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spk00: 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.
spk09: 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.
spk03: 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.
spk08: And with that, I will now turn it over to Steve. Thank you, Albert.
spk12: Paragon 28 second quarter 2023 net revenue was $51 million, representing 20% and 21% reported in constant currency growth, respectively. Gross profit margin was 82.6% for the second quarter of 2023, compared to 82% last year. We continue to make important investments in research and development as R&D with $7.7 million or 15% of revenue for the second quarter of 2023. During the quarter, we made additional investments in our robust and innovative product pipeline, ongoing clinical studies, and regulatory and quality initiatives. We continue to leverage our past investments in selling, general, and administrative expense, which totaled $43.8 million for the second quarter of 2023, representing a 330 basis point year-over-year margin improvement. Total SC&A expense has been consistent for the last three consecutive quarters. Adjusted EBITDA for the second quarter of 2023 improved by 17% to a $2.6 million loss. Second quarter adjusted EBITDA included approximately $2 million of one-time expenses composed of investments in our organizational structure and other growth initiatives. On a year-to-date basis, our adjusted EBITDA improved by 38% to a $4 million loss. We continue to expect 2023 adjusted EBITDA to improve by $5 to $10 million as compared to the $10.7 million loss in 2022. Turning to cash flow and liquidity. During the second quarter and six months ended 2023, P28 had $6.4 million and $11.4 million of operating cash use after normalizing for non-recurring legal settlement payments. These year-over-year operating cash flow improvements were in excess of 50% despite higher than normal levels of inventory on hand at June 30th, 2023. Beyond the inventory growth requirements to support new product launches and our expanding commercial footprint, increased supplier lead times have significantly contributed to our inventory growth. Specifically, these longer lead times have required us to increase our PAR levels of inventory. Our inventory balance also includes a higher than normal level of incomplete kits or work in process inventory awaiting delivery of final components to complete sets that otherwise would have been deployed to our sales force, contributing to revenue in the quarter. Turning to liquidity, we ended the second quarter of 2023 with approximately $117 million of total liquidity, including $57 million of cash in short-term investments and up to $60 million of cash available via our senior credit facility. Considering our anticipated future revenue growth, in improvements to adjusted EBITDA and free cash flow, we remain comfortable with our liquidity position, which we continue to expect will enable us to reach cash flow break even. Now, turning to our 2023 net revenue guidance. P28 continues to see tremendous demand for innovative products, and our commercial momentum and execution is very strong going into the second half of the year. For the full year of 2023, we are reaffirming our previous net revenue guidance of $214 million to $218 million. On a constant currency basis, the midpoint of our revenue guidance range implies 20% year-over-year growth. Our net revenue guidance also assumes foreign currency translation rates remain consistent with current translation rates.
spk08: That is the end of our prepared remarks.
spk00: And at this time, we will go ahead and open it up for Q&A. If you would like to ask a question, please press star and the number one on your telephone keypad, and we will pause for a brief moment to allow the Q&A roster to compile. And your first question will come from Greg Bajau with Bank of America. Your line is open.
spk07: Good afternoon, guys, and thanks for taking the questions. I guess I wanted to start with some of the supply chain challenges and maybe if you can go into a little bit more detail of what exactly they were, maybe quantify the impact and if it hits certain products more than others.
spk12: Thanks, Craig. It's Steve. Good question. Supply chain headwinds that we've been facing along with the rest of the industry have been out there for really a couple plus years since COVID. And our teams have done a really good job of navigating through that. Our ops teams and commercial teams have been really resilient. During the second quarter, you know, we did experience what I would call a higher number of stockouts on certain products that we primarily sell in our U.S. markets. And those would be products that are sterile packaged. And so we've seen our lead times on some of those products go from eight months to 22 months. And so a lot of our new products categories are experiencing, you know, some stockouts because of that. So, you know, that's an area that definitely had an impact on the second quarter, particularly in the U.S. But, you know, despite these challenges, our business is up 20% year-to-date in the U.S., and know also we expect and beginning in july we actually started to see some relief on some of those products actually getting in the door so we're really optimistic that that's going to improve over time particularly as we roll through the second half of this year uh got it that's helpful steve and then if i um you know maybe just you reaffirm guidance so would love to hear um
spk07: you know, if the split between U.S. and international, obviously international is doing, did well in the quarter, has done well thus far this year. The U.S. side, as you just talked about some of the supply challenges. So maybe just talk about how we should think about the U.S. and international contribution to, you know, your reaffirmed guidance.
