the kids that they treat. And so this is a look at what our scoliosis platform has looked like up until the end of 2023. And this is what it looks like going forward, where you can see the expansion into EOS, the addition with the next-generation fusion system. We continue with nonfusion. Bracing is new for us, enabling technologies expansion and so really, this is about treating the disease state of scoliosis and not just the end state of that process, which is where a lot of companies out there are focused on the fusion side, which is what we call end state. And just to end with closing with an example here of what this can look like and what this means. So if you think about a particular hospital in the market, top-ranked children's hospital in the U.S., where we have market share in scoliosis that is pretty limited, but a market share in Trauma and Deformity that is 25% plus and treating the most complex spine deformities. But this kind of footprint and dynamic is what we see in a lot of these high-volume teaching institutions in the U.S. And that is an example, though, there's 20 to 30 more just like that, where we have been in this position historically. We haven't quite had the breadth of portfolio in the scoliosis side to be able to really be taken seriously. Well, that is changing now. And this opportunity that we have to partner with surgeons to treat these kids with really severe deformities really does change the nature of the partnership we have with surgeons and we can create a lot of great opportunities as a result. Thank you. Back to Joe.

Okay. Yes, me again. Listen, I'm extremely excited to share more about our OrthoPediatrics Specialty Bracing business. So I want to break this down into two sections. The first section I want to talk about, why. I think it's really important that everyone understands why we have an OrthoPediatrics Specialty Bracing business and what is that business? And then second, I want to walk through these three key strategic objectives we have for this business over the next three years. So let's just have a quick, quick time to talk about why. We know that our pediatric orthopedic surgeon partners, they spend about 80% of their time on a weekly basis on average, trying to take care of kids that are not going into the operating room. And as a father to three daughters, I'm very thankful that if the decision happens with my kid that needs a surgery, that OrthoPediatrics is there from an implant perspective to help. But if I had my preference, I would prefer not to be in the operating room, and I'm sure that's how a lot of parents would feel. And so as a company, who's dedicated to musculoskeletal health for pediatrics, we have to be in the bracing business if we're going to really take care of a far greater number of kids. And interestingly enough, as we take care of more kids, we're finding that -- in the bracing world, we're finding that most of the competitors out there, similar to our implant business, are not focused in this space. It's very underserved. There's a lot of unmet needs. And when it comes to developing more products, this is a slightly faster time line. It's a Class I device designation for the most part and the speed to bring products to market will be quicker than our implant franchise. Good news on our side, you don't need the required set consignments in order to produce revenue. So it provides a different model for us as we go forward. We know it's a large market. It's a good growth driver for us. And maybe most importantly, the same surge in customer base as our implant business are the ones that are prescribing for the bracing business. So the hardest thing to do after we -- I guess one of the interesting things was after we made the announcement of the OrthoPediatrics Specialty Bracing business last fall, and then we announced the acquisition of Boston Orthotics and Prosthetics in January. The outpouring of message that myself and all my colleagues received on how positive from our customer base. So our why from our customer, we got that answer very quickly that everybody had an extreme amount of enthusiasm that it's an underserved spot. More resources here will help, care for kids needs to be improved, more products need to be developed, the connection between the orthotist and the surgeon has to be a requirement in every children's hospital and it's not today. So these are a few quotes from fairly well-known surgeons that are one of many that we hear on a regular basis. But if I had to take a second to really reflect on what's our ultimate why, as long as technology works for us, I'll show you a quick video. [Presentation]

So that's our why is to help kids like Olivia have a different way of life, different mobility. You'll see that the Levity product, we did bring one with us, you'll be able to see that and get hands on it later on today. But this is the OrthoPediatrics Specialty Bracing business. It exists -- it contains a few brands one being the Mitchell Ponseti brands, which was the MD Orthopedics organization, which is today considered gold standard treatment for kids that are diagnosed with clubfeet. From there, we have Rhino and our Rhino portfolio of products, which includes the Cruiser product, which at this point for kids with DDH in certain phases is considered a gold standard of treatment. You just saw the Levity device, which was from Ora Medical. And that one has a long way to go, but we believe it can become a standard of care for kids to help be more mobile. And then we have the dynamic femur fracture brace, DF2, which I'm sure you've heard Dave and Fred speak about that we believe over time will minimize time that has -- for a child to spend in the OR after they get a femur fracture by applying a DF2 brace. And last but certainly not least, Boston Orthotics and Prosthetics. That brand has a series of products and represents our clinics. So let's talk a little bit about Boston Orthotics and Prosthetics. I'm going to walk you through the patient experience. How do these clinics work? What do they do? So you're a parent, your child has some type of issue concern. You go see a pediatric orthopedic physician. Within that assessment and maybe a diagnosis, if the child needs a brace, the surgeon will provide a referral for that child to go get a brace. If you take a look at the picture here on the left -- on the right side of the left picture, there's a glass. It's hard to see the OrthoPediatrics Specialty Bracing clinic. But oftentimes, with our current clinics where the physicians saw the patient in their clinic setting right next door is our OrthoPediatrics or the Boston O&P specialty clinics. So the patient will go from seeing the physician and sometimes walk next door, sometimes they walk down the hall, sometimes they have to go across the street and sometimes maybe it's a block or two away, but the key thing is that it's close in proximity to where these physicians see their patients. And then they'll go into one of those clinics with that referral with a specific order from the physician. And that's where the impressive magic work occurs. We have an unbelievably impressive group of certified prosthetist and orthotist that work hand-in-hand with the physician to help understand the assessment that was made to do -- to go through education of what they're about to go through with this brace and to take measurements or cast molds or scans to help provide the brace that's necessary. That information gets sent to Stoughton, Massachusetts, which is the global headquarters for OPSB, where the manufacturing of that product occurs. Few weeks' time, the product has returned back and the patient comes back in to meet with the orthotist for the application. One thing to remember with this is that once that orthotist has engaged that family, oftentimes, if there's any issues with the brace or the product, the family will go back with the child to the orthotist first to help get any adjustments or anything made before or even go back to the physician for a follow-up treatment. But that's essentially what our -- that's the rhythm of how business works within the Boston O&P and our OPSB clinics. Let's talk about the three key strategies now that you understand how our clinics work that are going to take us to the next three years of how we see this business growing. So we're going to talk about our target market, aggressive clinic expansion and revenue expansion strategy first. So the map that you're seeing up here, we have about 28 clinics that serve 9 target markets across the U.S. A target market, you could define as a population center, a greater metro area, a location that has kind of a circle around it that those clinics would serve. If you think about the Boston O&P clinics in Boston, as one of our target markets on this list, we believe we have about 80% share of the bracing in the Boston area. If you look at the remaining, [ 20, 21 ] clinics -- and there's about six or seven in Boston, [ 20, 21 ] clinics across the rest of these eight target markets, some of them have higher market share, some of them have lower, but we think we have about 15% to 20% share in those target markets. So our first -- our very first easiest layer of growth is to close that gap of that 15% and trying to get to a 50% market share in the key target markets today. So that will be -- that's what we've already started doing and already increasing the referral patterns from the physicians into these clinics. And one thing to remember about our clinics is we have the only trained staff that is only focused on doing pediatric O&P care. And so every time a referral is made or they understand that clinic is near them, surgeon understands they're getting care that has expertise to it. The second phase of this is our expanded 80 markets, so 71 additional target markets where we want to bring OPSB clinics over an extended time horizon. Think about our 300 children's hospitals that we have today, the majority of these hospitals that we're focused at today are within these target markets. Certainly, some of our largest hospital customer bases today are within this when we built this target market listing. So how fast do we want to do this? What's the pace we want to go about. We want to open up 18 new markets in the next three years. That puts us on a pace for four clinics in 2025, four target markets in 2025. Six target markets will be in by 2026 and eight target markets by 2027. And when you look at that previous map, that would get us about 1/3 of the way through on our ultimate goal by the end of the three years. Some of the financials for these and what's important is there'll be two options that we have when we go into these markets. Option one will be to use a greenfield approach, a startup approach. With the greenfield approach, we have good profitability metrics early on in the business. We think that depending on the upfront investment. It will be about a breakeven of three years. The difference with the greenfield startups is that there's a lot of steps that have to happen for us to get the licensure, insurance, contracts, staff, location. And so that can take somewhere between 6 and 12 months sometimes in certain markets to get that done. So alternatively, which we won't do this as much, we have the acqui-hire option. The majority of what we do will be in the greenfield space, but there'll be certain markets strategically where we want to -- we might make an acquisition of a certain clinic that already has these insurance contracts, already has their DMEPOS, all the licensure necessary, also might have some trained staff. Maybe they don't do all children today but they give us a faster entry point into a market, and once we're in that state, and we have that licensure, we can expand within that state. Profitability is fairly similar to our greenfield, the ROI breakeven will take a little bit longer depending on the size of the clinic and maybe the acquisition if it's -- and being opportunistic about 5 years for that time frame. And we do expect that there'll be one to four clinics per target market. One to four clinics per target market. Again, you could base that on the population size of the area and how many physicians there are to serve. Moving on from our clinic -- our target market clinic expansion strategy. This is our plan from an R&D perspective. We've got four key launches that are expected to happen in 2024, and if you take a look at the picture on the bottom right, there's a button and then there's a phone beside it. That is a sensor that can go inside of a scoliosis brace today and then it's connected to software, where the software can provide our surgeon and the partners within the physician setting compliance data. One of the biggest struggles with bracing is that we know bracing works, but it's hard to have compliance with patients and to know they're wearing the product. This sensor will help give that surgeon information about how that patient has been progressing and wearing. The key part of that is as the next step, not just in our scoliosis brace, but we're going to be able to apply that same button into our other bracing products. So as an example, think about our clubfoot products today. And you need to wear that product 23 hours a day immediately when they start to go into the boots and bar. Being able to put a sensor in there that provides the physician real-time data on how they're progressing and how the treatment is progressing is so critical as we move forward. And then we'll be able to apply that sensor in other bracing modalities. Our pipeline is extremely large in terms of what we're pursuing and what we're investigating. And when I smile about that, it's mainly because I feel like every week, including this morning, I got a message of someone who's got some idea on a product that should be developed in this space and they want us to have -- to take a look on how we can advance it. Last on the strategies. Talking about 2016, our T&D business, we didn't have the power of scale and growth then. We're in that phase now for our OPSB business. We have to double the size of this channel over the next 3 years, and that includes both sales representative and international distribution networks. In doing that, those people have this job where they're going to go hand in hand with our hardware, our implant representatives and be introduced to the surgeon from a relationship standpoint, relationships that have been built over 15 years, and then from there, the implant rep and as you heard from Greg and myself, we've got a pretty ambitious agenda for our implant representatives. We can't have them distracted by this other business. So they'll get back to serving the physicians on an implant perspective and then our OPSB sales reps will become the subject matter experts for all bracing. And as a secondary piece, they'll also be working if they have a clinic in their backyard to increase referral basis of today to bring more patients into those clinics. The best testimony to success and a guiding principle that we have at OrthoPediatrics and a principle that helps us make decisions, hard decisions pretty easily is we ask ourselves, "Would you want this product to be on your own child?" And if there's hard topics that's in front of us, it makes the decision so easy when you're talking about quality and other issues that can come up. And so for me to hear a story that I want to share with you, a surgeon Dr. Kaushal, who is out of New Jersey. He was in Miami with his family. They were on vacation. It was the morning that they were coming home. They were frantically packaging, getting ready. He has two children, and his 7-year-old son fell off the bed and landed and was hurt. They were still frantically packing. He went to his son, he realized, I don't know what assessment will be done quickly from a physician's perspective but he realized everything was in order and crying had stopped. So he wanted to get on the plan and get home because he figured that would be the best way to get care for his son. Carried his son, held his son for most of that trip home, got home, immediately went into one of his partners under x-ray and you see the x-ray up here. This is a mid-shaft spiral femoral fracture in a 7-year-old boy. He had heard about our dynamic femur fracture brace. And had remembered that, hey, if there was a way not to put a spica cast on, I would like to entertain that. So he called his trusted partner. Who's name is Karen, who is a Boston Orthotics & Prosthetic orthotists. And she happened to -- this was early in the launch. They happened to have the product there already, and they are able to put the DF2 brace on his son. And from there, it took about 5 to 6 weeks, he was able to start walking again and ultimately healed. And Neil had made the comment that it was just so much easier to be able to remove this brace, to be able to clean and to process through the child healing and not have to have a hip spica up. So this is the summary. Here's what we're doing. First and foremost, we want to help more kids, two kids that you saw videos and stories of today. We know this is a large market for us. We know it's a $500 million TAM today. The bottom right chart in our pipeline of product development, things that we're evaluating today with business cases we estimate that there's an additional $1 billion of TAM to go after. Now we don't have those products out yet. And as we go to launch those products, that's how we'll get into a spot to say that we're gaining access to the additional TAM, but just in a quick review, there's a large market. I did not talk about the international business at all today. Quite frankly, we don't want to get too far ahead of ourselves. But we have a handful of calls that have already come in from some key markets that they want a clinic and they want the OPSB business in their backyard. We're really excited about that opportunity, but we've got a big job ahead of us to get the goals done that I laid out in front of you. And that is our 18 new markets, new target markets by the end of 2027, that is an increasing cadence of product development to meet some of the unmet needs, and that's our ability to double the size of our sales channel in that same amount of time. And this is probably my dream is that every hospital in the U.S. and across the world has a little OPSB clinic attached to it, and this would be our vision as a whole entire team is to have this type of care available right next door. Thank you.

