Paragon 28, Inc.

Good afternoon and welcome to Paragon 28's fourth quarter 2023 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. I would now like to hand the conference over to your host today, Mr. Matthew Brinkman, SVP of Strategy and Investor Relations. Mr. Brinkman, please go ahead when you're ready.

Good afternoon, and thank you for joining Paragon 28's fourth quarter 2023 financial results and earnings call. Presenting on today's call are Albert DeCasa, 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 those 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 filings 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 now turn the call over to Albert.

Thanks, Matt. Good afternoon and thank you for joining us for our fourth quarter 2023 earnings call. I will start things off with a review of our recent performance, followed by highlights from the quarter. And I'll pass it over to Steve to provide further details on our fourth quarter and full year financial results and an overview of our 2024 revenue guidance. Before diving into the results, I want to acknowledge our team's amazing work throughout 2023. This was a transformative year for Paragon 28, and we made significant progress in our transition into a more scalable organization for our next phase of growth. I want to thank this team for their unwavering resilience and teamwork to get us where we are today and for advancing our mission to improve foot and ankle patient outcomes. Now turning to results, Global revenue for the full year 2023 was $216.4 million, representing 19.3% reported growth and 19.7% constant currency growth, in line with the top end of our preliminary revenue results provided on January 8th. Once again, we saw balanced growth across all the five foot and ankle subsegments, growing the entire business at nearly three times our overall market growth rate of 7%. Fourth quarter 23 global revenue was $60.6 million, representing 17.6% reported growth and 17.3% constant currency growth compared to the fourth quarter of 22. We saw a nice 14.7% step up compared to the third quarter of 23, reflective of the normalized seasonality we expected this year. This compares favorably to the 11% third to fourth quarter net revenue step up we saw in 22 and reflects the improving supply chain environment. Looking at the U.S. business performance, I am pleased to say that our growth accelerated nicely compared to the third quarter. We have a lot to be positive about beyond the fourth quarter top line performance. In the fourth quarter of 23, we increased our U.S. producing sales roster by almost 14%, 266 reps compared to the fourth quarter of 22, and grew our surgeon customer base by 9%. to a record 2,215 surgeons. Both our rep roster and surgeon base are larger than ever, and these metrics are strongly indicative of our future growth potential as we expect to continue driving productivity increases on legacy products and new product launches. We've done a lot to bolster our medical education program, including the launch of a second mobile lab late in 23, specifically designed for more metro markets. With this new mobile lab, we're able to cover more ground in the U.S., meeting our surgeons and reps at their respective sites of care for highly focused and efficient training. Our international business continues to do very well. We've invested heavily in our core markets and have established a direct or directly managed commercial model in 13 of our 22 international markets. We still have positive runway for P28 internationally, as we continue to drive regional investments in our teams and infrastructure, as well as regulatory initiatives, like EUMDR, to clear and launch more new products. In short, we continue to build momentum, and I'm excited for what the future holds for F&A and the surgeon community internationally. Now I want to shine a light on our innovation, which is critical to our growth and our mission to improve foot and ankle outcomes. In the fourth quarter of 23, we launched two new solutions with the JAWS great white night and all staple system and the beast cortical fiber bone graft, which were both great additions to our portfolio. And now we're off to the races to start 24, but five meaningful product launches and one limited market release announced already in the first quarter. It's important to note that these products launched so far in 24 are in high growth, foot and ankle segments like bunion. soft tissue, and minimally invasive surgery. In soft tissue, we have launched three solutions with the Grappler and Atlas Anchor, Ridgeline Tape, and Mr. Tenon Harvester, all of which will typically be used in conjunction with other procedures and are highly complementary to our existing plating and screw systems. Another solution is our FJ2000 power console and burr system, designed specifically for the extremities and optimized for MIS surgery. This system features disposable handpieces and instruments that help streamline workflow and minimize the need for sterilization between cases, which allows surgeons to turn more cases in a day. Lastly, we launched a precision MIS bunion system and have our new lapidus clamp, the Bunyomatic, on limited market release. With these two solutions, P28 boasts a substantial range of offerings for treating bunions. Ultimately, our goal as a leader in foot and ankle and a real partner to our surgeons is to give surgeons multiple options to treat each patient's unique condition. We expect that these early 2024 product launches will generally start having a nice impact on Topline in the second half of the year and substantially contribute in 2025. I am so proud of the design teams and engineers that brought these truly innovative solutions to life, and we are excited to see them all hit the market. Of course, it's only February and we have a lot more to look forward to in 2024 on the product front with over 25 active projects, including our first reveal of the Smart28 platform expected mid-year. The Smart28 software has already been incredibly beneficial for our internal development and we are excited to share it once ready. Our balanced and innovative portfolio galvanizes P28 as a strong partner to the surgeon community. and an ideal home for the most passionate foot and ankle salespeople. In closing, I am pleased with the progress we made in 2023, but even more excited about 2024 and beyond. We made significant investments in 23 to enhance our infrastructure, teams, and processes to enable P28 to realize its full potential. We also fortified our balance sheet and combined with our focus on profitability and cash flow improvements, we have plenty of liquidity to get us to cash flow break even. Underlying demand in foot and ankle continues to be very strong, and we are in a great position to execute on our mission to improve foot and ankle patient outcomes across the globe. With that, I will now turn it over to Steve.