spk12: Yeah, and maybe before I do that, you know, Albert actually punched me under the table and said that it was eight weeks to 22 weeks, not months. So, you know, it's felt like months to me, and I'm sure to our sales team. So just wanted to clarify that. So as we go forward, we do expect our businesses to continue to contribute on a pretty similar basis as we go forward. We expect our U.S. business to continue to be a terrific driver of growth for us, as it has been for the first half of the year. And then our international business also has a lot of momentum, as you can see by our year-to-date results and also prior to that. One thing to think about as we go into 3Q, our international business typically has the highest level of seasonality because of the concentration of revenue in the European markets there. So you do typically see a step down in international contribution during the third quarter. So that's the way I would think about the reaffirmation of guidance. And when we think about reaffirming our guidance, our business has enormous demand for our products. We're maintaining our guidance really just to be prudent about the supply chain situation and other uncertainties relating to the economic conditions we all operate within.
spk07: If I can just squeeze on the guidance cadence. Any thoughts on how we should think about Q3 versus Q4 with respect to the guidance?
spk12: Yeah, no, happy to answer that. And this year, we actually have a couple less billing days in the third quarter as compared to last year. So that will have a headwind of 300 basis points or so. So we'll have a greater concentration of revenue in the fourth quarter. as compared to the third quarter when you look at our previous historical levels. So we expect our third quarter to be the lowest growth quarter of the year because of that factor. And then ramping back up again in the terms of growth into the fourth quarter. The other thing we have this year that in terms of 3Q comparison is last year we grew 30% in the third quarter. So that's our toughest comp of the year as well. So, when you're doing your modeling and thinking about our business, 3Q has some unusual factors that will make the growth level the lowest of the year on a quarterly basis.
spk08: Thanks, guys. You got it. Thanks, Craig.
spk00: Your next question comes from Mike Mattson with Needham & Company. Your line is open.
spk09: Yeah, thanks.
spk12: Just wondering if you could maybe give us an update on some of your surgeon training in the quarter. I don't know if you're willing to share any numbers or anything like that, but. Yeah, Mike, happy to. We continue to have very strong training momentum, training again over 600 surgeons. The mobile lab was really effective for us again, training hundreds of surgeons for us in the second quarter. So we're continuing to touch and train both new surgeons. on our products, but also, you know, importantly, as we've mentioned before, we also train existing surgeons on a lot of our new product offerings. So it's a double benefit for us. And then, you know, another benefit as well is just getting to have our sales representatives and other commercial team members also have opportunities to train alongside these surgeons. Okay. Thanks. And then the international growth was particularly strong this quarter. I mean, I know it's a smaller dollar amount. It does kind of bounce around a little. But I was just wondering, is there something going on there? Or is it just kind of, you know, maybe like a more procedural recovery in some of those markets? Or is it just kind of a random thing that happens? We've really been really pleased with the growth in the markets outside the United States, and the teams there have done a nice job of training new surgeons, of training existing surgeons on our products. Our medical education programs really have driven a lot of new customers to us. And our existing markets, such as the UK, they're just absolutely killing it right now. And our Australian market is doing very, very well. And then we have a new market in Spain that is really starting to drive a lot of growth for us and just really starting to hit across all of our major markets. And we've been doing that. I think we've reported record sequential quarters for the last eight quarters or so. But 2Q is particularly strong. And, you know, it's just I think a lot of the investments we've been making really paying off. And as we move into 3Q, we get a little bit of seasonality coming back. But, you know, 2Q we were very pleased with.
spk09: Okay, great. Thank you.
spk00: And your next question comes from Matthew O'Brien with Piper Sandler. Your line is open.
spk11: Thanks for taking the questions. Can we just start again on the US performance and specifically the supply chain, Albert or Steve, just was it specifically on the set side of things? There's certain components to the set that you weren't getting, so you couldn't get sets out the door, especially on the new product side of things. So you still put up really good growth, just more legacy products, but the new products weren't seeing as much traction. And did those cases get delayed into Q3? because they are elective and you start to see the benefits of that, or are they just kind of lost sales because of the supply chain issue?
