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 ended September 30, 2023 and reaffirmed its 2023 net
revenue guidance.
Third Quarter 2023 and Nine Months Ended September 30, 2023
Financial Results
- Consolidated net revenue for the third quarter of 2023 was
$52.8 million, representing 14.7% and 14.5% reported and constant
currency growth, respectively, compared to the third quarter of
2022. Consolidated net revenue for the nine months ended September
30, 2023 was $155.8 million, representing 20.0% and 20.6% reported
and constant currency growth, respectively, compared to the nine
months ended September 30, 2022.
- U.S. net revenue for the third quarter of 2023 and nine months
ended September 30, 2023 was $44.6 million and $131.8 million,
respectively, representing 11.5% and 16.9% reported growth,
respectively, compared to the prior year periods.
- International net revenue for the third quarter of 2023 and
nine months ended September 30, 2023 was $8.2 million and $24.0
million, respectively, representing 36.2% and 40.6% reported growth
respectively, compared to the prior year periods.
- Gross margin was 80.3% for the third quarter of 2023 compared
to 81.5% in the third quarter of 2022. Gross margin was 81.9% for
the nine months ended September 30, 2023, compared to 82.4% for the
nine months ended September 30, 2022.
- Operating expenses were $51.4 million for the third quarter of
2023, an increase of 11.7%, compared to $46.0 million for the third
quarter of 2022. Operating expenses were $153.7 million for the
nine months ended September 30, 2023, an increase of 15.6%,
compared to $133.0 million for the nine months ended September 30,
2022.
- Net loss was $8.3 million for the third quarter of 2023, a
decrease of 14.3%, compared to a net loss of $9.7 million for the
third quarter of 2022. Net loss was $28.3 million for the nine
months ended September 30, 2023, a decrease of 1%, compared to net
a loss of $28.6 million for the nine months ended September 30,
2022.
- Adjusted EBITDA was a $1.2 million loss for the third quarter
of 2023, an improvement of 54.1%, compared to a $2.7 million loss
in the third quarter of 2022. Adjusted EBITDA was a $5.3 million
loss for the nine months ended September 30, 2023, an improvement
of 42.4%, compared to a $9.1 million loss for the nine months ended
September 30, 2022.
“Paragon 28’s business fundamentals are as strong as ever and
continue to position us for sustainable long-term growth. Through
the third quarter, we grew revenue 20% and ended the quarter with
record numbers of U.S. sales representatives and surgeon customers
while also improving EBITDA by over 50% compared the third quarter
of 2022,” said Albert DaCosta, Chairman and Chief Executive
Officer. “Finally, our new product pipeline is filled with
meaningful and innovative technologies, and we are excited to be
bringing several of these important new products to market in the
next few quarters.”
2023 Net Revenue Guidance
The Company reaffirms its prior 2023 net revenue guidance, and
expects net revenue to be $214 million to $218 million,
representing 19% and 20% reported and constant currency growth at
the midpoint, respectively, compared to 2022.
The Company’s 2023 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 third quarter
2023 financial results on Tuesday, November 7, 2023, 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 (646-904-5544) for
international callers, using conference ID: 308457. 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 2023. 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 March
2, 2023. 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 September 30, 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,
unaudited)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
34,949
$
38,468
Trade receivables
33,615
37,687
Inventories, net
94,380
60,948
Income taxes receivable
1,022
615
Other current assets
4,826
4,658
Total current assets
168,792
142,376
Property and equipment, net
73,530
61,938
Intangible assets, net
21,802
22,387
Goodwill
25,465
25,465
Deferred income taxes
132
148
Other assets
3,634
1,795
Total assets
$
293,355
$
254,109
LIABILITIES & STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
27,395
$
14,939
Accrued expenses
24,966
26,807
Accrued legal settlement
—
22,000
Other current liabilities
1,893
3,844
Current maturities of long-term debt
640
728
Income taxes payable
—
184
Total current liabilities
54,894
68,502
Long-term liabilities:
Long-term debt net, less current
maturities
42,288
42,182
Other long-term liabilities
1,467
1,628
Deferred income taxes
327
342
Income taxes payable
635
527
Total liabilities
99,611
113,181
Stockholders' equity:
Common stock, $0.01 par value, 300,000,000
shares authorized; 83,469,426 and 78,684,107 shares issued, and
