Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to Paragon 28 First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

And I would now like to hand over the conference to the host of today, Mr. Matthew Brinckman, SVP of Strategy and Investors Relations. Mr. ahead. go please Brinckman,

Matt Brinckman

Deitsch, thank results joining on and DaCosta, and are and quarter today's XX's XXXX Albert Steve CEO; and financial earnings Chairman you afternoon Paragon for first call CFO. Good calls. Presenting

Reform Before Private statements management this make of that remind the Act will made meaning the Harbor I Securities of we of include law, statements Safe forward-looking pursuant which would are begin, that to you like call Litigation within during the federal provisions XXXX. securities to

Forward-looking forward-looking statements management's as future information, forward-looking the current intentions, and These required statements. may based upon to Paragon are to hopes, or estimates, and by of uncertainties, statements. these subject forward-looking assumptions results, statements All obligation, results predictions cause law, from that actual except a made include available risks, company's statements assumes number to XX no statements differ are beliefs, or expectations, update events, as to of performance. or these materially

Additional the information contained time earlier that that issued to may from and time certain statements in uncertainties these was forward-looking impact SEC the press is filings today. in release risks company's concerning and

will contained EBITDA in presentation, comparable our press growth. is refer non-GAAP this issued of measure, the net today. adjusted financial GAAP we During reconciliation to measure net reported and growth revenue financial revenue currency most constant to A the income, earlier and release

to the turn over now Albert. will I call that, with And

Albert DaCosta

give financial update. results an Thanks, will will earnings an first details on provide and to additional performance quarter our Matt. call. Throughout financial a our first update our Steve afternoon, Good overview and call, business I XXXX provide provide welcome and this guidance. our then regarding XXXX of quarter XXXX

incredibly was our XX% impressive the open quarter I'm comps million, record in the strong of $XX of with of quarter XX% performance this is constant a XXXX will net first especially our against in We which first first year, and quarter XX% quarter call currency to year-over-year. XXXX. growth pleased the first for representing Total the revenue Q&A. then growth of

net the growth the U.S. U.S. delivered revenue of in in XXXX. first to that first quarter growth First XX% $XX XX% or subsegments. million, our and I quarter foot of of am quarter say business each XXXX, the greater over was proud of ankle representing X

balanced growth of the outcomes the patient focus and market. our improving ankle on entirety Our underscores foot across

producing than reps did producing producing the again the customers our also per U.S. of to net X% reps, XXX XXXX Our by prior the quarter in first during quarter, percentage, XXXX. increase increased in with XXXX. quarter business to annualizing year-over-year mid-single-digit Despite our was sales $XXX,XXX revenue revenue rep large the a during once sizable the increase also increase of by producing first This represented to quarter compared the of to of compared quarter, year. more the fourth increase XX% the of X,XXX part XX% during compared We rep. a first over number per driven an surgeon an increase U.S.

with in new to in addition increases nice we see additions, revenue existing Importantly, customer to continue customers.

PXX's primarily come for us XX. to Paragon Africa, net and The quarter markets for our that foot was made of estimated international first have from revenue United XX% of representing first Xx consolidated are surgeon the exciting almost and XXXX. we long-term expect quarter product paying growth dividends customers positioning currency rate. market international growth well First and the and over innovative including was success, the growth growth pipeline was Australia, quarter South $X are ankle XX% investments have of revenue a record constant revenue driven International our million, the by Kingdom. largest

world. the by ankle patient made contributions members and mission deliver around has an foot PXX results improve The and outcomes. extraordinary the for our committed ability you to is of team to team Thank to incredible all our

to I will over now it Steve. turn

Stephen Deitsch

Thank net XX.X% you, compared growth currency your the was Albert. Expanding $XX the on XX's revenue XXXX. to XXXX, earlier constant representing reported quarter million, record and a XX.X% of comments growth, of first on quarter respectively, first Paragon