spk12: Yeah, Matt. So, you know, as we mentioned, I would say that probably two-thirds of the lost cases or deferred cases in the U.S. were related to products that are sterile packed for us. And, you know, I think when you listen to some of the other larger joint orthopedic companies talking about There are increases in volumes over the last couple of quarters. Most of their products are sterile-packed as well. So we've been competing with space on the manufacturing lines with some of these very large hip and knee companies that have had unusual levels of high growth coming out of post-COVID era. And it just happens that a number of our new products that we've launched over the last 24, 36 months are sterile-packed. So that has been a big element of the deferred or lost cases, you might call it. I don't think they're lost, but we certainly maintain relationships with physicians. They get moved out in some cases. We've done a really nice job of maintaining relationships and selling other products to physicians if we may not have a particular product that's sterile-packed. So, you know, we're looking forward to 3Q and into 4Q. We've started to see improvements in the supply of those products moving forward. But it's also beyond that. There's an element of just completing kits for waiting on certain components beyond just sterile packs so that we can get the product out into the field for the new reps that we've added and the record number of customers that are using Paragon today.
spk11: Got it. So I'll ask my second question. It's got two parts to it, but I'll ask them together. So the supply issue, do you think that's largely behind you exiting Q3, or is it more into 24 you expect to have this largely behind you? And then that extra $2 million investment that you made, I think you said in Q2, just alone, where was that? Was that medical education? Was it more reps, more advertising? Where was that investment? Because I know that's an area that get some pushback from investors for P28 not spending enough, not being aggressive enough to really drive the top line more than you already are?
spk12: Yeah, starting with the supply chain, we think by the time we exit this year, we'll be pretty much back in sync with the sterilized product supply. We've seen some relief already on that in 3Q, but we won't be back to normal until likely Exiting for Q, but we will get better every quarter over the next 2 quarters. So, but, you know, as I mentioned earlier, we have had these headwinds before we just started to see it peak. In the 2nd quarter, and we think it's going to improve. We know it's going to improve from here out based upon the delivery schedules. We have commitments for. So that's regarding your supply chain question. And then with respect to the investments, you're right. There has been continued investments in medical education and Salesforce expansion. That's not really what I was referring to in terms of the one-time costs. We made a number of enhancements to our organizational structure, some of our directors and senior directors and vice presidents. Bringing in new folks, transitioning out some older folks, and really just looking for folks that we believe are going to take us to 500 million plus in revenue in a reasonable period of time. So some headhunter costs, some transition costs. And then we also spent some money to accelerate EU MDR initiatives relating to getting some of our products approved faster for movement into the European Union. So a number of investments that are setting us well for continued growth.
spk08: Got it. Thank you. Yep.
spk00: Your next question will come from Neil Shatterjee with B. Riley. Your line is open.
spk06: Hey, guys. Thanks for taking the questions. Maybe just on just, you know, the Salesforce, I want to say, I think you said you were up to 250 producing reps. Just kind of curious, one, just on the productivity kind of ramp benefit kind of in the quarter and then kind of, you know, that in the second half and any plans for further Salesforce expansion?
spk03: Yeah, how are you doing? And thanks for the question. I'll start off by saying, you know, our momentum has been fantastic with building out our sales force really since we've gone public. And I think with the launch of each new piece of technology, we see some excited folks out there. And so it's inspired both surgeons attending medical education, but it's really inspired a lot of great conversations with with sales reps that might have some experience, though. We continue to have a really good momentum there. And maybe, Stephen, do you want to comment a little bit on the productivity?
spk12: Yeah, no, it's exactly right. And it's the number of reps we continue to expand. You know, we get a lot of inbound interest, continue to get a lot of inbound interest from very qualified folks who want to carry the Paragon bag. But at the same time, we continue to increase the productivity of our producing reps, which is You know, we're particularly proud of that when we're growing the number of reps by 12% during the quarter that we're able to increase productivity as well. Because when you put more reps into the equation that are newer to Paragon 28, it has a natural impact of bringing down the revenue per rep statistics. And we still increased it year over year despite adding 12% more reps.
spk08: So both growth levers are intact and doing really well for us. Great.
spk06: And just one quick follow-up. So I did notice that you had kind of held the AOFAS resident training at your headquarters. Just kind of curious, you know, maybe just more generally, you know, how much of your training is kind of focused on that kind of resident fellow kind of next generation?
spk03: Yeah, I would say we were really excited to finally get to support the industry in that way. We've built a pretty amazing facility here for medical education. It's kind of the center of our building and it's really been one of the key pillars of success for Paragon. And to be able to utilize the facility for AOFAS to use for some of their incoming residents was honestly pretty awesome to see and experience. And we hope to do a lot more of that in the future. I can tell you that supporting people at every stage of their career is really important for us. And I think that's been one of the really nice aspects of having the mobile app where we can bring this to really to their backyard, and we can have residents, fellows, attendings. We can have a pretty wide variety of folks come into the mobile lab and really tailor their education to whatever it is their interests are. So the mobile lab has really facilitated our ability to get to people at all the different stages of their career.
