Paragon 28 Reports First Quarter 2023 Financial Results and Reaffirms 2023 Net Revenue Guidance

Rhea-AI Summary

Paragon 28 reports Q1 2023 financial results with record net revenue of $52.0 million and reaffirms 2023 net revenue guidance of $214-218 million.

Positive

• Q1 2023 net revenue of $52.0 million, representing 25.8% and 27.1% growth over Q1 2022
• U.S. net revenue for Q1 2023 was $45.0 million, a growth of 24.9% over Q1 2022
• International net revenue for Q1 2023 was a record $7.1 million, representing 31.9% and 42.2% growth over Q1 2022
• Gross margin of 83% for Q1 2023
• Adjusted EBITDA improved by 57.1% to a loss of $1.4 million in Q1 2023 compared to a loss of $3.3 million in Q1 2022

Negative

• Net loss of $9.1 million in Q1 2023 compared to a net loss of $9.2 million in Q1 2022
• Operating expenses increased by 18.3% to $50.9 million in Q1 2023 compared to $43.0 million in Q1 2022

ENGLEWOOD, Colo.--(BUSINESS WIRE)-- Paragon 28, Inc. (NYSE: FNA) (“Paragon 28” or "Company”), a leading medical device company exclusively focused on the foot and ankle orthopedic market, today reported financial results for the quarter ended March 31, 2023 and reaffirmed its 2023 net revenue guidance.

First Quarter 2023 Financial Results

• Consolidated net revenue for the first quarter of 2023 was a record $52.0 million, representing 25.8% and 27.1% reported and constant currency growth, respectively, over the first quarter of 2022.
• U.S. net revenue for the first quarter of 2023 was $45.0 million, representing growth of 24.9% over the first quarter of 2022.
• International net revenue for the first quarter of 2023 was a record $7.1 million, representing 31.9% and 42.2% reported and constant currency growth, respectively, over the first quarter of 2022.
• Gross margin was 83% for the first quarter of 2023 compared to 84% in the first quarter of 2022.
• Operating expenses were $50.9 million for the first quarter of 2023, an increase of 18.3%, compared to $43.0 million for the first quarter of 2022.
• Net loss was $9.1 million for the first quarter of 2023, compared to net loss of $9.2 million for the first quarter of 2022.
• Adjusted EBITDA was a $1.4 million loss for the first quarter of 2023, a 57.1% improvement, compared to a $3.3 million loss in the first quarter of 2022.

“Paragon 28 is off to a great start in 2023. We are thrilled with our 27% constant-currency net revenue growth for the first quarter, particularly given the comparison to our very strong first quarter of 2022, which grew 25% on a constant-currency basis. Our impressive top-line growth, and our 57% year-over-year improvement in Adjusted EBITDA for the quarter, was the result of excellent execution by each of our global teams,” said Albert DaCosta, Chairman and Chief Executive Officer. “This exceptional performance demonstrates our leadership across the entire foot and ankle market, and the benefits of our exclusive focus. I am extremely confident in our prospects in 2023 and beyond.”

2023 Net Revenue Guidance

The Company reaffirms its prior 2023 net revenue guidance, and expects net revenue to be $214 million to $218 million, representing 18% to 20% reported growth compared to 2022.

The Company’s 2023 net revenue guidance assumes foreign currency translation rates remain consistent with current foreign currency translation rates.

Webcast and Conference Call Information

Paragon 28 will host a conference call to discuss first quarter 2023 financial results on Thursday, May 4, 2023, at 2:30 p.m. Mountain Time / 4:30 p.m. Eastern Time. Investors interested in listening to the conference call may do so by dialing (833)-470-1428 for domestic callers or (929)-526-1599 for international callers, using conference ID: 007721. Live audio of the webcast will be available on the “Investors” section of the company’s website at ir.paragon28.com. The webcast will be archived and available for replay for at least 90 days after the event.

About Paragon 28, Inc.

Based in Englewood, Colo., Paragon 28, is a leading medical device company exclusively focused on the foot and ankle orthopedic market and is dedicated to improving patient lives. From the onset, Paragon 28® has provided innovative orthopedic solutions, procedural approaches and instrumentation that cover a wide range of foot and ankle ailments including fracture fixation, forefoot, ankle, progressive collapsing foot deformity (PCFD) or flatfoot, charcot foot and orthobiologics. The company designs products with both the patient and surgeon in mind, with the goal of improving outcomes, reducing ailment recurrence and complication rates, and making the procedures simpler, consistent, and reproducible.

