Paragon 28, Inc. (NYSE: FNA) (“Paragon 28” or “Company”), a
leading medical device company exclusively focused on the foot and
ankle orthopedic market, today reported financial results for the
quarter and year ended December 31, 2023 and provided 2024 Net
Revenue guidance.
Fourth Quarter and Full Year 2023 Financial Results
- Consolidated net revenue for the fourth quarter of 2023 was
$60.6 million, representing 17.6% and 17.3% reported and constant
currency growth, respectively, compared to the fourth quarter of
2022. Consolidated net revenue for the full year 2023 was $216.4
million, representing 19.3% and 19.7% reported and constant
currency growth, respectively, compared to the full year 2022.
- U.S. net revenue for the fourth quarter and full year 2023 was
$51.7 million and $183.5 million, respectively, representing 14.1%
and 16.1% reported growth, respectively, compared to the prior year
periods.
- International net revenue for the fourth quarter and full year
2023 was $8.9 million and $32.9 million, respectively, representing
43.1% and 41.3% reported growth, respectively, and 40.7% and 44.1%
constant currency growth, respectively, compared to the prior year
periods.
- Gross profit margin was 74.5% for the fourth quarter of 2023
compared to 81.5% in the fourth quarter of 2022. Gross profit
margin was 79.9% for the full year 2023, compared to 82.1% for the
full year 2022. Related to the recent inventory stockpiling, during
the fourth quarter of 2023 the Company recorded inventory
write-downs totaling $4.0 million which reduced fourth quarter and
full year 2023 gross profit margins by 6.6 and 1.8 percentage
points, respectively.
- Research and development expenses and selling, general, and
administrative expenses increased by 10.5% to $56.4 million for the
fourth quarter of 2023, compared to $51.0 million for the fourth
quarter of 2022. Research and development expenses and selling,
general, and administrative expenses increased by 14.2% to $210.1
million for the full year 2023, compared to $184.0 million for the
fourth quarter of 2022. The increase in both periods was driven by
further investments in new product development, selling and
marketing initiatives, as well as investments in corporate and
operations infrastructure.
- Net loss was $19.6 million for the fourth quarter of 2023,
compared to a net loss of $38.8 million for the fourth quarter of
2022. Net loss was $47.8 million for the full year 2023, compared
to a net loss of $67.3 million for the full year 2022.
- Adjusted EBITDA for the fourth quarter of 2023, negatively
impacted by the $4.0 million of inventory write-downs, was a $4.4
million loss compared to a $1.5 million loss in the fourth quarter
of 2022. Adjusted EBITDA for the full year 2023, negatively
impacted by the $4.0 million of inventory write-downs during the
fourth quarter 2023, was a $9.7 million loss compared to a $10.7
million loss for the full year 2022.
“Our team ended the year with solid performances across each
foot and ankle segment both in the U.S. and International markets,”
said Albert DaCosta, Chairman and Chief Executive Officer. “Turning
to 2024, we are incredibly excited to launch several new and
high-impact solutions to start the year. Our continued growth is
proof of our ability to address unmet needs in the foot and ankle
market by committing to innovation and improving patient
outcomes.”
2024 Net Revenue Guidance
The Company expects 2024 net revenue to be $249 million to $259
million, representing 15.1% and 19.7% reported growth compared to
2023.
The Company’s 2024 net revenue guidance assumes foreign currency
translation rates remain consistent with current foreign currency
translation rates.
Webcast and Conference Call Information
Paragon 28 will host a conference call to discuss fourth quarter
and full year 2023 financial results on Thursday, February 29,
2024, at 2:30 p.m. Mountain Time / 4:30 p.m. Eastern Time.
Investors interested in listening to the conference call may do so
by dialing (833-470-1428) for domestic callers or (404-975-4839)
for international callers, using conference ID: 593140. Live audio
of the webcast will be available on the “Investors” section of the
company’s website at: ir.paragon28.com. The webcast will be
archived and available for replay for at least 90 days after the
event.
About Paragon 28, Inc.
