Full Press Release Details
Paragon 28 Reports Third Quarter 2023 Financial Results and Reaffirms 2023 Net Revenue Guidance
ENGLEWOOD, CO., November 7, 2023 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 September 30, 2023 and reaffirmed its 2023 net revenue guidance.
Third Quarter 2023 and Nine Months Ended September 30, 2023 Financial Results
Paragon 28 s business fundamentals are as strong as ever and continue to position us for
sustainable long-term growth. Through the third quarter, we grew revenue 20% and ended the quarter with record numbers of U.S. sales representatives and surgeon customers while also improving EBITDA by over 50% compared the third quarter of
2022. said Albert DaCosta, Chairman and Chief Executive Officer. Finally, our new product pipeline is filled with meaningful and innovative technologies, and we are excited to be bringing several of these important new products to market
in the next few quarters.
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 19% and 20%
reported and constant currency growth at the midpoint, respectively, 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 third quarter 2023 financial results on Tuesday, November 7, 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 (646-904-5544) for international callers, using conference ID: 308457. 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 September 30, 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.
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:
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 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.
Senior Vice President, Strategy and Investor
PARAGON 28, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
| September 30, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 34,949 | $ | 38,468 | ||||
| Trade receivables | 33,615 | 37,687 | ||||||
| Inventories, net | 94,380 | 60,948 | ||||||
| Income taxes receivable | 1,022 | 615 | ||||||
| Other current assets | 4,826 | 4,658 | ||||||
| Total current assets | 168,792 | 142,376 | ||||||
| Property and equipment, net | 73,530 | 61,938 | ||||||
| Intangible assets, net | 21,802 | 22,387 | ||||||
| Goodwill | 25,465 | 25,465 | ||||||
| Deferred income taxes | 132 | 148 | ||||||
| Other assets | 3,634 | 1,795 | ||||||
| Total assets | $ | 293,355 | $ | 254,109 | ||||
| LIABILITIES & STOCKHOLDERS EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 27,395 | $ | 14,939 | ||||
| Accrued expenses | 24,966 | 26,807 | ||||||
| Accrued legal settlement | 22,000 | |||||||
| Other current liabilities | 1,893 | 3,844 | ||||||
| Current maturities of long-term debt | 640 | 728 | ||||||
| Income taxes payable | 184 | |||||||
| Total current liabilities | 54,894 | 68,502 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt net, less current maturities | 42,288 | 42,182 | ||||||
| Other long-term liabilities | 1,467 | 1,628 | ||||||
| Deferred income taxes | 327 | 342 | ||||||
| Income taxes payable | 635 | 527 | ||||||
| Total liabilities | 99,611 | 113,181 | ||||||
| Stockholders equity: | ||||||||
| Common stock, $0.01 par value, 300,000,000 shares authorized; 83,469,426 and 78,684,107 shares issued, and 82,555,907 and 77,770,588 shares outstanding as of September 30, 2023 and December 31, 2022, respectively | 824 | 776 | ||||||
| Additional paid in capital | 296,018 | 213,956 | ||||||
| Accumulated deficit | (96,071 | ) | (67,789 | ) | ||||
| Accumulated other comprehensive loss | (1,045 | ) | (33 | ) | ||||
| Treasury stock, at cost; 913,519 shares as of September 30, 2023 and December 31, 2022 | (5,982 | ) | (5,982 | ) | ||||
| Total stockholders equity | 193,744 | 140,928 | ||||||
| Total liabilities & stockholders equity | $ | 293,355 | $ | 254,109 |
PARAGON 28, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net revenue | $ | 52,783 | $ | 46,006 | $ | 155,828 | $ | 129,875 | ||||||||
| Cost of goods sold | 10,394 | 8,491 | 28,158 | 22,920 | ||||||||||||
| Gross profit | 42,389 | 37,515 | 127,670 | 106,955 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development costs | 7,244 | 6,337 | 21,976 | 18,100 | ||||||||||||
| Selling, general, and administrative | 44,126 | 39,667 | 131,773 | 114,857 | ||||||||||||
| Total operating expenses | 51,370 | 46,004 | 153,749 | 132,957 | ||||||||||||
