FNA - Earnings call transcript Q2 2024

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Operator

Good afternoon, and welcome to Paragon 28 Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

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

Matt Brinckman

and thank Results joining on and DaCosta, Executive are and Officer. Chief Quarter today's XX XXXX Albert Officer; Chief and Financial Earnings Chairman Wright, you afternoon, Interim Paragon Financial for Second call Krissy Good Call. Presenting

EVP pleased and Supply are Financial also newly Chief joining have to We Chain Chahine, Operations Chadi appointed Officer of us.

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

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

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

Albert. will I net to call reconciliation in today. And with reported the and earlier to most During turn respectively, financial will measure financial the growth. A net press currency now the growth we to income our this of presentation, issued constant is non-GAAP comparable refer revenue that, adjusted EBITDA over release net and revenue measure, contained GAAP

Albert DaCosta

joining earnings quarter Matt. Good call. for us our for second afternoon, XXXX Thanks, thank and you

Chadi like team. to I'd the to First, welcome

him thrilled joining are We have to us.

enabled with to top quarter. second this launches. results kick have operating mission. the critical in off their line company, our improvements as to their as to are I for commitment enduring in the entire we achieve Paragon line want well efforts, This on thanking commercial truly product which the and am a of the XX quarter us it for a to has bottom impressive meaningful the team for strong grateful I of by Now execution, been call cadence out rapid expenses coming

I For that, thank the all team.

our growth, revenue XX.X% the 'XX respectively. Now turning to constant for representing in quarter was currency of Global XX.X% performance. second million, reported and $XX

We drive the subsegments continue growth quarter. across all balanced to our in

quarter reported Looking representing U.S. second of at million, for the performance. was growth. business XX.X% Revenue $XX.X the 'XX

which XX% the the grew is During we quarter, customer to growth second quarter compared our of to X,XXX, 'XX. base surgeon

period, X% XX.X% we the in producing sales Over and same time rep increased increase saw reps XXX a rep our base. by across our productivity U.S. to roster

across commercial and commercial to have for metrics, the Looking strategy, at growth foundation durable these the laid you growth on see we've that momentum execute the our continued can in we future.

Importantly, product expand we enabling in bolstered are customer further and sales significant base, education. launches medical productive, our be investments continued our to new by continuing increasingly and to force

be single we the growth the in was commercial and business. foot with and our $XX.X South to we have both customers clear quarter day bolster what on XX.X% believe XX's the markets I the best truly impressed in want work the every outside look to word agencies the are primarily we growth, working in I in front, Australia, deliver the launch International forward that international they team States. One U.S. easy do, international products to in I additional reiterate and scaling their do final surgeon with, and best driven sales every align that possible and of the Paragon growth continuing many business partners am reported proud ankle currency million, Second isn't as to with markets. vision. the day. results XX.X% representing the United reps so while to Africa, constant was respectively. our by We international am to they Kingdom, United and and revenue They Spain. I to It

our to next product Turning portfolio.

We of by are ankle first high X the high-impact our many and fully those subsegments. setting first indications, release. the launches different year, That products of in nearly pace makes growth are in of XX market or products foot spanning a of X and quarter, months the new through innovation, all having in followed launched another X of stages launches

in pipeline, R&D this still have engine to the on expect roll we we Our is out really all cylinders, which additional later and firing projects year.

QX portfolio. As and with the Bun-Yo-Matic, the be PRECISION and in tissue highly are growth X nicely drivers, in which, a particularly cycle, the complementary performing out that those are while to market included launches hardware of early in future. to FJXXXX, forefoot limited soft MIS, our We expected reminder, release our rounded products significant

new what's at this earnings cycle. for Looking

limited release. extensions X-line have market We and

BONOBO diabetic Joint launched designed recently limb specifically the Circular Monkey is salvage of for ex-fix Ball functionality the increases system. and First Rings Strut our

and to holes updates soon to Angle appropriate the interface prepare surgeon. There we the of live an precisely Drill launches, for getting early world some we innovation. are, our in because implant ankle implementation preview incredible for recent into the coming what want launch to the is we're foot a will for, ankle be I areas, to groundbreaking novel streamlining and truly XD tibia are share I with Right change our of preparing implant, APEX designed Second, this more drill but on total vertical to where personally

give first ankle complementary during repair limited is ankle on visualize novel the crown expected these plating be RXFLEX that The of dynamic features time tensioning and mitigate our complication fracture incredibly ability of catalyst fractures. portfolio which the for is the to believe primary of we for the a injury RXFLEX will and types help highly have response, is surgeons a portfolio to First, the The simple That we the our important, a fracture adjust it handle. with is precisely jewel significant System with a arthritic planned our and RXFLEX be syndesmotic is turn following business. repair market to release. Stabilization tension to