Based in Englewood, Colo., Paragon 28, is a leading medical
device company exclusively focused on the foot and ankle orthopedic
market and is dedicated to improving patient lives. From the onset,
Paragon 28® has provided innovative orthopedic solutions,
procedural approaches and instrumentation that cover a wide range
of foot and ankle ailments including fracture fixation, forefoot,
ankle, progressive collapsing foot deformity (PCFD) or flatfoot,
charcot foot and orthobiologics. The company designs products with
both the patient and surgeon in mind, with the goal of improving
outcomes, reducing ailment recurrence and complication rates, and
making the procedures simpler, consistent, and reproducible.
Forward Looking Statements
Except for the historical information contained herein, the
matters set forth in this press release are forward-looking
statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, including,
but not limited to: Paragon 28’s potential to shape a better future
for foot and ankle patients and its estimated net revenue for full
year 2024. You are cautioned not to place undue reliance on these
forward-looking statements. Forward-looking statements are only
predictions based on our current expectations, estimates, and
assumptions, valid only as of the date they are made, and subject
to risks and uncertainties, some of which we are not currently
aware. Forward‐looking statements should not be read as a guarantee
of future performance or results and may not necessarily be
accurate indications of the times at, or by, which such performance
or results will be achieved. These forward‐looking statements are
based on Paragon 28’s current expectations and inherently involve
significant risks and uncertainties. Actual results and the timing
of events could differ materially from those anticipated in such
forward‐looking statements as a result of these risks and
uncertainties. These risks and uncertainties are described more
fully in the section titled “Risk Factors” in Paragon 28’s filings
with the Securities and Exchange Commission (the “SEC”), including
Paragon 28’s annual report on Form 10-K filed with the SEC on
February 29, 2024. Paragon 28 does not undertake any obligation to
update forward‐looking statements and expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward‐looking statements contained herein. These
forward-looking statements should not be relied upon as
representing Paragon 28’s views as of any date subsequent to the
date of this press release. Paragon 28’s results for the quarter
ended December 31, 2023 are not necessarily indicative of our
operating results for any future periods.
Use of Non-GAAP Financial Measures and Their
Limitations
In addition to our results and measures of performance
determined in accordance with U.S. GAAP presented in this press
release, we believe that certain non-GAAP financial measures are
useful in evaluating and comparing our financial and operational
performance over multiple periods, identifying trends affecting our
business, formulating business plans and making strategic
decisions.
Adjusted EBITDA is a key performance measure that our management
uses to assess our financial performance and is also used for
internal planning and forecasting purposes. We define Adjusted
EBITDA as earnings (loss) before interest expense, income tax
expense (benefit), depreciation and amortization, stock-based
compensation expense, employee stock purchase plan expense,
non-recurring expenses and certain other non-cash expenses.
We believe that Adjusted EBITDA, together with a reconciliation
to net income, helps identify underlying trends in our business and
helps investors make comparisons between our company and other
companies that may have different capital structures, tax rates, or
different forms of employee compensation. Accordingly, we believe
that Adjusted EBITDA provides useful information to investors and
others in understanding and evaluating our operating results,
enhancing the overall understanding of our past performance and
future prospects, and allowing for greater transparency with
respect to a key financial metric used by our management in its
financial and operational decision-making. Our use of Adjusted
EBITDA has limitations as an analytical tool, and you should not
consider these measures in isolation or as a substitute for
analysis of our financial results as reported under U.S. GAAP. Some
of these potential limitations include:
- other companies, including companies in our industry which have
similar business arrangements, may report Adjusted EBITDA, or
similarly titled measures but calculate them differently, which
reduces their usefulness as comparative measures;
- although depreciation and amortization expenses are non-cash
charges, the assets being depreciated and amortized may have to be
replaced in the future, and Adjusted EBITDA does not reflect cash
capital expenditures for such replacements or for new capital
expenditure requirements;
- Adjusted EBITDA also does not reflect changes in, or cash
requirements for, our working capital needs or the potentially
dilutive impact of stock-based compensation; and
- Adjusted EBITDA does not reflect the interest expense, or the
cash requirements necessary to service interest or principal
payments, on our debt that we may incur.
