Paragon 28 Appoints Chadi Chahine as Chief Financial Officer and Executive Vice-President of Supply Chain Operations, Reports Second Quarter 2024 Financial Results and Narrows 2024 Net Revenue Guidance
Recent Business Updates
-
Strengthened executive leadership team with appointment of
Chadi Chahine as CFO & EVP Supply Chain Operations, effectiveAugust 5, 2024 -
Recorded global revenue of
$61.0 million in the second quarter, representing 19.6% and 19.7% reported and constant currency growth compared to the prior year period, respectively - Drove 840 basis point improvement in operating expense as a percent of revenue in the second quarter compared to the prior year period
- Initiated an operational efficiency strategy targeted at optimizing the organizational structure, minimizing costs and preserving cash without compromising revenue growth opportunities
-
Narrowed 2024 net revenue guidance of
$249 million to$255 million , representing 15.1% to 17.8% reported growth compared to 2023 -
Filed an amended Form 10-K/A for the 2023 fiscal year and an amended Form 10-Q/A for the quarter ended
March 31, 2024 in connection with the financial restatement detailed in the Form 8-K filedJuly 30, 2024
Appointment of
The appointment of
“We are thrilled to welcome Chadi to our executive team,” said
Prior to his tenure at Zimmer Biomet,
“Paragon 28 is a truly unique business in the world of orthopedics. The Company’s commitment to innovation and excellence in foot and ankle aligns perfectly with my professional values and goals,” said
Second Quarter 2024 and Six Months Ended
-
Consolidated net revenue for the second quarter of 2024 was
$61.0 million , representing 19.6% and 19.7% reported and constant currency growth, respectively, compared to the second quarter of 2023. Consolidated net revenue for the six months endedJune 30, 2024 was$122.1 million , representing 18.5% reported and constant currency growth compared to the six months endedJune 30, 2023 .U.S. net revenue for the second quarter of 2024 and six months endedJune 30, 2024 was$49.7 million and$100.8 million , respectively, representing 17.6% and 15.5% reported growth, respectively, compared to the prior year periods.-
International net revenue for the second quarter of 2024 and six months ended
June 30, 2024 was$11.3 million and$21.3 million , respectively, representing 29.4% and 35.1% reported growth respectively, compared to the prior year periods.
-
Gross margin was 75.0% for the second quarter of 2024 compared to 77.3% in the second quarter of 2023. Gross margin was 76.2% for the six months ended
June 30, 2024 compared to 78.8% for the six months endedJune 30, 2023 . -
Operating expenses were
$56.5 million for the second quarter of 2024, an increase of 9.7%, compared to$51.5 million for the second quarter of 2023. Operating expenses were$118.9 million for the six months endedJune 30, 2024 , an increase of 16.1%, compared to$102.4 million for the six months endedJune 30, 2023 . -
Net loss was
$13.8 million for the second quarter of 2024, a$0.6 million increase, compared to a net loss of$13.2 million for the second quarter of 2023. Net loss was$31.2 million for the six months endedJune 30, 2024 , a$7.1 million increase, compared to net a loss of$24.1 million for the six months endedJune 30, 2023 . -
Adjusted EBITDA was a
$3.0 million loss for the second quarter of 2024, a$2.4 million improvement, compared to a$5.4 million loss in the second quarter of 2023. Adjusted EBITDA was a$10.7 million loss for the six months endedJune 30, 2024 , a$2.6 million decrease compared to a$8.1 million loss for the six months endedJune 30, 2023 .
“We are pleased with our results this quarter and continue to see strong momentum in the
Operational Efficiency Strategy
The Company also announced an operational efficiency strategy targeted at optimizing the organizational structure, minimizing costs and preserving cash without compromising revenue growth opportunities. This strategy was initiated in the second quarter of 2024 and is expected to result in durable savings for the rest of 2024 and in 2025. Management has determined that this operational efficiency strategy will not result in the Company incurring material charges. This operational efficiency strategy includes:
-
An approximately 7% reduction in work force expected to take place in August of 2024, and is intended to result in up to
$8 million in annualized savings offset by approximately$1 million in severance costs; - Detailed review and optimization of functional costs and controls;
- An inventory burn-down plan; and
- One-time realignment of executive compensation for 2024
“Our company has consistently demonstrated strong growth and we remain committed to sustaining that momentum by making thoughtful strategic adjustments,” said
2024 Net Revenue Guidance
The Company narrows its prior 2024 net revenue guidance and expects net revenue to be
The Company’s 2024 net revenue guidance assumes foreign currency translation rates remain consistent with current foreign currency translation rates.