Thank you, Joe. Now we're going to transition to our KOL panel. And so I'd like to introduce Dr. Josh Hyman, who's the professor of Orthopedic Surgery at Columbia University Medical Center. And Dr. Dominick Tuason, the Assistant Professor of Orthopedics and Rehab at Yale New Haven Children's Hospital. Gentlemen? Thank you both for taking time. I know it's tough to get in and out of the city. And I know both of you have patients that are eagerly awaiting your arrival in clinic. So I really appreciate you guys taking the time. Maybe you would kick us off, Dom, and just talk a little bit about your practice and the kinds of patients you treat and your background, educational background, all of the above.

Sure. Thanks, Dave. I'm Dominick Tuason. I currently practice at Yale New Haven Health. I've been in practice as a pediatric orthopedic surgeon for the past 12 years. My educational training, I went to Johns Hopkins, undergrad University of Pennsylvania for medical school and then did my orthopedic residency training at the University of Pittsburgh Medical Center. And then subsequently did a 1-year fellowship in pediatric orthopedic and scoliosis at Scottish Rite Hospital for Children in Dallas, Texas. Started my practice actually at Rutgers in New Jersey, but then transitioned a little further north to Connecticut about 5 years ago. My practice profile, I currently predominantly take care of kids with pediatric spinal disorders. And that includes the entirety of kind of what Greg presented on, including early onset scoliosis, do about 100 scoliosis procedures yearly. But like has been mentioned already earlier this morning, also treat a number of children with braces who want to stay out of the operating room, as already has been alluded to. So that's my background.

Thanks, Dom.

Okay. So I went to Medical School of Columbia, and then was in Boston at the Harvard Orthopedics program for my residency training and then spent a year at Toronto with The Hospital for Sick Children from a pediatric orthopedics and then came back in 2000 to Colombia. And have been there since at the Children's Hospital of New York. When I arrived, there was one other pediatric orthopedic surgeon. And the impetus for my coming back to Columbia was to have the opportunity to help and develop the pediatric orthopedic but we are now pediatric orthopedics surgeons. I did spine surgery for about 17 years and pivoted to focus practice on neuromuscular conditions and deformity. So I'm the Director of the Weinberg Family CP Center, a fellowship director with respect to education in pediatric orthopedics. I run the clubfoot program. And I'm very happy with what we've been able to accomplish in these last 24 years at OrthoPediatrics.

Great, thank you. So we talk a lot about our cause at OrthoPediatrics and it being a purpose-driven company. And we also talk about how pediatric orthopedic surgeons by and large, are just different. There's a different driving factor of how you treat patients and why you treat patients. I'm curious if you guys would be comfortable giving of yourself a bit and talking a little bit about why you chose pediatric orthopedics and hopefully, why you like your jobs and continue to do the work that you do that is very challenging in a tough patient population?

Well, I think the story of Olivia is an impactful one, right? That being in medical school, I initially thought I was just going to go into general pediatrics but then saw that orthopedics was a way by which I can really have a measurable positive impact on the lives of several hundreds if not thousands of children, hopefully. And so that was really the impetus for me is that there really is a lot of kind of purity to be able to impact a child's life positively and a lot of joy that comes with these opportunities. So I do get out of bed with a lot of energy each day because it gives me the opportunity to have numbers of positive impacts on different kids throughout the day. So it's very fulfilling.

Right. So I agree completely with what Dom said about getting up in the morning with a lot of energy. I came out from a different -- I wanted to be a surgeon and I recognized what I really liked were kids for multiple reasons. First of all like thought, I think everybody likes children, most of us do. They do really well. They're enthusiastic. They, for the most part, [Technical Difficulty].

Thank you. For the most part, they do very well but also the conditions that afflict children are fascinating, the congenital issues, the developmental issues. Frankly, they're really fairly esoteric. They are very unusual. You've gotten a sense of that, I think, from the beginning of the talk. In general numbers, you don't come across these children on a daily basis in your lives. However, in children's hospitals, this is all that we see, all that we do. When you combine that within a country the size of the United States, the numbers do become quite large, but they are focused. And the care of these children is really focused in centers. So I really came about it I bet, but I think most of us do for selfish reasons, it's just a lot of fun and a lot of personal satisfaction.

I appreciate it. So one of the things that we get asked often from investors and our analysts is to discuss the environment inside children's hospitals. Certainly, this has been a trying time for the health care system overall, with COVID, we saw ridiculously high levels of RSV, something that you guys probably saw often in your practices, but something that had -- in the many of our hospitals had shut things down a lot. And it's been very, very difficult for us to predict when these things are going to hit the business. Seems like things have gotten better. We had a good summer. But I'm curious as to how you guys have seen the rebound, what you think about the surgical environment, are cases getting done at a reasonable pace, staffing back up to speed? What's your thinking on that now?

Well, I think we're most certainly out of whatever low we experienced during the kind of 2020 and the immediate aftermath of COVID. We, for unrelated reasons did an audit of our practice at Yale and have found that our case volumes have nearly doubled in the past 4 years. So I think we're certainly out of that low for sure and that's great. Efficiencies, I think, can always be better at our children's hospitals. If anything, we're struggling to get on always trauma -- I mean I think one of the things that seems to be universal is that kids will not struggle to find ways to get themselves hurt and need someone like myself or Dr. Hyman to fix their broken bone. So that definitely has remained pretty busy for us. And so I think that's been our perspective at least.

Yes, I agree. Our volume has exceeded where we were in the beginning of 2020, in part because we have new people onboard, but just on a surgeon to surgeon level, we are all busier than we were because our practices have been growing and the hospital is back up to capacity. We are impacted by RSV seasonally, but that was before COVID. Thankfully, we and orthopedists have been able to get most of our work done, but occasionally, some procedures are canceled because it is not bed availability. That doesn't really impact us very much, though.

And what do you guys see from a dynamic perspective in terms of referrals and not maybe specifically into your hospital. I know there is some competition, obviously, for referrals. But what do you see in terms of these patients and the trends of these patients that may have historically been seen in the community and now maybe moving towards more and more specialized care with people like yourselves that are experts. Is that a trend that is a positive trend in our direction, something we can expect over the next 10 years? Or do you see surgeons in the community trying to wait into some of these very difficult conditions?

I think that for the most part, adult orthopedists who are not trained specifically in pediatrics, want nothing to do with being on the wrong side of doing maybe something wrong, not intentionally, but just so my adult partners are always, "Please take care of this because I have no idea how to deal with the growth rate", right? So I do think that the general trend is -- and we did a study on this one when I was at Pittsburgh with Tim Ward. One of my mentors there. It shows that there's, I think, going to continue to be a sense of wanting to take these patients and ensure that they're cared for by the right people and people with the subspecialty training in and pediatric orthopedics.

Yes. And I agree completely here and you looked at the maps of where OrthoPediatrics is focusing their attention. And you see these big blue blobs up in the Northeast and down in Southern California and parts of Florida, it's really where the population centers are. That's where the pediatric orthopedists are, where the children's hospitals are. When I first came to Colombia, I wanted to do to develop a base of research. I didn't have any patients to look at so you do these large datasets. So one of the things that we focused on was penetrants of pediatric orthopedic surgical care. We looked at complications associated with pediatric conditions. And we showed that the majority of pediatric orthopedic treatment was actually done by non-pediatric orthopedic surgeons nationally. This would have been the 1990s data. The majority of complications that occurred were done in non-pediatric centers. And over the last 20 years, we've gone back and looked at these datasets with new years, and that trend -- those trends are changing. More and more care is being done at pediatric centers, complications still are occurring outside of pediatric centers.