highly The planning for anticipated Smart submit launched the highly XX portal and updates, turning Smart a XX cleared with for serve also patient-specific product both also line front, rest on settings. cases, Paragon preoperative the engineering real-time and weight-bearing will that our teams coordinate sales Now which XX imaging. surgeons insights. Also, a and the management we updates host XX, bunion surgical as to is for say now of communication surgery It for of of and out our quarter. planning XD our Smart to portal giving and ASC plan FDA the modules all implants, our am support, direct x-rays, SMART dates, acute suitable while case for will to module, both and rounds pleased I first live. Bun-Yo-Matic is patient ability correction, scans making it CT which status the

we identify individual to for the groundbreaking. most, Bun-Yo-Matic correction, leverage the the scans to complex abnormalities The which and all millimeter understand will is combined only a down perhaps minutes. The CT XD models, XD AI-enabled surgeons both correction believe massive precision plan will the in patient, to revolutionizes ability outcomes. by improved for and SMART ecosystem for planning valgus highly planning imaging, precisely x-ray surgeons. to and SMART the Smart creating ability be preoperative intraoperative Bun-Yo-Matic tailored statistical input XX optimize is about within surgeon with to deformities and is hallux plans plan a With advancement with multiplanar ability algorithms But plan control. The result helping surgeons correction to widely what available XX the surgical and full the and seamlessly export and implement ultimately differentiates utilizing in reproducible surgeon

wait SMART ahead, the sharing Smart be XX cases a but could glimpse after in the all our you in weeks share now, and July. on will not we We first with Bun-Yo-Matic more late completing to coming

share efficiency. before drive want to update over Krissy on things financials, our walk to I I through to hand operational improved Now strategy to an

cash line we a to that and value excellence across business, discipline our while is invested. With building now solid operational like to allocation. drive strategically preserve dollar all I operational control, our a growth drive plan hyper-focused include believe of it's ensuring shareholders. Elements maximize professional success. In burn-down a we cost to long-term our plan savings and hand our facets Paragon and IT, realignment implementing value we remain we improve operational plan travel, efficiency in today, on closing, every excellence, to in for top capital a we foster we planned are high a a XX will well for also areas announcing that XXXX we freight, of that, While believe efficiency reductions that Krissy. long-term and aligned us every allocated and operational Further, current on durable and maintain sustain end, growth, combined inventory services sharp and workforce, and of improve and experience, focus on XXXX. executive are a compensation, to growth comprehensive patient focus rigorous are one-time turn are crucial with days for shareholder of outcomes, surgeon To reduction name sustainable result few. enable will These measures, inventory positioning very to that an we throughout and will with on foundation dollar it will over

Kristina Wright

you, Thank Albert.

the dive recent earlier into share will the update from the I regarding XX-Q/A well XX-K/A an XXth of as our and X-K we filing filed Before rest today. as P&L, first July

of we second inventory errors As year-ended excess variances, of the of calculation overstatement XXXX, goods cost as and in the quarter sold net resulted the noted inventory for identified that a accounting XXXX. XXXX for X-K QX as in well during for which inventory and a filing, understatement errors and in of obsolete net of in

XXXX, the cost sold these in $X.X of of errors XXXX year, first for an and correction cash equivalents for net the inventory overstated and fiscal did restated quarter $X.X reported XXXX. being the was and $X.X impact Consequently, cash million revenue for These by of resulted on periods. understated first balance million for The of by XXXX. the $X or million million quarter areas not have goods for

concluded over financial reporting and to monitoring. was disclosed filings amended internal environment management control our control our affected that not we in weaknesses material Additionally, that our due in

monitoring controls reporting. to progress on in efforts and plan continue update of management accounting enhancing developing function, has weeks, the accounting plan. the expertise, quarters. begun evaluating appropriate controls, resources the the future past organization Over finance remediation our of and will internal and our The management internal This status of a hiring controls company several and remediation includes the share design review and over financial with design

rest Now of to turning the the P&L.

and XX-K/A from gross with XX-Q/A we and for margin earlier XXXX, year-over-year profit For restated is today, result was higher of offset the decrease primarily a selling second time, margin. Gross expense figures to lower by of will noted inventory and beginning prices, prices has filed revenue. from our lower quarter XXXX. profit gross margin the The expense revenue At quarter in obsolete suppliers, we references the XX.X% comparisons stabilized. the to in has compared reference XX.X% in for international, of freight partially which higher higher margin this and gross average non-cash percentage believe excess as

several to improvements pre-COVID to have including of levels. drive to initiatives legacy in pricing ongoing SKUs We reduce gross to place profit, actions

time through high-cost over inventory tailwind a expect XXXX. purchased we sell in the We as

the or XX.X% cost or million expense of is to savings to year to of $X.X $X.X services, period. quarter the a prior Second XX.X% million, in second of The implementation by million was of investments increased R&D consulting revenue, XXXX. quarter in the improvement $X.X million the or expense revenue personnel. driven initiatives by was quarter outsourced XX.X% offset in compared partially increase $XX.X lower compared SG&A