Additionally, we report revenue growth on a constant-currency
basis in order to facilitate period-to-period comparisons of
results without regard to the impact of fluctuating foreign
currency exchange rates. The term foreign currency exchange rates
refers to the exchange rates used to translate the company's
operating results for all countries where the functional currency
is not the U.S. dollar into U.S. dollars. Because we are a global
company, foreign currency exchange rates used for translation may
have a significant effect on our reported results. References to
revenue growth on a constant-currency basis means without the
impact of foreign currency exchange rate fluctuations.
The company believes disclosure of constant-currency revenue
growth rates is helpful to investors because it facilitates
period-to-period comparisons. However, constant-currency revenue
growth rates are non-GAAP financial measures and are not meant to
be considered as an alternative or substitute for comparable
measures prepared in accordance with GAAP. Constant-currency growth
has no standardized meaning prescribed by GAAP and should be read
in conjunction with our consolidated financial statements prepared
in accordance with GAAP. We calculate constant-currency growth
rates by translating local currency amounts in the current period
at actual foreign exchange rates for the prior period.
Because of these and other limitations, you should consider our
non-GAAP measures only as supplemental to other GAAP-based
financial measures.
PARAGON 28, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands)
December 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
75,639
$
38,468
Trade receivables
37,323
37,687
Inventories, net
98,062
60,948
Income taxes receivable
794
615
Other current assets
3,997
4,658
Total current assets
215,815
142,376
Property and equipment, net
74,122
61,938
Intangible assets, net
21,674
22,387
Goodwill
25,465
25,465
Deferred income taxes
705
148
Other assets
2,918
1,795
Total assets
$
340,699
$
254,109
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
21,696
$
14,939
Accrued expenses
27,781
26,807
Accrued legal settlement
—
22,000
Other current liabilities
883
3,844
Current maturities of long-term debt
640
728
Income taxes payable
243
184
Total current liabilities
51,243
68,502
Long-term liabilities:
Long-term debt net, less current
maturities
109,799
42,182
Other long-term liabilities
1,048
1,628
Deferred income taxes
233
342
Income taxes payable
635
527
Total liabilities
162,958
113,181
Stockholders' equity:
Common stock, $0.01 par value, 300,000,000
shares authorized; 83,738,974 and 78,684,107 shares issued, and
82,825,455 and 77,770,588 shares outstanding as of December 31,
2023 and December 31, 2022, respectively
827
776
Additional paid in capital
298,394
213,956
Accumulated deficit
(115,630
)
(67,789
)
Accumulated other comprehensive income
(loss)
132
(33
)
Treasury stock, at cost; 913,519 shares as
of December 31, 2023 and December 31, 2022
(5,982
)
(5,982
)
Total stockholders' equity
177,741
140,928
Total liabilities & stockholders'
equity
$
340,699
$
254,109
PARAGON 28, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net revenue
$
60,561
$
51,508
$
216,389
$
181,383
Cost of goods sold
15,440
9,537
43,598
32,457
Gross profit
45,121
41,971
172,791
148,926
Operating expenses:
Research and development costs
8,102
6,550
30,078
24,650
Selling, general, and administrative
48,249
44,466
180,022
159,323
Legal settlement
—
27,000
—
27,000
Total operating expenses
56,351
78,016
210,100
210,973
Operating loss
(11,230
)
(36,045
)
(37,309
)
(62,047
)
Other income (expense):
Other (expense) income
(860
)
(1,824
)
154
(1,214
)
Loss on early extinguishment of debt
(5,308
)
—
(5,308
)
—
Interest expense, net
(2,038
)
(1,264
)
(5,165
)
(4,129
)
Total other expense
(8,206
)
(3,088
)
(10,319
)
(5,343
)
Loss before income taxes
(19,436
)
(39,133
)
(47,628
)
(67,390
)
Income tax expense (benefit)
123
(370
)