Foreign net reduced points, by quarterly and reported approximately respectively. X.X revenue net revenue currency $XXX,XXX headwinds and growth percentage

inventory of in March, primarily a finished profit communicated for quarter XX.X% XXXX. strong. first to XX.X% of compared compared to obsolete in patient continues excess we first were and development Gross the ankle of increase to XXXX to the first XXXX. quarter costs $X development and very quarter investments the was to million, and in As This outcomes, percentage due early an decrease quarter the PXX its an increase of and expand product the great ultimately efforts new costs. Research was quarter margin including improve and was studies. XX.X% midst clinical in foot of PXX small

XX.X% a adjusted loss to of a closer quarterly well the basis points annualized strong bring rates, expected quarter revenue, revenue of and above compared the of to of XXXX rates margin, since year. education marketing, administrative was the PXX's our XXXX are investments revenue quarter this leveraging in improvement breakeven first margin million, first continue past basis of start of to $X.X greater growth, basis, medical the adjusted in demonstrates and company Adjusted the This in infrastructure. quarter general, increases an XXX steady first dollar throughout and market combined every on of was quarter or of million, improvement than expansion, million loss, EBITDA with will experienced expected in operating EBITDA for or the $XX.X to sales growth improvements force XXXX. PXX Selling, in On quarter growth representing $X.X have for XXXX. first million we of the expense EBITDA the XX% XXXX. and XX% revenue, $XX.X sequential compared

the payment, XXXX The the first a the for up was million $XX credit our to compared $X compared Normalized settlement quarter. million, first which this $XX quarter year available with significant or a improvement for million $XXX XX% liquidity, of cash facility. We Operating $XX items, ended the our $XX Denver acquisition of included million. purchase for the approximately and and included quarter short-term million X payment. senior building for approximately quarter year. XXXX for of of million investments of cash of of Disior onetime prior $X.X $XX.X legal via prior cash in $XX the for was use XXXX quarter and million Investing approximately million used cash $X used million first cash year million to including quarter $X.X headquarters to million, the prior of the first operating was XXXX also

reach liquidity are We leverage and free cash cash with will comfortable our of growth, flow very which breakeven result above-market enable a as coupled with in revenue us flow. we to continued expect continued operating position, improvements

trends weighted the of fourth revenue each is spring of pre-COVID Turning guidance. in with validate PXX our for to start XXXX. our trends, return historical revenue the example, the XXXX fantastic net heavily normal thinking. and shaping to to more year, quarters in and today in continue up through procedural revenue vacations line to quarterly more off XXXX a including, concentration and with first appears be summer seasonality more

reaffirming $XXX to of million, XX%, of approximately year revenue representing full to net are XX% previous million XXXX, the reported respectively. guidance we $XXX growth For our of

translation current consistent rates rates. Our assumes revenue remain also guidance with currency translation

That end questions open remarks. is the prepared of for please the and Operator, our lines answers.

Operator

Instructions] [Operator

comes from Our Securities. first JMP question from Dave Turkaly

Dave Turkaly

to strong that's to given Thank great came maybe the how about in, you hear. anything in the But concerns at I year, look you're quarter and it's we this given return this appreciate guys. of seeing but probably early pre-COVID you're normal, would the you any coming. and in seeing deceleration believe congrats, you? seasonality, the being not just as XQ And color somewhat that there's think nothing that conservative still that cause should we there's to that as that guidance

Stephen Deitsch

it's Turk, 'XX, better great comp seasonality. terrific the in look, EBITDA, off It's to excited last see growth question. better XX% Steve. year a normal start line tough flow. we're top XX%, We're of And more cash to really a against

look So we continued the due cylinders. hitting business at when the we we in full guidance is our you year, would been. And we're macroeconomic really that as I prudent the just uncertainty. conservatism. And we're in But being to look We're on ever decided for simply reaffirm strong cylinders. say uncertainties used the on fact the in. are we all all at when word hitting we're operating our environment, we've as to macroeconomic

record expand to force our continue at levels. sales We

We continue humming as is and force, so to with sales our our good international productivity PXX. well, business all across drive

Dave Turkaly

the I divisions the past, said or were just prudent like reaffirm U.S. over all don't to over And think XX%. XX%. were double In term, the digits. the said that, that you I recall in up categories X they I think I you too.

