Paragon 28, Inc. (FNA) Q1 2024 Earnings Summary

Executive Summary

• Record net revenue of $61.1M (+17.4% YoY constant currency) with sequential growth vs Q4 despite one fewer billing day; gross margin 80.0% and adjusted EBITDA loss widened to ($5.5M) on elevated SG&A investments .
• U.S. revenue $51.1M (+13.5% YoY) with producing reps +5.7% YoY to 261 and surgeon customers +12% YoY to 2,275; International revenue a record $10.0M (+42.2% YoY) led by the U.K. and Australia .
• FY24 net revenue guidance reaffirmed at $249–$259M (+15.1% to +19.7% YoY); management flagged a slight push-out of EBITDA breakeven timing given Q1 investments but expects sequential improvement through 2024 .
• Catalysts: mid-year full launch of BunYo-Matic Lapidus clamp, continued MIS bunion traction, SMART 28 module planned mid-2024, and billing-day tailwinds in Q2 and balance of year supporting top-line momentum .

What Went Well and What Went Wrong

What Went Well

• Broad-based growth above market with balanced performance across all five foot & ankle subsegments; International strength (U.K., Australia) and sequential growth vs seasonally strong Q4 .
• Commercial KPIs improved: producing reps to 261 (+5.7% YoY) and surgeon customers to 2,275 (+12% YoY); “Our commercial channel continues to expand across all geographies” (CEO) .
• New product cadence in high-growth segments (MIS bunion, soft tissue, extremities power): Grappler R3INFORCE, Knotless Anchor, Bridgeline tape, Mister Tendon, FJ2000, PRECISION MIS; early buzz with surgeons, positioning for H2 contribution .

What Went Wrong

• Gross margin compressed to 80.0% from 82.9% YoY due to higher supplier prices and product/geographic mix; adjusted EBITDA loss widened to ($5.5M) vs ($1.4M) YoY driven by higher OpEx .
• SG&A reaccelerated (+23.7% YoY to $54.2M; 88.8% of revenue) on headcount, commissions, commercial investments, professional fees, and depreciation; management expects leverage but acknowledged near-term pressure .
• EBITDA breakeven timeline “slightly pushed” given Q1 investments; CFO transition (resignation of prior CFO, interim CFO appointed) adds execution focus on operating leverage .

Financial Results

Consolidated P&L and Key Metrics

Notes: Q4 gross margin impacted by $4.0M inventory write-down (–660 bps Q4, –180 bps FY effect) .

Geographic Revenue Breakdown

KPIs

Results vs Consensus Estimates

• S&P Global consensus estimates were unavailable for FNA due to mapping, so “vs estimates” comparisons could not be included. We will update once S&P data is available.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are off to a strong start in 2024… Our focus on innovation and education across all foot and ankle segments has set us up well for continued sustainable growth.” – Albert DaCosta, CEO .
• “Global revenue for the first quarter of ‘24 was a record $61.1 million… despite one less billing day this year.” – Albert DaCosta .
• “Gross profit margin for the quarter was 80%… The decrease… is primarily the result of higher prices from suppliers, as well as product and geographic mix shift.” – Kristina Wright, Interim CFO .
• “Adjusted EBITDA… was a $5.5 million loss… the impact of investments made in Q1 have slightly pushed out our expectation for EBITDA breakeven in 2024.” – Kristina Wright .
• “Investments to grow faster.” – Albert DaCosta on Q1 OpEx and commercial/R&D spend .

Q&A Highlights

• Guidance stance and growth drivers: Management reiterated confidence in $249–$259M FY24 net revenue and highlighted sustained international momentum; balanced top-line across subsegments .
• EBITDA timeline and OpEx leverage: Q1 investments slightly pushed breakeven; expect sequential improvement and leverage as revenue grows faster than OpEx .
• Sales force strategy: Targeted hiring aligned with new technology buzz; emphasis on clinically oriented coverage and education to drive adoption .
• Bunion/MIS share gains: Early traction in MIS bunion with PRECISION + FJ2000 power system tandem; expected more meaningful revenue contribution in H2 .
• Billing days tailwind: ~200 bps headwind in Q1; two more billing days in Q2 vs 2023; tailwinds expected for remainder of year .

Estimates Context

• S&P Global consensus estimates were unavailable for FNA due to a mapping issue, so we cannot provide “vs consensus” comparisons for Q1 2024 results or the next quarter. We will update when S&P Global CIQ mapping is resolved.

Key Takeaways for Investors

• Top-line resilience: Sequential revenue uptick in Q1 vs Q4 alongside double-digit YoY growth indicates durable demand even with fewer billing days; International strength diversifies growth .
• Margin normalization vs Q4: Gross margin recovered from Q4’s inventory write-down, but remains below prior-year levels on mix and supplier pricing—watch for product mix and sourcing actions .
• Investment-driven inflection: Elevated SG&A and R&D reflect an intentional growth push; management expects operating leverage as hiring productivity and new products scale into H2 .
• Pipeline/catalyst-rich H2: Full launch of BunYo-Matic mid-year and SMART 28 module planned for mid-2024 could drive incremental rep engagement and surgeon adoption, supporting estimates revisions once visibility improves .
• Commercial KPIs improving: Producing reps and surgeon customers continue to trend upward, reinforcing capacity to monetize product launches across U.S. and international geographies .
• Liquidity adequate: Ended Q1 with ~$108M total liquidity ($58M cash, $50M revolver availability), supporting growth investments while pursuing leverage improvements .
• Near-term trading setup: Expect narrative focus on SG&A leverage and H2 product contribution; billing-day tailwinds and international momentum are potential upside catalysts; lack of consensus visibility is a temporary overhang until S&P mapping is resolved .