SG&A As a The improved increase a depreciation by $X.X increase compared million depreciation by the costs, revenue, to of was $X.X points period. second XXXX. was EBITDA a by increased amortization driven quarter quarter improvement and gross the million $X XXXX EBITDA in compensation. stock-based for a compared to million driven prior in million operating variable commission primarily offset expense, basis and and XXX profit, expense in expense. Adjusted expense, improvement $X.X loss, percentage XX% year of second The adjusted in to personnel excluding of of is non-cash increased SG&A increase the an

prior by items, second changes working cash liquidity. second our and of XXXX inventory negative year of second settlement in namely lower to XXXX. $XX.X accounts million, capital is second Operating increase flow primarily quarter the quarter to million XXXX in use quarter net for payment the made of payable of and the the XXXX. quarter to compared after $X.X turning adjusting cash negative million offset compared $XX is attributed the the purchases The was for in to legal in cash Now period in flow

XXXX, operating in Looking plan, the the to expect by at with efficiency second million fourth improvement sheet share particularly operational $XX quarter driven back XXXX million available of we of pass We rest ended XXXX on of broader of XXXX. will quarter of our $XX over total to the updates on cash liquidity, facility. I our and through flows, cash Albert our balance and outlook. future of it consisting million $XX to and the guidance credit into

Albert DaCosta

Krissy. Thanks,

understate and Before I for you want we I guidance, into I quarter ask a as CFO. critical your has thank couldn't for get Interim leadership better been, cannot to incredible partner. how this

guidance. Now turning revenue to

$XXX to narrowing revenue we to current which XX.X%, foreign million, XXXX, of assumes $XXX guidance no XX.X% to million exchange of growth range year full change the are rates. in For reported representing our

back Looking growth continue the remain impact market. and continued of we foot highly monitor our macroenvironment how half cadence to underlying launches, led confident the year, our sales the product in ankle strategy, and at commercial reps the and we may of in significant by

strategy, to includes a be the And to We team improving taking growth. growth these costs, possible company, all functions. in drive long-term that steps shareholder by cash, always. and to success managing at areas. people, at products the the we operations, stop That's but making investments company in we smart all incredible building have and and the how preserving achieve be highly right and We of value best an levels don't will the competent want all

is of market, search orthopedic and great hand a of his record few track for want He to so to in have Krissy stood me. to bit partnerships, importantly, few XX, Chadi working to for want finance, I guy, out partner business I Outside a to He's and share pack on a words. during and a and only and be to he's days him Chadi to the up you a Now of his going the this a he prepare heck it why to sleeves, fostering believe do, over has a operations. wealth closely strong already asset with we a CFO little board. before But in, of me huge tell Paragon excited we from transition. about I rolled being for nice are our experience

Now to Chadi. turning

Chadi Chahine

XX the to for Thanks, next and immediately. is profitability, a built strong sustainable level. goal call a Albert. start orthopedics. deliver to From lot priorities business strong and and X, scale time Albert ankle us on incredibly market, and the value. working unique help the as pressure out the business executing Paragon No with help and drive on eager momentum everyone. XX an laid in the day profitable at forward foot improve afternoon, the sustainable point. I'm company team initiatives the impressed opportunities and shareholder with I to to the at company's within all. an I'm that take us. all understanding focused ahead ramping I'm spending the and potential to with strategic team such of on look know inflection of Good to growth. entire team Albert quickly My have level, And impact and up an closely I'm the and getting the reputation to excited next making build earlier to to the growth, incredible join Paragon needed important I'm

it I to back will over Matt. now turn With that,

Matt Brinckman

Chadi. Thanks,

please? our first question, session. We Q&A will Operator, start may we now have our

Operator

Certainly, Craig today the line is America. Bijou of the first of of Bank from question

Craig Bijou

start the to want revenue I guidance. with

growth the So obviously, half, the than believe guidance half easier down the for and less midpoint, comps. first that year I XX% the implies comes at the second which to XX% is despite in

foot Paragon could us of expect moving a years. should an going from hoping you're market in the ankle attached companies the I it from should we maybe reason just we bit half, specific, at growth? last some couple have the you And -- away think for that either we the impact? savings how it I growth know was down? the then that So when the question some softer you And may coming Or or market cost and guys growth we So that rate of is understand the heard keep keeps was other about kind is growth why maybe what little that forward? guys implementing, want first is, help we've I XX% that that product-wise that level? you to look exactly I guess of the had

Albert DaCosta

start, some well some choppiness quarter lingering as Maybe say I'll quarter. honestly, this of we as And felt definitely take third what that one. the to second in the I'll the is of well. into

for So was that consideration a us.

maybe of growth, a experienced products drove thrilled of some launches the that that that second of fueled quarter, energy will We've were communicating. of lot and factored up say, were despite hitting to what Given was XX.X% that felt to in we all the that energy at in that currency a some some product we've put this the the the looking We constant choppiness. What second got choppiness new we of of definitely us for is some some I market. some of disproportionate exciting quarter by others in. lot

while effect kind we macroeconomic also commercial range see second million brought monitoring a we're strategy. lingering And range some effects on $XXX to of when it's million we're We monitoring there, choppiness carefully kind set that, there. if short-term be confidence in of of the to some based $XXX the our to if lot we some have of that half. there into carefully that confidence hit our to We're just also could a that or noise seeing of the within

