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Paragon 28 Reports Fourth Quarter and Full Year 2021 Financial Results and Provides 2022 Net Revenue Guidance

March, 08, 2022

Paragon 28, Inc. (NYSE: FNA) (“Paragon 28” or “P28”), a leading medical device company exclusively focused on the foot and ankle orthopedic market, today reported financial results for the quarter and twelve months ended December 31, 2021.

2021 Highlights

  • Net revenue $42.8 million for the fourth quarter of 2021, representing 22% growth over the fourth quarter of 2020, driven by increased revenue per US surgeon and US sales force expansion, plus strong growth in South Africa and the UK
  • Net revenue $147.5 million for the twelve months ended December 31, 2021, representing 33% growth over 2020
  • Gross margin 81.7% for the fourth quarter 2021 compared to 72.3% for the fourth quarter of 2020, reflecting lower excess and obsolete inventory expenses and a greater mix of higher margin products sold in the current period
  • Operating expenses $40.0 million for the fourth quarter of 2021 compared to $24.7 million for the fourth quarter of 2020
    • Research and Development expense $4.9 million compared to $3.0 million in the prior year quarter, driven by 30 new products in development, plus three new products receiving FDA clearance in the fourth quarter of 2021
    • Selling, General and Administrative expense $35.1 million compared to $21.7 million in the prior year quarter, including increased selling and marketing expenses driven by more US marketing and medical education events, increased variable commission expense, and investments in US and International commercial teams, and increased general and administrative expenses, driven primarily by additional costs related to becoming a publicly traded company
  • Net loss $6.2 million for the fourth quarter of 2021 compared to net income $4.2 million for the fourth quarter of 2020
  • Adjusted EBITDA $0.1 million for the fourth quarter 2021 compared to $6.3 million for the fourth quarter of 2020
  • Cash $109.4 million as of December 31, 2021

“Our teams are foot and ankle specialists, and their focus, resilience, and passion for serving foot and ankle patients and surgeons drove our strong fourth quarter and full year revenue growth, further expanding our market share in the US and internationally,” said Albert DaCosta, Chairman and Chief Executive Officer. “I am thrilled with the team's execution in 2021, including receiving approvals for eight new products, expanding our commercial teams and surgeon base, training over 800 surgeons in-person at our Denver headquarters and across the US in the second half of 2021, and building critical corporate infrastructures to go public and scale for future growth. We reached these commercial and operational successes, and continued reporting positive Adjusted EBITDA, realizing $3.1 million for 2021.”

Mr. DaCosta continued, “The current foot and ankle market is large and growing rapidly with potential for even greater future growth to be driven by potential improvements in patient outcomes. P28 is uniquely positioned as foot and ankle specialists to continue to gain market share and lead the way to drive future improvements in patient outcomes.”

2022 Net Revenue Guidance

The Company expects 2022 net revenue to be in a range of $167.0 million to $171.0 million, representing annual growth of approximately 13% to 16%. For the first quarter of 2022, the Company also expects net revenue growth to be in a range of 13% to 16%, compared to the first quarter of 2021. In recent weeks, COVID-19 net revenue headwinds have waned as compared to those experienced earlier in the first quarter. However, given the unpredictable nature of COVID-19, our revenue guidance incorporates the risk of COVID-19 headwinds similar to those experienced first quarter of 2022 to date.

The foregoing forward-looking statements reflect our expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. We do not intend to update our financial outlook until our next quarterly results announcement.

Webcast and Conference Call Information

Paragon 28 will host a conference call to discuss fourth quarter and full year 2021 financial results on Tuesday, March 8, 2022 at 1:30 p.m. Pacific 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: 353414. 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 (bunions), 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 2022 and first quarter 2022 net revenues. 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 year ended December 31, 2021 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

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

As of December 31,

 

 

2021

 

2020

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

109,352

 

 

$

17,501

 

Trade receivables, less allowance for doubtful accounts of $1,032 and $1,296, respectively

 

 

25,939

 

 

 

19,972

 

Inventories, net

 

 

40,241

 

 

 

32,226

 

Income taxes receivable

 

 

920

 

 

 

1,479

 

Other current assets

 

 

3,078

 

 

 

617

 

Total current assets

 

 

179,530

 

 

 

71,795

 

 

 

 

 

 

Property and equipment, net

 

 

32,181

 

 

 

22,363

 

 

 

 

 

 

Intangible assets, net

 

 

16,505

 

 

 

3,325

 

Goodwill

 

 

6,329

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

 

 

 

100

 

 

 

 

 

 

Total assets

 

$

234,545

 

 

$

97,583

 

 

 

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED SERIES EQUITY & STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

13,028

 

 

$

8,812

 

Accrued expenses

 

 

18,232

 

 

 

10,052

 

Other current liabilities

 

 

1,929

 

