Paragon 28, Inc.

Good afternoon and welcome to the Paragon 28's first quarter 2022 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. I will now pass the call over to your host, Matt Basko with Paragon 28. You may proceed.

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 March 31st, 2022. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation 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, including but not limited to those relating to our operating trends and future financial performance, including our revenue guidance for the full year 2022, the impact of COVID-19 on our business, supply chain, 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 our public filings with the Securities and Exchange Commission, including our annual report on Form 10-K filed with the SEC on March 9, 2022. This conference call contains time-sensitive information and is accurate only as of the live broadcast May 9, 2022. 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 non-GAAP financial measures adjusted EBITDA. A reconciliation of adjusted EBITDA to net income or 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. Good afternoon and thank you for joining Paragon 28's first quarter 2022 earnings call. I will provide an overview of the first quarter 2022 and give a business update. Steve will then provide additional detail regarding our quarterly results and provide an overview of our updated 2022 revenue guidance. We will then open the call to Q&A. Beginning with our first quarter 2022 performance, total revenue for the first quarter was $41.4 million, representing growth of 25% compared to the first quarter of 2021. First quarter U.S. revenue was $36 million, representing growth of 24% compared to the prior year period. Despite COVID-19 headwinds in January and early February, our strong growth during the quarter was driven by double digit revenue gains each month, including record revenue for the month of March. excellent commercial execution including expansion of our sales force and surgeon customer base and increased revenue per sales rep were key drivers of our success during the quarter i will provide more detail on each of these growth drivers later in my prepared remarks first quarter international revenue was a record 5.4 million dollars representing growth of 35 compared to the prior year period and an increase of 15 percent sequentially compared to the fourth quarter of 2021 In addition to our strong operating performance during the first quarter, Paragon28 continues to be focused on our mission to improve foot and ankle patient outcomes, which will enable growth in our business for years to come. During the quarter, we accelerated key investments in medical education, commercial expansion, and new product development, including Smart28. We also closed the acquisition of Dizior, which is a key aspect of Smart28, and we are very excited to welcome our 21 new team members in Helsinki, Finland. Today, Paragon 28 has more exciting growth opportunities than at any time in our past. We will continue to make disciplined and opportunistic investments in commercial expansion, surgeon medical education, and technology advancements to achieve our mission of improving foot and ankle patient outcomes and expanding our market share. On another note, My co-founder and dear friend Frank Bono has decided to retire at the end of 2022 after a career in orthopedics spanning several decades. As co-founder and CTO of Paragon28, Frank has been an integral part of the success of our company for the last decade. I want to personally thank him for all he has done for Paragon28 and wish him all the best in his retirement. To ensure a smooth transition between now and the end of the year, Frank will continue to be involved in the day-to-day operations of the company and partner with our newly hired Chief Technology Officer, Jason Eady. Jason has been a leader in med tech research and development for over 20 years and has a track record of success in foot and ankle. We would like to welcome Jason to the team. Moving to our foot and ankle sub-segment revenue trends. During the first quarter, Paragon 28 experienced very strong growth in the two largest market sub-segments of fracture fixation and hallux valgus, or bunions. Fracture fixation and bunion growth was driven by recent product launches and continued strong commercial execution. Additionally, we continue to see strong momentum and growth across our entire ankle product portfolio, which remains a strategic focus for the company as it is one of the fastest growing markets with opportunities for significant improvements in patient outcomes. I will now provide an update on a few of our key strategic initiatives, starting with the expansion of our commercial team and surgeon training. We ended the first quarter of 2022 with 197 producing sales reps in the United States. As a reminder, our US sales force consists primarily of independent sales representatives, the majority of which are exclusive. Revenue per producing sales rep increased an impressive 20% in the first quarter. Growth in our US surgeon customer base was also impressive, increasing 15% during the quarter to over 1800 customers. Paragon's strategy of developing and putting innovative technologies in the hands of our clinically oriented sales force and providing best-in-class medical education to foot and ankle surgeons is working. Speaking of medical education, over 600 surgeons attended in-person medical education events in the first quarter of 2022. The first quarter is a seasonally strong period for medical education. These specialized events are designed to enhance surgical skills and ultimately improve patient outcomes. Medical education events are also a great opportunity to showcase our innovative product line to both new and existing surgeon customers. We expect to continue to optimize our medical education programs throughout 2022. Moving to recent product development, in mid-April, we launched our REACT syndesmotic stabilization system, which I believe is one of the most innovative products we have brought to market. With an estimated 20% of all ankle injuries requiring implants for soft tissue healing, we believe REACT will be a nice compliment to our entire ankle fracture portfolio. The addition of REACT bolsters our ankle fracture and soft tissue product offering, which includes the Gorilla ankle fracture plating, Gorilla Pilon plating, Mini Monster screws, and release stabilization system. With this comprehensive portfolio, we now offer customers a broad array of innovative solutions for fracture fixation and soft tissue stabilization. Additionally, We recently launched the Paratrooper Planner Plate System for Hammer Toe, a low-profile, all-suture implant offering surgeons a new and innovative approach for planner plate repair and forefoot deformities. Repair of the planner plate has historically been one of the more challenging pathologies within the hammer toe subsegment. We are thrilled to have developed an all-suture-based, low-profile, and versatile implant capable of treating a variety of planner plate conditions. The paratrooper planter plate system adds to our growing portfolio of soft tissue and hammer-toe products, which remains a strategic focus for the company as it is one of the fastest-growing markets with opportunities for significant improvements in patient outcomes. Also, the acquisition of Dizior in January accelerated our SMART28 initiatives by providing us a cutting-edge, three-dimensional preoperative planning technology. We are very excited about putting this technology into the hands of surgeons around the world in the coming years. In summary, we have made considerable progress on all key strategic initiatives and will continue to invest in the business to drive long-term durable growth. We are grateful for the trust our physicians and patients have for Paragon 28. I would also like to thank our sales representatives and employees around the world for their diligent efforts and dedication to fulfilling our mission to continuously improve outcomes and experiences of patients suffering from foot and ankle conditions. I will now turn it over to Steve. Steve.