But factored the want here. I where XX.X% to our to that confident, range XX.X% We'll from level, launch next on we we to the Craig, to commercial confidence product feel guide further new plan of for set our conditions with energy, really than certainly execute numbers that a implies got going good going the our is of all some $XXX on million. that A get is So of that. when out commenting the in And up. carefully we've something year. that's we just high that lot now, will sure to that look from And into where on but the that's that, and strategy. commitment at end. million into end to high there macroeconomic again, refrain again, make of sure you make understanding monitoring $XXX we

Craig Bijou

think comments, fact implementing new a thing cash the I on obviously maybe flow, I that investors you Krissy's and appreciate and savings are I cost And guys other focused are heard EBITDA, is the that program.

capital way any then you in of your the half cash progression for enough we programs there quantify -- expect capital the the second can be steps how the you talk enough to 'XX to and these flow where needs or about where of even to that some you're is EBITDA, about other to And will into it? move should maybe forward? talk So that just have and of taking extent

Albert DaCosta

to operational first head wouldn't efficiency is when things business. roles areas of reminded actually impact and get could that growth we I'm of question really We our opportunities. were the didn't of any a hear. that to simplification effect could at enhance careful we the question were your our that part we looking have influence target, I looking second understanding on count. your Craig, And at Yes. really that me The

careful so us. in were And was very front we that of

anticipate of we operational are And our and supportive those going so the to that enhance business be just efficiency.

don't line anticipate hit that ability we affecting top our grow So to and numbers.

call answer that this this repeat is to saying, emphasize me, and On the just I I by hope I today of that preface want side the is. times this other how a important I'll forgive on few because --

cash our important and simple, achieve operational priority on based we're now the team top XXXX going things flow in us going XX to positivity that and that 'XX. as in emphasize talking it's again, be me that's positivity of is in Going our emphasize is the forward, absolute the to move absolute and around year working project target. to and efficiency EBITDA really I'm direction, Paragon we're my I that priority. are that that That leader the on, right that that going about achieve to to And all entire

can that about points to some we've be that of the of already the other we have some part believe of basis things The OpEx. quantify, improvements I kicked contributed to XXX that may off,

that improvement impact we quantify we're to you see committed some million, be optimizations, $X this starting to head $X of count that to million some So severance can million. what anticipate with the there. year, the about of And about of I is $X for achieving

So that question. answered that is, hopefully, your

Operator

of question is Piper the line O'Brien from today next Our Sandler. Matthew of

Phillip Dantoin

the the a mentioned headwinds. biggest This on big as SG&A part And Matt. quarter I lot scale. operational of the on you've strategy and for you past, to congrats might is lost growth in looks as that But I like you organization get outgrew see that's story at your a weeds the in is think of loss unrolled, despite competition, what still the today. going here? you the part Phil the It of the look And

through the balance of this how So expect curious into and SG&A to you your move to year hear XXXX? on take

Albert DaCosta

thank the the quarter. performance you And Yes. for recognizing in

but a good way our What that the accelerate the and to with We financial opportunities Our grow thing we performance. to really move best look at to especially right? forward, return that putting but of investment, public, is business. this our went market. affect were are and company sure being we When position of one really, doing way given the some made and every balance we making on spend that the to to to on growth. ability we billion start, company, We that, just looking be analyzing stingy To investments, anticipated the now want We $X been ankle I those the at very business. every to some of want dollar business, some significant and public don't aspiration maybe dollars not really dollar, the just ankle has we're to to really going to compromise aspect move to be were proud ability that's forward. dollar reemphasize don't to foot to careful commentary places. a foot that a optimize around of the to going in this But the do want that's impact to investment the of want this. target we sure to of make it's right And structure every always

emphasis professional like and looking things on every at lot maybe our positioning marketing presence, we're just at of at medical education looking -- a some of looking optimization inventory dollar, of looking capital. spend, of working putting every some where the So and again, amount to really dollars, travel, those freight, services, at

chain, moving of we perfect how area of right? and that's us forward. than inventory is do burn, all last some to So know you it's and from manage had a that headwinds help significant of -- that. that Well, for burn we working excess net for and forced a create capital we supply did the down that And through pricing, inventory the to some us so leverage before, some year some that tailwind us build less because that at eyeball and to perspective, an year target

going keep that are the sure we answering absolutely We technology are growing patients those get know how of do is to you an is to things going make what that, that areas bringing to we're way, outcomes, to this us. What that that. don't the we company, our sure do, for improve unicorn all effective but I'm target best trademark so ability fiscal to do was for I we the which to and making were a IPO. honestly this the and we for And to need that with business obsessed meaningful into that hope growth, without in responsibility way compromising in to manage that we compromise

Phillip Dantoin

call here. What market any clearly as taking then growth ahead share quarter. we does growth? too least the again, thoughts on might next far half to And goes? end And to of not end But And back as more it, share finally far -- of you get growing, get guide at soon level this when mid-teens as myself then a as -- back could year?