Yes. Good, thank you. So let's transition a little bit to products and some of the technologies. You guys probably had a pretty good idea of what you're going to see on the slides, you have known the company for a while. But love to hear your reaction so far to what you've seen what you know about the company in terms of the product development? And I guess I would start with a question of maybe sharing with the audience your experiences with OrthoPediatrics both over the course of the last several years of your career and then a bit of a reaction to what was said so far today.

Yes, I'll start by saying that. So I've been using OP products for the entirety of my career for 12 years and kind of we need to see the journey from kind of the infancy to kind of where you guys are currently. And I use the RESPONSE system for fusions, I use the ApiFix, I use the FIREFLY technology for some of the more complex spinal deformities. And I think that one key differentiator among OP versus other orthopedic implant companies is kind of similar to why there's a loyalty for some people to the Apple brand, right? Instead of starting with beautiful products that they make, they start with why they make them. They want to think different and they want to challenge the status quo. Likewise, here, you don't start with the shiny gadgets, it's why do we do it? What's the impetus for it? It's to help make better lives for children with orthopedic conditions, and then everything kind of emanates from that. Even the rollout of ApiFix is a reflection of that by collecting all these patients and registry studying their outcomes and making sure they're getting good outcomes and if they're not, improving the product in order to ensure that the product provides the outcomes of the highest fidelity and the highest quality is really at the heart of the why. And so for that reason, I mean, unless OrthoPediatrics doesn't really offer kind of like the Medtronic Shilla, which is going to be the -- competed by the VerteGlide. OP is my go-to implant of choice for that reason because I think that brand loyalty kind of comes from things that resonate deep inside you.

So my career so practicing orthopedic surgeon predates OP. And I would remember vividly working -- trying to work closely with Synthes, Smith & Nephew to develop products specifically for kids. They are very enthusiastic and receptive to bringing in their preexisting equipment that I can use, they were less receptive about designing new products. So I spent a lot of time bending plates, cutting plates, bending rods, cutting rods to try and accommodate children. Soon as OP came into -- before OP came into this, I was aware of this fomenting and started working with them using their products from the beginning, and it was a breath of fresh air. They -- as you've heard, they are the only equipment manufacturer that is solely devoted to providing products for children. And similarly, they're also providing education to children. And it's been fantastic. They are wonderful supporters of pediatric orthopedists as well as children. I'm very enthusiastic to hear about their movement into the O&P space. It's not sexy but it is vital to pediatric orthopedic care. I've had the tremendous good fortune of working with really good O&P services. I work with Boston brace throughout my tenure in the '90s in Boston. And then at SickKids, we have a terrific O&P program. And now at Colombia, we have, over the last 20 years, developed a very strong O&P program, and it's vital. I am well aware of other fairly large pediatric orthopedic centers that don't have this. And it's very difficult to practice. It's not terrific for the patients, and it can be a point of frustration as well as bad outcomes. So having this is really going to make a big difference. And that was a -- I'm enthusiastic for. And then, of course, any new product that is going to solve the problem that we have. And there are a lot of problems that are yet to be solved will be welcomed.

Talking about products, what are some of the products that you have experienced with Dr. Hyman through OP, maybe some of the products you don't or the indications that you treat that orthopedics doesn't have a good product for and you'd like to see us expand into?

Well, I use their trauma equipment predominantly for trauma. I use their deformity equipment. I helped to design one of their plates. I -- for tibial trauma, I use other nails because this nail does not exist yet. The main other company that I work with is NuVasive their precise femoral lengthening nail, which is a similar technology to what you had heard about before that is -- that's a magnetic lengthening device in the spine that now OP is going to have a different technology, but similar concept. There's a device that goes into the femur to lengthen bones, goes into the tibia to lengthen bones, that's magnetically controlled. It has revolutionized the treatment of both deformity as well as limb differences, limb length differences. But OP doesn't have that yet. And I did not see anything on the screen about that.

I'm talking directly to Joe. We're not sure what he's waiting on.

It's coming on, right?

But I wish it was close enough that we could see it on the screen.

And Dr. Tuason, you saw a lot about the U.S. portfolio. And our strategy here in penetrating accounts where we may not have as much of a footprint with our Fusion device but thinking about being able to treat these very complex patients. I assume you treat these types of patients in your practice and what is the state of art right now in early onset scoliosis space across the few products that you have available? And what's your reaction to our investment in that space?

Yes, I think it's a wise move, right, to come up with, again, not repurposed adult implants that we try to modify to use in kids, but rather to look at some of the shortcomings of the existing implants that are used to treat a very difficult problem to enhance the product and to make it specifically geared toward children. To take your knowledge of what's going on with the Shilla and why it's sometimes a negative in terms of wear debris and having metallosis with motion as this screws slide along the rods and to improve the new manufacturing and the polishing of the surfaces to avoid that under VerteGlide and likewise, to see that some of the drawbacks of the magnetic power technology in the spine to improve upon that with the Valley. I think those are really wise moves and again, reflect the mission, which is to improve upon some of the current existing products to design products that are made specifically for kids and for surgeon to take care of kids. And I think that's a great way to kind of break into the market for places where you're not necessarily seeing a lot of fusions right now. But I think it gives you the opportunity to demonstrate some of the capabilities and features that are unique to the Fusion or the RESPONSE or the newer iterations of the RESPONSE. So I think that's definitely a wise move.

Okay.

And just another comment about the other companies that I've used the other products. 10 years ago, I might have been using on a regular basis, products from 5 or 6 different orthopedic companies. The hospital doesn't like that as maybe you're all aware, hospitals want to have contracts with fewer hospitals. They have more leverage, they have lower pricing. And peds, they are a bit more understanding and they would allow me to bring in pretty much whichever company I needed at the time. Over the last few years, that's changed. I am now using an external fixator, deformity correction device that OrthoPediatrics has. I am using more of their plating systems. There are unilateral external fixators that are coming out now from OP that I'll be using. And I'm really now only using two other companies on a regular basis. And I know that from an inventory perspective, the hospital is appreciative as well as from a contracting perspective.

Sure. And just kind of closing the loop on some of the implant side. What are the factors that you guys consider when trying to decide what implant for what patient and how you would align with the company?

I mean, I think it's really just boiling down to for each specific individual case or a circumstance, what is the right implant for that patient. And I think that seeing that the repertoire, they -- what will be offered by OP in the future makes me excited about kind of some of the neuro technology for sure.

I think that there are certainly certain products that are unique to OP when getting Pega Medical, for instance, that was tremendous. Those are very specific implants for specific conditions that no other company has and have made care of some of those conditions much easier. The other factor that goes into it is the representation within...

I was hoping you're going to say that.

Within the operating room. Again, over the past 25 years, I've had the opportunity to work with a number of companies, and a number of representatives. And that old thought about salesman selling themselves, not the product, is really very true because some of these products are unique, but the majority of them are a commodity and the sales forces is critical. And the people that I've worked with at OP have been the same people for a very long time, and they have been tremendous provide -- we're being reliable providing instrumentation. They are very helpful to the nursing staff, the other staff within the hospital. And from an educational perspective, they are terrific with our residents. They provide us with a great deal of educational service, and they've been very receptive and easy to work with.

That's great. Well, I was actually going to go there next. And Tim Hinspeter is with us today. Tim has been, I think, the sales agent in both of your regions for 15 years, been with the business for a long time. But you may be the brains behind the organization, but I think there's people locally that are with you guys very consistently. I mean how has the impact of having somebody that's reasonably knowledgeable, hopefully, the people that you work with? I know them. I know they're reasonably knowledgeable, but it'd interesting to just hear how that relationship has developed over the years with Tim, with Tim's team and how they're able to support. I mean, these got to show up at any time of the day or night or yes I'm just for the greedy ones that are...

Absolutely, I think that one of the things that's most impressive about the company is that there's continuity, there's staying power. There's not a lot of turnover. Rob Tyler, my rep at Connecticut has been there for the entirety of the 5 years that I have been at Yale and then prior to that, Brian McKenna at Rutgers is the same OP rep that was there for 7 years as well was at Rutgers. So I think it says something about the company. And again, I think OP has done a wonderful job of recruiting like-minded and mission-oriented people who care about the why more than the what and I think that, that it kind of reminds me of how Walmart was when Sam Walton was the CEO there. He took care of his people, and it showed in the way that, that company grew because it attracted people who were attracted to their mission. And maybe it's a different time now. But I mean I think that likewise, at OP the leadership is, again, so cause-oriented and mission-oriented that everything kind of flows from that. So I think that, that -- but I see it on the front lines every day because he -- Rob Tyler is there whenever I need him. I mean -- and I think he takes ownership of the patients just like my residents do and just like my nursing staff does. So he's like a fully integrated member of my team.

Sure, that's great.

Yes. And I agree completely that not only do they recruit wonderful people, but they also promote them. So I've worked with two representatives in the last almost 20 years, well, 15 years. One of them has moved up within the sales organization now has his own regional territory. The other person that I've worked with now for how many years Josh, for 4 years is magnificent. And yes, so you want somebody who is reliable. They will be there with the instrumentation, they are knowledgeable. They -- some of the instrumentation that does come in the new stuff is different. And not only am I maybe a little unfamiliar with it, but certainly, the nurses are unfamiliar with it. And uniformly, the reps are well versed in it, comfortable. They are very gentle with how they impart their instrument knowledge and experience which is really...

That was not accountable but we know that Josh and Rob are...

Yes, yes, Josh and Luke have been fantastic. And they have a great rapport with the nurses, which is a big deal because there's a little potential tension because they're not hospital employees and they're not part of the culture in that sense of the operating room. But in fact, they really have become. And there's no question because I see this every day. They have a different relationship with the staff than some of the other reps do.

Yes. That's great. So we touched on the bracing. Obviously, we talked about that. I think I know the answer to this question, but how much time -- and both of you guys are busy surgeons. But how much time and what percentage of your patients are ultimately racing candidates, whether they are preoperative, postoperative I assume you both would avoid -- like we would want to take kids to the operating room, but give us a flavor for the percentage -- what you see in clinic. I mean all these kids aren't going to surgery, right? And so what does that look like in your clinics?

I think for me, probably I see 40 patients in a day, maybe 20% of them are surgical candidates, another 50% are just observation and I hopefully it does not progress and another 30% are probably bracing candidates at the means by which to hopefully prevent the need for progressing to a surgical magnitude. So it's a pretty big percentage.

And even that patient population, I mean what percentage of the patients that have surgery, maybe outside of scoliosis more acutely they ultimately go on to have some kind of device postoperatively?