XQ past. the that implies again, Correct? even So that accelerated in versus something

Stephen Deitsch

Yes. a was Look, that quarter way. it this out was this we -- specifically and great called

foot business the designed and U.S. be was globe, working foot with the the greater to balance that surgeons every grew specialist ankle or well. the Our ankle honestly, and ankle category. all around that business foot and it's in serving and XX% is the truly needs And preeminent of

Operator

next Rose comes question Our from Canaccord. from Kyle

Caitlin Cronin

for on Great Caitlin quarter. is This Kyle. Hi.

factors you rest of the Just And some What to of continue QX. you equally force the the are sales additions to your for start sales force expect in year? productivity speaking that sales will additions to growth? strong drive force, do the really saw off, plans and this

Stephen Deitsch

We you. but had which a not reps year, really year was XX quarter. first contribution Hey, rep rep to from nice over hear grew just in XX% a yes, XXX, increase. And from Caitlin, count sales the our producing to increase sequential producing we nice nice a really also

deliver months running expected experienced their take making XX, reps are to up XX had like at to potential. It does sometimes, starting that and we've really investments the XX So to we them really to. been get

we're see that. And starting so really to

reps. of your to you just a bit, nice you're producing as bringing this we in tends quarter, productivity of drive little single-digit saw in go math, newer number a because the -- productivity. up reps, in down increase So But mid-single-digit the

that more we out influenced heavily quarter in by our force So expect was will sales balance those again. this the the But of time expansion over U.S.

Caitlin Cronin

contribution then the this and be? year you what it. just launched longer-term Smart on first the XX potential expect Smart still do do module really think Got could you And quickly from XX,

Albert DaCosta

Yes.

higher the it's we that this in of going early the what better pretty no outcome predicting to patients. of even of planning is surgery, later technology basis type phases you and launch market desperately in tell been us that. look us needs limited rates visibility think to improve that significant secret giving outcomes that, XX going and year, that Disior-type enabling the complication diagnosing to technology Paragon do a the this we platform. the mission reflection opportunities really a And in I a made right. a the expecting to we foot expect long-term think more had think of of that on would next we on contribute to enabling outcomes. and has we of way phase still X to is And always improve phases the have meaningful modules, year, good surgery, like. of first I visibility to X are those We give most is a ankle We for think And

Operator

question next from Stephens, from Inc. comes Sellers Our George

George Sellers

of can think taking I launches expected we're we great have about rest that so new of also year the this about maybe year this the congrats quarter. the the we year, for modeling last you wanted on device recent some you've just new remind to cadence Thanks the think then the us of the year? a as rest Hi. pipeline. as about of maybe you and any as device made the year-over-year questions. comps ask And this And that in just launches

Albert DaCosta

pretty which a that. year in out launched Ex George, for earlier year, is start they key particularly We launched indications launches which has pin fixator, been and used fix bar few because were circular to product we Charcot have the more more of So -- goal. later was for reverse, weren't segment participating and foot and of in more significant more And to the and on fixation. Those were great in I'll primarily totally example launched last a us in which actually and the we contributions a a right? system foot we fracture of around we used participation of ankle, then yet. and ankle the great is areas a deformity called ankle.

fracture a there, year. pretty some launched heavy tissue products soft to fixation again. RXACT products like And foot used we also couple launch we We out a for have key we the X the few called put us. of product fracture the that proud a tissue the line, a -- in future although system, stabilization And product soft products last ankle, role fracture is ankle particular spotlight see fixation were playing of which that I've and we market on and in in