82,555,907 and 77,770,588 shares outstanding as of September 30,
2023 and December 31, 2022, respectively
824
776
Additional paid in capital
296,018
213,956
Accumulated deficit
(96,071
)
(67,789
)
Accumulated other comprehensive loss
(1,045
)
(33
)
Treasury stock, at cost; 913,519 shares as
of September 30, 2023 and December 31, 2022
(5,982
)
(5,982
)
Total stockholders' equity
193,744
140,928
Total liabilities & stockholders'
equity
$
293,355
$
254,109
PARAGON 28, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands,
unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net revenue
$
52,783
$
46,006
$
155,828
$
129,875
Cost of goods sold
10,394
8,491
28,158
22,920
Gross profit
42,389
37,515
127,670
106,955
Operating expenses:
Research and development costs
7,244
6,337
21,976
18,100
Selling, general, and administrative
44,126
39,667
131,773
114,857
Total operating expenses
51,370
46,004
153,749
132,957
Operating loss
(8,981
)
(8,489
)
(26,079
)
(26,002
)
Other income (expense):
Other income, net
1,660
59
1,014
610
Interest expense, net
(1,119
)
(1,093
)
(3,127
)
(2,865
)
Total other income (expense)
541
(1,034
)
(2,113
)
(2,255
)
Loss before income taxes
(8,440
)
(9,523
)
(28,192
)
(28,257
)
Income tax (benefit) expense
(108
)
201
90
306
Net loss
$
(8,332
)
$
(9,724
)
$
(28,282
)
$
(28,563
)
PARAGON 28, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands,
unaudited)
Nine Months Ended September
30,
2023
2022
Cash flows from operating activities
Net loss
$
(28,282
)
$
(28,563
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
10,602
9,624
Allowance for doubtful accounts
147
—
Provision for excess and obsolete
inventories
2,053
(91
)
Stock-based compensation
10,294
7,052
Other
(1,428
)
(1,295
)
Changes in other assets and liabilities,
net of acquisitions:
Accounts receivable
3,706
(10,227
)
Inventories
(35,558
)
(15,316
)
Accounts payable
12,468
951
Accrued expenses
3,718
176
Accrued legal settlement
(22,000
)
—
Income tax receivable/payable
(533
)
297
Other assets and liabilities
(2,704
)
1,442
Net cash used in operating activities
(47,517
)
(35,950
)
Cash flows from investing activities
Purchase of office building
—
(18,300
)
Purchases of property and equipment
(21,893
)
(15,637
)
Proceeds from sale of property and
equipment
795
642
Purchases of intangible assets
(933
)
(1,720
)
Acquisition of Disior, net of cash
received
—
(18,504
)
Net cash used in investing activities
(22,031
)
(53,519
)
Cash flows from financing activities
Proceeds from draw on term loan
—
20,000
Proceeds from issuance of long-term
debt
—
16,000
Payments on long-term debt
(568
)
(367
)
Payments of debt issuance costs
—
(420
)
Proceeds from issuance of common stock,
net of issuance costs
68,453
—
Proceeds from exercise of stock
options
2,535
2,224
Proceeds from employee stock purchase
plan
560
—
Payments on earnout liability
(5,500
)
(500
)
Net cash provided by financing
activities
65,480
36,937
Effect of exchange rate changes on
cash
549
(495
)
Net decrease in cash
(3,519
)
(53,027
)
Cash at beginning of period
38,468
109,352
Cash at end of period
$
34,949
$
56,325
PARAGON 28, INC. AND
SUBSIDIARIES
RECONCILIATION OF NET LOSS TO
NON-GAAP ADJUSTED EBITDA
(in thousands,
unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in thousands)
Net loss
$
(8,332
)
$
(9,724
)
$
(28,282
)
$
(28,563
)
Interest expense, net
1,119
1,093
3,127
2,865
Income tax (benefit) expense
(108
)
201
90
306
Depreciation and amortization expense
4,188
3,058
10,602
9,624
Stock based compensation expense
3,512
2,587
10,294
7,052
Employee stock purchase plan expense
86
100
268
100
Change in fair value (1)
(1,714
)
(35
)
(1,394
)
(575
)
Adjusted EBITDA
$
(1,249
)
$
(2,720
)
$
(5,295
)
$
(9,191
)
(1) Represents non-cash change in the fair value of earnout
liabilities and interest rate swap contract.
PARAGON 28, INC. AND
SUBSIDIARIES
Constant-Currency Revenue
Growth
(in thousands,
unaudited)
Three Months Ended September
30,
Change
Nine Months Ended September
30,
Change
2023
2022
%
2023
2022
%
Total Consolidated Revenues
As Reported
$
52,783
$
46,006
14.7
%
$
155,828
$
129,875
20.0
%
Impact of foreign currency exchange
rates
(92
)
—
*
804
—
*
Constant-currency net revenues
$
52,691
$
46,006
14.5
%
$
156,632
$
129,875
20.6
%
Total International Revenues
As Reported
$
8,235
$
6,046
36.2
%
$
24,035
$
17,094
40.6
%
Impact of foreign currency exchange
rates
(92
)
—
*
804
—
*
Constant-currency net revenues
$
8,143
$
6,046
34.7
%
$
24,839
$
17,094
45.3
%
* Not meaningful
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107432441/en/
Investor Contact: Matt Brinckman Senior Vice President,
Strategy and Investor Relations mbrinckman@paragon28.com
Paragon 28 (NYSE:FNA)
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