Oh, yes. I mean a pretty significant number at least a quarter. Whether it be like a foot correction that needs an AFO afterwards or a patient who has a procedure that may need sometimes a spica cast sometimes a brace, but that might be another application for the DF2 down the road, who knows and right now, we're exclusively using it really for our pediatric human raptors, but there might be other applications for in the future, too.

Yes. I would agree. I'd say about 25% of my operative patients need some form of a mobilization after surgery. Traditionally, it's been casting, but we're moving more to bracing. It's nice. It's easier to remove a brace in the clinic than it is a cast, Kids don't like cast saws. So if you can avoid that, it's a benefit. As far as kids who don't get surgery, but have bracing only as a person who's a large portion of my practice is focused on neuromuscular conditions. The vast majority of those children have some form of bracing and again, I've had the good fortune of working with terrific orthotists. And the brace -- the manufacturer of that brace, the fabrication of the brace is as important as the performance of a surgery. You have a poorly done operation even if it's a great theoretical procedure, it's not going to have a good outcome. If you have a brace that's not manufactured well, it's not going to work well, you won't have a good outcome. So having quality orthotists is really important. And having a relationship in the clinic between the orthotist and the surgeon is vital.

Yes, absolutely. So I got two other topics I'd like to touch on before we depart here. We haven't had Kevin talk about enabling technologies yet and some of this is very new products that probably neither of you guys have been exposed to Playbook, for example. But one of the observations that we make is that these adult hospitals that are performing mass quantities of the same procedure and over and over again, working really hard to drive efficiencies in those outcomes, efficiencies in our OR times. Easy to collect a ton of data on that patient because there's a lot of those surgeries done. In any given day, one of the things we always talk to people about is that pediatric orthopedic surgeons do a lot of surgery but don't do a lot of the same surgery over and over and over again. I don't think there's anybody I know of a pediatric orthopedic surgeon that does 800 of any 1 procedure. There's probably five people here locally that are doing 800 total hips or total knees. And so the investment has historically been made on enabling technologies there. We've seen it more credibly deployed in pediatric spine surgery, although generally not specific for pediatric spine. But just the general thrust of the marketplace, where do you see enabling technologies, preoperative planning, these types of technologies fitting into your practice or not fitting in your practice as you think about that over the course of the next 5, 10 years?

I mean, for me, as someone who does benefit from doing a lot of repetitive surgeries with AIS, I will say that I think I view part of my job as being a little bit of a choice architect for families, and it would be great to be able to -- and I kind of do this on a rudimentary level by using my own database of saying, "Okay, your daughter has a 60-degree curvature in this region of the spine. Here's another patient or here's my collection of patients who had the same curvature. Here's what I can produce for you radiographically, here's what your child's SRS 22 patient reported outcome score looks like preoperatively. Here's what my average postoperative SRS 22 scores after fixing this type of curve looked like, but it would be great if down the road, we could use leverage AI or enabling technology to make it easier for me not to even have to go through my laptop and check they can just look at a screen and say, this is what it's going to look like if your daughter has surgery". Or conversely, if we decide we're not going to have surgery here's what the future looks like because this is what the SRS 22 scores looked like for that patient. Or if we're a different patient got a 30 degree curvature, here's what it looks like if we decide to use a brace and here and if you wear the brace this number of hours a day, we're using the data from the -- show them the button. Here's what you're going to look like 5, 10 years down the road. So if I can do that on a day-to-day basis with each and every patient encounter, I think it's a little bit more impactful and gives patients and families more concrete information when they're trying to make these decisions in real time.

Yes, can imagine that. Dr. Hyman?

So one of the reasons I went into orthopedics was because I couldn't decide what type of orthopedic surgery I really wanted to do, whether I wanted to operate on the upper extremity, lower extremity, spine, and pediatric orthopedics, ironically is sort of the last realm of the generalist. During the last 20 years, that has changed. We are becoming subspecialists. And Dominick is a perfect example of that, and I have two partners who all they do are spine surgery. I still have, in my mind, the good fortune of doing a multitude of different procedures. And -- but with that does come anxiety and there's, we don't get a lot as nearly as much focused assistance from companies with technology to help us with preoperative planning, with education within the clinic about what to expect, what the patients and families can expect from the procedures. There are disparate pre-op planning programs available, bone hinges is the one that comes to mind. That are really helpful. But again, it's not within a single portfolio. And if that could happen, that would be helpful. The other thing we didn't talk about is 3D printing. 3D printing has become very big in spine surgery. It's becoming bigger -- I do a lot of pelvic work. Any complex structure is nice to be able to see that what it looks like 3D. We had a 3D printer at Colombia and then it broke and now we don't. But our spine guys, they get everything 3D printed because Medtronic does it for them. And that's something that I would like to get back to.

Yes, I can imagine. Well, last few questions. You're both educators and I have worked with residents and fellows and both of you were residents and fellows at a time yourselves. We talk a lot about clinical education. I think it's -- so we believe it maybe is the most significant contribution that we can make. We talk about the number of children we help and then you recognize that it's not just a kid as you guys well know, there's moms, there's dads, there's brothers and sisters. It's a big impact potential across the board. And then you talk about the capacity to educate and the impact potential that educating people has, and particularly in this country where there's pretty solid knowledge and education but even be able to scale that digitally to the Rest of the World. How important is the investment that we make? Are we making the right investments? What has been your experience both at your hospitals and maybe Dr. Tuason, over the last 12 years, you're a surgeon who's grown up really with OrthoPediatrics. When did you first experience that? Was is it good, bad? Just really interested to hear both of your commentary on that.

Yes. I think that you're exactly right, Dave, that the investment in education is so, so worthwhile in terms of making an impact and indirectly getting brand name out there. But I think more specifically, just knowledge is power and being able to impart knowledge is really a very impactful thing. And that again, just referencing Rob Tyler again, the fact that he is such an integrated team member and such a good teacher, Josh alluded to with how his rep teaches his nurses and his residents and Rob's very much the same way. I have saw bones and these events where we have the opportunity to maybe sometimes in a less stressed environment, go through different techniques, procedures, the nuances of different OP implants so I do think that, that investment in education is still worthwhile.

Sure.

So when I was growing up, the AO, which is the education arm of Synthes, it still is the education of Synthes was the primary teacher of trauma care worldwide. And people just thought of trauma equipment as Synthes equipment, it was thought of as a generic brand. So from a marketing perspective, it was terrific, but more importantly, from an education perspective, they were doing great work. Over the years, that has faded. OrthoPediatrics, if you look at their sponsorship of educational forums, I'd say, they are punching far beyond their weight. . I think if I were an investor, I might not be happy with how much money they spend on it. But as an orthopedic surgeon, I am very appreciative but you do also notice it. So you recognize kindred spirit and you're appreciative and you do wind up paying more attention to what it is they're doing, what they're bringing to market and of course, then more willing to use it. I've been -- I've had a good fortune of being involved in educational activities both internationally, nationally, regionally and locally with just within our hospital sponsored by OP and worked closely with them, and they are terrific.

Great, thank you. So last question this is a risky one for us here. But you got the entire executive management team at OrthoPediatrics and we are on the spot, right here in front of analysts and investors what things do we need to be doing for you guys and for your colleagues over the course of the next few years, what directions would you like to see us go from a technical standpoint, an unmet need standpoint? How do you see the next several years evolving?

Well, I think you're working towards it, right? So I mean, in my current practice, still the areas where I'm not using OP would be the growth guidance and the real control is growing rods for example. But the technology developments that are upcoming and the eLLi and the newer kind of VerteGlide to be released soon. I think we'll meet a lot of those unmet needs. And I think it's just continuing to keep an eye on the mission is really the main thing that I would say that is going to be the separator and distinguishing factor of this company is that continuing not only to make great products, but to understand why you're doing it and make that be your fuel that drives you every day, I think is the main thing that I would say, and that's what attracted me to OP in the first place, and that resonated me from the get-go. And will continue to do so.

I appreciate that.

I think that Joe, Greg and Tim have heard me over the last 15 years, all of my complaints and concerns. OP had great heart from the beginning. They didn't always have great products. Their products now though really are terrific. The plating systems, the roding systems, the deformity systems are finally there. Now they just have to get finally disseminated more broadly. I'm happy that they're refining their plating system, the P3 will be great when it's available. As I mentioned, I'd like to see a self lengthening nail. I'd like to be able to use an OP product rather than a NuVasive product. I'd love to see 3D printing available because a lot of the things that we deal with are kind of weird looking and it's nice to have it in your hand before you get to the operating room.

Okay. Well, gentlemen, thank you very much. Really, really great, and thank you for coming in, and hopefully it's...

I appreciate the opportunity to be with you, guys.

Now I'd like to introduce Kevin Unger to talk about our enabling technologies business. Kevin?