So effect of launches. we complementary there those had nice for really a some

This far, and a tissue is It product being really reason. those soft our X bunion I've lesser metatarsals us met procedure. in we've we tandem surgery. And X is surgical of and ankle the to and foot tend meaningful tandem complementary solution the year far can that the each And a so indications. product indications in products, shortening so which address met said different better, to always make X of product that goal sure first to a the segment. the following with launched second exciting shortening the X be bunion procedures with or every more balanced address potentially that of shortening is to address gives for And even technology

launched that remember make year, last total nice an But more parallel ankle when prep replacement. if we're procedure done ankle that this the late it's ankle us things sure alignment need total where also early to respect which we walking. really to we're a ankle, procedure. the complement in itself replacement the realign for is ground be you the for That the like of realignment to also we can We by supramalleolar just system launched limited year,

continue couple is to later be another product. year supramalleolar weighted a nice more product I'd little additions then of with to probably complementary And a So to see the second expect year. that of really don't heavier this going is this all half our address market I more are it more product really product to favorites, needs but us. that. and always meaningful ankle to indications of and I've introductions. And to introductions said foot and have nice the

So excited we're happen later year. about going what's to pretty this

George Sellers

Okay. maybe helpful. Steve, then, That's And really you. for X

profitability about the talked and there. previously You've timeline

curious your you're XX profitability. Just about updated thinking on returning Paragon thoughts how to

Stephen Deitsch

$X in about what the which it's we approaching have EBITDA Yes, from us breakeven. George, had we we expect million quarter said this improvement still adjusted $XX would last where same our year, to talked million

profitability So on it's an going to pierces Paragon EBITDA be basis. soon the when

great margins. drives make progress high-quality We driving growth, continue to which gross on strong

delivered we saw, you As quarter. XX% again this

there to product make starts making on. investments continue all like things expansion, international in it matter, then So where just investments salesforce so and development, they new expansion, and

we we So and that's focus leverage else. where and our everything energy, time, money,

to about so our -- profit over time. flow improved And cash excited pathway continued profitability and

Operator

Our Bijou Craig America. from from comes Bank question next of

Craig Bijou

where heard quarter. revenue afternoon, the on cadence, taking Congrats concentration to And Thanks Good Steve. your comments follow Wanted recognize on for another strong up be. on -- I guys. the I will revenue questions.

at QX a are I you Your 'XX. look comps, though, little bit -- when guess variable sorry,

think in on to relation first just the and back the maybe bit So half then provide color relation about little could half. to to QX how if maybe guys a more you in QX

Stephen Deitsch

quarter Craig, we seeing -- and week revenue your and for really you that a we the great is of we're that. looking within. you. quarter more conference pleased we ankle a And operate that what to at in next have to are No. the business concentration to first fourth seasonality see question, normal And after Great and foot means see forward the

for was us obviously So the first quarter strong, XX%. really

as some the roll mention through did You comps strange we year.

though, quarter a comp. first XX% year, last us, For was the

to up schedules. fourth revenue, a second of the out third the each are procedures. dollar think on actual ramp So third of we quarter as really and begins the though, basis and distribution with that. then the a bolus get into then lowest the pleased And typically the really year, vacation about of When quarter you quarters is

year are and bit was you that think from quarter quarter third third comps year levels. due similar would second In step a strange normal our year the was unusual. have first pretty down quarter, quarters rates and a to And some the which going see quite last a now, environment, our than this first second second quarter I you And in that think to quarter which our is we larger than growth larger mentioned. second the we're over quarter

third normalized a more bit year strong. still a a expecting quarter strong see and fourth really, of We growth the into we're where of first revenue really a So quarter then perspective. step this but is down building on trend basis, from quarter a year-over-year an overall the good then dollar and rates,

Craig Bijou

procedure about heard all ortho strong in catch or procedure We've is That's it. some categories. Steve, revenue other or Albert growth QX might across XX% as the ortho there And be or up. you talked other growth your Got helpful. recovery

love not perspective, in take So I ankle is procedures from and to seeing you're know And necessarily to part you're play and love foot procedure an market. But the would how see of out seeing just what would get it your understand perspective, underlying on what 'XX. you and over trauma elective.