Restatement
As previously announced in our Current Report on Form 8-K filed with the
Webcast and Conference Call Information
About
Based in
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; the Company’s preliminary financial results for the quarter ended
Use of Non-GAAP Financial Measures and Their Limitations
In addition to our results and measures of performance determined in accordance with
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
- 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
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.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, unaudited) |
||||||||
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|
||
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|
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||||
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|
|
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(As Restated) |
|||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
46,741 |
|
|
$ |
75,639 |
|
Trade receivables, net of allowance for doubtful accounts of |
|
|
36,708 |
|
|
|
37,323 |
|
Inventories, net |
|
|
96,406 |
|
|
|
90,046 |
|
Income taxes receivable |
|
|
1,018 |
|
|
|
794 |
|
Other current assets |
|
|
3,575 |
|
|
|
3,997 |
|
Total current assets |
|
|
184,448 |
|
|
|
207,799 |
|
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
74,904 |
|
|
|
74,122 |
|
Intangible assets, net |
|
|
20,977 |
|
|
|
21,674 |
|
|
|
|
25,465 |
|
|
|
25,465 |
|
Deferred income taxes |
|
|
714 |
|
|
|
705 |
|
Other assets |
|
|
3,959 |
|
|
|
2,918 |
|
Total assets |
|
$ |
310,467 |
|
|
$ |
332,683 |
|
|
|
|
|
|
|
|
||
LIABILITIES & STOCKHOLDERS' EQUITY |
|
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Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
23,136 |
|
|
$ |
21,696 |
|
Accrued expenses |
|
|
26,531 |
|
|
|
27,781 |
|
Other current liabilities |
|
|
962 |
|
|
|
883 |
|
Current maturities of long-term debt |
|
|
640 |
|
|
|
640 |
|
Income taxes payable |
|
|
422 |
|
|
|
243 |
|
Total current liabilities |
|
|
51,691 |
|
|
|
51,243 |
|
|
|
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
|
|
|
||
Long-term debt net, less current maturities |
|
|
109,913 |
|
|
|
109,799 |
|
Other long-term liabilities |
|
|
1,159 |
|
|
|
1,048 |
|
Deferred income taxes |
|
|
231 |
|
|
|
233 |
|
Income taxes payable |
|
|
638 |
|
|
|
635 |
|
Total liabilities |
|
|
163,632 |
|
|
|
162,958 |
|
|
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Common stock, |
|
|
833 |
|
|
|
827 |
|
Additional paid in capital |
|
|
307,524 |
|
|
|
298,394 |
|
Accumulated deficit |
|
|
(154,827 |
) |
|
|
(123,646 |
) |
Accumulated other comprehensive loss |
|
|
(713 |
) |
|
|
132 |
|
|
|
|
(5,982 |
) |
|
|
(5,982 |
) |
Total stockholders' equity |
|
|
146,835 |
|
|
|
169,725 |
|
Total liabilities & stockholders' equity |
$ |
310,467 |
$ |
332,683 |
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, unaudited) |
||||||||||||||||
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Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
(As Restated) |
|
|
|
|
(As Restated) |
||||||
Net revenue |
$ |
61,016 |
|
|
$ |
51,009 |
|
|
$ |
122,098 |
|
|
$ |
103,045 |
|
|
Cost of goods sold |
|
15,261 |
|
|
|
11,599 |
|
|
|
29,103 |
|
|
|
21,828 |
|
|