Good morning, everybody. Actually, it might be good afternoon. Either way, it's good to be here with you all today and share a little more depth about the enabling technologies business to you. Read about and heard about this morning. I've met some of you, although not very many of you. So a little bit about myself. I think Dave mentioned at the beginning, I'm familiar with OrthoPediatrics having been on the Board for 11 years prior to joining the company as the President of the enabling technologies business and to really incubate and start a new division within OrthoPediatrics. Prior to that, I spent about 15 years, the majority of my career was at Stryker. Last 5 years, I ran their technology businesses and some of the -- I guess, the term maybe wasn't digital health back then, but digital health enabling technologies and the technology side of the business in Dallas, Texas. So familiar with this space, really, really kind of have a passion for technology and using technology to solve problems in the operating room. I've had the opportunity to see the impact of that with -- I have five children. And one of my daughters had a fairly significant tumor in her hip and was able to use navigation and some other technologies to really have a great outcome for her. So I have a passion for this, and you'll probably feel that and hear that as we as we talk about the business. My purpose for today really is not to get real deep into the technology. I know that we don't have time for that, but really to talk to you a little bit about kind of why enabling technologies, what we're doing, a couple of the platforms that we're launching and then how we intend to contribute in a meaningful way over the next 3 and 5 years to the OrthoPediatrics' broader strategy and growth trajectory. So you guys are all familiar with the left side of this graph. You guys know the orthopedic space. You know how big that market is, how it's growing, it's sizable, and it's been a great source of growth and really for this business for a long time. The green sliver there is really intended just to show that we have a very precise focus on pediatric care. You've heard that over and over today. But what you're not maybe as familiar with is the circle to the right, which is this kind of larger and very rapidly emerging digital health Enabling Technologies business. Although the products aren't the same, and we're not snipping rods and plates to access this market. We also feel like there are significant unmet needs in digital health enabling technologies that exist. Very similar to what we've seen in orthopedics over the last 15 and 20 years. And so we feel like we're well positioned to access that market. We feel like our competition is probably not paying attention to that, similar to what you guys have seen from OrthoPediatrics. And so we're really excited about that. And at the end of the day, it's the same cause. It's the same customer. And our goal and purpose and focus with this is how can we help more kids, how can we access this market and help our colleagues that you heard from up here just a few minutes ago. So let's talk a little bit about the pillars for our success. I think whenever you access a new market or have a start-up business as this is within OrthoPediatrics, especially when it's a very large market, $100-some billion, some people may say it's over $200 billion. The challenge in the risk is that if you don't have guardrails, you can get very distracted by shiny objects and chase kind of anything that comes your way. And so we have these four strategic pillars that we're really focused on. First one is just to improve surgical care efficiencies and outcomes focused solely on the pediatric space. We feel like digital health and enabling tech can have a real impact and is going to continue to have an impact and grow over the next couple of decades. We want to create competitive advantage. You've heard Joe and Greg both of them had segments of their slides where they talked about digital health and surrounding implant technology with digital health with data, with technologies that can really create competitive advantage for sometimes implant markets that are -- that struggle to find differentiation and competitive advantage. So we really want to bring that to OrthoPediatrics and focus there. We also want to use digital health and enabling tech to access new markets. You're going to hear a little bit about that today as I talk about one new platform that we're preparing to launch in the coming months. But we feel like we are positioned well to access areas outside of orthopedics as well as we think about expanding and helping 1 million kids eventually per year as our goal, we know we're going to have to branch outside of just orthopedics. And then finally, data, data, data, you hear it from a lot of the big orthopedic companies, a lot of people are talking about it. Very few people set aside an entire business to focus on building data competency, data analytics. You heard some of that from the surgeons up here. And so we know that this is a big part of the growth in health care, artificial intelligence, machine learning, data analytics, these are words that are buzzwords currently, but unless you bring focus to it and you act on it, you're not going to develop competency there. And so these are the four areas that we really are intent on and kind of chalking the field. We feel like if we do a great job in those four areas that we can build a sustainable growth engine that continues to spur along the growth that you've seen from OrthoPediatrics. So let's talk a little bit about the products. Again, I'm not going to go into a ton of detail on the products, but let's talk about kind of where we are today and what you guys are going to see in the next 6 and 12 months coming out of the Enabling Technologies business. There was a mention of 3D guides. You guys know about FIREFLY and 3D-Side, some of those relationships. Those products have really helped in some of the challenging anatomy and procedures where there's some additional technology that -- some of these technologies were used on my daughter. So I have a great appreciation for what that means to have precision and accuracy. And so we're really excited about that. We've seen nice growth there over the last few years. As well as surgical navigation. You guys are also familiar with this technology. We've been able to penetrate new markets with this. We're excited about the fact that it's a low-dose radiation technology while bringing precision accuracy to the procedure and improving outcomes. So both of these technologies, I would say, are enabling technologies. And there's always been some confusion about what that means, but it's basically taking a procedure that could be done without this technology and enhancing it, trying to produce better outcomes, more precision and less variability in the procedure. So we're excited about both of those. We're going to continue to develop there and access the market and grow upon that. One of the first digital health technologies that you're going to hear about from us is called Playbook. Playbook is the surgical workflow and outcome optimization software. I've got some slides coming up or one slide coming up to dig a little deeper here. But we're really, really excited about this. You heard Dave mention it. And we feel like this is a meaningful part of our advancement into digital health and helping create efficiencies and more reproducible outcomes in the operating room. The second one that you're going to hear us talk about, and I have a slide on this to go a little deeper, is a robotic platform for cochlear implants. So this gets us out of orthopedics and into the ENT space, very, very similar concept here with unmet needs from surgeons, a need that was brought out of really surgeon requirements and surgeon demands and so we're excited to really leverage this platform. We've partnered with a company called IotaMotion, and we're going to be accessing this space upon full pediatric indication in 2025. So let's take a little deeper look at Playbook and what that is exactly. You heard me talk about surgical workflow optimization. And I'm certain some of you are saying, what is that exactly? What does that mean to me? What does that mean to the surgeon? Believe it or not, when you look at and think about preoperative planning, many surgeons out there today are using the entire Microsoft suite of products to do preoperative planning. They open up a spreadsheet, they document what screw size and trajectory and all the different variables around screw instrumentation. They open up a word document and type in the operative notes around how they want their OR set up for a particular procedure. They open up a PowerPoint and copy and paste maybe an image from their PACS system so that they can mark up and meet with surgeons and residents, and then they send out text messages and e-mails to try to make sure the team is all coordinated around the plan of care. That's a challenging environment for many reasons. First of all, there's no opportunity for data collection around any of that. It's a very manual process. There's all kinds of holes in the way of how you collaborate and how you make sure that everybody is on the same page. And it's not an end-to-end solution that you've heard people talk about up here today, meaning the preoperative plan doesn't connect to the intraoperative workflow, doesn't create a platform for gathering data so you can analyze postoperative care and then loop back through machine learning and AI algorithms to make sure that we're driving toward best practices. As you can imagine, with the suite of Microsoft products, there's never going to be an opportunity for that. So what Playbook is that end-to-end solution that has preop planning, allows the surgeon to still have their art and craft so that they can take and be creative around how they preoperative plan a specific patient. But then that generates a very specific workflow around that procedure that the entire team can follow and track. It also has contextual collaboration, so you can have other colleagues and residents, fellows that can enter the procedure, land on the right page with Playbook. They know exactly what the step is, what the plan was. They can see visualization of intraoperative imaging and have an interactive session with the surgeon. And then all of this at each step along the way is gathering data. So you postoperatively, we start to gather data for outcome, analytics as well as a loop back so that over time, we develop machine learning algorithms. You've heard some of the surgeons talk as well about I want to know whether my plan produced the result that I wanted. Currently, a lot of that's anecdotal and we hope to use data to really drive toward best practices and connect surgeons to share the best practices. We believe this is about a $200 million market. Forgive me because it is a new market and a new -- kind of new frontier, so there's not a lot of data out there. You can't just easily go find out what that is. But backing into the numbers, it's a sizable opportunity for us and we're super excited about it. This is a platform as well. So the little note that you see down at the bottom just means we're jumping off with a Phase I, but we have a very robust road map of different technologies to add. Some will require greater FDA approval as we start to get into predictive analytics around predicting what the outcome is going to be based on biomechanical data that's fed into the preoperative plan. So we're really excited about this, and you'll hear more about it in the months ahead. The second one here, I'm going to talk about is IotaMotion and the spirit of really focusing on the problem first. Let's first start with what the problem is. As you can imagine, a cochlear implant in any patient is a very precise surgical procedure. And then when you add the anatomy of a small child, there's a lot of opportunity for damage to the cochlea and to the hearing. And so when you're trying to repair hearing, you don't want to cause further damage with the procedure. And so what this robotic insertion device does is it controls the variability around force and speed of insertion. You can see some of the data there with 78% reduction in insertion force, 51% on the force, one on variability, on speed. And it relates to a more controlled outcome with the procedure. We believe this is about a $100 million market in the U.S, so a nice sized market. That does not include the implant, the cochlear implant. This procedure has great data around reimbursability, about a $35,000 to $40,000 procedure, so it's a nice growing and profitable procedure for the hospital, and we're excited to be a part of bringing technology that delivers reproducibility and better outcomes for the pediatric surgeon. So how are we going to get all this stuff to market? If that's not your question, it probably would be pretty shortly. Really, I've had an opportunity to do this a couple of times in my career, and that is to layer in a specialized sales force on top of an existing sales force with deep and penetrated relationships. And so this isn't a new model. It's one that works. It's one that's proven. It's one that I've done many times in the past. It starts with expertise. You have to hire and bring the best talent on to the organization, so there has to be great expertise there. You can see on the far left, Graham Heaven, who is the VP of Sales for EOS Technologies. He's used to bringing new technology to market. He's used to talking about capital and software sales. He's used to negotiating finance agreements with the C-suite. And so is the team to the right there who have all sold for some of the thought-leading companies out there and have had great success. So once you have the right expertise, then you have to have the right focus and the right collaboration. And so the red kind of heads that you see below, that's our 200-person sales force that exists at OrthoPediatrics currently. And so we are building a very collaborative environment there where this overlay of a technology sales force that sits on top of and helps drive a different type of sale than an implant and a metal and plastics business that's very clinical in nature. And now you've got this technology sale, you can understand that there's different expertise that are required across the board. So this is a very leveraged sales model. The team that you see up here is already in place, already built relationships with their counterparts on the OrthoPediatrics side. And so we feel like our ability to access these markets and penetrate are really enhanced by the fact that we have -- already have existing relationships and a strong brand that's recognized with OrthoPediatrics, so we're excited about this sales force. We feel like this is probably one of the greatest assets at OrthoPediatrics, is a specialized and focused sales force. You heard some of that today up here, and we're going to continue to provide that expertise and that service through the specialized model. So last slide here before we turn it over to Fred, let's talk just a little bit about outlook and expectations. You'll see market launch of both the playbook technology and the platform in the next 6 months. Playbook is going to come a little ahead of iota just because we're still waiting on a full pediatric indication that we are hopeful for in the first half of 2025. We're really excited about just continued to expand on what has really been well received by our customers, and that's the specialization around pediatrics and a sales force. You saw the team that's already there. That team was put into place last year. They've been helping to drive some of the enabling technologies that I spoke about at the beginning 7D, in particular, those relationships are there. The sales process is there. And so now as we layer on top playbook and IotaMotion, this isn't a new thought for the organization. This is something that's in existence and it's ongoing and it's already producing good positive results. And as I mentioned before, leverage that OP channel to access this market. These are exciting products. What we're really excited about is that they're new markets, they're new products, they're highly differentiated technologies. They're not me-too products in a competitive and crowded environment. This is an environment that's not getting attention from others in the industry. The adult space is the adult space and there's focus there on broad markets, Epic or some big electronic medical records company is not going to sit down and listen to these surgeons and try to come to market with very specialized products in this space. So we're excited about the new growth drivers. These are both in accretive markets, depending on which source of data you look at. A lot of people are saying that these are 20%-plus underlying growth markets, so they're accretive in a positive way to the orthopedic space. And we're really excited to access them through the technologies that you just saw today and to really become a more meaningful part of the long-term revenue growth that OrthoPediatrics has shown for the last 17 years and will continue to show for many years ahead. Appreciate your time. Thank you for listening and letting me take the path down the digital health and enabling technologies, of course, but I appreciate your time. Thank you.

Good afternoon, everyone. My name is Fred Hite. I'm the COO and CFO at OrthoPediatrics. I've been with the company for just over 9 years. First of all, I'd like to thank everybody for being here with us today. We very much appreciate your time and attention. Second, I'd like to thank all of my colleagues who are here with me today and who have enabled us to, I think, dive deeper into the ortho pediatric story, give you some more details and really expand on the multiple growth opportunities that we have within the company. As we look at the financial summary, we're going to continue aggressive revenue growth as we have historically. That is going to continue. The adjusted EBITDA is going to be greater than the set deployment in 2025. We're going to achieve cash flow positivity in 2026, and we'll show you some of those numbers and we really have started to focus on improved ROI. And that means balancing the growth of the company with the amount of cash that we're deploying to deliver that growth. And most importantly, we think we now, as of August, are capitalized to deliver on these initiatives and to move the company into cash flow positivity and then start generating cash. When we look at the next 3 years, we see revenue growing in the high teens and leveraging the cash portion of G&A. Within the OPSB business, which you heard about from Joe today, that business will continue to grow at greater than 20%. There are a lot of opportunities. We're very early in that game. You heard some of the surgeon feedback and their excitement about that business, and we see tremendous opportunity for that business to continue to grow. The gross margin of the business will be within 74% to 75% as it has been over the last 3 to 4 years. We see that continuing over the next 3 years. We will get a little bit of sales and marketing leverage just as we have over the last 3 years and we estimate that at about 1 percentage point of revenue for each year over the next 3 years. We do not plan on leveraging the R&D spend. R&D will continue to grow with the revenue growth just like it has over the last 3 years. And the true leverage in the business is going to come on the cash portion of G&A. And what I mean by that, it's all the support cost in the business, the finance department, the IT department, customer service, regulatory, all of the support functions within the business we have in place, and they'll grow. We'll have to continue to spend some more money there, but it will grow at about 50% of the pace of the revenue growth. And what that means for us is that the EBITDA margin, which is positive today, will grow by about 300 basis points, and that will expand each year and by 2027, it will be somewhere in the 13% to 14% of sales. We don't think that's where the business ultimately will end, but we do think that, that is where it should be, given our growth trajectory and the life cycle of the business. If you look 10 years, 15 years, 20 years and you compare the EBITDA margin of this business to the large OEMs, we absolutely think it should be equal to or better than the large OEM's adjusted EBITDA as a percentage of sales because of our niche that we have within the orthopedic space and the limited competition. So very excited about where the business can continue to grow. So what does that mean on a cash flow basis? As you know, this year, $8 million to $9 million of adjusted EBITDA, that is up from $5 million last year and breakeven just 2 years ago. For the next 3 years, we're committed to growing that by over 300 basis points each year to get us to that 13% to 14% of sales. This year, we'll spend just under $20 million in deploying new sets. And as Dave mentioned, last year, we had deployed $22 million, and we anticipate for the next 3 years, each year, we'll deploy somewhere between $15 million and $20 million of cash. So slightly less than we have historically on a much, much larger business. And one of the reasons for that is we're refocusing the cash into the OPS business, which does have less capital usage and a better ROI. There's also cash that is used in working capital. You grow receivables. We have to grow inventory to support these increasing businesses. And in 2024, that will be somewhere around the $20 million mark. And we're focused on improving that, even though the business will be larger, to $15 million to $20 million in the future. And while this year, we'll use about $30 million of operating cash, less operating expense -- I'm sorry, capital expense. In 2025, that will be much less. And in 2026, that will move into the positive territory and, in 2027, we'll start adding to the cash balance. Let's talk about the balance sheet. So we have a very strong balance sheet. In August of this year, we recapitalized the business and pro forma that recapitalization, we have approximately $90 million of cash on the balance sheet. We also have another $25 million that's available to us in a line of credit with our new partner. And that is something that we will probably not be drawing down on any time soon, but it is available to us in the future. And we think it's the right way to capitalize the business. This cash will be used to continue to deploy sets at a lower rate, but we'll continue to deploy sets. A lot of those set deployments will be on new products that you heard about today that will be rolling out into the marketplace. We'll continue to use some working capital supporting that growth, and we'll use some cash to support the OPSB clinic expansions, which Joe very nicely laid out to you and the pace of which are going to be very aggressive to get from 9 markets today into 27 markets in the future. Before I turn it over to Dave for closing comments, I'd like to take off my CFO, COO hat and instead put on a parent and a grandparent and a customer hat. I am very fortunate to have 4 lovely children. My oldest daughter has been married for 5 years, and I have a grandson named Oliver. Oliver is 3 years old. Very fortunate to have a grandson. Two weeks ago, I was fortunate enough to have my second grandson, [ Viet ] was born. Viet has unilateral clubfoot. So Viet is on his way as we speak right now, driving to Riley Hospital to have his first appointment with an orthopedic surgeon to have his first cast put on his foot and he'll continue to go to Riley once a week for the next 6 weeks and continue to get casted to improve the angle of that clubfoot. And from there, he'll be moving to a clubfoot product called the Mitchell Ponseti clubfoot device, which you see right over here in the room. And if you haven't been over there, I'd encourage you to go take a look at it. Viet will be using that product for the next 3 to 4 years. But the good news is, is that there's a 98% chance of success with no issues in the future because of this procedure and because of this product that we offer. So I'm very blessed to be part of this company, very blessed and very thankful that there are individuals like you who support our company. There are surgeons that continue to do excellent work in the field of orthopedic pediatrics and every single one of my colleagues around the world in what they do in supporting our initiative to continue to bring our products to more and more children around the world. So thank you very much, and I'll turn it over to Dave Bailey for some closing comments.

I'm not sure how you're supposed to top that. That's really great. Thanks, Fred, for giving up yourself that way. So before we move to Q&A, I do want to share one additional slide, and we've talked a lot about what the next 3 years of the business look like. And we also talked a lot about and we started with how long a number of us have been with the business, really as entrepreneurs starting something we think, and Fred articulated quite well, is extremely special. And you all have been supporting that story for a long time, and I think you should feel proud of the fact that we, together, have helped over 1.1 million kids. One of the things that I thought long and hard about and I think all of my colleagues who have been on this journey is, we went public and we thought about, well, what does the journey look like? Is this the end. Do we not to be able to function as entrepreneurs anymore? And what does it look like to set out a new journey? And we were very much influenced by the book of The Infinite Game talking about thinking about business is not in finite terms but as an infinite term. And I think we have always thought, early led by Mark Throdahl about being a different kind of company that was a permanent orthopedic implant company. And so when we post IPO, and I think when Fred and I took over leadership here, we started to think about what does the next 20 years look like? What does the next 10, 20 years look like? And while, it's really exciting 3 years, I think, we have a great story and something that's super executable. We see opportunities in pediatric orthopedics or in pediatric health care more broadly. Since we started this business as entrepreneurs, we have been bombarded with nonpediatric orthopedics. People outside of the pediatric orthopedic space that are in subspecialties that probably are even more underserved than the pediatric orthopedic surgeon community. And so while we think that over the course of the next 3 to 5 years, we will be able to establish a very dominant market share position, we aspire to continue to grow the business over the course of a 5- to 10-year period of time. I started by saying that we'd helped 1.1 million kids, we aspire this year to help 122,000 children, but our internal aspiration is to help a million kids a year. And so when we get asked by all of you, what inning we are in? You can do the math. We're 12% to our aspirational goal and how we think we're going to be able to do that? Not over a 3-year time horizon, but certainly over a 5- to 10-year period of time is to be able to move and -- from specialty to specialty, utilizing the knowledge and the experience that we have in starting small businesses, growing those businesses in niche space, first surrounding the pediatric orthopedic surgeon and now you hear a lot about us talking about surrounding the children's hospital more broadly. And so you see on the left of this slide, this is where we've been. Trauma limb deformity, OP specialty bracing, the enabling technology business is new. But impressionistically speaking, the opportunities exist to build businesses like this, in cardiovascular surgery or cardiothoracic surgery, in general surgery, in ENT, in almost every subspecialty. And we think that being on that journey over the long haul is what will ultimately allow us to not just treat 1 million kids in our company's history, but to treat 1 million kids in a year. So thank you for your time, and I think we'll open it up to questions-and-answers.

Matt O'Brien, Piper Sandler. So maybe just starting off on specialty bracing, I don't know who this question is for, Joe or Greg or David. You talked about these 9 territories or markets and being able to go from 15% to 50% market share. And by my math, that's $50 million of opportunity plus the other centers you're going to be adding. So when I'm thinking about all that collectively, it seems like just specialty bracing alone should be able to get you maybe something like 500 basis points of growth over the next several years on the top line. Is that too aggressive? And then it implies that the implant business will be a little bit slower than what we've seen with all these 2 products, I'm not sure why that would be the case. So the long question really trying to get to like how much conservatism as you built into this top line outlook because it seems like there's a fair amount?

Yes. So I think it's clear that we expect the Specialty Bracing business to lead at least in terms of percentage growth and it's relatively small at this stage. So yes, I think it's fair to assume that, that will be a major growth driver for the business. I think there is a little conservatism in the implant side of our business. But I think what as Fred talked about, what we're trying to balance here is the deployment of capital into the implant business. And it's possible that we will flex the growth of that business as new products come out, we'll probably reflect how we invest in those businesses. I mean, I started by saying that we've essentially got every children's hospital with our legacy products, which has been the bolus of the cash usage of our business over -- since 2017. And so I think we're going to be able to flex the investments we make there, and I think the growth will be, again, strong certainly within the implant business. But our intent is not to just utilize aggressive volumes of cash in that space to drive top line revenue growth at all costs.

Yes, I would just clarify also on the OPSB side. Today, there's 9 markets that we're serving. We serve about 15 hospitals within that. There's about 26, 27 clinics and the 9 markets that we have today will be going to 27. And so I think you can do some math there. I would just caution us to know that day 1, it's not going to be 100% revenue, it's a building, particularly in these greenfield entities. But we've got a long list of opportunities. And I think by the end of that 3-year period, our target is to have about 33% of the market share, which today is very, very small. So it's kind of 27 of the 80 markets will be served through our clinics, and it won't be overnight, but it will be growing into that over the next 3 years and really beyond.

Got it. And then maybe for Joe or Greg, you've now penetrated all the centers, all the hospitals around the U.S. How do you go deeper in these centers? Because I know that's been a growth driver for you, but now you got to go deeper in a lot of these centers. And just talk about the confidence in being able to get deep with these fellows, et cetera, because I think that's a concern a lot of investors have is like, Hey, the implant business has done well because you've been getting into new centers, but now you got to go deep. And so how do you really do that?

