Paragon 28, Inc. (NYSE: FNA) (“PARAGON”), a leading medical
device company exclusively focused on the foot and ankle orthopedic
market, today reported financial results for the quarter ended
September 30, 2022 and increased its 2022 net revenue guidance.
Financial Highlights
- Net revenue $46.0 million for the third quarter of 2022, a
quarterly net revenue record, representing reported growth of 28%
over the third quarter of 2021.
- Foreign currency headwinds reduced quarterly net revenue and
net revenue growth by approximately $0.8 million and 2.1 percentage
points, respectively, as compared to the prior year quarter.
- U.S. quarterly revenue was a record $40.0 million, representing
growth of 25% over the prior year quarter. Growth was driven
primarily by sales force productivity gains resulting from new
product launches, an expanded customer base, and continued medical
education momentum.
- International quarterly net revenue was a record $6.0 million,
representing reported growth of 52% over the prior year quarter.
Foreign currency headwinds reduced quarterly international net
revenue and net revenue growth by approximately $0.8 million and 19
percentage points, respectively, as compared to the prior year
quarter. Growth was driven primarily by Australia, South Africa,
Spain, and the United Kingdom.
- Gross margin 81.5% for the quarter compared to 80.2% for the
third quarter of 2021, reflecting lower excess and obsolete
inventory expense.
- Operating expenses $46.0 million for the third quarter of 2022,
representing a 3.3 percentage point improvement in operating
expenses as a percentage of net revenue as compared to the second
quarter of 2022.
- Net loss $9.7 million for the third quarter of 2022 compared to
net loss $5.1 million for the third quarter of 2021 and net loss of
$9.6 million for the second quarter 2022.
- Adjusted EBITDA for the quarter was negative $2.7 million
compared to negative $1.0 million in the third quarter of 2021 and
negative $3.2 million in the second quarter of 2022.
“I am very proud of our year-to-date results through September,
as we achieved reported net revenue growth of 24% despite a
challenging business environment. Our year-to-date and record third
quarter net revenue results reflect the success of our targeted
investments and demonstrate our team’s ability to consistently
execute,” said Albert DaCosta, Chairman and Chief Executive
Officer.
Increased 2022 Net Revenue Guidance
The Company increased its 2022 net revenue guidance by $3.5
million to $179.5 million. Net revenue growth for 2022 is now
expected to be 22%, compared to the Company’s previous guidance of
19%. The increased net revenue guidance includes the impact of
stronger foreign currency headwinds in both the third and fourth
quarters of 2022, which are now expected to reduce 2022 net revenue
and net revenue growth by approximately $2.4 million and 1.6
percentage points, respectively. Previously issued 2022 net revenue
guidance included estimated foreign currency headwinds reducing net
revenue by $1.5 million and 1.0 percentage points,
respectively.
The Company’s increased 2022 annual net revenue guidance
includes fourth quarter 2022 net revenue guidance of $49.6 million,
representing reported net revenue growth of 16% compared to the
prior year quarter. Fourth quarter net revenue guidance includes
the impact of stronger foreign currency headwinds, which are now
expected to reduce fourth quarter 2022 net revenue and net revenue
growth by approximately $0.9 million and 2.1 percentage points,
respectively. Previously issued fourth quarter 2022 revenue
guidance included estimated foreign currency headwinds reducing net
revenue and net revenue growth by $0.4 million and 1.0 percentage
points, respectively.
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
2022 financial results on Thursday, November 10, 2022, 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
(844)-200-6205 for domestic callers or (929)-526-1599 for
international callers, using conference ID: 703484. 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, hallux
valgus – which includes bunions and hammertoe, 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 the
full year and fourth quarter of 2022. 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 8, 2022. 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 and nine month period ended September 30,
2022 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 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.