Albert DaCosta

Yes, there you the our apologize. there of anticipated for it. from savings half One got count So would this word thing, $X missed what an number thing I head mentioned When is one annualized, right? the not I potential second the the annualized of we expect million, I is simplification, of that million year. savings $X the

make to just myself. wanted correction have I I So that should to it. when I caught that was saying

year the is, the positive choppiness that of We products product of had ton this momentum in of carried a interesting space. in the the key mostly of from quarter. launches. launched Those energy QX, some really On -- half ton communicated, X that around part the second a pretty forefoot because first us for a of we despite the we've second such was

So choppiness. sense one there's of sense, in this

And we On Well, for expect second there's meaningful several being lag there's we launches you all more products, you really around other sense, contributions. quarter the start half, right? anticipate despite a product the to carrying first meaningful us. excitement that when all in As excitement, launches. can seeing quarter the we start those this before forward, expect, launch would

and there of of being certainly second end we that's the lot feel the a implied into even more honestly, that high range, meaningful that what's on So into our forward is half momentum 'XX. carrying

EBITDA clear the financial -- be to to this keeping positivity we statement company, look want to things that we us, the get mind, all in positivity got transparent, with cautious optimization we at to for we that time and on cash in to a sure 'XX, also want he's the but other priority the really want The understand is handle flow of part important are on 'XX. helps we want as now, team Chadi us, be #X in and are because a where really us be for make with strategy, and but

in of am focusing the sales Chadi operational we've We'll get remediation things; to the things front half and that the execution at of second be looking all really when look the on for we're got And these our launches, really on thrilled second force But all exciting got now, us, all information. for sense efficiency, execute I place closer in that 'XX. half. it working so plan we we've to productivity at to increases, is executing right what in is with for and product then be and our 'XX a getting the which exciting corrections, of communicating

Operator

Our from next JMP. Dave of Turkaly Citizens line today of the question is

David Turkaly

You today mentioned was that's force where going? did increase quantify that wondering, I productivity. stands in think like and where you X% sales the maybe you

Albert DaCosta

that certainly really also launch as productivity the to productivity, Yes. So it comes that. for productivity from medical To us count of level lot a balancing increases. our contribute comes looking One, we something in but new products, right? helps bring head is to new places. answer different always introductions, education that at product up, investments that question, we're a Productivity few from

existing the are the in they yet. are that story. might We've at of attendees utilizing at that additional courses users our half to Half past new medical that brand attendees education be of looking about the referenced not -- products

surgeon's mix also bringing only for reps awareness the nice it but cetera. really efficiency And that cetera, that sales we're the there. et effectiveness the of the products got a the or influences we've productivity, to and definitely really So not et market, impacts

I at. The if transparent -- we a area that's rep the in we to as on can do sales look into be confusing that the new number curve. producing funnel people sales point that that, that So lower is they're really tend one

tend productivity little we just just so bit. momentum And to see that that forward. we carrying then see fluctuate But a

the as number piece but in productivity So And a certainly on a productivity there's we something bring mind up. bit, funnel seasonality also that to people that can to end, in the down lower ramp we then as that's to bit little keep well. of little expect

David Turkaly

any is impact back any there quarter? in day Was follow-up. A there the in quick the half? And

Albert DaCosta

you that one? want do hit to Krissy,

Kristina Wright

Yes. the Thanks for question.

quarter in impact versus the last no day quarter year. second So second

I think couple the a for no be X there the back and was I next There same days this of quarter. earnings change. more there of half day days in Q… change, implied And that is last quarter call, year, on might

Albert DaCosta

Three.

Kristina Wright

last QX year. versus QX

Operator

And our Matson next of question is from Mike Needham. the line of

Michael Matson

Yes.

like more seeing So of the just about second I half year. maybe economic be this example, be bunions, which there is was to that and elective the kind business? less. of for seems business second of about In like, it tend some words, maybe affecting the to talking continuing in in to trauma sort some affecting -- of others, terms you're things is anticipated/worried just that it areas choppiness the like some in the more like than wondering, quarter other kind of of impact

Albert DaCosta

of have again bit, I really I'm the Yes, brag see Mike. one that, But of it. and ankle at the Honestly, little spectrum. and thing balanced reported enough looked our we every segments, of and a of pretty proud looked And strong growth I I entire carefully, X -- to in diversity across foot each didn't segment. we those present that we're portfolio

thrilled And took So that elective it excited approach some that. both. saw we about looked at non-elective, really I'm did I balance. because across that us again, nice momentum give When I really the diverse and

I'll influence we a that looking say piece? there the us is, I frame exactly forefoot quarter. in and what -- QX see boosted the that really So asked the one second elective launched in was you the products But time lot Mike, was on some kind of caveat there, to of

there. less I see, so that choppiness seeing week-to-week more a were could we the bit that choppiness little to might But was best have And product-specific and the what of muted choppiness.

Michael Matson

if flow mean, And cash then sort of implications, for it's I but it may -- be as probably this the have so as margin? far for how it plan, any, flow, inventory will know what don't margins? I does I And negative if and know. gross that work? don't imagine burn-down for I'd cash positive

Albert DaCosta

Yes.

pricing influence inventory and that One talk we legacy X burn to down primarily there. we time little XX% build and margin so inventory X see around stand that down, can a -- of And XX%, with the a pre-COVID that 'XX. Our gross corrected that about us our keys we we bit of SKUs, there's where positive is, baseline to to for the there. pricing of accounts on increased get some take statements to start don't will as more in to When selling ordering baseline our for burning right? today, the is is is anticipate And less.

which on some inventory today, replenish down So that or try capacity burn need to was in 'XX we've mentioned the manage We've through and shortage inventory, the without communicated we've to essential to just opportunity calls that of part we've to and position previous shortage yet. got stockpiling 'XX. inventory got issues that of now that the

So what down. we're second that effect modest we see burn communicating anticipate that's the half essentially some in when to from

Michael Matson

R&D of and IPO, looking it I from part there's done job that's just Chadi's happened kind know title. at But on clearly, of kind the mean, issues operational been you've And perspective, like of what's I the the seems a an company since new some side. great And innovation perspective.

bring I'm but doing would a more -- the of given make trouble CFO mean, of sense -- the just does you've area? to degree sense in person make I a had just it have to fully So kind maybe Or wondering, kind that it of dedicated both? is this

Albert DaCosta

Yes.

were of few the operational finance, we perfect diverse on might his stab Let start, say even of a history one to so of about organization, have building was and efficiency, the first, attractions me of aspects just us to within and partnerships experience all take words for Chadi background these his Chadi at real for. experience is. I looking But a how one what was managing that maybe in things; Tons one, that. then

So we -- the was marriage that part there. of

to us other phase. something I some out advantage was our X we the enhance company. went public, some expense and investments the investments, of set One, really X, that take building On ourselves, operational looked at make support with but some we to made associated opportunity sure positioning it aggressive There we we when be a really team up and post-IPO on future stages mentioned, fronts. to side to as to in growth of were is, is that of building public opportunities, quickly significant our

at some end, being found errors I those some that announcement, analyzing making pieces that, to just controls looking where and process sure errors. of a put to we those the are simplify we're think, ensure for overcomplicate were opportunity complexity the Now to that things make of today, what of X, real some and just made don't there areas like, us there, we don't X-K that's because kinds

we tons about So when can simplification, there's we areas where of talk improve.

pipeline. always a always that we've I'm engine. company. got we've company always development compliance across we've want be single every Those optimized, want with strength and mature things, the business, say no We of something a of the balanced the I've want had always best of to means and and and to this commercial really full ours. is thing infrastructure, force or the happy a finance enhance to honestly, operations got had the to forward. we pipeline. the be compliance, team, always care product regulatory organization And to as Now commercial product be one have going company. and to we We've lopsided spectrum product we're that's been IT sales part a with strongest We want that development But health that and or moving don't communicated be the little don't very

dollar And Everybody then working single right company and operations. of from now the to piece Everybody way has to the this a the board. of most is the priority for optimized question impression that -- be I been don't is the move to last looking is This on gotten going the we've give company. at entire team to forward. is, positive. that So improve freight, want thing feedback working Chadi to this to alone travel, is SG&A, spend. incredibly is aspect OpEx, we're analyzing every find Every

So anything Chadi? to that, add to

Chadi Chahine

have believe process, through through think responsibility, I I able that I talent, to deliverables remarks, really I'm because Albert, our in goals and very moving said my understand about and I from us excited systems, prepared that operating as to strengthening firmly mechanism. being

we the So have visibility.

not a in mode. are And are reactive So mode. in instead, proactive we we a

look So no to I organization the and make have reality. the it. I I that forward And the doubt deliverable the trust of for support this have

Operator

of Caitlin Our Canaccord next Genuity. of question today is from the Cronin line

Caitlin Cronin

on growth this Congrats the quarter.

this from in both U.S. And by you're color seeing this love phenomenon a Just a internationally? choppiness macro on we a would little more you what perspective? whether also and is mean the

Albert DaCosta

quarter, it compliment. the for was Again, strong like really considered. things felt Thanks a we all

year COVID to that take trips taking seasonality a significant that And in part and a last holidays, mentioned felt because the country. was weren't pretty following return we choppiness, of We to especially hospitals seasonality. the that able On surgeons people out vacations on them normal years honestly that we COVID, more years the had prior. leaving, the mentioned of restrictions some of

vacation felt year, normal taking actually return during were people so where a last more And felt like some we we to the there summer months.

beginning Sometimes QX. at of summer the half those continue months on

a much early and in else there, see at carefully there both we our want so the piece? it a something that? But of looking of them non-elective inflation see, to to at other our out, is I glance what point influencing just we're is And again, elective didn't seasonal is marching something piece pieces macroeconomic between business, of that's Or difference least strong. here, or

shapes rest that this look So about lingering some there's associated going like certainly But just vacations comments with monitor what like, of to to it maybe that make felt how half might into bit the a and little choppiness we before quarter QX. second in see carefully definitive up. the we're any quarter

Caitlin Cronin

that pilot modules? the additional of think guess when And do you'll move also with module? plan do with And when Bun-Yo-Matic. congrats you I of on launch Smart add full into to launch XX a more you

Albert DaCosta

enough for about initiatives. thrilled I now, of because I really the you thank the blushing been Smart Caitlin, smiling right first X.X and certainly question. years get excited acquisition I'm so XX some module, I'm for My that of can't since the which Disior. that almost about launch of or we've face talking is about

I where case the going mean management which piece of the that about really is us but portal overshadow SMART type future. system, that is the really Bun-Yo-Matic, technology to launched for of to in We just also because don't exciting. take excited

having operating room If And fulsome, there's we're they it something versatility launching we're system, as surgeon intraoperative pre-op we sort in to Early to our make that By we're really gives feedback When patient-specific but replicate those When there's and there to some in hard the with sophistication trying adjustments the out. complete XD of that the a it surgeons anything them with see guiding about Bun-Yo-Matic those it's guide planning, taking good. is the them worth intraoperative more key plan, some loses talk SMART pointing see look surgeries, flexibility. surgeries at gives comfortable that all the of some planning adjustments. that those with, not they fair. they're it's make system.

models, using worked So x-ray. shape point cetera, to into really to some to plans, the an surgeons' ability feedback to do but hard on same with here really positive. One that more X-dimensional part not has been AI-algorithm CTs only we have about is brag to et statistical model develop the

we of aware But that it gave not the We for planning that be to enhanced with is everybody world. future to access think pre-op definitely important that. at CT capability. has was now, to the that least going we really are access And

we really to XD have that an planning. for also x-ray we're clearance really, report excited So to FDA

considered solutions, But center couldn't I any to SMART to it's bunion that the outpatient launching better. And be there. in it moving with just second these think, say than year like Bun-Yo-Matic, add being of good. we're expecting be is half That lucky settings. I'd surgery reimbursement to settings us and CMS one point so forefoot this happens nicely. the So be forward to by better more primarily timing

center opens So really at interesting the for to really options. us some look more surgery it avenues of

excitement give question, your last for part you Bun-Yo-Matic, I yet. sorry, really Thank sophistication realized planning more that. answered on just it's what that so And just hope is. And haven't of to I about the of all-around SMART to and the I you asking anyway, visibility

of it's procedures, to going And postoperative we outcomes. foot and tool, Our goal planning, right? the preoperative exists that to really is intraoperative to evaluation and help improve patterns in identify that complexity to of all essentially and our some bring almost ankle, think all aspects

foot our to is goal entire that ankle. So and to the bring

Operator

question next Sellers from George of Stephens is the today of And Inc. line our

George Sellers

Maybe if sort and access just associated revenue how you to growth? sort business on and of discussion. on XX I'm think -- to follow-up of give What's that us some the could model? we that that for fee there just curious licensing color model? that Is Smart platform additional that does generate impacting the What's platform? revenue? an should And business about how system

Albert DaCosta

tool. an the say includes plan, correction a me to the scans let be total that ability converting piece. is plan, for do to and CT that correction guide that associated very model It intraoperative planning the that giving into that systems into intraoperative and we're start, where we of for To what will part today surgeons the ankle System, that. includes what similar call turn also preoperative then with really the MAVEN replacement, service, we that a There fee guide the

used the just to situation enhanced really a where few cases. be could also plan difficult the without where tools. a And are alone might some intraoperative There handle situations there some there's support there engineering be

to total to that that But that. the there are what expect so for a ankle speaking, for few replacement. generally And exceptions might outside do today we we MAVEN go of similar be

of expect Lapidus. that of fixation right? -- multitude first some The we of known other that of products, the TMT for what's is We've addressing as a pull-through or some part options our all got other

we got staples. We have have plates, we've nails,

there, customize solution the that to So patient. needs that. One visibility that's going George, give that really of more them can to of surgeon And a -- planning on a is based part certainly the part sorry.

these get But for takes cetera, up delayed the running, medical et hospital and of cetera. part education, contracting, that. to right, few a Sorry et it things months

real 'XX a of in 'XX, but in lot So beyond. meaningful to see we contributions in contributions would we more excitement and would a some bit 'XX, less, expect little anticipate 'XX and

George Sellers

a some us of quarter? revenue how early launched new those on you what gears to that here first those detail quantitative maybe on give this focusing shifting growth the some have quarter. little how had in you maybe then contribution the Could of devices the to quarter, and And back bit devices progressed

Albert DaCosta

the had get obviously, those amount, granular a competitive real timing System Console, been We've our The performance QX try right lot on Bunion reasons. on of not excitement now, We and the some the There's we've patient that exceeded to including for real the really contribution solutions, well. FJXXXX. some for just of launches. demand around tell doing has there. MIS you, some could -- incredibly for forefoot a Power PRECISION too the good it's I But expectations of

of absent as Bun-Yo-Matic We've fulsome of had expecting and right on now the algorithm, the just SMART Bun-Yo-Matic great response well. a launch a alone, more Bun-Yo-Matic we're our even

had products So great soft we then momentum contributing several there. And piece that the is tissue other are really nicely.

