Paragon 28, Inc.

Good afternoon and welcome to Paragon 28's second quarter 2022 earnings conference call. Currently, participants are in 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 June 30, 2022. Before we begin, I would 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 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 the macroeconomic environment or operating trends and future financial performance, including our revenue guidance, the impact of COVID-19 on our business, supply chain disruption, expense management, expectations for hiring, growth in our organization, market opportunity, commercial expansion, and product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that cause actual results or events to maturely 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 undue 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 quarterly report on Form 10-Q filed earlier today with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on August 3, 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 the non-GAAP financial measures of adjusted EBITDA, a reconciliation of the most comparable GAAP financial measure net income is contained in our press release issued earlier today. And with that, I'll turn the call over to Albert.

Thank you, Matt. Good afternoon and thank you for joining Paragon 28's second quarter 2022 earnings call. I will provide an overview of our second quarter 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 second quarter 2022 revenue performance, total revenue for the second quarter was $42.5 million. representing growth of 19% compared to the second quarter of 2021. Strengthening of the U.S. dollar reduced our second quarter net revenue growth by 140 basis points as compared to the prior year period. Second quarter U.S. revenue was $36.8 million, representing growth of 19% compared to the second quarter of 2021. U.S. growth was the result of increased revenue contribution from new product launches and benefits from recent medical education and training, resulting in strong Salesforce productivity gain, offset partially by modest COVID disruptions. Later in my prepared remarks, I will provide more detail on the quarter's revenue growth drivers. Second quarter international revenue was a record $5.7 million, representing growth of 20% compared to the second quarter of 2021. Strengthening of the U.S. dollar reduced our second quarter international net revenue by 10 percentage points as compared to the prior year period. Growth in the quarter was once again driven primarily by our three largest international markets of Australia, South Africa, and the United Kingdom. Moving to our foot and ankle subsegment revenue trends, during the second quarter, Paragon 28 experienced double-digit revenue growth in each of the foot and ankle subsegments, including fracture, ankle, Flatfoot, Palaxalgis, including Hammertoe, and Sharko. Ankle and fracture product lines, which both benefited from recent new product launches, led our growth in the second quarter. Paragon's comprehensive product portfolio, which addresses each of the foot and ankle subsegments, continues to be a key driver of our success. I will now provide an update on U.S. revenue growth drivers, including Salesforce expansion, Salesforce productivity, new product contributions, and medical education. Starting with the sales force, we ended the second quarter of 2022 with 198 producing sales reps compared to 197 in the first quarter of 2022. The number of producing reps can fluctuate quarter to quarter due to various factors, including, among other things, the seasonality of the foot and ankle market and the timing of hiring and onboarding new sales reps. P28 continues to be the destination of choice for sales reps who are foot and ankle specialists, as well as reps new to the industry. I am excited about both the quantity and quality of reps that have joined P28 in the last year. We expect the number of producing reps to increase over time and in the second half of 2022. Moving to Salesforce productivity, which we define as average revenue dollars per producing sales rep, increased by an impressive 17% as compared to the prior year period. Fueling this growth was new product launches, including nine new products so far this year and 19 new product launches since 2020. New product launches, complemented by our medical education and Salesforce expansion initiatives, have increased our revenue with existing and new surge in customers. Specifically during the second quarter, we did business with 1,829 U.S. surgeon customers, including 582 U.S. producing surgeons, both records for P28, and an increase compared to the prior year period of 11% and 18% respectively. With approximately 15,000 surgeons that treat foot and ankle in the United States, we have only scratched the surface and have a long runway of growth in front of us. Our broad and innovative product portfolio in the hands of our best-in-class and growing sales force, combined with leading medical education and training, is driving sustainable, high-quality revenue growth. Speaking of medical education and surgeon training, almost 700 surgeons attended in-person F&A medical education events in the second quarter of 2022. bringing the total number of surgeons trained in person at FNA medical education events to almost 2,200 in the last 12 months. We are very pleased with our ability to meet the very strong surgeon demand for these training events, leveraging our best in class surgeon training facility at our headquarters in Denver, Colorado. Thank you to all our medical education team for their commitment and passion to improve patient outcomes, including many, many weekends worked over the last year. Building on this momentum, in July we announced the launch of our new mobile surgeon training lab housed in a 43 by 30 foot tractor trailer, which includes a state of the art six station cadaveric training facility. The mobile lab is currently on the road and will be hosting over 50 training sessions in approximately 50 US cities during the second half of 2022. The mobile lab will highlight our broad and innovative product portfolio including the nine new products and surgical systems launched so far this year speaking of new product launches in mid-may we expanded our soft tissue portfolio with the launch of our grappler suture anchor system the grappler suture anchor system is offered in peak titanium and an all suture option in a variety of sizes and configurations to address soft tissue repair in all the foot and ankle sub-segments in may We also launched Tenotac 2.0 for minimally invasive soft tissue repair for hammer toe and other complicated deformities. Redesigned with an angulating washer to allow for greater capture of soft tissue, Tenotac 2.0 streamlines tensioning and improves fit to the bony surface. The addition of the grappler in Tenotac 2.0 bolsters P28's soft tissue product offering, which includes the recently launched paratrooper planer plate system and react stabilization system, grappler interference screw system, and release stabilization system. With this comprehensive portfolio, Paragon 28 provides its customers a broad array of innovative solutions for soft tissue stabilization and repair. Lastly, in June, we launched our monkey rings circular external fixation system for trauma, deformity correction, and limb salvage. Monkey rings is an external fixation device designed to maintain anatomic position while providing stability, preservation of soft tissue, and allow for adjustability and functionality. The monkey ring system allows hospitals and surgeons to collaborate with a single vendor for internal fixation, external fixation, wound care, and biologics. Combined with the launch of Monkey Bar's pin-to-bar external fixation system earlier this year, we are building out a strong external fixation portfolio and complementing our wide-ranging internal fixation biologics and soft tissue options. As we head into the back half of 2022, our product pipeline remains strong and is expected to continue to drive future growth. In summary, we continue to have success on all key strategic initiatives, and we will continue to invest in the business to drive sustainable and profitable revenue 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?