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
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
and per share data)
(unaudited)
September 30, 2022
December 31, 2021
ASSETS
Current assets:
Cash
$
56,325
$
109,352
Trade receivables
35,960
25,939
Inventories, net
54,771
40,241
Income taxes receivable
705
920
Other current assets
1,947
3,078
Total current assets
149,708
179,530
Property and equipment, net
58,591
32,181
Intangible assets, net
20,850
16,505
Goodwill
26,975
6,329
Deferred income taxes
841
—
Total assets
$
256,965
$
234,545
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
13,979
$
13,028
Accrued expenses
19,507
18,232
Other current liabilities
6,889
1,929
Current maturities of long-term debt
735
153
Income taxes payable
497
615
Total current liabilities
41,607
33,957
Long-term liabilities:
Long-term debt net, less current
maturities
42,492
7,476
Other long-term liabilities
907
840
Deferred income taxes
59
78
Income taxes payable
527
—
Total liabilities
85,592
42,351
Commitments and contingencies (Note
12)
Stockholders' equity:
Common stock, $0.01 par value, 300,000,000
shares authorized; 77,990,290 and 77,360,806 shares issued, and
77,076,771 and 76,447,287 shares outstanding as of September 30,
2022 and December 31, 2021, respectively
769
763
Additional paid in capital
207,109
197,868
Accumulated deficit
(29,026
)
(463
)
Accumulated other comprehensive (loss)
income
(1,497
)
8
Treasury stock, at cost; 913,519 shares as
of September 30, 2022 and December 31, 2021
(5,982
)
(5,982
)
Total stockholders' equity
171,373
192,194
Total liabilities & stockholders'
equity
$
256,965
$
234,545
PARAGON 28, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share
and per share data)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net revenue
$
46,006
$
35,851
$
129,875
$
104,689
Cost of goods sold
8,491
7,096
22,920
20,209
Gross profit
37,515
28,755
106,955
84,480
Operating expenses
Research and development costs
6,337
4,118
18,100
11,254
Selling, general, and administrative
39,667
28,968
114,857
79,009
Total operating expenses
46,004
33,086
132,957
90,263
Operating loss
(8,489
)
(4,331
)
(26,002
)
(5,783
)
Other income (expense)
Other income (expense)
59
(98
)
610
(124
)
Interest expense, net
(1,093
)
(573
)
(2,865
)
(1,174
)
Total other expense
(1,034
)
(671
)
(2,255
)
(1,298
)
Loss before income taxes
(9,523
)
(5,002
)
(28,257
)
(7,081
)
Income tax expense
201
105
306
437
Net loss
$
(9,724
)
$
(5,107
)
$
(28,563
)
$
(7,518
)
Less: cumulative dividends on Series B
convertible preferred stock
—
(574
)
—
(1,516
)
Net loss attributable to common
stockholders
$
(9,724
)
$
(5,681
)
$
(28,563
)
$
(9,034
)
Foreign currency translation
adjustment
(588
)
(121
)
(1,505
)
(575
)
Comprehensive loss
$
(10,312
)
$
(5,802
)
$
(30,068
)
$
(9,609
)
Weighted average number of common stocks
outstanding:
Basic
76,850,949
47,005,334
76,595,118
46,926,344
Diluted
76,850,949
47,005,334
76,595,118
46,926,344
Net loss per share attributable to common
stockholders:
Basic
$
(0.13
)
(0.12
)
$
(0.37
)
$
(0.19
)
Diluted
$
(0.13
)
(0.12
)
$
(0.37
)
$
(0.19
)
PARAGON 28, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September
30,
2022
2021
Cash flows from operating activities
Net loss
$
(28,563
)
$
(7,518
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
9,624
6,094
Provision for excess and obsolete
inventories
(91
)
2,226
Stock-based compensation
7,052
2,747
Employee stock purchase program
100
—
Amortization of debt issuance costs
417
372
Change in fair value of earnout
liabilities
(575
)
60
Deferred income taxes
(1,110
)
—
Loss on disposal of property and
equipment
902
118
Other
(1,029
)
317
Changes in other assets and liabilities,
net of acquisitions:
Accounts receivable
(10,227
)
(807
)
Inventories
(15,316
)
(7,860
)
Other current assets
1,442
(3,952
)
Accounts payable
951
3,404
Accrued expenses and other current
liabilities
176
2,935
Income tax receivable/payable
297
668
Net cash used in operating activities
(35,950
)
(1,196
)
Cash flows from investing activities
Purchase of office building
(18,300
)
—
Purchases of property and equipment
(15,637
)
(10,270
)
Proceeds from sale of property and
equipment
642
581
Purchases of intangible assets
(1,720
)
(1,196
)
Acquisition, net of cash received
(18,504
)
(15,000
)
Net cash used in investing activities
(53,519
)
(25,885
)
Cash flows from financing activities
Proceeds from draw on term loan
20,000
—
Proceeds from issuance of long-term
debt
16,000
25,985
Payments on long-term debt
(367
)
(5,991
)
Payments of debt issuance costs
(420
)
(3,080
)
Proceeds from issuance of common stock
—
1,001
Payments on treasury stock repurchased
—
(561
)
Proceeds from exercise of stock
options
2,224
442
Payments on earnout liability
(500
)
—
Net cash provided by financing
activities
36,937
17,796
Effect of exchange rate changes on
cash
(495
)
(340
)
Net decrease in cash
(53,027
)
(9,625
)
Cash at beginning of period
109,352
17,501
Cash at end of period
$
56,325
$
7,876
Supplemental disclosures of cash flow
information:
Cash paid for taxes
$
788
$
381
Cash paid for interest
2,111
670
Purchase of property and equipment
included in accounts payable
2,363
58
Series B convertible preferred stock
dividend
—
1,516
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,
2022
2021
2022
2021
(in thousands)
Net loss
$
(9,724
)
$
(5,107
)
$
(28,563
)
$
(7,518
)
Interest expense
1,093
573
2,865
1,174
Income tax expense
201
105
306
437
Depreciation and amortization expense
3,058
2,424
9,624
6,103
Stock based compensation expense
2,587
1,032
7,052
2,747
Employee stock purchase plan expense
100
—
100
—
Change in fair value of earnout liability
(1)
(35
)
—
(575
)
—
Adjusted EBITDA
$
(2,720
)
$
(973
)
$
(9,191
)
$
2,943
________________________
(1) Represents non-cash change in the fair
value of earnout liability for the three and nine months ended
September 30, 2022
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110006017/en/
Investor Contact: Matt Brinckman Senior Vice President,
Strategy and Investor Relations mbrinckman@paragon28.com
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