spk08: Thanks. That's it for me. Yep. Thanks. Thanks.
spk00: Your next question will come from Dave Turkley with JMP Securities. Your line is open.
spk08: Hey, Gideon.
spk02: Just a quick question again. I appreciate the year over year. Sequentially, I think it's something like three. And as we look at this year, I was wondering, do you have a plan that you might want to share with us or maybe a number, even if it's going to be a little uneven in terms of how they're at it, but where do you think you could take that in 2023.
spk08: In terms of producing reps, Dave, sorry, you went... Sorry.
spk02: I was talking about the 250 reps from last quarter. I think I had 247 in it, so I was just trying to get an idea of where that might wind up by the end of the year.
spk04: That's a little less than you had.
spk12: We haven't really talked about specifics by quarter or by year, but we have said that we expect that number to double over time. And, you know, it won't always be perfectly linear because sometimes, you know, the opportunities don't present themselves that way. As we have the opportunity to add reps, it's certainly we take them whenever they come. And, From the seasonality perspective, we see a lot more productivity, particularly in the fourth quarter. So we would expect that producing rep number to go higher as more of our reps who aren't productive in terms of the definition become producing reps in the fourth quarter. So that number is going to keep growing as we move forward, and we expect it to double over time.
spk02: Got it. And then sort of your enabling technology initiatives. I think you'd said that you expected to have pre-op planning tools commercial sometime in the back half of this year. I'm just curious if there's any update there, anything you'd like to share in those areas.
spk03: That is right. We're expecting later this year to have a limited launch of one of the first modules of really what, you know, is the DZIOR introduction. We're pretty excited about that. As we mentioned on previous calls, we've been very effective utilizing that technology in our internal development process. It's really sped up certain aspects of that. So it's been very useful as a tool for us really since day one. But we are expecting to introduce into the market later this year, early next year, really one of the first modules that I think will give you a great representation of what that tool could mean. And overall, just generally speaking, I think I've said this before, we really feel like SMART28 initiative could be one of the most significant opportunities to improve outcomes for patients and give surgeons visibility really to the deformity, the planning, and even the tracking post-operatively. So we've got a lot of energy around that, and we're still pretty excited about what that could mean.
spk08: Great. Thank you. You got it.
spk01: Your next question comes from Kyle Rose with Canaccord.
spk00: Your line is open.
spk10: Great. Thank you for taking the question. So, you know, a lot's been asked, but the one thing I wanted to talk about through the first half of the year is really on the gross margin line. You know, strong gross margins, particularly when we consider first half 23 relative to the second half 22. And then, you know, normally when we hear things about supply chain challenges and increasing lead times, you know, there's always some sort of increased cost associated with that. So I guess I'm just trying to understand, how should we think about gross margins through the first half of the year? Is that how we should really be thinking about them through the second half of the year? Or is there anything that we should be calling out there? Thank you. Hey, Kyle, thanks.
spk12: And, you know, one of the things we've been pretty consistent about saying is, you know, think about our business as an 80% plus gross margin business. continued to perform above that in an 82 to 83% range, which we think really reflects the value of our products and the price that we're getting them for or selling them for and the price we're procuring it for. We haven't seen any significant impact at this point in time in terms of the actual procurement cost year over year. Our supply team has done a terrific job of managing that. Where we have some extra cost is just carrying the additional inventory on our balance sheet today. We're buying products that are, you know, all valid and good products. We just have more than, you know, we normally would have given the longer lead times. You know, so, you know, we expect as we move forward that we won't, you know, as these lead times decrease, that we'll be able to work through this inventory and get back to a more normalized level of days of inventory on hand. And then further, as we also complete sets and replenish existing sets and get them back out into the field where we've had back orders, we expect that to drive more revenue. And so it'll have the benefit of more revenue in the future as we move forward and complete those sets. And we also expect that inventory balance to come down. So 80%, I think, or thereabouts is the right way to model our gross margins. And, you know, if we continue to do well on our pricing of our products and manage supply and chain to get products at the right price, you know, we can potentially do better than that like we have the last several quarters.
spk10: Okay, great. And then just two products I'd love to get an update on. You know, you've made a big focus on putting out some innovative soft tissue products as well as, you know, the total ankle has been a big investment. I just wonder if you could talk about, you know, how those are being received by both the, you know, the growing sales force as well as, you know, all of the new physicians you're adding. Just kind of the overall growth there would be helpful.