 

 

469

 

Current maturities of long-term debt

 

 

153

 

 

 

2,231

 

Income taxes payable

 

 

615

 

 

 

504

 

Total current liabilities

 

 

33,957

 

 

 

22,068

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Long-term debt net, less current maturities

 

 

7,476

 

 

 

4,030

 

Other long-term liabilities

 

 

840

 

 

 

 

Deferred income taxes

 

 

78

 

 

 

 

Total liabilities

 

 

42,351

 

 

 

26,098

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

Convertible preferred series equity:

 

 

 

 

Series A convertible preferred stock, $0.01 par value, $0 cumulative preferred dividends, as of December 31, 2021 and December 31, 2020, respectively; 0 shares and 13,812,500 shares authorized, issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

4,250

 

Series B convertible preferred stock, $0.01 par value, $0 and $812 cumulative preferred dividends as of December 31, 2021 and December 31, 2020, respectively; 0 and 6,608,700 shares authorized, issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

36,842

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, $0.01 par value, 300,000,000 and 72,187,845 shares authorized; 77,360,806 and 47,567,010 shares issued, and 76,447,287 and 46,738,540 shares outstanding as of December 31, 2021 and December 31, 2020, respectively

 

 

763

 

 

 

467

 

Additional paid-in-capital

 

 

197,868

 

 

 

22,107

 

Retained earnings (accumulated deficit)

 

 

(463

)

 

 

12,418

 

Accumulated other comprehensive income

 

 

8

 

 

 

823

 

Treasury stock, at cost; 913,519 and 828,470 shares as of December 31, 2021 and December 31, 2020, respectively

 

 

(5,982

)

 

 

(5,422

)

Total stockholders' equity

 

 

192,194

 

 

 

30,393

 

Total liabilities, convertible preferred series equity & stockholders' equity

 

$

234,545

 

 

$

97,583

 

PARAGON 28, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited – Three Months Ended December 31, 2021 and 2020)

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2021

 

2020

 

2021

 

2020

Net revenue

 

$

42,774

 

 

$

35,057

 

 

$

147,464

 

 

$

110,981

 

Cost of goods sold

 

 

7,815

 

 

 

9,713

 

 

 

28,024

 

 

 

25,099

 

Gross profit

 

 

34,959

 

 

 

25,344

 

 

 

119,440

 

 

 

85,882

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development costs

 

 

4,873

 

 

 

2,996

 

 

 

16,128

 

 

 

11,171

 

Selling, general, and administrative

 

 

35,078

 

 

 

21,679

 

 

 

114,087

 

 

 

72,641

 

Total operating expenses

 

 

39,951

 

 

 

24,676

 

 

 

130,215

 

 

 

83,812

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

 

(4,992

)

 

 

668

 

 

 

(10,775

)

 

 

2,070

 

 

 

 

 

 

 

 

 

 

Other (expense) income

 

 

 

 

 

 

 

 

Other (expense) income

 

 

(362

)

 

 

3,697

 

 

 

(486

)

 

 

3,557

 

Interest expense

 

 

(545

)

 

 

(69

)

 

 

(1,719

)

 

 

(602

)

Total other (expense) income

 

 

(906

)

 

 

3,628

 

 

 

(2,205

)

 

 

2,955

 

 

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(5,898

)

 

 

4,296

 

 

 

(12,980

)

 

 

5,025

 

Income tax expense (benefit)

 

 

276

 

 

 

131

 

 

 

713

 

 

 

1,527

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(6,174

)

 

$

4,165

 

 

$

(13,693

)

 

$

3,498

 

PARAGON 28, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Year Ended December 31,

 

 

2021

 

2020

 

2019

Cash flows from operating activities

 

 

 

 

 

 

Net (loss) income

 

$

(13,693

)

 

$

3,498

 

 

$

3,117

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

8,961

 

 

 

6,384

 

 

 

4,202

 

Allowance for doubtful accounts

 

 

1,022

 

 

 

636

 

 

 

300

 

Provision for excess and obsolete inventories

 

 

2,821

 

 

 

7,467

 

 

 

1,712

 

Stock-based compensation

 

 

4,948

 

 

 

1,808

 

 

 

1,754

 

Amortization of debt issuance costs

 

 

576

 

 

 

134

 

 

 

85

 

Change in fair value of earnout liabilities

 

 

440

 

 

 

 

 

 

 

Deferred income taxes

 

 

170

 

 

 

1,307

 

 

 

(1,115

)

Loss on disposal of property and equipment

 

 

237

 

 

 

554

 

 

 

545

 

Other

 

 

31

 

 

 

113

 

 

 

(26

)

Changes in other assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(6,461

)

 

 

386

 

 

 

(5,221

)

Inventories

 

 

(11,098

)

 

 

(14,831

)

 

 

