Paragon 28 Reports Fourth Quarter and Full Year 2022 Financial Results and Provides 2023 Financial Guidance

March 2, 2023

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 and year ended December 31, 2022.

Fourth Quarter and Full Year 2022 Financial Results

  • Consolidated net revenue for the fourth quarter of 2022 was $51.5 million, representing 20.4% and 22.1% reported and constant currency growth, respectively. Consolidated net revenue for the full year 2022 was $181.4 million, representing 23.0% and 24.5% reported and constant currency growth, respectively.
    • U.S. net revenue for the fourth quarter and full year of 2022 was $45.3 million and $158.1 million, respectively, contributing to a 22% growth rate for the year ended 2022.
    • International net revenue for the fourth quarter and full year 2022 was $6.2 million and $23.3 million, respectively, contributing to a 34% reported growth rate and a 47% constant currency growth rate for the year ended 2022.
  • Gross margin for the fourth quarter of 2022 was 82%, consistent with the fourth quarter of 2021 and the third quarter of 2022. Gross margin for the full year of 2022 was 82% compared to 81% for the full year of 2021.
  • Research and development costs and selling, general, and administrative expenses $51.0 million for the fourth quarter of 2022, compared to $40.0 million for the fourth quarter of 2021 and $46.0 million for the third quarter of 2022. Research and development costs and selling, general, and administrative expenses $184.0 million for the full year of 2022, compared to $130.2 million in the full year of 2021.
  • Net loss $38.8 million for the fourth quarter of 2022, compared to net loss $6.2 million for the fourth quarter of 2021 and net loss of $9.7 million for the third quarter 2022. Net loss $67.3 million for the full year of 2022 compared to net loss $13.7 million for the full year of 2021.
  • Adjusted EBITDA ($1.5) million for the fourth quarter of 2022, compared to $0.1 million in the fourth quarter of 2021 and ($2.7) million in the third quarter of 2022. Adjusted EBITDA ($10.7) million for the full year of 2022 compared to $3.1 million for the full year of 2021.

“P28 continued to deliver exceptional revenue growth throughout 2022, including 25% constant currency growth for the full year 2022, driven by our innovative and expanding foot and ankle portfolio in the hands of our best-in-class global commercial team,” said Albert DaCosta, Chairman and Chief Executive Officer. “Also, during 2022, our first full calendar year as a public company, we made significant strategic investments across all aspects of our business, positioning P28 for continued momentum and increased operating leverage into 2023 and beyond.”

2023 Net Revenue Guidance

The Company expects 2023 net revenue to be $214 to $218 million, representing 18% to 20% reported growth compared to 2022.

The Company’s 2023 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 2022 financial results on Thursday, March 2, 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 (844)-200-6205 for domestic callers or (929)-526-1599 for international callers, using conference ID: 798665. 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 and twelve-month period ended December 31, 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.

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 the 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)

 

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

38,468

 

 

$

109,352

 

Trade receivables

 

 

37,687

 

 

 

25,939

 

Inventories, net

 

 

60,948

 

 

 

40,241

 

Income taxes receivable

 

 

615

 

 

 

920

 

Other current assets

 

 

4,658

 

 

 

3,078

 

Total current assets

 

 

142,376

 

 

 

179,530

 

Property and equipment, net

 

 

61,938

 

 

 

32,181

 

Intangible assets, net

 

 

22,387

 

 

 

16,505

 

Goodwill

 

 

25,465

 

 

 

6,329

 

Deferred income taxes

 

 

148

 

 

 

 

Other assets

 

 

1,795

 

 

 

 

Total assets

 

$

254,109

 

 

$

234,545

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

14,939

 

 

$

13,028

 

Accrued expenses

 

 

26,807

 

 

 

18,232

 

Accrued legal settlement

 

 

22,000

 

 

 

 

Other current liabilities

 

 

3,844

 

 

 

1,929

 

Current maturities of long-term debt

 

 

728

 

 

 

153

 

Income taxes payable

 

 

184

 

 

 

615

 

Total current liabilities

 

 

68,502

 

 

 

33,957

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt net, less current maturities

 

 

42,182

 

 

 

7,476

 

Other long-term liabilities

 

 

1,628

 

 

 

840

 

Deferred income taxes

 

 

342

 

 

 

78

 

Income taxes payable

 

 

527

 

 

 

 

Total liabilities

 

 

113,181

 

 

 

