Paragon 28, Inc. (FNA) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 preliminary unaudited net revenue came in at $71.5–$71.8M, up ~18.0–18.5% year over year; full-year 2024 preliminary revenue was $255.9–$256.2M (~18.2–18.4% YoY) .
• 2024 net revenue guidance was raised at Q3 to $252–$256M, and the Q4 pre-announcement implies finishing at the high end of the range .
• Operational efficiency actions drove a sequential improvement in adjusted EBITDA to positive $0.432M in Q3 (first positive quarter since IPO) and materially improved free cash flow vs both prior year and Q2 .
• Management tone remained confident on growth durability and profitability targets; a company presentation around the Q4 update highlighted goals to be EBITDA positive in 2025 and Free Cash Flow positive late in 2025, while Q3 commentary guided FCF positive in 2026 or sooner—an apparent acceleration in the latest presentation .

What Went Well and What Went Wrong

What Went Well

• Robust top-line momentum: Q4 preliminary revenue grew ~18% YoY; Q3 revenue grew 18.1% YoY to a record $62.3M, with international up 35.7% and U.S. up 14.8% .
• Operating leverage: Adjusted EBITDA inflected to +$0.432M in Q3 (first positive quarter since IPO) and OpEx improved ~970 bps YoY and 500 bps sequentially; free cash flow use improved ~69.5% YoY and ~54.7% sequentially .
• Product cadence and adoption: 13 product launches in 2024, including Fibula Nail, APEX 3D short-stem tibia, and SMART Bun‑Yo‑Matic; CEO: “2024 has been a transformative year…positioning us for sustainable, profitable growth in the future” .

What Went Wrong

• Gross margin pressure: Q3 gross margin was 74.1% (down from 77.4% in Q3 2023), with management now targeting ~75% for FY2024 rather than prior ~80% aspirations .
• Inventory balance remains elevated: Q3 days inventory outstanding was 545, above orthopedic peers (management expects gradual reductions given trauma mix and capital deployment needs) .
• Restatement and control issues: Errors in inventory accounting led to 2023 and Q1 2024 restatements; material weaknesses in internal controls were identified, with remediation underway .

Financial Results

Headline Metrics (quarterly)

Notes:

• Q4 press release provided revenue range only; EPS/margins not disclosed .

Geographic Revenue (quarterly)

KPIs and Liquidity

Guidance Changes

Note: The late-2025 FCF timing appears in the January 13, 2025 company presentation, while Q3 2024 press materials referenced 2026 or sooner; management should reconcile at next formal update .

Earnings Call Themes & Trends

Management Commentary

• CEO (Q4 pre-announcement): “2024 has been a transformative year…positioning us for sustainable, profitable growth…Looking ahead to 2025, we are more excited than ever to build on this momentum and redefine what is possible in the foot and ankle market.”
• CFO (Q3 call): “We are pacing ahead of schedule…actions…to be EBITDA positive in 2025 and cash flow positive in 2026…significant improvement year-on-year when it comes to EBITDA deliverables in 2025 versus 2024.”
• Strategy (presentation): Goals include achieving EBITDA profitability in 2025 and Free Cash Flow positive late in 2025; expand U.S. and international channels; deliver operational excellence and margin/cash flow improvements .

Q&A Highlights

• Guidance and macro tone: Management framed “choppiness” rather than structural softness; momentum into Q4 supported optimism .
• Profitability cadence: Expect continued EBITDA improvement; seasonal expense profile acknowledged; discipline on cost optimization .
• Inventory and working capital: DIOH at 545 days; ongoing reduction plan with attention to trauma mix needs; improving DSO/DPO .
• Product ramp: New launches (Fibula Nail, APEX 3D short-stem) expected to drive incremental benefit in 2025 given typical 6–12 month ramp .
• Smart 28 adoption: Early surgeon feedback strong; platform designed for ease-of-use and intraoperative flexibility; broader module roadmap planned .

Estimates Context

• S&P Global consensus EPS and revenue estimates for Q4 2024 were not available via our tool due to a CIQ mapping issue, so we cannot provide estimate comparisons. If you want, we can revisit when SPGI mapping is updated.
• As a result, any “vs estimates” annotations are unavailable for this quarter (Wall Street consensus from S&P Global could not be retrieved).

Key Takeaways for Investors

• Revenue acceleration into Q4 at ~18% YoY suggests durable demand and successful product cadence; trajectory into 2025 likely supported by late-2024 launches and SMART 28 adoption .
• Profitability inflection is underway: Q3 adjusted EBITDA turned positive and free cash flow improved substantially; watch for sustained EBITDA and cash flow progress in 2025 .
• Margin reset: Management’s near-term gross margin target is ~75%, with initiatives to improve over time (pricing normalization, inventory optimization, freight cost control); model with a 75% base near term .
• Working capital remains a lever: Elevated inventory will take time to normalize given trauma mix; sequential reductions in DIOH/DSO/DPO should continue as efficiency actions scale .
• Control remediation is a watch item: Restatements and material weaknesses are being addressed; expect lower professional services spend over coming quarters (tailwind to SG&A) .
• Guidance credibility: Q3 raise to $252–$256M was effectively met by Q4 preliminary results at $255.9–$256.2M; signals execution discipline despite macro noise .
• Trading lens: Near-term catalysts center on formal Q4 results and 2025 outlook details, confirmation of EBITDA-positive trajectory, and clarity on FCF timing (late 2025 vs 2026) to resolve messaging discrepancy between presentation and Q3 press materials .