Paragon 28 (FNA) Q4 2023 earnings summary

Executive summary

• FY 2023 net revenue was $216.4M, up 19.3% reported and 19.7% constant currency; Q4 revenue was $60.6M, up 17.6% reported and 17.3% constant currency.

• FY 2023 net loss narrowed to $47.8M from $67.3M; adjusted EBITDA loss improved to $9.7M from $10.7M.

• Growth spanned all five foot and ankle subsegments; U.S. producing sales representatives rose 13.7% to 266, and surgeon customers increased 8.8% to a record 2,215.

Financial highlights

• Q4 gross margin was 74.5% vs. 81.5%; FY 2023 gross margin was 79.9% vs. 82.1%, including 6.6- and 1.8-point impacts from $4.0M inventory write-downs.

• Q4 net loss was $19.6M vs. $38.8M; FY 2023 net loss was $47.8M vs. $67.3M.

• Q4 adjusted EBITDA loss was $4.4M vs. $1.5M; FY 2023 adjusted EBITDA loss was $9.7M vs. $10.7M, with 2023 results affected by Q4 inventory write-downs.

• R&D and SG&A expenses rose 10.5% to $56.4M in Q4 and 14.2% to $210.1M for FY 2023, reflecting investments in products, sales, marketing, corporate functions and operations.

Outlook and guidance

• FY 2024 net revenue guidance is $249M–$259M, implying 15.1%–19.7% reported growth; guidance assumes foreign currency rates remain consistent with current rates.

• Positive adjusted EBITDA is expected for FY 2024.

• Q1 2024 is expected to have the lowest quarterly year-over-year growth rate, reflecting a 27% constant-currency comparison in Q1 2023 and one fewer billing day; later quarters are expected to grow faster.

• Significant operating cash flow improvement is expected in 2024 and beyond, supported by revenue growth, reduced inventory stockpile, completion of the legal settlement and positive annual adjusted EBITDA.