42,351

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 300,000,000 shares authorized; 78,684,107 and 77,360,806 shares issued, and 77,770,588 and 76,447,287 shares outstanding as of December 31, 2022 and December 31, 2021, respectively

 

 

776

 

 

 

763

 

Additional paid in capital

 

 

213,956

 

 

 

197,868

 

Accumulated deficit

 

 

(67,789

)

 

 

(463

)

Accumulated other comprehensive (loss) income

 

 

(33

)

 

 

8

 

Treasury stock, at cost; 913,519 shares as of December 31, 2022 and December 31, 2021

 

 

(5,982

)

 

 

(5,982

)

Total stockholders' equity

 

 

140,928

 

 

 

192,194

 

Total liabilities & stockholders' equity

 

$

254,109

 

 

$

234,545

 

 

PARAGON 28, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended December 31,

 

 

Years Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenue

 

$

51,508

 

 

$

42,774

 

 

$

181,383

 

 

$

147,464

 

Cost of goods sold

 

 

9,537

 

 

 

7,815

 

 

 

32,457

 

 

 

28,024

 

Gross profit

 

 

41,971

 

 

 

34,959

 

 

 

148,926

 

 

 

119,440

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development costs

 

 

6,550

 

 

 

4,873

 

 

 

24,650

 

 

 

16,128

 

Selling, general, and administrative

 

 

44,466

 

 

 

35,078

 

 

 

159,323

 

 

 

114,087

 

Legal settlement

 

 

27,000

 

 

 

 

 

 

27,000

 

 

 

 

Total operating expenses

 

 

78,016

 

 

 

39,951

 

 

 

210,973

 

 

 

130,215

 

Operating loss

 

 

(36,045

)

 

 

(4,992

)

 

 

(62,047

)

 

 

(10,775

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

(1,824

)

 

 

(362

)

 

 

(1,214

)

 

 

(486

)

Interest expense

 

 

(1,264

)

 

 

(545

)

 

 

(4,129

)

 

 

(1,719

)

Total other expense

 

 

(3,088

)

 

 

(906

)

 

 

(5,343

)

 

 

(2,205

)

Loss before income taxes

 

 

(39,133

)

 

 

(5,898

)

 

 

(67,390

)

 

 

(12,980

)

Income tax (benefit) expense

 

 

(370

)

 

 

276

 

 

 

(64

)

 

 

713

 

Net loss

 

$

(38,763

)

 

$

(6,174

)

 

$

(67,326

)

 

$

(13,693

)

 

PARAGON 28, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net (loss) income

 

$

(67,326

)

 

$

(13,693

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

13,728

 

 

 

8,961

 

Allowance for doubtful accounts

 

 

155

 

 

 

1,022

 

Provision for excess and obsolete inventories

 

 

485

 

 

 

2,821

 

Stock-based compensation

 

 

10,365

 

 

 

4,948

 

Employee stock purchase program

 

 

213

 

 

 

 

Amortization of debt issuance costs

 

 

599

 

 

 

576

 

Change in fair value of earnout liabilities

 

 

1,280

 

 

 

440

 

Deferred income taxes

 

 

(514

)

 

 

170

 

(Gain) loss on disposal of property and equipment

 

 

(71

)

 

 

237

 

Other

 

 

477

 

 

 

31

 

Changes in other assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(12,013

)

 

 

(6,461

)

Inventories

 

 

(21,512

)

 

 

(11,098

)

Other assets

 

 

(3,012

)

 

 

(2,468

)

Accounts payable

 

 

1,895

 

 

 

3,431

 

Accrued expenses

 

 

2,317

 

 

 

7,095

 

Accrued legal settlement

 

 

22,000

 

 

 

 

Income tax receivable/payable

 

 

391

 

 

 

671

 

Other liabilities

 

 

1,362

 

 

 

 

Net cash (used in) provided by operating activities

 

 

(49,181

)

 

 

(3,317

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of office building

 

 

(18,300

)

 

 

 

Purchases of property and equipment

 

 

(22,813

)

 

 

(18,296

)

Proceeds from sale of property and equipment

 

 

897

 

 

 

799

 

Purchases of intangible assets

 

 

(1,973

)

 

 

(2,993

)

Acquisition, net of cash received

 

 

(18,504

)

 

 

(15,000

)

Net cash used in investing activities

 

 

(60,693

)

 

 

(35,490

)

Cash flows from financing activities

 

 

 

 

