Paragon 28, Inc.

Hello and welcome to the Paragon 28th Third Quarter 2021 Earnings Conference Call. My name is Alex and I will be your operator for today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypads. If you wish to withdraw your question, you can press star 2. I will now hand over to your host, Matt Baxo from the Gilmartin Group. Matt, over to you.

Good morning and welcome to Paragon 28's third quarter 2021 earnings conference call. Currently, participants are in a listen-only mode. We will be facilitating a question and answer session at the end of today's call. As a reminder, this call is being recorded for replay purposes. Joining me from Paragon 28 are Albert DaCosta, Chairman and CEO, and Steve Deitch, CFO. Earlier today, Paragon 28 released financial results for the quarter ended September 30, 2021, and filed its third quarter Form 10-Q. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation and Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements include, but not limited to those relating to our operating trends and future financial performance, including our revenue guidance for the fourth quarter of 2021, The impact of COVID-19 on our business, expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion, and product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. All forward-looking statements are based upon current available information, and Paragon 28 assumes no obligation to update these statements. Accordingly, you should not place under-reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of the public filings with the Securities and Exchange Commission, including the final prospectus filed with the SEC pursuant to Rule 424B4 on October 18, 2021, in connection with our initial public authoring. This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 22, 2021. Paragon 28 disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. During this presentation, we will refer to a non-GAAP financial measure, adjusted EBITDA, a reconciliation of adjusted EBITDA to net income loss the most comparable GAAP financial measure is contained in our press release issued this morning. And with that, I'll turn the call over to Albert.

Thank you, Matt, and thank you to everyone for joining us today for Paragon 28's first earnings call as a publicly traded company. Paragon 28 completed its IPO on October 19th, and we are proud to be listed as F&A on the New York Stock Exchange. Like our company name, Paragon 28, the ticker symbol FNA was selected to emphasize our company's exclusive focus on the large and fast-growing foot and ankle global orthopedic marketplace. I would like to take this opportunity to thank our investors who participated in the IPO, which raised $131 million in net proceeds. This capital is an important element of our company's strategy to continue the development of innovative new foot and ankle technologies, including Smart 28. which will improve patient outcomes and ultimately expand the foot and ankle market. P28 is just getting started in 2021. There are more opportunities available to us today as compared to when we started the company in late 2010 in a basement in Birmingham, Alabama. P28 now has greater financial strength, which complements its established team, culture, and the energy and passion required to redefine and vastly improve foot and ankle patient outcomes. Also, thank you to the early P28 investors, including my mother, who many of you know was our first investor. I look forward to the ongoing support from this group as we continue the mission that P28 set out to achieve since its inception. Finally, and most importantly, thank you to the entire P28 team and their families for their unwavering dedication and focus on our mission. The P28 team includes our amazing 331 employees in the United States and around the globe. our board of directors, our U.S. and international sales representatives who serve patients and surgeons every day in the field, and the clinicians around the world who use and put faith and trust in our solutions. Now I'd like to tell you more about P28, the foot and ankle market, and our growth strategies. Paragon 28 is exclusively focused on the foot and ankle orthopedic market, which is an estimated $4.3 billion in 2021, with approximately 55% of that amount in the U.S., growing approximately 7% per year through 2025. We have a full suite of innovative orthopedic solutions covering a wide range of foot and ankle ailments, including fracture fixation, bunions, hammer toe, ankle, flat foot, Charcot foot, and orthobiologics. Our broad suite of solutions comprises 72 product systems, including approximately 8,700 SKUs to help fit the specific needs of each patient and procedure. These solutions have enabled us to grow revenue above market growth rates and capture market share. From 2015 to 2019, our revenue CAGR was 52%. We have over 30 new products in development with 140 million of revenue for the trailing 12-month period ended September 30th, 2021. We believe we are the largest pure play foot and ankle orthopedic company. We compete with both large global diversified med tech companies as well as smaller and often single product foot and ankle businesses. At Paragon28, we eat, sleep, and breathe foot and ankle. We believe we can continue taking market share and over time expand the foot and ankle market by improving patient outcomes via new and innovative technologies and world-class medical education. Our strategy to drive durable long-term growth includes one, new product development, two, Smart28 initiatives, three, expanded sales distribution, four, advanced medical education and marketing initiatives, and five, business development opportunities. First, starting with the new product development, our proven ability to identify, develop, and launch innovative technologies combined with our foot-and-ankle-centric culture and passion is the cornerstone of the success and growth of Paragon 28. It has been the catalyst for us to grow our market share over the past several years. However, we believe the foot and ankle market growth has potential to accelerate further, driven by advancements in technology that will improve patient outcomes, increases in patient and clinician awareness, and the adoption of available treatments. Given that the foot and ankle market is a young and emerging orthopedic segment, we believe there is significant opportunity to improve outcomes to be on par with other more mature orthopedic specialties. as a result of increased innovation and new product launches. Paragon 28, with its exclusive focus on the foot and ankle patient and clinician, and a proven track record of launching innovative new products, will be a catalyst for improvements in foot and ankle clinical results. We also expect the market to benefit from favorable macro trends, including an aging population, increased incidence of obesity and diabetes, as well as the broader patient population's desire to pursue a more active lifestyle. Our SMART28 initiatives will also be an important driver of improving patient outcomes. We have branded our enabling technologies initiatives as SMART28. SMART28 is a key focus area for us and is a key element of our mission to improve foot and ankle outcomes in patients' lives. SMART28 has three elements, a preoperative planning element, intraoperative support, and postoperative evaluation. Within each category, we have or expect to have specialized products designed to improve overall patient outcomes and improve surgical efficiency. Within preoperative planning, we are developing patient-specific algorithms to provide surgeons a better understanding of the patient's needs before they even get to the surgical center. In intraoperative support, we have developed and continue to evaluate tools such as surgical guided technologies that can help improve reproducibility and assist with the live procedure. And finally, for post-operative support, we will continue to evaluate opportunities around AI solutions, data collection and aggregation, and tools to validate procedural outcomes. Additionally, we will continue to make significant investments to expand our global sales force. A leading and innovative product line combined with our entrepreneurial and clinically oriented culture has allowed us to attract, build, and retain a leading sales force exclusively focused on the foot and ankle market. Our US sales force has grown significantly over the last several years and consists primarily of independent sales representatives, the majority of whom are exclusive. As of September 30th, 2021, it included approximately 200 producing sales representatives, which accounted for most of our US revenue in the third quarter. We began selling outside the United States in late 2016, As of September 30th, 2021, we sell our products in 23 countries. In year-to-date through September 30th, 2021, our international business contributed approximately 12% of our revenue. Paragon 28, both in the U.S. and international markets, is well-positioned to be the company of choice for foot and ankle sales representatives looking for unlimited opportunities to grow with an exclusively focused foot and ankle company that boasts a full suite of innovative products and is not part of a larger multi-channel company. Continued excellence in medical education and new targeted marketing initiatives are also important parts of our growth agenda. Medical education is a strength of Paragon 28 and will continue to be a key part of our strategy to improve foot and ankle patient outcomes and grow our business. Our medical education team and infrastructure are best in class. Late in 2019, we opened a new dedicated 250-person auditorium and a 40-station cadaveric lab at our Denver headquarters. This facility is now used almost every week for hands-on training and learning with physicians and our commercial team. In addition, we offer many regional medical education programs and virtual seminars. Digital and direct-to-patient marketing initiatives are becoming a greater focus for Paragon 28, as certain subsegments of the foot and ankle market are well-suited for us to articulate the benefits of our products to patients and surgeons. We believe our marketing initiatives will raise patient awareness of the benefits of our solutions with an approach that keeps physicians as the ultimate and final arbiter of patient care. Finally, business development is an important part of our future growth plan. In the second quarter of this year, Paragon 28 completed the acquisition of the assets of additive orthopedics. This is a good example of the type of acquisitions that we look for to complement our portfolio with unique technology. Additive gave us the first in the world and only FDA-approved patented Total Tailor Spacer. This product can change the lives of certain foot and ankle patients, patients who otherwise would require either a complicated fusion procedure or possibly even foot amputation. In summary, Paragon28 is exclusively and passionately focused on the large and fast-growing foot and ankle market. We will develop technologies enabled by Smart28 initiatives that we expect will deliver better clinical outcomes and drive market share gains via our best-in-class sales channel and potentially accelerate growth in the foot and ankle orthopedic market. I am more excited now than I have ever been about the future of Paragon 28 and its potential to shape a better future for foot and ankle patients. I will now turn it over to Steve, who will provide a summary of our third quarter financial performance and provide revenue guidance for the fourth quarter of 2021. Steve? Thank you, Albert.