really feedback great. be So has don't positive been all hyperbolic, The want around momentum we're to but there. I thrilled.

of far. We've 'XX contribution, from of meaningful performance We QX the like SMART but those few the off where Bun-Yo-Matic, really a more are so a more RXFLEX, from also of In anticipate year, half to that coming. exciting it's start. expect launches products in see although second some got to and we more there would a launches great recent contribution this feedback

the several line have a Strut half I our our do lot exciting you. ex-fix interrupting other Ball had for we this and of extensions second with Right keep but of Angle I coming more, line. forgetting we've year, Sorry, in Joint Drill, keep launches

been around of us. X a pretty excitement we've lot balanced for So subsegments, all got which has

Operator

Blair. next Vazquez our today from William is Brandon question And of line of the

Brandon Vazquez

share this? clinical closed upfront to second, I platform any I plans of build a Smart about also what be the an kind years talk couple But XX, to then surgeons modules? for for to of new of can an as about things like a just given, on the you been the kind open one And training Albert, you the follow-up. IPO. of on wanted specifically? talking I a a you've Is you going questions. on coming in saying, hardware space? list have then of XX of lift to is the have like? this technology data a this these the is were so Smart can I'll new demonstrate kind Is to or kind this kind your stay over since off unrelated of bit benefits what's and little of

Albert DaCosta

first Yes, where part let the me address this complexity. it's of the

noticed in first that his Duke. presentation, of complexity the at Dr. designing savvy they're aahs a to like of one in oohs X-dimensional not that this were real our he's Dr. So that really de X-dimensional when one thinking room And things Cesar he when able careful adviser always there's technically fear this. module, we've with general we But gives the the Cesar out Netto leading surgeon is as everybody analyze is and is. tools as of

not rerun with X-dimensionally correcting, they to so that here planning they're even or Instagram ability use a into this to potentially we ability really were and that preoperative, and patient. configurations what just is them a convert so the as the into it manipulate different it turn patient. What's upload was to see and than our as to Facebook, plan right? but to some exists is that And So flexibility that even streamlined make for tool that giving goal surgeons that then can sophistication communicate when to easy a deformity to have much XX particular to use designing DICOM easier, important less the that to image, within minutes people plan, the the

wouldn't And on that X-dimensional plan, sometimes, simple a you XD things view. the at on just when see look you see view, right, a you

to excited for a decisions lot to information patients, that are better all really described. but I we're their to so make be And that more armed then surgeons with flexibility have going that

that didn't the to so good is I've fix different platform, do we calls really that previous easy-to-use And help unique, And surgeons that determining mentioned make surgeons have deformity. deformity complex place. really There's that X, how bunion a really wanted them diagnosing to really sure Dr. in that are we to X, be that first considerations we to gave a know least different there's multitude when Cesar in today, X-dimensional pathways So, this; of right? on focused information pathways the at to X have on should everybody a that. this that of we a are

tools a going capabilities we're customize those surgeons decisions. patient, make for So have those if we diagnostic give truly treatment patient better to options specific, and to to

we were So all for consideration this. developing when of was a that us

Another excited reason why launching we're as this. we're so

Brandon Vazquez

and pushout either just sheet Chadi maybe comfortable but cash flow the Just kind a or gears follow-up, as might balance the And talk are? us to cash switching for and flow you you positivity XXXX, about do a now with Krissy, bit, capital that of where how feel about that pushed given then guys have, little thinking you out be positivity. to are you

Albert DaCosta

be flow is 'XX, be cash our of say to that again, positive top formally, one So positivity the that cash flow this I'll might we're focusing on just 'XX. thing by first communicating priority one in times

right positive flow add to to Krissy you now on We've we're cash EBITDA us account. this are Any got, again, 'XX. achieve everything positive breakeven an that, in we're right the a top or for priority want Chadi? now of that. taken doing to and going All we're that and color moves making into We've all then create to 'XX, to sure or of make in enhance opportunity

Kristina Wright

I has is EBITDA half contributing and hit No. our the at to that that Albert in would X cash acceleration the as And mentioned. well I back year our acceleration just as of confidence those guess in flow. metrics ability to add we're looking of performance that

Chadi Chahine

I is my #X up my have priority And that sleeves the to CFO, that to deliverables want as this and reiterate, make happen. roll

Operator

this would time, I any hand the remarks. management back like no further at with questions And in for to queue closing to

Albert DaCosta

again. upcoming today. for on Conference Yes. We'll industry at Thanks conferences. months. next look other you next and That Canaccord of We joining seeing concludes forward the over investor be all to our us Thanks, couple conferences week everybody, at call remarks. the our

Operator

Paragon Thank This call. XX concludes earnings XXXX everyone. quarter second you, the

You may line. know disconnect your

Paragon 28 (FNA) 8 Aug 242024 Q2 Earnings call transcript