 

 

Payments on note payable - related party

 

 

 

 

 

 

Payments on revolving credit facility

 

 

 

 

 

 

Proceeds from draw on term loan

 

 

20,000

 

 

 

 

Proceeds from issuance of long-term debt

 

 

16,000

 

 

 

10,000

 

Payments on long-term debt

 

 

(570

)

 

 

(6,034

)

Payments of debt issuance costs

 

 

(732

)

 

 

(3,139

)

Proceeds from issuance of common stock

 

 

 

 

 

1,001

 

Proceeds from IPO, net of issuance costs

 

 

 

 

 

129,384

 

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

 

 

 

 

 

 

Payments on treasury stock repurchased

 

 

 

 

 

(561

)

Proceeds from exercise of stock options

 

 

5,271

 

 

 

445

 

Proceeds from employee stock purchase plan

 

 

518

 

 

 

 

Payments on earnout liability

 

 

(1,000

)

 

 

 

Net cash provided by financing activities

 

 

39,487

 

 

 

131,096

 

Effect of exchange rate changes on cash

 

 

(497

)

 

 

(438

)

Net (decrease) increase in cash

 

 

(70,884

)

 

 

91,851

 

Cash at beginning of period

 

 

109,352

 

 

 

17,501

 

Cash at end of period

 

$

38,468

 

 

$

109,352

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

1,103

 

 

$

678

 

Cash paid for interest

 

 

3,073

 

 

 

1,086

 

Purchase of property and equipment included in accounts payable

 

 

3,402

 

 

 

881

 

Series B convertible preferred stock dividend

 

 

 

 

 

 

 

PARAGON 28, INC. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA

(in thousands, unaudited)

 

 

 

Three Months Ended December 31,

 

 

Years Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(38,763

)

 

$

(6,174

)

 

$

(67,326

)

 

$

(13,693

)

Interest expense

 

 

1,264

 

 

 

545

 

 

 

4,129

 

 

 

1,719

 

Income tax (benefit) expense

 

 

(370

)

 

 

276

 

 

 

(64

)

 

 

713

 

Depreciation and amortization expense

 

 

4,104

 

 

 

2,884

 

 

 

13,728

 

 

 

8,987

 

Stock based compensation expense

 

 

3,313

 

 

 

2,201

 

 

 

10,365

 

 

 

4,948

 

Employee stock purchase plan expense

 

 

113

 

 

 

 

 

 

213

 

 

 

 

Change in fair value of earnout liability (1)

 

 

1,855

 

 

 

380

 

 

 

1,280

 

 

 

440

 

Legal Settlement (2)

 

 

27,000

 

 

 

 

 

 

27,000

 

 

 

 

Adjusted EBITDA

 

$

(1,484

)

 

$

112

 

 

$

(10,675

)

 

$

3,114

 

__________________
(1)

Represents non-cash change in the fair value of earnout liabilities.

(2)

Represents a non-recurring expense to settle the Wright Medical litigation claims

 

PARAGON 28, INC. AND SUBSIDIARIES

Constant-Currency Revenue Growth

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Years Ended December 31,

 

 

 

2022

 

 

2021

 

 

% Increase
(Decrease)

 

 

2022

 

 

2021

 

 

% Increase
(Decrease)

 

Total Consolidated Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

$

51,508

 

 

$

42,774

 

 

 

20.4

%

 

$

181,383

 

 

$

147,464

 

 

 

23.0

%

Impact of foreign currency exchange rates

 

 

706

 

 

 

 

 

*

 

 

 

2,149

 

 

 

 

 

*

 

Constant-currency net revenues

 

$

52,214

 

 

$

42,774

 

 

 

22.1

%

 

$

183,532

 

 

$

147,464

 

 

 

24.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total International Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

$

6,184

 

 

$

4,677

 

 

 

32.2

%

 

$

23,278

 

 

$

17,352

 

 

 

34.2

%

Impact of foreign currency exchange rates

 

 

706

 

 

 

 

 

*

 

 

 

2,149

 

 

 

 

 

*

 

Constant-currency net revenues

 

$

6,890

 

 

$

4,677

 

 

 

47.3

%

 

$

25,427

 

 

$

17,352

 

 

 

46.5

%

______________

* Not Meaningful

 

Investor Contact:
Matt Brinckman
Senior Vice President, Strategy and Investor Relations
mbrinckman@paragon28.com

Source: Paragon 28, Inc.