Paragon 28, Inc.

Good afternoon and welcome to Paragon 28's second quarter 2023 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. And now, I would like to hand the conference over to your host today, Mr. Matthew Brinkman, Senior Vice President of Strategy and Investor Relations. Mr. Brinkman, please go ahead.

Good afternoon, and thank you for joining Paragon 28's second quarter 2023 financial results and earnings call. Presenting on today's call are Albert DaCosta, Chairman and Chief Executive Officer, and Steve Deitch, Chief Financial Officer. Before we begin, I would 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. Forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or predictions of future events, results, or performance. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from these forward-looking statements. All forward-looking statements are based upon current available information, and Paragon 28 assumes no obligation except as required by law, to update these statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filing and in the press release that was issued earlier today. During this presentation, we will refer to the non-GAAP financial measure of adjusted EBITDA and constant currency net revenue growth. A reconciliation to the most comparable GAAP financial measure, net income, and reported net revenue growth is contained in our press release issued earlier today. And with that, I will turn the call over to Albert.

Thanks, Matt. Good afternoon and thank you for joining us for our second quarter 2023 earnings call. I will kick the call off with a business update and then pass things over to Steve to provide an overview of our financial results and give an update on our 2023 financial guidance. To start things off, we are extremely pleased with the work our team has done, continuing to grow our global business at a great pace and well above the overall foot and ankle market growth rate. Paragon 28 is all about changing the world of foot and ankle and helping improve patients' lives. And I see the passion, tenacity, and commitment to that mission from our team every day. That collective effort and enthusiasm is really what drives our success and is why we win in so many ways. With that, I will turn to some updates on the business and our performance this year. Total revenue for the first half of the year was $103 million, representing constant currency growth of 24% year over year. Both our U.S. business and international business had strong first half 2023 performances. The U.S. grew 20% and international grew 51% constant currency, and all our segments grew double digits year to date. Our resilient team, combined with our balanced business model, delivered growth at over three times the broader foot and ankle market growth rate, despite industry-wide supply chain challenges. Both our U.S. and international businesses had strong performances in the second quarter as well, with global net revenue totaling $51 million, representing constant currency growth of 21% year over year. Our U.S. revenue performance in the quarter was once again led by our innovative and comprehensive product portfolio, which continues to attract new surgeons and sales reps to Paragon 28. During the quarter, we increased our U.S. surgeon customer base by 12% to a record 2,047 surgeons. We finished the quarter with an increase in the number of producing sales reps to 250, while also increasing the average revenue per producing sales rep. Our international business also did very well during the quarter with sizable growth contributions coming from our key markets. Turning to our product portfolio, in the second quarter we fully launched two new systems including the phantom met shortening system and the gorilla super malleolar osteotomy or FMO plating system. We also have a few products on beta launch that we are thrilled to bring to market later this year. The phantom met shortening system is a novel approach aimed to prevent metatarsalgia and floating toe pathologies associated with various forefoot procedures. The introduction of our met shortening system addresses an unmet need in foot and ankle and will help catalyze our growth in the forefoot segment. The gorilla SMO plating system includes a state-of-the-art bone graft kit that offers surgeons a streamlined, customized, and reproducible way of addressing ankle deformities. This system is highly synergistic with existing products in our ankle franchise, including total ankle replacement. As a reminder, we've launched nearly 20 products since the start of 2021, and our pipeline boasts over 25 active new products under development across all of the subsegments within foot and ankle. Perhaps as important as new product introductions and our exciting pipeline, we continue to experience substantial growth from our legacy products including our plating systems, screw systems, and bone wedges, which span multiple segments and indications. Foot & Ankle is a gem within the orthopedic market, and we feel so lucky to be in such a dynamic, high-growth space where we can contribute in a meaningful way. Our passion and singular focus on this market motivates us every day and drives our success. We continue to perform well and take share across each subsegment and geography. a compelling testament to the balance and strength of our overall business and team.