213
(64
)
Net loss
$
(19,559
)
$
(38,763
)
$
(47,841
)
$
(67,326
)
PARAGON 28, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
Year Ended December
31,
2023
2022
Cash flows from operating activities
Net loss
$
(47,841
)
$
(67,326
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
15,542
13,728
Allowance for doubtful accounts
614
155
Excess and obsolete inventories
(352
)
485
Loss on early extinguishment of debt
1,881
—
Stock-based compensation
12,364
10,365
Change in fair value
(791
)
1,280
Other
984
704
Changes in other assets and liabilities,
net of acquisitions:
Accounts receivable
(161
)
(12,013
)
Inventories
(36,595
)
(21,512
)
Accounts payable
6,742
1,895
Accrued expenses
6,428
2,317
Accrued legal settlement
(22,000
)
22,000
Income tax receivable/payable
(50
)
391
Other assets and liabilities
(655
)
(1,650
)
Net cash used in operating activities
(63,890
)
(49,181
)
Cash flows from investing activities
Purchase of office building
—
(18,300
)
Purchases of property and equipment
(26,716
)
(22,813
)
Proceeds from sale of property and
equipment
1,043
897
Purchases of intangible assets
(1,314
)
(1,973
)
Acquisitions, net of cash received
—
(18,504
)
Net cash used in investing activities
(26,987
)
(60,693
)
Cash flows from financing activities
Proceeds from draw on term loan
—
20,000
Proceeds from issuance of long-term
debt
100,000
16,000
Payments on long-term debt
(30,727
)
(570
)
Payments of debt issuance costs
(4,423
)
(732
)
Proceeds from issuance of common stock,
net of issuance costs
68,453
—
Proceeds from exercise of stock
options
2,406
5,271
Proceeds from employee stock purchase
plan
944
518
Payments on earnout liability
(8,000
)
(1,000
)
Net cash provided by financing
activities
128,653
39,487
Effect of exchange rate changes on
cash
(605
)
(497
)
Net increase (decrease) in cash
37,171
(70,884
)
Cash at beginning of period
38,468
109,352
Cash at end of period
$
75,639
$
38,468
PARAGON 28, INC. AND
SUBSIDIARIES
RECONCILIATION OF NET LOSS TO
NON-GAAP ADJUSTED EBITDA
(in thousands,
unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
(in thousands)
Net loss
$
(19,559
)
$
(38,763
)
$
(47,841
)
$
(67,326
)
Interest expense, net
2,038
1,264
5,165
4,129
Income tax expense (benefit)
123
(370
)
213
(64
)
Depreciation and amortization expense
4,940
4,104
15,542
13,728
Stock based compensation expense
2,070
3,313
12,364
10,365
Employee stock purchase plan expense
54
113
322
213
Loss on early extinguishment of debt
(1)
5,308
—
5,308
—
Change in fair value (2)
603
1,855
(791
)
1,280
Legal Settlement (3)
—
27,000
—
27,000
Adjusted EBITDA
$
(4,423
)
$
(1,484
)
$
(9,718
)
$
(10,675
)
(1)
Represents non-recurring expenses related to the write-off of
unamortized debt issuance costs and fees incurred to exit the
MidCap Credit Agreements early
(2)
Represents a non-cash change in the fair value of earnout
liabilities for all periods presented and interest rate swap
contract for the three months and year ended December 31, 2023
(3)
Represents non-recurring expenses in connection with the Wright
Medical litigation settlement
PARAGON 28, INC. AND
SUBSIDIARIES
Constant-Currency Revenue
Growth
(in thousands,
unaudited)
Three Months Ended
Year Ended
December 31,
Change
December 31,
Change
2023
2022
%
2023
2022
%
Total Consolidated Revenues
As Reported
$
60,561
$
51,508
17.6
%
$
216,389
$
181,383
19.3
%
Impact of foreign currency exchange
rates
(151
)
—
*
652
—
*
Constant-currency net revenues
$
60,410
$
51,508
17.3
%
$
217,041
$
181,383
19.7
%
Total International Revenues
As Reported
$
8,849
$
6,184
43.1
%
$
32,884
$
23,278
41.3
%
Impact of foreign currency exchange
rates
(151
)
—
*
652
—
*
Constant-currency net revenues
$
8,698
$
6,184
40.7
%
$
33,536
$
23,278
44.1
%
* Not Meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240229979521/en/
Investor Contact: Matt Brinckman Senior Vice President,
Strategy and Investor Relations mbrinckman@paragon28.com
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