Gross profit |
|
45,755 |
|
|
|
39,410 |
|
|
|
92,995 |
|
|
|
81,217 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Research and development costs |
|
7,083 |
|
|
|
7,683 |
|
|
|
14,667 |
|
|
|
14,732 |
|
|
Selling, general, and administrative |
|
49,439 |
|
|
|
43,827 |
|
|
|
104,221 |
|
|
|
87,647 |
|
|
Total operating expenses |
|
56,522 |
|
|
|
51,510 |
|
|
|
118,888 |
|
|
|
102,379 |
|
|
Operating loss |
|
|
(10,767 |
) |
|
|
(12,100 |
) |
|
|
(25,893 |
) |
|
|
(21,162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense), net |
|
|
132 |
|
|
|
(76 |
) |
|
|
647 |
|
|
|
(692 |
) |
Interest expense, net |
|
|
(2,917 |
) |
|
|
(803 |
) |
|
|
(5,539 |
) |
|
|
(2,008 |
) |
Total other expense, net |
|
|
(2,785 |
) |
|
|
(879 |
) |
|
|
(4,892 |
) |
|
|
(2,700 |
) |
Loss before income taxes |
|
|
(13,552 |
) |
|
|
(12,979 |
) |
|
|
(30,785 |
) |
|
|
(23,862 |
) |
Income tax expense |
|
|
230 |
|
|
|
269 |
|
|
|
396 |
|
|
|
198 |
|
Net loss |
|
$ |
(13,782 |
) |
|
$ |
(13,248 |
) |
|
$ |
(31,181 |
) |
|
$ |
(24,060 |
) |
Foreign currency translation adjustment |
|
252 |
|
|
|
(283 |
) |
|
|
(845 |
) |
|
|
(382 |
) |
|
Comprehensive loss |
$ |
(13,530 |
) |
|
$ |
(13,531 |
) |
|
$ |
(32,026 |
) |
|
$ |
(24,442 |
) |
|
Weighted average number of shares of common stock outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
83,115,861 |
|
|
|
82,373,441 |
|
|
|
82,984,878 |
|
|
|
81,536,607 |
|
Diluted |
|
|
83,115,861 |
|
|
|
82,373,441 |
|
|
|
82,984,878 |
|
|
|
81,536,607 |
|
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.17 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.30 |
) |
Diluted |
|
$ |
(0.17 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.30 |
) |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) |
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|
|
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|
|
|
|||
|
|
Six Months Ended |
||||||
|
|
2024 |
|
2023 |
||||
|
|
|
|
|
(As Restated) |
|||
Cash flows from operating activities |
|
|
|
|
|
|||
Net loss |
|
$ |
(31,181 |
) |
|
$ |
(24,060 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|||
Depreciation and amortization |
|
|
8,868 |
|
|
|
6,414 |
|
Allowance for doubtful accounts |
|
|
785 |
|
|
|
147 |
|
Provision for excess and obsolete inventories |
|
|
5,932 |
|
|
|
923 |
|
Stock-based compensation |
|
|
6,112 |
|
|
|
6,782 |
|
Change in fair value of financial instruments |
|
|
(601 |
) |
|
|
366 |
|
Other |
|
|
(581 |
) |
|
|
394 |
|
Changes in other assets and liabilities, net of acquisitions: |
|
|
|
|
|
|||
Accounts receivable |
|
|
(360 |
) |
|
|
3,138 |
|
Inventories |
|
|
(12,631 |
) |
|
|
(20,959 |
) |
Accounts payable |
|
|
1,456 |
|
|
|
14,745 |
|
Accrued expenses |
|
|
809 |
|
|
|
1,845 |
|
Accrued legal settlement |
|
|
— |
|
|
|
(22,000 |
) |
Income tax receivable/payable |
|
|
(23 |
) |
|
|
(359 |
) |
Other assets and liabilities |
|
|
211 |
|
|
|
(779 |
) |
Net cash used in operating activities |
|
|
(21,204 |
) |
|
|
(33,403 |
) |
|
|
|
|
|
|
|||
Cash flows from investing activities |
|
|
|
|
|
|||
Purchases of property and equipment |
|
|
(9,491 |
) |
|
|
(15,354 |
) |
Proceeds from sale of property and equipment |
|
|
724 |
|
|
|
635 |
|
Purchases of intangible assets |
|
|
(462 |
) |
|
|
(544 |
) |
Net cash used in investing activities |