Stephen Deitsch

orthopedics I'll Yes. spillover here In perspectives do for start quarter, in Albert like has quarter, And, some see sure. you first Craig, quarter, seasonality normal first as some a and the well quarter of a typical the our then first just to not just procedures into heavy because surgical across patients and med-tech. were their done that volumes, were and but foot in of med-tech, get ankle unable and but scheduled fourth

advantage take of the and like strong, things and position about second that as strong seeing continues into a good. so typically the with quarter. look, very underlying those we're And procedural are January start when spring and you markets And pretty March, But to then then you then is into And that, our get month. you very, see breaks excited February markets. seasonality some

Albert DaCosta

That's right.

feel to stuff, team's contributing and I a and part fundamentals additions, our playing on growth well just product feel to just the there, everything to launches, really right? of executing outside medical rates force there. I add that, nice really sales The think seasonality like education, the I is like some

Operator

Our next question from from comes Mike Needham Company. Mattson

Mike Mattson

thanks. Yes,

want ask Just on one to training.

from stepped I if in kind of could any give metrics surgeon us there, it's updates, curious and more really be of even But didn't away if nature, giving any you detail. you give and You just was qualitative may lot think training. I a

Stephen Deitsch

Yes, training programs are happy quarter. the strong really F&A to, The again in Mike. first

the trained in almost for it's lab We first mobile really us. mobile Our quarter. surgeons the in doing lab XXX alone well

really adding And avenue and really these XXX us for didn't to quarter. that's is a whole to surgeons. the exciting a us internationally So of in get train different trained this But for over U.S., we surgeons. we surgeons lot

the the are we interest more spend So a then our really lab. and train cost-effective training happy product of continued is added their and with they in And the work time too, reps more existing to and and doctors customers. with mobile and benefit get to for all lines with surgeons get way, are we get training new potentially our with our really to this to these more ability becoming doctor

So it and us, was quarter. first again for the in it's program a really nice

Mike Mattson

got of Okay, questions. it. And just a couple financial

quarter So we than modeling. were the in OpEx the a what little higher was

rate million year. stay Just wondering for the the if million $XX run to you around -- from expect sorry, it here $XX

Stephen Deitsch

to not continue terms path dollars R&D continue to talk about education. salesforce EBITDA see our going drive but total of we So to the and to ready we that, leverage leverage we're really or continue would move to going of we and forward to per medical course, quarter, in throughout OpEx to basis. as and And positivity. on expectations continue the in actual as We're quarterly a expect invest on to

Mike Mattson

were was think versus then And you same than anything were range kind there of it higher little be any what It more that or we XX% of Was there did. margin, it. that kind we modeling. in just to got bit I in a one-offs Okay, led gross thing. XX% maybe the

Stephen Deitsch

No one-offs.

able strong that for partners. pretty secure lot from to contribution we were products very reasonable from solid good Just pricing a our of

to get to sure and paid our make hard then we really product get teams work and reasonable sales contracting works team at our our price, So appropriately. teams

models the in with XX%-plus And so about business think recommend, think XX% our nothing that We do continue forward. an to you business about your as margin. comfortable going level and margin unusual as

Operator

Neil Our next from comes B. Chatterji question from Riley.

Neil Chatterji

Australia could already distributors. taking anything South Spain the back afternoon. asked, what's if strength been just via Good it's guess or international of side, U.K. that the whether Most on about have but talk coming questions. for driving or Thanks the specific to and maybe just just or mine I international, you Africa

Stephen Deitsch

business, strategic Neil, keep look, making really pleased Similar certain to U.S. our delivering. and markets investments they business. international in really some been we're we've key our with

So again our U.K. we'll continue performed in making Australia business investments well first quarter. there. extremely our And the business,

well there. Just for really, about excited doing really momentum really us and the

then Our like increased South in to well markets, and and starting Africa in new we're business penetration areas Spain, Italy to continues And see Germany as in perform. as Canada.

lot opportunities and a going on growth forward. there So for we've we're going got of it's focus to that continue to area an

Neil Chatterji

those then in as call as of Great. terms opportunities? out countries, to And sizing far expansion anything those there