Yes, I'll go first. So I think for the T&D business, and we outlined a little bit here already that the way we need to bring product development and forward, you think about, let's just say, there's 10 surgeons at a specific children's hospital, and at this point, we have confidence that every one of those surgeons is using at least 1 of our products, but they're not using all of the products. And maybe they use 20%, but they're a holdout because they're waiting for a day that we have a special plate that can handle hip fractures like we saw there today. So I think the deeper penetration is inevitable once we launch some of these additional systems so that we can start to grow from 3, 4, 5 surgeons using 1 product to all 10 using the majority of products and then over time, continue to bring that forward from an education standpoint. So I think that's the second piece for T&D is that our people that are in these hospitals today, the sales representation, they're phenomenal. And they learn more about these procedures and they quite frankly -- and Dr. Hyman can maybe smirk about it, they're in more volumes sometimes than our pediatric orthopedic physicians. And so you talk about starting to use a new system and maybe something a little different novel to have our sales representation there to be able to walk through just builds more confidence and more surgeons that see that it begets deeper penetration into the account.

From a scoliosis perspective, I think that this is at the crux of our strategy here in this entry into the EOS space because these are the top-tier children's hospitals treating the most complex spine deformity. We're helping the surgeons treat a very difficult segment of their kids that they really care about. I mean, certainly, they care about all the kids, but these are really tough challenges. And I think what we're starting to see is that it's changing the conversation and the view that these surgeons have of the company. And when we are able to provide that in the EOS space alone at a given hospital, I show that example, we could do somewhere between $0.5 million and $1 million just in the EOS space, right, before we're even talking about Fusion. But that enables us to get a foothold and start to develop a different kind of relationship and confidence with that institution, those surgeons. And then with the new technology on the Fusion side as well as enabling technologies, we feel that, that really puts us in a position to go deeper, as you say, into these bigger high-volume institutions.

Mike Matson, Needham & Company. I just want to ask one. Following up on the -- you guys' commentary there. Can you just maybe talk about the regulatory pathway for some products with regard to eLLi, and I can't remember [indiscernible] PMA or not, and any kind of sense of timing in terms of when those products can...

Can you repeat the question, please?

Yes. So the question was about the regulatory pathway for the early onset products. So our expectation is that these are 510(k)s, Mike, and that we will be able to go down the more traditional pathway. But from a timing perspective, and where we are in the development, some of the conversations with the FDA are really more at the beginning right now. And so we're learning more about how they view these technologies and what they want to be able to look at or asking us to submit along with in that process. And so a lot of that is sort of ahead of us as far as those discussions and then we'll have a better sense for how that's viewed. I think things like the breakthrough device designation for eLLi certainly has us in a different position just in terms of the dialogue, which you always want to have with the FDA, an ongoing dialogue, and so we're encouraged by that. But I think time will tell here over the next few months and over the next year as to specifically what that path is going to look like and timing.

Okay. And then just on the -- one of the surgeons mentioned the limb lengthening application. So I guess why have you elected to go after the spine application first? And I got to assume you have limb lengthening somewhere in the pipeline, maybe it's not something you're working on yet, but...

Yes. So I'll start with that. I think as we began that project, we had intention of going into both spaces and found that it was optimal for the scoliosis first. And there was on one of my slides, a reference to the potential that we might be able to leverage that technology and the great work that the team has done with eLLi to bring that into a nailing platform. So we're just not ready yet to declare that we can do that and so we want to not get too far over our skis here.

Ryan Zimmerman, BTIG. I want to follow up actually on Mike's questions for Greg. If you think about the NuVasive product, the Ellipse Technologies, there is a lot of clinical issues that came out over the years from the podium about magnetic sharing and things like that. Has that tainted the market in your view? And how do you -- what do you need to do to kind of reengage surgeons who may have been turned off by that? And the second part of this question is just around ApiFix. I think it came out with a lot of excitement, and it's now -- we're now 3 years in. And how do you view it as -- in terms of your portfolio, the position in the portfolio? And when do you feel like you're going to reach some level of optimal scale with that product?

Yes. Good question. So I think as it relates to eLLi and the experience that some services has had with previous technologies, what we find that's interesting is that it is still being used out there because it is the -- a lot of surgeons view still the best thing out there. As we've been having discussions and as we've been sharing our technology and where we're headed with this, with surgeons, there is so much excitement. And what they -- I characterize it as almost desperate that they need a better technology in the space that is more reliable. It certainly appears to us that with what we're hearing from surgeons, having a radio frequency connection, not a magnetic connection, which is predicated on the distance of the controller to the implant, this is designed to be much more reliable. There's also a whole ceiling component of the internal mechanisms to drive the rod that is very important, and you're more than welcome to talk to Victor after for the little show of intel as he can speak more intelligently. But all these issues of concern around where biocompatibility, and then the power of the device, too, to be able to, at a given time and treatment to provide enough power to the implant to lengthen the spine is critical, but surgeons are still very optimistic about the future. And again, still a lot of usage even with a subpar device out there right now, which is encouraging to us.

Dr. Hyman, you look like you're dying to say something. You're right in my field of vision here. So sorry, get a mic for him.

I don't do spine surgery any longer, but I used to. I used to. One of my very best friends is a very active spine surgeon, Michael Vitale. The alternative to a self-lengthening device is multiple operations and there's plenty of evidence that there are problems, both physiologic as well as psychological with repeat operations just to make the system a little bit longer to accommodate growth. So there is tremendous enthusiasm for self-lengthening devices. And when the magic system first came out, there was excitement, there was adoption. And then of course, like with many devices, the more you get to use it, you recognize the shortfall. The theory is great. Perhaps the specific technology is the issue. And with a change in technology, you won't have some of these significant problems that are associated with this one device. So I think that once there is a product available, there will be adoption of it very rapidly.

So you asked about ApiFix and I think what we set out to do with ApiFix was to collect a really strong body of evidence. So we've completed the registry that we set out to do. I think with that, there were 5 patients out of more than 200 that actually converted to Fusion, which we feel very good about. It has been an ongoing process though. Surgeons are really trying to understand, which patients respond best to this kind of treatment. And while non-Fusion, there's still a lot of interest in the non-Fusion segment and will continue to be, I think, a lot of surgeons are still sitting looking at, well, I'm trying to understand the absolute ideal candidate and they're going to rely on the outcomes and the data that we've collected to be able to hone in on that so that they can confidently go forward. And I think that's what we're in the middle of right now and as that starts to become more clear, I think we'll continue to see growth.

Great. Just a quick follow-up. Fred, looking at your slides, expected uses of cash, you don't have M&A on there. And so is that a -- but the company historically has used M&A as a way to expand and drive growth. And so is the messaging that we're not going to see much M&A over the coming 3 years or is there still opportunity in your mind for some M&A in some of the segments?

Yes, a couple of things. Number one, on the clinic side of the business, we talked about the greenfield side, but also the acquisition side. So there may be some small tuck-in acquisitions there as we enter into new spaces, new states, as Joe mentioned earlier. But what you saw today was really the growth drivers that we see to deliver the results for the next 3 years that I was presenting. And we have the cash to do that. If there is any type of significant acquisition, which we don't have anything on the plate right now, there would be additional cash required to support that. And again, right now within the 3 years that we're talking about today, we don't anticipate anything major on the M&A side, not to say it won't happen, but that's not in our short term, I would say, plans. At this point in time we have enough growth drivers we put in place to deliver these results.

Rick Wise, Stifel. On the enabling technology side, that seems like a very exciting venture and lots of opportunities. And as you said, Kevin, it's a Phase I product launch, I guess, getting underway here. How do we think about the potential for growth and incremental contribution to revenues? Is this something that's going to take 3 to 5 years to really get ramped up? You're going to be able to contribute next year and maybe talk a little bit more about the cochlear implant story as well? And how does that fit in? How do we think about that as we think about modeling it, some more concrete of an opportunity?

Yes, sure. So yes, the Playbook platform and the digital health platform that you mentioned in your first question, I called it a Phase I intentionally because our initial launch into this is a non-510(k) regulated medical device. It's not a software, it's a medical device and so that gets us in, gets us into all the areas that I just spoke about, as we start to think about that as a platform. So now we're gathering data, you heard me use the words, AI, machine learning, predictive analytics, those become diagnosis and treatment using software. And so you need to start layering in different regulatory paths and in a software-as-a-service or a subscription model, there's a significant revenue growth opportunity as we layer those in over 2, 3, 4 and 5 years. And we start to think about how we're taking the data we're gathering in Phase I, turning that into predictive models and helping do some of the things that you heard the surgeon said that they wanted to accomplish up here. The challenge always is to predict the timing of that because it's a brand-new market and a new space. And so when does that growth hit? And what's the slope on that growth line look like is really challenging to predict exact timing around that. But we're just -- we're really confident that we're going to have a meaningful impact, and we've talked to enough of our customers to know that this is an area that we need to focus, and I think we're on the right path here in that area. As it relates to the cochlear implant, so the technology that we're launching is a robotic insertion device. There is a capital kind of potentially a SaaS component to that on the front end. There's also, I didn't mention, but a consumable, that insertion component is a consumable component of a per procedure revenue-generating opportunity. So obviously, as we start to place more of these and then it starts to compound related to procedures and the consumable component. And there's also platform expansion opportunities there as well as you start to think about navigated cochlear implant technology and expansion there. So we love these platform launches because we can continue to build on those, and both of them have very obvious road maps for opportunity to expand penetration and to expand revenue generation as well. So we're excited like you are about both those areas.

Great. Fred, just for you is sort of a variation of why not more revenue growth upside question. Gross margins, I just -- listening to the day, I mean, I think about it at higher volumes, high growth, new innovative products gaining share, opening new markets, a lot more software-intensive focus. That sounds like high margin, I say to myself. You guys are pretty efficient. Why the heck would gross margins just -- I mean, they're wonderful 74%-75%, but why wouldn't there be more upside as we look over the next 3 -- 2 to 4 years in gross margin?

Yes, absolutely. First of all, we're very pleased with the margin at 74% to 75% in this marketplace. It's made up of obviously the product mix. It's also made up of U.S. versus non-U.S. sales. We think the OUS business will continue to grow faster than the domestic business. And as you know that does have lower margins, particularly on the stocking side of things when we're selling many times them sets at our cost. So it's a mix of all of those things and the growth rates, which we expect over the next 3 years. The OPSB business has similar gross margins to our overall corporate average in that 74%, 75% rate, but actually higher contribution margin and higher adjusted EBITDA than the overall business today. So we see as that business grows faster, it helps the overall profitability of the business.