Forward Looking Statements

Except for the historical information contained herein, the matters set forth in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to: Paragon 28’s potential to shape a better future for foot and ankle patients and its estimated net revenue for full year 2023. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements are only predictions based on our current expectations, estimates, and assumptions, valid only as of the date they are made, and subject to risks and uncertainties, some of which we are not currently aware. Forward‐looking statements should not be read as a guarantee of future performance or results and may not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. These forward‐looking statements are based on Paragon 28’s current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward‐looking statements as a result of these risks and uncertainties. These risks and uncertainties are described more fully in the section titled “Risk Factors” in Paragon 28’s filings with the Securities and Exchange Commission (the “SEC”), including Paragon 28’s annual report on Form 10-K filed with the SEC on March 2, 2023. Paragon 28 does not undertake any obligation to update forward‐looking statements and expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward‐looking statements contained herein. These forward-looking statements should not be relied upon as representing Paragon 28’s views as of any date subsequent to the date of this press release. Paragon 28’s results for the quarter ended March 31, 2023 are not necessarily indicative of our operating results for any future periods.

Use of Non-GAAP Financial Measures and Their Limitations

In addition to our results and measures of performance determined in accordance with U.S. GAAP presented in this press release, we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes. We define Adjusted EBITDA as earnings (loss) before interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, employee stock purchase plan expense, non-recurring expenses and certain other non-cash expenses.

We believe that Adjusted EBITDA, together with a reconciliation to net income, helps identify underlying trends in our business and helps investors make comparisons between our company and other companies that may have different capital structures, tax rates, or different forms of employee compensation. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these potential limitations include:

• other companies, including companies in our industry which have similar business arrangements, may report Adjusted EBITDA, or similarly titled measures but calculate them differently, which reduces their usefulness as comparative measures;
• although depreciation and amortization expenses are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditures for such replacements or for new capital expenditure requirements;
• Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs or the potentially dilutive impact of stock-based compensation; and
• Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur.

Additionally, we report revenue growth on a constant-currency basis in order to facilitate period-to-period comparisons of results without regard to the impact of fluctuating foreign currency exchange rates. The term foreign currency exchange rates refers to the exchange rates used to translate the company's operating results for all countries where the functional currency is not the U.S. dollar into U.S. dollars. Because we are a global company, foreign currency exchange rates used for translation may have a significant effect on our reported results. References to revenue growth on a constant-currency basis means without the impact of foreign currency exchange rate fluctuations.

The company believes disclosure of constant-currency revenue growth rates is helpful to investors because it facilitates period-to-period comparisons. However, constant-currency revenue growth rates are non-GAAP financial measures and are not meant to be considered as an alternative or substitute for comparable measures prepared in accordance with GAAP. Constant-currency growth has no standardized meaning prescribed by GAAP and should be read in conjunction with the our consolidated financial statements prepared in accordance with GAAP. We calculate constant-currency growth rates by translating local currency amounts in the current period at actual foreign exchange rates for the prior period.

Because of these and other limitations, you should consider our non-GAAP measures only as supplemental to other GAAP-based financial measures.

PARAGON 28, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
		March 31, 2023				December 31, 2022
ASSETS
Current assets:
Cash		$	85,883			$	38,468
Trade receivables			37,262				37,687
Inventories, net			69,174				60,948
Income taxes receivable			596				615
Other current assets			4,167				4,658
Total current assets			197,082				142,376
Property and equipment, net			66,810				61,938
Intangible assets, net			22,137				22,387
Goodwill			25,465				25,465
Deferred income taxes			354				148
Other assets			1,697				1,795
Total assets		$	313,545			$	254,109
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	20,538			$	14,939
Accrued expenses			25,446				26,807
Accrued legal settlement			13,000				22,000
Other current liabilities			3,772				3,844
Current maturities of long-term debt			690				728
Income taxes payable			208				184
Total current liabilities			63,654				68,502
Long-term liabilities:
Long-term debt net, less current maturities			42,204				42,182
Other long-term liabilities			1,523				1,628
Deferred income taxes			377				342
Income taxes payable			635				527
Total liabilities			108,393				113,181
Stockholders' equity:
Common stock, $0.01 par value, 300,000,000 shares authorized; 83,220,392 and 78,684,107 shares issued, and 82,306,873 and 77,770,588 shares outstanding as of March 31, 2023 and December 31, 2022, respectively			821				776
Additional paid in capital			287,286				213,956
Accumulated deficit			(76,841	)			(67,789	)
Accumulated other comprehensive loss			(132	)			(33	)
Treasury stock, at cost; 913,519 shares as of March 31, 2023 and December 31, 2022			(5,982	)			(5,982	)
Total stockholders' equity			205,152				140,928
Total liabilities & stockholders' equity		$	313,545			$	254,109

PARAGON 28, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
		Three Months Ended March 31,
		2023				2022
Net revenue		$	52,036			$	41,371
Cost of goods sold			8,906				6,791
Gross profit			43,130				34,580
Operating expenses
Research and development costs			7,049				5,773
Selling, general, and administrative			43,820				37,242
Total operating expenses			50,869				43,015
Operating loss			(7,739	)			(8,435	)
Other income:
Other expense			(179	)			(101	)
Interest expense			(1,205	)			(668	)
Total other expense			(1,384	)			(769	)
Loss before income taxes			(9,123	)			(9,204	)
Income tax (benefit) expense			(71	)			32
Net loss		$	(9,052	)		$	(9,236	)

PARAGON 28, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
		Three Months Ended March 31,
		2023				2022
Cash flows from operating activities
Net loss		$	(9,052	)		$	(9,236	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			3,117				3,030
Allowance for doubtful accounts			—				600
Provision for (reversal of) excess and obsolete inventories			293				(643	)
Stock-based compensation			3,182				2,122
Other			180				387
Changes in other assets and liabilities, net of acquisitions:
Accounts receivable			441				(2,240	)
Inventories			(8,435	)			(2,329	)
Accounts payable			5,592				(1,178	)
Accrued expenses			(877	)			(682	)
Accrued legal settlement			(9,000	)			—
Income tax receivable/payable			132				669
Other assets and liabilities			367				(3	)
Net cash used in operating activities			(14,060	)			(9,503	)
Cash flows from investing activities
Purchases of property and equipment			(7,521	)			(23,036	)
Proceeds from sale of property and equipment			223				305
Purchases of intangible assets			(254	)			(704	)
Acquisition of Disior, net of cash received			—				(18,201	)
Net cash used in investing activities			(7,552	)			(41,636	)
Cash flows from financing activities
Proceeds from draw on term loan			—				20,000
Proceeds from issuance of long-term debt			—				16,000
Payments on long-term debt			(197	)			(37	)
Payments of debt issuance costs			(7	)			(405	)
Proceeds from issuance of common stock, net of issuance costs			68,449				—
Proceeds from exercise of stock options			1,622				12
Payments on earnout liability			(500	)			—
Net cash provided by financing activities			69,367				35,570
Effect of exchange rate changes on cash			(340	)			(136	)
Net increase (decrease) in cash			47,415				(15,705	)
Cash at beginning of period			38,468				109,352
Cash at end of period		$	85,883			$	93,647

PARAGON 28, INC. AND SUBSIDIARIES RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA (in thousands, unaudited)
		Three Months Ended December 31,
		2023				2022
Net loss		$	(9,052	)		$	(9,236	)
Interest expense			1,205				668
Income tax (benefit) expense			(71	)			32
Depreciation and amortization expense			3,117				3,030
Stock based compensation expense			3,182				2,122
Employee stock purchase plan expense			122				—
Change in fair value of earnout liability (1)			80				80
Adjusted EBITDA		$	(1,417	)		$	(3,304	)
(1) Represents non-cash change in the fair value of earnout liabilities.

PARAGON 28, INC. AND SUBSIDIARIES Constant-Currency Revenue Growth (in thousands, unaudited)
		Three months ended March 31,
		2023			2022			% Increase (Decrease)
Total Consolidated Revenues
As Reported		$	52,036		$	41,371			25.8	%
Impact of foreign currency exchange rates			552			—		*
Constant-currency net revenues		$	52,588		$	41,371			27.1	%
Total International Revenues
As Reported		$	7,055		$	5,348			31.9	%
Impact of foreign currency exchange rates			552			—		*
Constant-currency net revenues		$	7,607		$	5,348			42.2	%
* Not Meaningful

 

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Investor Contact:

Matt Brinckman

Senior Vice President, Strategy and Investor Relations

mbrinckman@paragon28.com

Source: Paragon 28, Inc.

FAQ

What were the Q1 2023 net revenue results for Paragon 28?

Paragon 28 reported a record net revenue of $52.0 million for Q1 2023, representing growth of 25.8% and 27.1% over Q1 2022.

What was the net loss for Q1 2023?

Paragon 28 reported a net loss of $9.1 million for Q1 2023, compared to a net loss of $9.2 million in Q1 2022.

How did the Adjusted EBITDA change in Q1 2023?

Adjusted EBITDA improved by 57.1% to a loss of $1.4 million in Q1 2023, compared to a loss of $3.3 million in Q1 2022.

What is Paragon 28's 2023 net revenue guidance?

Paragon 28 reaffirmed its 2023 net revenue guidance of $214 million to $218 million, representing 18% to 20% growth compared to 2022.