Stephen Deitsch

you I large and bigger, our into, lot The our as X. tell market internationally, get know foot to bigger And to markets opportunity going just have Look, we're can existing ankle that getting billion. grow. get Those very would is big nice the us. for a over a markets they then are including you $X

sure want for account best can ankle make not at that improve And and into foot the focus patients to be revenue, ankle the procedures just to foot we we a and there, to company that taking so just practices treat but also outcomes. and so we continue globally-focused how truly and

it better So it's us also revenue, but drive important products. helps develop to help

Neil Chatterji

Got it. And the point the just cadence. not quarterly belabor to on

'XX? expectations I for picking specifically 'XX? July-August, like just returning or versus, the guess those about to Does levels. for pre-pandemic vacations to but I April imply say, I 'XX say, that color are versus vacations was think pretty wanted you some good gave here, up with ask just Or that, how

Stephen Deitsch

carefully vacation and And this And seeing spring more like very Yes. and it. we just sales customers surgeons interesting, scheduling Neil, to force No, normal vacations our things to really obviously talk are schedules summer again. look patients actually we and look are where and about at taking at. it's break

And would some so travel sorts to on see. restrictions have their to to There's ability practices in those and allowed hospitals, would the lifted that's liked that as been as have of much do not procedures in return, the past, put when been physicians by and to have great then they and large. they

can't happy so customers get to to I'll And we're for but we vacation, our to wait see take you able tell that. them be back into the OR,

Operator

Our Sandler. next question is from Matt O'Brien from Piper

Samantha Kurtz

Hi. impact Congrats on our do those Samantha about for This question what Matt. QX on continue business the is maybe I products you guess to maybe forward. first is to and new moving influenced the expect quarter. how

Albert DaCosta

ankle forefoot Samantha, every with I from nice for And key really in and of seeing pretty and lean right? products, COVID, can influence really it ankle key piece more of in nice fixation. medical right? mentioned other, We've of really right? don't that their hesitant But which newer contribution. and want is ankle, those. call external our be I'll cycle includes bunion I'm if the those you foot fixation growth Yes. launched fracture meaningful which from could flat influence education at high Charcot, replacement, and X again, backside those the had new total ankle couple launches. foot portfolio, say saw and ankle we're products saw products a being I the we on sometimes PCFD, or I still Charcot impact hit But we a we that. to demand a glamorize our from of subsegment lot products think a growth earlier that market really QX, on had to because, market, in a maybe the look over of an but fusion,

to So I really like in all of answer a nicely feel more lot a segments the of giving but you I'm contributed I like QX our products success. to that question, feel broad

Samantha Kurtz

Obviously, growth you and and is on it's rate specifically. there And X Perfect. meaningful maybe question more are international that? just what a how then seeing durable

Stephen Deitsch

keep lot It's comparable of growing. very U.S. We've the a is Sam. market. in international durable, the market to to got size room And

markets we over become in a established strong In time. a important have So I of significant presence, there. there. don't where important are going lots grow mentioned, Like lot already beachhead, we're for those really room the us, to to of have in a markets opportunity more and

going it's of those investing growth an we're plan important to and markets. So in excited forward, our part keep

Albert DaCosta

Maybe there. I'll add given thing delayed products regulatory too. here launched to Samantha, United just the of the a little X the that, lot reaction a international markets in of we have with A States bit new procedures

the really And so last we're still the opportunity three those on excited of seeing or years the the we could launched two have about in with some the international impact success. products and

Operator

DaCosta currently questions, We go have further remarks. Albert to back like no so ahead. Please I would for final to hand the call

Albert DaCosta

many on your and Have conferences, investor for you seeing look May next at week including forward to Conference today. Vegas the time again Healthcare of America at Thank day. Xth of XXth. the We industry Las Bank future great you a and in

Operator

Ladies for call. gentlemen, concludes today's this Thank joining. you and

Thank lines. disconnect now you. may your You

Paragon 28 (FNA) 4 May 232023 Q1 Earnings call transcript