| Operating loss | (8,981 | ) | (8,489 | ) | (26,079 | ) | (26,002 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income, net | 1,660 | 59 | 1,014 | 610 | ||||||||||||
| Interest expense, net | (1,119 | ) | (1,093 | ) | (3,127 | ) | (2,865 | ) | ||||||||
| Total other income (expense) | 541 | (1,034 | ) | (2,113 | ) | (2,255 | ) | |||||||||
| Loss before income taxes | (8,440 | ) | (9,523 | ) | (28,192 | ) | (28,257 | ) | ||||||||
| Income tax (benefit) expense | (108 | ) | 201 | 90 | 306 | |||||||||||
| Net loss | $ | (8,332 | ) | $ | (9,724 | ) | $ | (28,282 | ) | $ | (28,563 | ) |
PARAGON 28, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (28,282 | ) | $ | (28,563 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 10,602 | 9,624 | ||||||
| Allowance for doubtful accounts | 147 | |||||||
| Provision for excess and obsolete inventories | 2,053 | (91 | ) | |||||
| Stock-based compensation | 10,294 | 7,052 | ||||||
| Other | (1,428 | ) | (1,295 | ) | ||||
| Changes in other assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | 3,706 | (10,227 | ) | |||||
| Inventories | (35,558 | ) | (15,316 | ) | ||||
| Accounts payable | 12,468 | 951 | ||||||
| Accrued expenses | 3,718 | 176 | ||||||
| Accrued legal settlement | (22,000 | ) | ||||||
| Income tax receivable/payable | (533 | ) | 297 | |||||
| Other assets and liabilities | (2,704 | ) | 1,442 | |||||
| Net cash used in operating activities | (47,517 | ) | (35,950 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of office building | (18,300 | ) | ||||||
| Purchases of property and equipment | (21,893 | ) | (15,637 | ) | ||||
| Proceeds from sale of property and equipment | 795 | 642 | ||||||
| Purchases of intangible assets | (933 | ) | (1,720 | ) | ||||
| Acquisition of Disior, net of cash received | (18,504 | ) | ||||||
| Net cash used in investing activities | (22,031 | ) | (53,519 | ) | ||||
| 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 | (568 | ) | (367 | ) | ||||
| Payments of debt issuance costs | (420 | ) | ||||||
| Proceeds from issuance of common stock, net of issuance costs | 68,453 | |||||||
| Proceeds from exercise of stock options | 2,535 | 2,224 | ||||||
| Proceeds from employee stock purchase plan | 560 | |||||||
| Payments on earnout liability | (5,500 | ) | (500 | ) | ||||
| Net cash provided by financing activities | 65,480 | 36,937 | ||||||
| Effect of exchange rate changes on cash | 549 | (495 | ) | |||||
| Net decrease in cash | (3,519 | ) | (53,027 | ) | ||||
| Cash at beginning of period | 38,468 | 109,352 | ||||||
| Cash at end of period | $ | 34,949 | $ | 56,325 |
PARAGON 28, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA
(in thousands, unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net loss | $ | (8,332 | ) | $ | (9,724 | ) | $ | (28,282 | ) | $ | (28,563 | ) | ||||
| Interest expense, net | 1,119 | 1,093 | 3,127 | 2,865 | ||||||||||||
| Income tax (benefit) expense | (108 | ) | 201 | 90 | 306 | |||||||||||
| Depreciation and amortization expense | 4,188 | 3,058 | 10,602 | 9,624 | ||||||||||||
| Stock based compensation expense | 3,512 | 2,587 | 10,294 | 7,052 | ||||||||||||
| Employee stock purchase plan expense | 86 | 100 | 268 | 100 | ||||||||||||
| Change in fair value (1) | (1,714 | ) | (35 | ) | (1,394 | ) | (575 | ) | ||||||||
| Adjusted EBITDA | $ | (1,249 | ) | $ | (2,720 | ) | $ | (5,295 | ) | $ | (9,191 | ) |
PARAGON 28, INC. AND SUBSIDIARIES
Constant-Currency Revenue Growth
(in thousands, unaudited)
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||
| 2023 | 2022 | % | 2023 | 2022 | % | |||||||||||||||||||
| Total Consolidated Revenues | ||||||||||||||||||||||||
| As Reported | $ | 52,783 | $ | 46,006 | 14.7 | % | $ | 155,828 | $ | 129,875 | 20.0 | % | ||||||||||||
| Impact of foreign currency exchange rates | (92 | ) | * | 804 | * | |||||||||||||||||||
| Constant-currency net revenues | $ | 52,691 | $ | 46,006 | 14.5 | % | $ | 156,632 | $ | 129,875 | 20.6 | % | ||||||||||||
| Total International Revenues | ||||||||||||||||||||||||
| As Reported | $ | 8,235 | $ | 6,046 | 36.2 | % | $ | 24,035 | $ | 17,094 | 40.6 | % | ||||||||||||
| Impact of foreign currency exchange rates | (92 | ) | * | 804 | * | |||||||||||||||||||
| Constant-currency net revenues | $ | 8,143 | $ | 6,046 | 34.7 | % | $ | 24,839 | $ | 17,094 | 45.3 | % |