Good afternoon, and welcome to the OrthoPediatrics Corporation Third Quarter 2025 Conference Call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to Trip Taylor from the Gilmartin Group for a few introductory comments.

Thank you for joining today's call. With me from the company are David Bailey, President and Chief Executive Officer; and Fred Hite, Chief Operating and Financial Officer. Before we begin today, let me remind you that the Company's remarks include forward-looking statements within the meaning of federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous risks and uncertainties, and the Company's actual results may differ materially. For a discussion of risk factors, I encourage you to review the Company's most recent annual report on Form 10-K, which was filed with the SEC on March 5, 2025, and its subsequent quarterly reports on Form 10-Q. During the call today, management will also discuss certain non-GAAP financial measures, which are supplemental measures of performance. The company believes these measures provide useful information for investors in evaluating its operations period-over-period. For each non-GAAP financial measure referenced on this call, the Company has included a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure in the third quarter earnings release. Please note that the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for OrthoPediatrics financial results prepared in accordance with GAAP. In addition, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, October 28, 2025. Except as required by law, the Company undertakes no obligation to revise or update any statements to reflect events or circumstances taking place after the date of this call. With that, I would like to turn the call over to David Bailey, President and Chief Executive Officer.

Thanks, Trip. Good afternoon, everyone, and thank you for joining us today. We are proud to start this call with our typical and most meaningful performance metric. In the third quarter, we supported the treatment of more than 37,100 children, increasing our total impact to approximately 1.3 million kids’ health. With too few solutions designed specifically for children and the clinicians who care for them, pediatric health care has long faced critical gaps. At OP, we are committed to addressing these unmet needs, and our mission to close those gaps and reshape the future of pediatric care remains clearer than ever. We have made tremendous progress in this market, but there is still a substantial market opportunity ahead. In the third quarter, we saw strength in all areas of our business, excluding 7D capital sales and LatAm international stocking and set sales. In fact, we saw total third quarter global revenue growth, excluding 7D capital sales of 17% and domestic revenue growth, excluding 7D capital sales of 19%. Both T&D and scoliosis implant sales were strong as we saw a very normal summer selling season and OPSB growth continues to be extremely robust with growth in excess of 20%. As a reminder, OPSB sales are approximately 80% T&D and 20% scoliosis, and we saw strong growth in both areas. As we highlighted in our preliminary announcement, our revenue results fell short of our expectations, driven by 2 isolated factors: 7D capital sales that were expected in the quarter did not close prior to the quarter end; and headwinds from stocking and set sales in Latin and South America have continued longer than expected. Although these 2 areas did not produce the results we wanted, these are 2 of our lower-margin segments. And because the rest of the business remains strong, we still delivered high gross margins and profitability in line with our expectations. Looking beyond the top-line for the third quarter, we are pleased to see a significant 56% improvement in adjusted EBITDA, growing to $6.2 million. In addition, we also saw huge progress with our free cash flow usage, which was dramatically lower in the third quarter, decreasing $8.2 million. Both of these metrics have been a focal point of our strategy, and we are succeeding in delivering our goals. Touching briefly on our outlook. As announced previously, for the full year, we now expect revenue to range from $233.5 million to $234.5 million. Adjusted EBITDA is still expected to be $15 million to $17 million, and we are on track to deploy $15 million in sets and generate positive free cash flow in Q4. Even though our top-line expectations have been adjusted, we are maintaining our profitability and free cash flow outlook. As we drive toward our profitability goals, our core business, consisting of trauma and deformity and scoliosis implants, specialty bracing and our international agencies generate higher margins and better free cash flow than the capital sales and LatAm stocking and set sales. Our core businesses are positioned to remain the key engines of revenue growth, adjusted EBITDA and free cash flow, and we are confident in our forecast of generating positive free cash flow in Q4 and breakeven in 2026. Turning to our segments. In the third quarter of 2025, the T&D business grew by 17% in the quarter, driven by continued strong market share gains across several product lines. More specifically, growth was led by strong performances in trauma implants and a return to normal scheduling in the elective limb deformity business. Extremely strong exfix growth and the continued high growth of OPSB were the highlights in the quarter. Taking a closer look at Trauma, we saw particularly strong revenue gains driven by continued rapid adoption of PNP Femur, PNP Tibia, ORTHEX and the Bioretec ActivaScrew. Looking closer at the 3P platform, following the FDA approval of the 3P Pediatric Plating Platform Hip system and its first surgical cases, we are seeing consistent case growth, which we expect to continue through the remainder of the year and to ramp aggressively as we begin the full launch of this product in 2026. Although I cannot go into certain details, I would also like to mention that we are pleased to have recently accomplished another milestone for this platform as we have just announced the next 3P system in the series, 3P Small and Mini, which has been approved by the FDA. This approval comes ahead of schedule, and we now expect to complete the first cases in the beginning of next year. With the 3P platform, we expect to launch new systems each year for the next several years, bolstering both Trauma and Limb Deformity revenue. T&D remains a core growth engine for our business, powered by our expanding scale, ongoing market share gains and a steady cadence of innovation focused on unmet clinical needs. We have established ourselves as a market leader in T&D, and we are executing with confidence, especially as we see more competitors exiting the space by removing pediatric-specific product lines. Our OPSB specialty bracing strategy continues to build momentum. And with continued execution of our operational goals, our confidence in this long-term opportunity only strengthens. This segment represents a high potential capital-efficient growth avenue and is an integral part of our company strategy. We will continue our efforts to drive targeted territory expansion, accelerate R&D efforts and continue scaling our sales force. As a reminder, when we acquired Boston O&P in January of 2024, there were 26 operational clinics. As previously reported, since then, we have expanded to more than 40 clinics, entered into 8 new territories and launched several new products. Our preliminary expectations for new clinic return on investments of 25% for new clinic acquisitions and 40% for new greenfield clinics are being realized. During the quarter, we expanded our footprint into 2 very large markets, New York City and California. We expanded Denver and Ohio. And for the first time, we expanded internationally with a clinic in Ireland. These latest additions continue to reinforce the importance and need for OPSB clinics, and we anticipate that the strong wave of clinic expansion opportunities driven by high customer demand and a robust pipeline will continue. In addition to expansion opportunities, same-store sales growth has been increasing and generating positive momentum. Our OPSB strategy is delivering strong results and has proven to be a highly efficient expansion path for OrthoPediatrics. Our presence outside the operating room allows us to create deeper partnerships with our customers. This powerful strategy is extending our leadership position in pediatric orthopedics. We remain focused on executing our strategy with precision as we work towards securing a leading share in this growing market. Moving to the Scoliosis business, our growth of 4% seen in Scoliosis this quarter was led by strong U.S. Scoliosis implant and Scoliosis OPSB growth, offset by $2.3 million lower 7D capital sales. U.S. Scoliosis growth continues to be led by new users adopting OrthoPediatrics technology, including RESPONSE as well as pull-through from past 7D placements. As mentioned, the underlying OUS business grew nicely but was negatively affected by reduced stocking and set sales in LatAm, primarily Brazil. We expect this will continue for the next several quarters, but are working on an improvement plan to implement in the near future. 7D sales in the quarter were impacted by increased variability in the timing of unit placements that caused delayed capital sales, and the corresponding revenue from those placements had a significant impact on quarterly sales and overall growth. Typically, there are a few 7D unit sales within the quarter. But for the third quarter of 2025, there were zero unit sales. This compares to our strongest 7D unit sales results in the third quarter of 2024. We still expect 7D to be a revenue driver for us, but we cannot predict how much and which quarter sales will fall in. To minimize the impact of lumpy 7D unit sales, we have adjusted our outlook, so there is minimal impact on our expectations, which does result in negative growth assumptions from this segment. Looking at our EOS product portfolio, we are pleased to see that our portfolio expansion strategy continues to be effective. In particular, we are seeing positive trends with our recently launched VerteGlide Spinal Growth Guidance System in skeletally immature patients. Following the first completed cases in August, we are seeing solid adoption of VerteGlide through the limited release, and we remain on target for the full market release in the coming months. We are excited about the progress made within this portfolio and look forward to progressing the remainder of our EOS products. Moving to international, international underlying sales were solid in the quarter due to extremely strong demand in surgical volume in EMEA and APAC, offset by unfavorable growth from LatAm. The underlying revenue largely comes through our sales agencies and represents a good reflection of high surgeon usage and higher-margin replenishment revenue. We are particularly excited to see our EMEA Scoliosis launch going so well and are eagerly awaiting the EU MDR approval of our 4.5 Scoliosis System, along with multiple other approvals expected before the end of the year. On the other hand, the headwinds in LatAm have persisted longer than we anticipated. In an effort to focus on improved cash metrics, we have made the conscious decision to limit new stocking and set sales to South America. This dynamic continues to play out and negatively impacts our growth, particularly in Brazil. We believe that at this point, our LatAm business would be in a more stable position and that we would see the benefit of growth in Latin and South America again. However, we experienced continued disruption in sales, largely related to timing of large stocking and set orders. We're working towards solutions but expect there to be some variability here moving forward, which we have reflected in our outlook. In summary, we are proud of the way the business performed, excluding 7D and LatAm. OrthoPediatrics continues to lead the pediatric orthopedic market and provide comprehensive solutions to support the care of children. We remain focused on execution across the business, including scaling of OPSB, leveraging previous set deployments and launching innovative new products. This strategy will support revenue growth, increase adjusted EBITDA while meaningfully reducing cash burn as we work towards achieving free cash flow break-even in 2026. Lastly, we believe our strategy positions OrthoPediatrics to help more children than ever before. With that, I'd like to turn the call over to Fred to provide more details on our financial results.

Thanks, Dave. Taking a closer look at the P&L, our third quarter of 2025 worldwide revenue of $61.2 million increased 12% compared to the third quarter of 2024. Growth in the quarter was driven primarily by strong performance across Trauma and Deformity, Scoliosis, and OPSB, offset by a decline in 7D unit sales and LatAm stocking and set sales. U.S. revenue was $48.7 million, a 14% increase from the third quarter of 2024, representing 80% of total revenue. Growth in the quarter was primarily driven by Trauma and Deformity, Scoliosis, and OPSB, offset by a decline in 7D unit sales. We generated total international revenue of $12.5 million, representing growth of 6% compared to the third quarter of 2024 and representing 20% of our total revenue. Growth in the quarter was primarily led by increased procedure volumes, partially offset by lower stocking and set sales to LatAm. In the third quarter of 2025, Trauma and Deformity global revenue of $44.1 million increased 17% compared to the prior year period. Growth was primarily driven by strong growth across multiple product lines, specifically our cannulated screws, PNP Femur, PNP Tibia, DF2 and OPSB. In the third quarter of 2025, Scoliosis global revenue of $16.3 million increased 4% compared to the prior year period. Growth was primarily driven by increased sales of RESPONSE 5560 and revenue generated from FIREFLY, offset by a decline in 7D unit sales. Finally, Sports Medicine/Other revenue in the third quarter of 2025 was $0.8 million compared to $1.3 million in the prior year period. Touching briefly on a few key metrics. For the third quarter of 2025, gross profit margin was 74% compared to 73% for the third quarter of 2024. The increase in gross margin was primarily driven by favorable product sales mix as a result of lower 7D unit sales and lower stocking and set sales to LatAm, which generate lower gross margin profit. Total operating expenses increased $9.0 million or 19% compared to the prior year period to $54.7 million in the third quarter of 2025. The increase was mainly driven by $2.3 million of restructuring charges, $2.3 million of impairment charges, increased noncash stock compensation as well as the ongoing growth of the OPSB clinics. Sales and marketing expenses increased $1.9 million or 11% compared to the prior year period to $18.7 million in the third quarter of 2025. The increase was mainly driven by increased sales commission expense and an overall increase in volume of units sold. General and administrative expenses increased $2.9 million or 11% year-over-year to $29.2 million in the third quarter of 2025. The third quarter increase was driven primarily by increased noncash stock compensation as well as the ongoing growth of the OPSB clinics. Intangible asset impairment recorded during the third quarter of 2025 was $2.3 million related to our annual impairment test, where we determined the fair value of ApiFix, Telos and Medtech trademark assets and Telos customer relationship assets were below the carrying value. We recorded an impairment charge to reduce the carrying amount of the intangible assets to their estimated fair value. Restructuring charges recorded during the third quarter of 2025 was $2.3 million related to the company's global restructuring plan started in the fourth quarter of 2024, aimed at improving operational efficiency, reducing operating costs as well as reducing staffing. For the third quarter, we recorded additional restructuring expenses as we continue to review structural changes required to drive down costs. We saw savings in the third quarter but anticipate greater impact in the fourth quarter and in 2026. Research and development expense decreased $0.2 million in the third quarter of 2025 due to timing of product development third-party invoices. Total other expense was $2.5 million for the third quarter of 2025 compared to $3.6 million of other expense for the same period last year. GAAP net loss per share for the period was $0.50 per basic and diluted share compared to $0.34 per basic and diluted share for the same period last year. Non-GAAP net loss per share for the period was $0.24 per basic and diluted share compared to $0.18 per basic and diluted share for the same period last year. Adjusted EBITDA was $6.2 million in the third quarter of 2025, a 56% improvement when compared to $4.0 million in the third quarter of 2024. We ended the third quarter with $59.8 million in cash, short-term investments and restricted cash. In the third quarter, we saw a significant improvement in free cash flow performance. For the third quarter, free cash flow usage was $3.4 million compared to $11.7 million of free cash flow usage for the third quarter of 2024. Set deployment was $4.1 million in the third quarter of 2025 compared to $5.3 million in the third quarter of 2024. Turning to guidance. As Dave mentioned, we adjusted our expectation for full year 2025 revenue to be in the range of $233.5 million to $234.5 million, representing year-over-year growth of 14% to 15%. We are reiterating the guidance that our full year gross margin will be within the range of 72% to 73%. We also continue to expect to generate between $15 million and $17 million of adjusted EBITDA in 2025. Additionally, we continue to expect approximately $15 million of new set deployments in 2025. This represents our continued focus on driving the business to free cash flow break-even by 2026, and we anticipate delivering our first quarter of free cash flow positivity in the fourth quarter of 2025.

Our first question comes from David Turkaly with Citizens Bank.

Dave, you made a comment, I thought I heard you make it, so I just wanted to clarify it, something about competitors exiting the space. I was wondering specifically, what were you referring to there?

Yes. Good question, Dave. Listen, we see some of the big OEMs that have notified customers that they're pulling products that historically have been used in the pediatric patient population. So we've seen that from J&J. We've seen that from Smith & Nephew in the last 6 months, with more recently, J&J having a Hip product that would be a competitor to 3P. And so we have really nice timing that we're coming out with a new Hip system. And I just think that we are seeing a continued defocus of pediatrics in some of the large OEMs, which I think is not necessarily great overall for patients, but certainly good for us from a competitive standpoint.

And I know that you talked about sort of 12% being, I think, the new LRP limit or down, I guess, the lower limit of growth. It seems like you're doing a pretty good job with these clinics. But as we look ahead to the next couple of years, do you think there's an ability to possibly accelerate either the expansions or openings on the OPSB side, maybe to accelerate that number?

Yes. I think there is no question that there is extremely high demand for clinics. And this year, I would say we've gotten a lot of experience in terms of the timing of accelerating those clinics and the timing of getting those clinics started. We're pleased with what we've seen so far. And you can bet that if we have the opportunity to do more and do more faster, we would certainly want to do that. Certainly, trying to balance also that against the P&L requirements of trying to drive to increase profitability. But I think the demand is there. And yes, you could assume that if we have the opportunity to open more clinics, we would certainly want to do that.

Our next question comes from Ben Haynor with Lake Street Capital Markets.

First off, regarding OPSB and the 25% and 40% realized returns you're seeing, does this include any halo effects from other products on either the QD or Scoliosis side?

No, it does not. It would be difficult, I think, to try to quantify that. So that's not included.

Okay. Got it. And then just thinking about the revenue range, the $1 million difference between the top end and the bottom end there with the $2 million difference between the top end and the bottom end of the EBITDA range. Is there anything that folks should read into there? Any additional color on what might drive that EBITDA range to the top or bottom end?

No, it's really product mix is probably the single biggest item that drives the change on the bottom line. That's where it was to start with, and we didn't feel like narrowing that gap on the last update.

Okay. That's fair enough. Lastly, regarding the competitors that have informed customers they are leaving the market, do you have an idea of their current market share?

Yes. I certainly don't know their market shares in each one of those individual product lines. No question that our largest competitors historically have been legacy products from those 2 large OEMs. More of their product sales probably are in the commoditized small plate, small screws types of things like that. But certainly, when there are fewer options available in the market and we have the best products there, it certainly bodes well for us taking all the share we would credibly want to take in areas like hip deformity correction, for example.

Our next question comes from Ryan Zimmerman with BTIG.

This is Izzy on for Ryan. So I heard the comments about accelerating off of 12% for the long-term plan with new clinics opening. But I was just curious if you guys could talk a little bit about what's giving you the confidence in 12% as being the correct base to grow from.

Yes. I mean, when we look at implant sales across the board and what we see adoption rates of all our products, the way the Scoliosis business has grown and then we strip out some of the uncertainty that we've seen from Latin America, and strip out the majority of the 7D, which is inevitably going to happen. But as we've said, it's very difficult for us to determine quarter-to-quarter. When you strip some of those things out and look at the momentum we have in all of those other areas of our business, it gives us a lot of confidence that a 12% kind of baseline is a good one for us. And you're right, I mean, I think there's the opportunity for acceleration when you look at the speed with which we're growing the OPSB franchise. I mean there's just a lot of demand for clinics. We're seeing same-store sales within our existing clinics go up. I don't even think that we have seen the impact yet from the R&D initiatives that we've got going. We launched a number of products on the OPSB side. I think DF2 is the primary one that we talk about because it's growing so rapidly. But I think in the next few quarters, we'll be talking a lot more about a number of new R&D projects that are coming out of the OPSB franchise. And when you add all that up, we feel very confident in kind of a baseline growth rate of 12% going forward.

Got it. And I heard you call out strength in other international regions outside of Brazil and LatAm. I was curious if you guys are taking any steps to kind of derisk international revenue volatility as we move into 2026. Are any of the other regions where you're seeing strength growing fast enough or strong enough to offset any of the headwinds that you've seen this year?

As our international business expands, our reliance on revenue from Latin America, especially Brazil, is becoming less significant. We are experiencing strong growth in the Asia-Pacific region, EMEA, and across all of our implant businesses. Notably, we are seeing new growth in Scoliosis, particularly in EMEA, where we haven’t had a presence in recent years. Over the past year, we've grown this business from nothing to something notable, and it is rapidly increasing. This growth helps counterbalance the revenue fluctuations we experience from stocking distributors in Latin and South America. Fred and I are looking into whether we can create better structures with our stocking distributors in Latin America to reduce some of the inconsistencies in revenue. We have several strategies in mind. As we grow our agencies and they contribute more significantly to our revenue, particularly in EMEA, it should alleviate some of the volatility. Lastly, I want to highlight the progress we’re making with the EU MDR. We currently have several files with our notified body and expect to receive multiple MDR approvals by year-end. The most exciting approval we are anticipating is for our small stature scoliosis system, the 45-50 system. While we are rapidly growing our Scoliosis business in EMEA, we feel limited because we don’t have a full product portfolio. It's promising to see such strong customer adoption of RESPONSE with just one version available, especially knowing that we are close to receiving approvals for our small stature system.

Our next question comes from Matthew O'Brien with Piper Sandler.

This is Anna on for Matt. I guess I just wanted to ask a bit on the T&D franchise. You've got a bunch of good and new products there, but I guess we were maybe expecting a bit stronger growth. So how much room is left in the market? And maybe how much of that is low-hanging fruit versus penetrating the next layer of docs?

We are currently very satisfied with the growth we are experiencing, notably a 17% increase in our T&D global operations. While we recognize some T&D disruptions in Latin America, we feel confident in the underlying growth rate of our largest business. There are numerous growth opportunities remaining in T&D. Outside of the U.S., we anticipate that several EU MDR approvals will facilitate our growth in those markets. We've also introduced new product lines like 3P Small-Mini and 3P Hip. We are seeing some exit from our competitors, particularly from established providers in the market. One key consideration for our T&D strategy is the pace at which we wish to grow this business, especially in light of our set deployment, which has decreased from nearly 25 sets last year to 15 this year, with many of those on the T&D side. Without direct competition in this space, we have some flexibility regarding our growth rate. We can adjust our capital deployment based on our strategy for generating free cash flow. By deploying fewer sets, we may negatively impact growth by a few points or, conversely, if we choose to increase set deployment in the future, we could accelerate growth in T&D. We believe there is still plenty of untapped potential, and it largely hinges on whether we choose to increase or decrease our growth rate depending on our future cash usage strategy.

Got it. That's super helpful. And then on 7D placements, there tends to be a strong implant pull-through effect in the next few years following placement. So I was just wondering how the lowered outlook on 7D, how that has any impact on the growth of the core spine business going forward?

Yes, that's a great question. This is more about timing than our outlook. The unit placements we expected in Q3 are still anticipated, and they are likely to close at some point in the future, whether that's several in Q4 or many in Q1, though it's difficult to determine. However, I don't believe that the delays in placing these units will significantly affect the long-term growth rate of the implant business in Scoliosis. Therefore, I'm not particularly concerned about that. We also have more opportunities in the top of our funnel for 7D than we've ever had before, indicating a promising future for deploying 7D units. It's just challenging to predict the exact quarter for those placements, and it’s unlikely to impact implant sales.

Okay. Great. That's great to hear. And then if I can just squeeze in one last one on the profitability improvements we saw in OpEx, what was cut and how durable because you guys did a good job this quarter.

Yes. We're very pleased with the results we saw in the third quarter. Nice improvement both this third quarter compared to the same time last year as well as improvement over the second quarter. As mentioned, the restructuring actions we started in the fourth quarter of last year, took some more smaller actions earlier this year and then some bigger actions here in the third quarter. A little bit of those savings showed up in the third quarter, but more of those savings will show up here in the fourth quarter as well as all of 2026. So despite the softness in revenue, gross margins are strong. Profits are right where we expected them to be even with higher revenue. And that all means improved free cash flow for the business, which is obviously a key goal as well. So definitely taking steps in the right direction here.

Our next question comes from Mike Matson with Needham & Company.

This is Joseph on for Mike. So I guess maybe just to start off the EU MDR, the approvals or expected approvals you guys called out. Does that get you to half or above half of the Scoliosis portfolio available over there in Europe? And then just the reduced staffing that you guys called out, I was just wondering, maybe you did mention it where that's coming from. Is that demand-driven? Is it location-dependent? Is this just kind of bloat, I guess, just kind of trimming the fat for staff that necessarily wasn't needed?

Yes. From the perspective of EU MDR approval, obtaining the 45-50 on our Fusion platform would fully complement our offerings on that side. The newer EOS products for early onset scoliosis are not yet approved in Europe. However, some hospitals and physicians can access these products through critical access or emergency use. Therefore, we do anticipate some sales for EOS. Additionally, we expect to have a complete range of products on the RESPONSE side once the RESPONSE 45-50 is approved. Regarding staffing, as we announced last year, we have significantly reduced our operations in Israel, which is yielding savings. We have typically utilized our Telos business for R&D related to clinical and regulatory efforts concerning EU MDR, as well as collaboration with external companies. Now that we have submitted the technical files for EU MDR, we can reduce the expenses associated with Telos. This reduction includes staff cuts. Overall, we are streamlining operations and recognizing that our business will be consistently profitable, leading to cash generation soon, and we are making adjustments that will ultimately enhance our profitability.

Okay. Great. Yes, that makes a lot of sense. And then I guess maybe just the next-gen or the new spinal fusion system. I guess, is that still expected this year? Or is that more of a 2026 launch? I don't know if that has to do anything with how much momentum you guys are getting with RESPONSE, if that's changing your thinking around the launch there. But yes, any color there would be helpful.

Yes. Certainly, Nextgen will be a 2026 initiative, probably not a full-blown launch in 2026, but our hope is to start doing some cases probably in the back part of 2026. You're fairly accurate in saying that while from an R&D perspective, we're heads down on making sure we got the best system. It's not critically imperative that that product gets launched right away when we see RESPONSE growth as high as it is. So we're certainly not throttling anything back, but it's good to see that when Nextgen comes, we think we'll have an absolutely elite system there, and it will be building on the strength of RESPONSE and an already growing product line in RESPONSE. And so probably 2026, to answer your question, back part of 2026, probably a big launch in 2027, 2028 but not factored into our revenue here this year or really much revenue in 2026.

Our next question comes from Richard Newitter with Truist Securities.

This is Ravi in for Rich. I have two questions. First, regarding third-party opportunities, could you help us understand how the recent innovations and line extensions in that space might contribute to the $450 million opportunity in Latin America? How does this enhance your market penetration? Additionally, should we view this as a potential long-term driver for leverage in both selling, general and administrative expenses as well as gross margins, considering you have a unified product platform for production and sales?

Yes. There are various implant systems in the 3P category that target specific anatomical areas or correction of particular deformities. We're creating many new opportunities with 3P as our existing plating system doesn't cover all indications and feels somewhat outdated. I see 3P as the flagship for our trauma and limb deformity product range going forward, significantly impacting our capacity to grow the T&D business. It probably allows us to deepen our relationships with existing accounts. While we are present in every major children's hospital, we sometimes face challenges with shelf space and the established presence of commoditized small plates and screws that have been around for a long time. We will need more disruptive technology to replace those systems and introduce newer, modern alternatives. As we fully launch 3P in the coming years, I expect substantial displacement of commoditized products with high-technology offerings that feature specific plates, screws, shapes, sizes, and instruments that facilitate easier procedures for surgeons. This is crucial for us and will help us deepen our presence in the children's hospitals where we are already active.

Yes. And to the leverage question, that's a great call out. I mean it's called a platform for a reason. That's the design from the very beginning is to try to leverage this stuff and to really drive what we've been working on for the last really 3 to 5 years with all of our new product introductions, which is improved return on all of our assets that we're deploying. And by combining this into a platform, we can then leverage similar drivers, similar screws, a lot of the similar items across multiple platforms, which gives us tremendous improved return on investment on these new sets coming out. So more leverage there, leverage with the suppliers than really on the SG&A side. So you'll probably see it show up more in improved gross margin. But absolutely, improved gross margin and better return on investment from a cash perspective is absolutely multiple benefits from that type of a system launch.

Yes, I want to emphasize Fred's point regarding asset utilization metrics. We have been discussing with the investment community how our legacy products, which have been in the market for 10 to 15 years, are still growing. When we developed those products nearly 20 years ago, asset utilization metrics were not a priority for us as a small company. Since our IPO and particularly over the last 5 years, our new product development has focused not only on addressing significant unmet clinical needs in pediatric healthcare but also on improving asset utilization metrics, whether that means higher average selling prices or reduced inventory. I am confident in the performance of the 3P Hip, both in terms of average selling price and the inventory needed for elective procedures. The first iteration of the 3P platform is meeting our expectations, enabling surgeons to perform surgeries on children they would otherwise find challenging to treat, especially those with high demand. Additionally, it operates at an advantageous price point and provides a solid margin. I am excited about seeing our return on assets improving significantly compared to our legacy products.

Great. I have one last question regarding how you're viewing growth in Latin America, particularly in Brazil, as you navigate the current dynamics there. Considering the long-term 12% outlook you're projecting for 2026 and beyond, how should we assess the potential restart of growth in that region, especially with a possible new business model? Should we expect to trade some profitability for revenue in that area? Any insights on your new strategy, given the recent changes, would be very helpful for 2026.

You should expect a continued focus on revenue, but also on improving profitability and free cash flow. It's not about revenue at any cost; rather, it's about generating profitable revenue that increases our free cash flow. Any changes we make in the business will align with these principles. So while we may not prioritize maximizing revenue growth, our emphasis will be on enhancing sales profitability and significantly boosting the cash flow of that operation.

I'm not showing any further questions at this time. I'd like to turn the call back over to Dave for any further remarks.

Well, thank you for everybody for your good questions. Thank you for your time. And I'd just like to thank all of my associates and partners in pediatric healthcare and our investors for continuing to share in the mission to help 1 million kids a year. Have a great day, and we look forward to talking to you soon.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.