(3,560

)

Other current assets

 

 

(2,468

)

 

 

944

 

 

 

(618

)

Accounts payable

 

 

3,431

 

 

 

(6,238

)

 

 

8,430

 

Accrued expenses and other current liabilities

 

 

7,095

 

 

 

(815

)

 

 

3,098

 

Income tax receivable/payable

 

 

671

 

 

 

(236

)

 

 

(405

)

Net cash (used in) provided by operating activities

 

 

(3,317

)

 

 

1,111

 

 

 

12,298

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(18,296

)

 

 

(9,653

)

 

 

(17,261

)

Proceeds from sale of property and equipment

 

 

799

 

 

 

522

 

 

 

580

 

Purchases of intangible assets

 

 

(2,993

)

 

 

(1,187

)

 

 

(773

)

Acquisition of Additive Orthopaedics

 

 

(15,000

)

 

 

 

 

 

 

Net cash used in investing activities

 

 

(35,490

)

 

 

(10,318

)

 

 

(17,454

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of note payable - related party

 

 

 

 

 

 

 

 

3,000

 

Payments on note payable - related party

 

 

 

 

 

(3,000

)

 

 

 

Proceeds from revolving credit facility

 

 

 

 

 

 

 

 

780

 

Payments on revolving credit facility

 

 

 

 

 

(9,821

)

 

 

 

Proceeds from issuance of long-term debt

 

 

10,000

 

 

 

458

 

 

 

8,885

 

Payments on long-term debt

 

 

(6,034

)

 

 

(1,686

)

 

 

(2,200

)

Payments of debt issuance costs

 

 

(3,139

)

 

 

(53

)

 

 

(150

)

Proceeds from issuance of common stock

 

 

1,001

 

 

 

1,842

 

 

 

 

Proceeds from IPO, net of issuance costs

 

 

129,384

 

 

 

 

 

 

Proceeds from issuance of Series B capital stock, net of issuance costs

 

 

 

 

 

36,030

 

 

 

 

Payments on treasury stock repurchased

 

 

(561

)

 

 

(1,538

)

 

 

(3,885

)

Proceeds from exercise of stock options

 

 

445

 

 

 

1,780

 

 

 

115

 

Net cash provided by financing activities

 

 

131,096

 

 

 

24,012

 

 

 

6,545

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(438

)

 

 

86

 

 

 

29

 

Net increase in cash

 

 

91,851

 

 

 

14,891

 

 

 

1,418

 

Cash at beginning of period

 

 

17,501

 

 

 

2,610

 

 

 

1,192

 

Cash at end of period

 

$

109,352

 

 

$

17,501

 

 

$

2,610

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

678

 

 

$

453

 

 

$

97

 

Cash paid for interest

 

 

1,086

 

 

 

395

 

 

 

550

 

Purchase of property and equipment included in accounts payable

 

 

881

 

 

 

120

 

 

 

115

 

Series B convertible preferred stock dividend

 

 

 

 

 

812

 

 

 

PARAGON 28, INC. AND SUBSIDIARIES

RECONCILIATION OF NET (LOSS) INCOME TO NON-GAAP ADJUSTED EBITDA

(in thousands)

(unaudited)

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

2021

 

2020

 

2021

 

2020

Net Income (loss)

 

$

(6,174

)

 

$

4,165

 

 

$

(13,693

)

 

$

3,498

 

Interest expense

 

 

545

 

 

 

69

 

 

 

1,719

 

 

 

602

 

Income tax expense (benefit)

 

 

276

 

 

 

131

 

 

 

713

 

 

 

1,527

 

Depreciation and amortization expense

 

 

2,884

 

 

 

1,905

 

 

 

8,987

 

 

 

6,384

 

Stock based compensation expense

 

 

2,201

 

 

 

576

 

 

 

4,948

 

 

 

1,808

 

PPP Loan Forgiveness (1)

 

 

 

 

 

(3,747

)

 

 

 

 

 

(3,747

)

Excess and obsolete inventory expense related to supply chain disruption (2)

 

 

 

 

 

3,182

 

 

 

 

 

 

3,702

 

Change in fair value of earnout liability (3)

 

 

380

 

 

 

 

 

 

440

 

 

 

 

Adjusted EBITDA

 

$

112

 

 

$

6,281

 

 

$

3,114

 

 

$

13,774

 

(1)

Represents non-recurring other income received in connection with the forgiveness of the PPP Loan.

(2)

Represents non-recurring excess and obsolete inventory expense caused by supply chain purchasing process disruption during the COVID-19 pandemic.

(3)

Represents non-cash change in the fair value of earnout liability from acquisition date to December 31, 2021.

 

Investor Contact:
Gilmartin Group
Matt Bacso, CFA
Matt.bacso@gilmartinir.com

Source: Paragon 28, Inc.

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