spk03: Yeah, thanks for the question, Kyle. I would tell you we really – Since, honestly, 2020, right around COVID time, we launched a couple of key products really in the ankle arena, whether it's ankle fusion or ankle nail and our ankle fusion plating, in addition to our total ankle. We also launched last year a couple of significant products in the X-Fix category and some of the early products in our soft tissue portfolio. Those are crushing it. The market reception's been pretty awesome. And the complementary effect those have had to the rest of our portfolio has been pretty powerful. So we're seeing a lot of great momentum from those products. It's inspiring a lot of conversation around medical education, so the demand is pretty hot there. This year, I think we're going to add a couple more soft tissue products that are going to be pretty complimentary. We've also launched a couple of key products already this year. So we're really excited, not only about what we've launched and the momentum we're seeing those products generate, but in addition to that, our pipeline's as strong as ever. We've got well over 20 projects actively being developed. That's kind of a story for P28. It's consistent. It's consistent moving forward as well. So, you know, that's my sweet spot. It gets me excited every day, and I think it's really inspiring us here at Paragon 28 as well.
spk12: And, Kyle, Steve, I would just add to that that a number of those products that Albert mentioned there are sterile packaged. So, we would like more of those products to come in to meet the demand that we have. It's intense level of demand for a lot of those products, and And we're just working to get more of those sterile package goods in faster so we can get it out back into the field.
spk08: Great. Well, thank you very much for taking the questions. You got it. Thank you.
spk00: Your next question comes from George Sellers with Stevens Inc. Your line is open.
spk05: Hey, thanks for taking the question. And I apologize if I missed that. I've been jumping around between calls a little bit, but So I apologize if I'm repeating something that's already been asked, but I wanted to dig in a little bit on the international revenue. This was a really strong quarter for international and relative to our expectations as well. So just curious if you could peel back some layers there and give us some additional color on what was driving the outperformance in international, any specific devices or subsegments that were really outperforming expectations.
spk12: Yeah. Hey, George. It's Steve. I would tell you that I would say it's the culmination of a lot of investments that have been being made over the last 12 to 18 months. And some key markets for us and some key new markets. So, you know, I mentioned earlier our UK business, I believe we had a record second quarter in terms of total dollars of revenue. Our Australian for business performed very well again. And those are two markets where we've focused a lot of energy on and in many ways added a number of new, very talented people and augmented the teams. We've also, you know, despite some of the sterile pack problems and challenges that we've been working through the headwinds, we've also been able to get more kits over of some of our core legacy products to our international markets, and that's helped. You know, we also have some new markets like Spain that have done really well for us and are really just getting going. So lots of opportunities in the existing big three, which in addition to Australia and the U.K. includes South Africa, but also some emerging growth drivers in Spain and Germany and Italy. We expect to increasingly contribute more as we move forward.
spk05: Okay, that's really helpful context. And then maybe on the guidance, and again, I apologize if I missed this earlier, but The guidance seems to assume that there's going to be a bit of a slowdown in the second half relative to the first half in terms of growth. I'm just curious what some of the puts and takes there. Is that predominantly seasonality, or what's sort of going into that?
spk12: Yeah, George, it's a couple of things. You mentioned seasonality. I think this is the first. First year, we've had a normal seasonality, so 2 and 3Q have just generally less procedures as compared to last year when we had higher levels of procedures coming out of an Omicron-impacted first quarter. So that's one element. Another element, just candidly, is our 30% growth quarter last year in the third quarter. That's our toughest comp of the year, 30% growth in 3Q last year. And we also have two less billing days in the U.S. this year in the third quarter, and a similar number of billing days in the fourth quarter. So you lose a little bit of growth there. And then, you know, I think we've just continued to be prudent on – on our guidance for the full year, incorporating uncertainties related to, you know, the supply chain issues that we're turning the corner on and started to see improvements in July, but also just the uncertainties in the economic environment in the U.S. and around the world. So that's the thinking on the guidance.
spk05: Okay. That's really helpful. That's all of my questions. Thank you for the time. I appreciate it.
spk08: You got it, George. Thanks. Thanks, George.
spk00: This concludes Paragon 28's second quarter 2023 earnings call and Q&A. I will now hand the call back over to Albert for closing remarks.
spk03: Thank you again for your time today. We look forward to seeing many of you at future investor and industry conferences, including next week in Boston at the Canaccord Genuity Annual Growth Conference on August 9th. Have a great day.
spk00: This concludes today's conference call. You may now disconnect.
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