Paragon 28, Inc.

Good afternoon and welcome to Paragon 28 second quarter 2024 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. To enter the queue for questions, please dial star followed by one on your telephone keypad. As a reminder, this call is being recorded for replay purposes. And I would now like to hand the conference over to our host today, Mr. Matthew Brinkman, SVP of Strategy and Investor Relations. Mr. Brinkman, please go ahead.

Good afternoon, and thank you for joining Paragon 28's second quarter 2024 financial results and earnings call. Presenting on today's call are Albert DaCosta, Chairman and Chief Executive Officer, and Chrissy Wright, Interim Chief Financial Officer. We are also pleased to have Shadi Shaheen, newly appointed Chief Financial Officer and EVP of Supply Chain Operations joining us. 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 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, respectively, 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 second quarter 2024 earnings call. First, I'd like to welcome Shadi to the team. We are thrilled to have him joining us. I want to kick this call off by thanking the entire Paragon 2018 for their enduring commitment to our mission. I am truly grateful for their efforts, which have enabled us to achieve impressive results on the top line as well as the bottom line in the second quarter. This has been a critical quarter for the company, and we are coming out of it with strong commercial execution, improvements to operating expenses, and a rapid cadence of meaningful product launches. For all that, I thank the team. Now turning to our performance. Global revenue for the second quarter of 24 was $61 million, representing 19.6% and 19.7% reported in constant currency growth, respectively. We continue to drive balanced growth across all our sub-segments in the quarter. Looking at the U.S. business performance, revenue for the second quarter of 24 was $49.7 million, representing 17.6% reported growth. During the quarter, we grew our surgeon customer base to 2,271, which is 11% growth compared to the second quarter of 23. Over the same time period, we increased our U.S. producing sales rep roster by 13.1% to 277 reps and saw a 7% increase in productivity across our rep base. Looking at the momentum across these commercial metrics, you can see that we've continued to execute on our commercial growth strategy, and we have laid the foundation for durable growth in the future. Importantly, we are continuing to expand our customer base and enabling our sales force to be increasingly productive, bolstered further by significant new product launches and continued investments in medical education. Second quarter international revenue was $11.3 million, representing 29.4% and 29.6% reported in constant currency growth respectively. International growth was driven primarily by the United Kingdom, Australia, South Africa, and Spain. We look forward to continuing to bolster international growth as we clear and launch additional products in markets outside the United States. One final word on the commercial front. I want to reiterate that I truly believe we have the best reps in the foot and ankle business. I am so proud of our sales team and the many agencies that we work with, both in the U.S. and in the international markets. They are working every day to be the best possible partners to our surging customers while scaling their business to align with Paragon 28's vision. It isn't easy to do what they do, and I am impressed with the results they deliver every single day. Turning next to our product portfolio, we are setting a new pace of foot and ankle innovation. Having fully launched six products in the first quarter, followed by another six products in different stages of market release. That makes 12 launches through the first seven months of the year, and many of those launches are in high growth or high impact indications spanning nearly all of our subsegments. Our R&D engine is really firing on all cylinders, and we still have additional projects in the pipeline, which we expect to roll out later this year. As a reminder, our Q1 launches included the FJ2000, precision MIS, and limited market release of Bunyomatic, which while early in the cycle are performing nicely and expected to be significant growth drivers, particularly in forefoot in the future. We rounded those out with four soft tissue products that are highly complementary to our hardware portfolio. Looking at what's new for this earnings cycle, we have two line extensions in limited market release. First is the recently launched Bonobo ball joint strut. designed specifically for diabetic limb salvage and increases the functionality of our monkey rings circular XFIX system. Second, we are preparing to launch a novel right angle drill designed to precisely drill vertical holes in the tibia to prepare the appropriate interface for our Apex 3D total ankle implant, streamlining implant implementation for the surgeon. There will be more updates coming soon on our recent launches, but I want to share an early preview of where we are. because we're getting into some truly groundbreaking areas. And this is what I personally live for, to change the world of foot and ankle with incredible innovation. First, we have the reflex stabilization system on limited market release. The reflex is planned to be the crown jewel of our syndesmotic injury repair portfolio with novel features that give surgeons the ability for the first time to precisely adjust and visualize tension during a repair with a simple turn of the handle. That dynamic tensioning is incredibly important, and we believe it will help mitigate the arthritic response, which is a primary complication following these types of ankle fractures. The reflex is highly complementary to our ankle fracture plating portfolio and is expected to be a significant catalyst for our fracture business. Now turning to Smart28, which rounds out the rest of our product updates for the quarter. I am pleased to say that our Smart28 case management portal is now live. The portal will host all of our 3D preoperative planning modules and patient-specific implants, while also giving surgeons the ability to plan cases, coordinate surgery dates, and submit patient imaging. It will also serve as a direct line of communication with the Paragon 28 engineering and sales teams for real-time support, status updates, and surgical planning insights. Also, on the SMART28 front, we launched our highly anticipated first module, the Smart Bunyomatic for bunion correction, which is FDA cleared for both weight-bearing CT scans and x-rays, making it highly suitable for both acute and ASC settings. With the ability to leverage both CT scans and x-ray imaging, 3D planning will be widely available to all surgeons. The Smart Bunyomatic revolutionizes preoperative planning and correction for hallux valgus by creating plans tailored for the individual patient. utilizing AI-enabled algorithms and statistical models combined with the surgeon input to identify abnormalities and seamlessly export a surgical plan within only about 10 minutes. The ability to 3D plan a correction is groundbreaking, but perhaps what differentiates smart bunyomatic the most is the ability for surgeons to precisely implement the plan down to the millimeter with full intraoperative surgeon control. The SMART28 ecosystem is a massive advancement in helping surgeons understand highly complex deformities and optimize multi-planar correction, which we believe will ultimately result in improved precision and reproducible outcomes. We will be sharing more on SMART28 and the SmartBonyomatic in the coming weeks ahead, but we could not wait to share a glimpse with you all now after completing our first cases in late July. Now, before I hand things over to Chrissy to walk through financials, I want to share an update on our strategy to drive improved operational efficiency. While we remain hyper-focused on top-line growth, we believe it is crucial that we also maintain a sharp focus on operational efficiency and capital allocation. To that end, today we are announcing a comprehensive plan to foster operational excellence and drive discipline across all facets of our business, ensuring every dollar is strategically allocated to improve surgeon experience, patient outcomes, and maximize value for our shareholders. Elements of our operational efficiency plan include a reduction of current and planned workforce, a one-time realignment of 2024 executive compensation, and reductions in areas like travel, IT, professional services, and freight, to name a few. Further, we are implementing an inventory burndown plan that will improve our day's inventory on hand and preserve cash throughout 2025. These measures, combined with a rigorous focus on cost control, will result in durable savings and will enable us to sustain high growth while building a solid foundation for long-term success. In closing, we are positioning Paragon 28 for long-term sustainable growth and operational excellence, and we believe we are very well aligned to drive shareholder value with every dollar invested. With that, I will now turn it over to Chrissy.