Got you. And if you indulge me, I have one more question, but I was hoping to ask Dr. Hyman, you seem like an opinionated person. I noticed that Dave hustled you off the stage to protect you. But a larger picture question. When we think, as analysts, about growth, obviously, it starts with volume -- procedure volume in hospitals and practices like yours. How are you thinking, if you do think about it this way, about procedure or volume growth at Columbia. And just in general in the industry, I mean, obviously, hospital census volumes are 2%, 3%. How should we think about it at the clinic level?

Remember, we're orthopedic surgeons, right? We like to operate, and we like to come up with surgical solutions for problems. So we're always trying to figure out new ways to address clinical problems. With that said, we are also pediatric orthopedics and we try hard not to operate on a child unnecessarily. If we can solve a problem without an operation, we will go to it. So I think that there is certainly potential for growth on the nonoperative side, the O&P side, especially as people who don't have access to bracing and aren't doing it and that is a big factor. There are plenty of people who take care of children who just don't have access to braces and if they had access, they would utilize them. On the surgical side, I say that probably 60% to 70% of the operations that I am doing now, I never saw as a resident, as a fellow. These are new procedures that have come about primarily because of the devices, not because of some surgical ingenuity that they come up, somebody come up with a new way of doing an operation, but it's because of the devices that allow us to do these things. So I think there's plenty of one way, if you will, potential for growth in volume surgically in pediatric orthopedics.

Rich Newitter from Truist Securities. Maybe actually, I'll follow up to 2 of Rick's questions. On the -- maybe you could help us relate the enabling the tech revenue potential and the way that you're kind of envisioning cadence or when that could start impacting to the high teens annual revenue growth? Should we be thinking of that growth rate outlook as separate from the enabling tech or what enabling tech can do for you and enabling tech is maybe a little bit further out, but not a key driver in the 3-year outlook time frame? Or do you need enabling tech contributions to kick in even if it's towards the end to really sustain that level of growth?

Yes, I don't think we need outsized growth from enabling technology. Currently, the enabling technology business does drive revenue through all of the 7D products as well as -- the FIREFLY device as well as 3D side, and that's growing. It's growing alongside of our scoliosis business and T&D. So there is a contribution there. That's why we have a sales force already that's focused there. I would say that we see enabling technology as an opportunity when it hits really to generate, obviously, very strong growth, a big opportunity and certainly really profitable growth. But I think within the planning horizon, Greg, correct me if I'm wrong, we don't have a huge portion of the revenue growth predicted on our enabling technology business. I think very modest contribution in 2025, obviously growing, but not astronomical growth across that time horizon. And I think, again, most of -- a lot of the outsized growth that we expect over the course of the next 3 years is primarily focused on the OPSB business as well as the catalysts within the product pipeline that we have that we talked about within trauma, deformity, and scoliosis.

Okay. That's helpful. And then just as we think about it longer term, when that does start to potentially kick in and that becomes a bigger more sizable revenue contribution piece, how do we think about the gross margin impact kind of going back to Rick's question, is that going to be a drag? I hear things like SaaS and I think, high-margin or extremely high margin outsized, above-average medtech margin type direction? Or initially, is it going to be a drain with the capital pieces? Like how do we think about that?

Yes. To your point, that segment on the Playbook is definitely going to be a higher-margin product than our standard product. I think over the next 3 years, it probably won't be a big enough percentage of it to change it 10 years from now. Does it have an impact? Potentially. But probably not in the next 3 years. Will it have an overall impact on the total company's gross margin. But yes, you're right, that product could potentially be the highest product margin product that we have available in the marketplace.

Rick, common, you got something for us?

I appreciate that you're rethinking the set deployment and the focus there. But am I anxious? I mean, I think that everybody in the T&D side of the business must be depressed, less capital deployed in our direction. And to be serious about it, this is sort of foundational part of the company. Does this raise the risk more volatile quarterly performance or less ability to go deep in a hospital because you're not putting the sets and is there another side to this debate? I'm sure you all have thought about every aspect of it.

Yes, I'm going to jump over Joe here because I think that -- sorry, Joe. I'm not certain that what we're going to see is necessarily less sets and the reason that I say that is because when we were in our very earliest days developing this company, the impetus was certainly not on maximizing from an engineering R&D perspective, the efficiencies of these sets. We would meet a surgeon, like Dr. Hyman. He would say, "I need a blade plate and, Oh, by the way, I need every conceivable shape size, an instrument necessary to put them in from the tiniest kid to the largest kid," and probably naively, we went out and did all that. And so a lot of the legacy products, while they got us a foothold into these marketplaces are much less efficient than the products that you've seen us launch over the course of the last few years. And I think that's highlighted with the acquisition of Pega and the kinds of asset utilization metrics that we see there. Orthex on the ExFix side, I mean you're talking about $4 of revenue to $1 deployed versus a lot of our legacy stuff that is about $1 and some of them are less than $1. And so we see this also in the development of PNP Tibia, and its share gain and now PNP Femur that's commanding a large share. These are product lines that generally speaking, are much more efficient than where we had spent a lot of our legacy -- or a lot of our dollars on the legacy product deployment post IPO. And so I'm not sure that the trauma deformity business should be too upset. There's a lot of product lines. We think those product lines have good asset utilization metrics. And so I am going to take credit, and, I think, Joe should take credit for executing product development that is more focused on ensuring that these get a better ROI and require less inventory. And certainly, when you think about the early onset scoliosis space, I mean, these are marketplaces on the scoli side where these are the $30,000, $40,000, $50,000 procedures. Obviously, they're not happening acute. So these aren't trauma procedures and so the capacity for us to move inventory from location to location and drive ASPs is much more similar to what we see in ApiFix that has plus $15 of revenue for $1 deployment. So we would not, I don't think, put the company's growth rate at risk by dramatically reducing capital deployment if we weren't confident enough that what we're seeing in the ASP and the ROIs on some of our new technologies won't extend through the balance of the technologies we have in the pipeline.

Got you. Fred, back to you, if I could. I think Street modeling, Street consensus over the next few years is pretty much in line with the kind of numbers you gave, the big shot. But again, so everything we heard here today, help me, I'm getting older, it's hard for me to think these things through. It's like -- so again, so the innovation in the new markets to go deep, the sole-source contracts that Dave didn't talk about as much today that these are -- none of this -- it's like none of this accelerates growth. I'm sorry to be so [ nagging ] about it.

Actually, growth is accelerating. A couple of years ago, the business was $100 million and a 20% growth on that number is $20 million. Next year, we'll be over $200 million this year. And so in 2025, we'll generate a new business that's over $40 million. And so I think what you heard today is not just the 1 thing or the 2 things that we're really focused on to deliver the repeatable and consistent growth of the business, it's a multitude of items, and that's really our goal here is to diversify the business in a way that has multiple new growth drivers that will enable us to continue to add a $40 million, $50 million and in the future, a $60 million new business every single year and that's really what we're focused on.

Dr. Hyman also just texted me, I'm not sure, I understood your text, Dr. Hyman. He said, ask them whether they're going to develop a 3D printer internally or whether this is something they could acquire? And is it important? Is it important for you to have something like that? Sorry, Dr. Hyman, I know it was confidential.

I appreciate that, Rick.

Yes. So as you know, FIREFLY is a 3D printed guide for the spine. 3D side, 3D printed guide for the trauma and deformity. So we do have some of that technology. I was just in the back asking Tim, why we don't have something that can solve this problem and he assured me we would be working on that very shortly. So it's another growth driver that we can look at adding to the business that's not in our current plans.

And I'm sorry I keep driving Dr. Hyman into this. Sorry, Dr. Hyman. Again, we're just I won't speak for Rich, but we're just dumb analysts. We don't know what -- it all sounds great. You sitting there today and listening to all the exciting and interesting technology, what really struck you? What should we be excited about and focused on that, you said, Wow, this really is something incremental or important or...

Well, I think, that it's the truly new business for OrthoPediatrics. I think what -- we've heard 2 things. One is new business and then we've heard newer better products. The new business, to me, is really exciting. One is the orthotics and prosthetics, the O&P business. Because there really is tremendous unmet need outside of big pediatric hospitals, but there's a lot of care that goes on outside of big pediatric hospitals. Nonoperative care that could benefit from those products. And then the other one that I have mixed feelings about, but I think, it's ultimately probably good for the company is branching out away from orthopedics into other medical subspecialties. There's no question that pediatric problems are orphan problems and having a company that is focused on the care of children, whether it's children's musculoskeletal system or their cardiovascular system, I think, is going to be beneficial to the kids and there is likely a market available to make it profitable for the company doing it. I don't know of any other similar company outside of orthopedics that does this sort of stuff and other specialties. So to me, that is exciting. That is new. Again, I don't like their attention being so -- but from a company's perspective, I think it really is beneficial.

Yes, that's great and you stole my last question. I was going to say, I'll stop now. You talked about other specialties that sort of are out there, Kevin. Like what, cardiology? I mean what is on your mind?

Yes, I think, what you probably -- you all don't see and we talked a little bit about that when we talked about M&A is creating an ecosystem around the business where we're good partners and we're good acquirers. And I think that inbounded interest that we have from companies who have interesting technologies that could benefit patients, whether that's ENT or cardio or even just general surgical products that our sales reps is literally standing in one OR and the OR right beside them, there's an unmet need that needs a fairly -- in some cases, fairly simple technology to dramatically improve the life of the child. We see a lot of these. And I think that we're seeing more. And I think as we have successfully moved into the specialty bracing business, I think there's more entrepreneurs and small companies that have looked at us and understand our plan and understand how we treated the companies that we've acquired and integrated those companies into this bigger kind of movement, so to speak, to help kids. And so the opportunities for us, we think, are endless into that space. Now it's a question of what's next? One thing I will say that Kevin didn't say yet about the Playbook is that from a workflow management perspective, what happens in the orthopedic OR is not that dissimilar in a lot of cases, that what happens in a cardiothoracic surgery or a general surgery, it's managing workflows. And so one of the things that we think about Playbook and some of these digital tools allows us into the operating rooms of potentially not just orthopedic surgeons, but in other subspecialties where we can evaluate what implant technology or what disposable technologies might be relevant, but because we're developing workflows for those ORs. And so that's part of the digital health care strategy is a way to get our toe in the water, so to speak, without having to make a big splash and go all in on ENT or go all in on cardiology. This is a way for us to analyze those markets and determine where we could develop high-growth, profitable businesses in those space. All right. Well, thank you all for being with us. .

Absolutely. Thank you so much.