|
|
(9,229 |
) |
|
|
(15,263 |
) |
|
|
|
|
|
|
|||
Cash flows from financing activities |
|
|
|
|
|
|||
Payments on long-term debt |
|
|
(320 |
) |
|
|
(396 |
) |
Payments of debt issuance costs |
|
|
(18 |
) |
|
|
— |
|
Proceeds from issuance of common stock, net of issuance costs |
|
|
— |
|
|
|
68,453 |
|
Options exercised |
|
|
2,878 |
|
|
|
2,464 |
|
RSU vesting, taxes paid |
|
|
(424 |
) |
|
|
— |
|
Proceeds from employee stock purchase plan |
|
|
403 |
|
|
|
560 |
|
Payments on earnout liability |
|
|
(2,000 |
) |
|
|
(4,250 |
) |
Net cash provided by financing activities |
|
|
519 |
|
|
|
66,831 |
|
|
|
|
|
|
|
|||
Effect of exchange rate changes on cash and cash equivalents |
|
|
1,016 |
|
|
|
114 |
|
Net (decrease) increase in cash and cash equivalents |
|
|
(28,898 |
) |
|
|
18,279 |
|
Cash and cash equivalents at beginning of period |
|
|
75,639 |
|
|
|
38,468 |
|
Cash and cash equivalents at end of period |
|
$ |
46,741 |
|
|
$ |
56,747 |
|
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA (in thousands, unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
|
|
|
|
|
(As Restated) |
|
|
|
|
(As Restated) |
||||||
Net loss |
|
$ |
(13,782 |
) |
|
$ |
(13,248 |
) |
|
$ |
(31,181 |
) |
|
$ |
(24,060 |
) |
Interest expense, net |
|
|
2,917 |
|
|
|
803 |
|
|
|
5,539 |
|
|
|
2,008 |
|
Income tax expense |
|
|
230 |
|
|
|
269 |
|
|
|
396 |
|
|
|
198 |
|
Depreciation and amortization expense |
|
|
4,610 |
|
|
|
3,297 |
|
|
|
8,868 |
|
|
|
6,414 |
|
Stock based compensation expense |
|
|
3,024 |
|
|
|
3,600 |
|
|
|
6,112 |
|
|
|
6,782 |
|
Employee stock purchase plan expense |
|
|
88 |
|
|
|
60 |
|
|
|
168 |
|
|
|
182 |
|
Change in fair value of financial instruments(1) |
|
|
(82 |
) |
|
|
(151 |
) |
|
|
(601 |
) |
|
|
366 |
|
Adjusted EBITDA |
|
$ |
(2,995 |
) |
|
$ |
(5,370 |
) |
|
$ |
(10,699 |
) |
|
$ |
(8,110 |
) |
________________________________________ |
||
(1) |
Represents non-cash change in the fair value of our interest rate swap contract for all periods presented and earnout liabilities for the three and six months ended |
|
Constant-Currency Revenue Growth (in thousands, unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Change |
|
Six Months Ended |
|
Change |
||||||||
|
|
2024 |
|
2023 |
|
% |
|
2024 |
|
2023 |
|
% |
||||
Total Consolidated Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
$ |
61,016 |
|
$ |
51,009 |
|
19.6% |
|
$ |
122,098 |
|
$ |
103,045 |
|
18.5% |
Impact of foreign currency exchange rates |
|
|
24 |
|
|
— |
|
* |
|
|
47 |
|
|
— |
|
* |
Constant-currency net revenues |
|
$ |
61,040 |
|
$ |
51,009 |
|
19.7% |
|
$ |
122,145 |
|
$ |
103,045 |
|
18.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total International Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
$ |
11,313 |
|
$ |
8,745 |
|
29.4% |
|
$ |
21,345 |
|
$ |
15,800 |
|
35.1% |
Impact of foreign currency exchange rates |
|
|
24 |
|
|
— |
|
* |
|
|
47 |
|
|
— |
|
* |
Constant-currency net revenues |
|
$ |
11,337 |
|
$ |
8,745 |
|
29.6% |
|
$ |
21,392 |
|
$ |
15,800 |
|
35.4% |
________________________________________ |
|
* Not meaningful |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240808238306/en/
Investor Contact:
Senior Vice President, Strategy and Investor Relations
mbrinckman@paragon28.com
Source: