Q3 2021 Paragon 28 Inc Earnings Call

Hello, and welcome to the Paragon 28 third quarter 2021 earnings Conference call. My name is Alex and I will be your operator for today, if you'd like to ask a <unk>.

Speaker 1: Hello and welcome to the Paragon 28th 3rd Quarter 2021 Earnings Conference Call. My name is Alex and I will be your operator for today. If you would like to ask a question at the end of the presentation, you can press star 1 on your telephone keypads. If you wish to withdraw your question, you can press star 2.

<unk> at the end of the presentation you compress star one on your telephone keypad. If you wish to withdraw your question your compression start too.

Speaker 2: I'll now hand over to your host, Matt Baxo, from the Gilmartin Group. Matt, over to you. Good morning and welcome to Paragon 28's third quarter 2021 earnings conference call. Currently, participants are in a listen-only mode. We will be facilitating a question and answer session at the end of today's call. As a reminder, this call is being recorded for replay purposes.

I'll now hand, dovetail hoist my back so from the game I'll say great match over T. A.

Good morning, and welcome to Paragon 20, Eights third quarter 2021 earnings Conference call. Currently participants are in a listen only mode. We will be facilitating a question and answer session. At the end of today's call. As a reminder, this call is being recorded for replay purposes, joining me from Paragon 28, or Albert to Costa Chairman and CEO and Steve Deitsch CFO Earl.

Speaker 2: Joining me from Paragon 28 are Albert DaCosta, Chairman and CEO , and Steve Deitch, CFO . Earlier today, Paragon 28 released financial results for the quarter ended September 30th, 2021, and filed its third quarter Form 10-Q .

Earlier today Paragon 28, released financial results for the quarter ended September 30th 2021 and filed its third quarter Form 10-Q, before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1990.

Speaker 2: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements.

Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements. All forward looking statements include but not limited to those relating to our operating trends and future financial performance, including our revenue guidance for the fourth quarter of 2021, the impact of COVID-19 on our business expense.

Speaker 2: All four looking statements include, but not limited to those relating to our operating trends and future financial performance, including our revenue guidance for the fourth quarter of 2021, the impact of COVID-19 on our business, expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion, and product pipeline development are based upon our current estimates and various assumptions.

Management expectations for hiring growth in our organization market opportunity revenue guidance commercial expansion and product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward looking statements.

Speaker 2: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements.

All forward looking statements are based upon current available information and Paragon 28 assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of the public filings with the Securities and Exchange Commission, including the final.

Speaker 2: All forelooking statements are based upon current available information, and Paragon 28 assumes no obligation to update these statements. Accordingly, you should not place under reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of the public filings with the Securities and Exchange Commission, including the final prospectus filed with the SEC pursuant to Rule 424b-4 on October 18, 2021, in connection with our initial public offering.

Prospectus filed with the SEC pursuant to rule 424 before on October 18th 2021 in connection with our initial public offering.

Speaker 2: This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 22, 2021.

This conference call contains time sensitive information and is accurate only as of the live broadcast on November 20.

2021, Paragon 28 disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. During this presentation, we will refer to a non-GAAP financial measure adjusted EBITDA, a reconciliation of adjusted EBITDA to net income.

Speaker 2: Paragon 28 disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. During this presentation, we will refer to a non-GAAP financial measure, adjusted EBITDA. A reconciliation of adjusted EBITDA to net income loss, the most comparable GAAP financial measure, is contained in our press release issued this morning. And with that, I'll turn the call over to Albert.

Loss, the most comparable GAAP financial measure is contained in our press release issued this morning, and with that I'll turn the call over to Albert.

Thank you, Matt and thank you to everyone for joining us today for Paragon 20, Eights first earnings call as a publicly traded company.

Speaker 3: Thank you, Matt, and thank you to everyone for joining us today for Paragon 28's first earnings call as a publicly traded company. Paragon 28 completed its IPO on October 19th, and we are proud to be listed as F&A on the New York Stock Exchange.

On 28 completed its IPO on October 19th and we are proud to be listed as M&A on the New York stock exchange.

Speaker 3: Like our company name Paragon 28, the ticker symbol F&A was selected to emphasize our company's exclusive focus on the large and fast-growing foot and ankle global orthopedic marketplace.

Like our company name Paragon 28, the ticker symbol F&I was selected to emphasize our company's exclusive focus on the large and fast growing foot and ankle global orthopedic marketplace I would like to take this opportunity to thank our investors who participated in the IPO, which raised $131 million in net proceeds.

Speaker 3: I would like to take this opportunity to thank our investors who participated in the IPO, which raised $131 million in net proceeds. This capital is an important element of our company's strategy to continue the development of innovative new foot and ankle technologies, including Smart 28, which will improve patient outcomes and ultimately expand the foot and ankle market.

This capital is an important element of our company's strategy to continue the development of innovative new foot and ankle technology, including smart 28, which will improve patient outcomes and ultimately expand the foot and ankle market.

Speaker 3: P28 is just getting started in 2021. There are more opportunities available to us today as compared to when we started the company in late 2010 in a basement in Birmingham, Alabama.

<unk> 28 is just getting started in 2021, there are more opportunities available tests today as compared to when we started the company in late 2010, and the basement in Birmingham, Alabama.

Speaker 3: P28 now has greater financial strength, which complements its established team, culture, and the energy and passion required to redefine and vastly improve foot and ankle patient outcomes.

Eight now has greater financial strength, which complements its established team culture, and the energy and passion required to redefine and vastly improved but nagel patient outcomes.

Speaker 3: Also, thank you to the early P28 investors, including my mother, who many of you know was our first investor. I look forward to the ongoing support from this group as we continue the mission that P28 set out to achieve since its inception.

Also thank you to the early P 28 investors, including my mother, who many of you know was our first investor I look forward to the ongoing support from this group as we continue the mission that Pete 28 set out to achieve since its inception.

Speaker 3: Finally, and most importantly, thank you to the entire P-28 team and their families for their unwavering dedication and focus on our mission. The P-28 team includes our amazing 331 employees in the United States and around the globe, our board of directors, our U.S. and international sales representatives who serve patients and surgeons every day in the field, and the clinicians around the world who use and put faith and trust in our solution.

Finally, and most importantly, thank you to the entire 2018 and their families for their unwavering dedication and focus on our mission. The peak 28 team includes our amazing 331 employees in the United States and around the Globe, Our board of directors, our U S and international sales representatives to serve patients.

Surgeons everyday in the field.

And the clinicians around the world, who used them put faith and trust in our solutions now.

Speaker 3: Now I'd like to tell you more about P28, the foot and ankle market, and our growth strategy.

Now I'd like to tell you more about P 28, the foot and ankle market and our growth strategies.

Speaker 3: Paragon 2080 is exclusively focused on the foot and ankle orthopedic market, which is an estimated $4.3 billion in 2021, with approximately 55% of that amount in the U.S., growing approximately 7% per year through 2025.

On 28 is exclusively focused on the orthopedic market, which has an estimated $4 3 billion in 2021 with approximately 55% of that amount in the U S growing approximately 7% per year through 2025.

Speaker 3: We have a full suite of innovative orthopedic solutions covering a wide range of foot and ankle ailments, including fracture fixation, bunions, hammer toe, ankle, flat foot, charco foot, and orthobiologic.

We have a full suite of innovative orthopedic solutions, covering a wide range of foot and ankle ailments, including fracture fixation bunion.

<unk> hammertoe ankle flatfoot, shaco foot and ortho biologics our broad suite of solutions comprises 72 product systems, including approximately 8700 skus to help fit the specific needs of each patient and procedure. These.

Speaker 3: Our broad suite of solutions comprises 72 product systems, including approximately 8,700 SKUs to help fit the specific needs of each patient and procedure.

Speaker 3: These solutions have enabled us to grow revenue above market growth rates and capture market share. From 2015 to 2019, our revenue CAGR was 52%. We have over 30 new products in development, with $140 million of revenue for the trailing 12-month period ended September 30, 2021. We believe we are the largest pure-play foot and ankle orthopedic company.

These solutions have enabled us to grow revenue above market growth rates and capture market share from 2015 to 2019, a revenue CAGR was 52% we have over 30, new products in development with $140 million of revenue for the trout trailing 12 month period ended September 30th 2021 we bill.

Please we are the largest pure play flip make orthopedic company.

Speaker 3: We compete with both large, global, diversified medtech companies, as well as smaller and often single product foot and ankle businesses.

We compete with both large global diversified med tech companies as well as smaller and often single product, but nagel businesses.

Paragon 28, we eat sleep and breathe foot and ankle. We believe we can continue taking market share and over time expand the foot and ankle market by improving patient outcomes via new and innovative technologies and world class Medical education.

Speaker 3: At Paragon 28, we eat, sleep, and breathe foot and ankle. We believe we can continue taking market share and over time, expand the foot and ankle market by improving patient outcomes via new and innovative technologies in world-class medical education. Our strategy to drive durable, long-term growth includes one, new product development, two, Smart 28 initiatives.

Our strategy to drive durable long term growth includes one new product development to smart 28 initiatives.

Speaker 3: three, expanded sales distribution, four, advanced medical education and marketing initiatives, and five, business development opportunities.

Three expanded sales distribution.

For advanced medical education, and marketing initiatives and five business development opportunities.

Speaker 3: First, starting with the new product development, our proven ability to identify, develop, and launch innovative technologies combined with our foot and ankle-centric culture and passion is the cornerstone of the success and growth of Paragon 28. It has been the catalyst for us to grow our market share over the past several years. However, we believe the foot and ankle market growth has potential to accelerate further, driven by advancements in technology that will improve patient outcomes.

First starting with the new product development, our proven ability to identify develop and launch innovative technologies combined with our foot and ankle centric culture and passion is the cornerstone of our success and growth of Paragon 28. It has been the catalyst for us to grow our market share over the past several years.

However, we believe the foot and ankle market growth has potential to accelerate further driven by advancements in technology that will improve patient outcomes increases in patient and clinician awareness and the adoption of available treatments.

Speaker 3: increases in patient and clinician awareness, and the adoption of available treatment.

Speaker 3: Given that the foot and ankle market is a young and emerging orthopedic segment, we believe there is significant opportunity to improve outcomes, to be on par with other more mature orthopedic specialties.

That the foot and ankle market is a young and emerging orthopedic segment. We believe there is significant opportunity to improve outcomes to be on par with other more mature orthopedic specialties. As a result of increased innovation and new product launches Paragon 28, with its exclusive focus on the foot and ankle patient and clinician and a proven.

Speaker 3: as a result of increased innovation and new product launches. Paragon 28 with its exclusive focus on the foot and ankle patient and clinician and a proven track record of launching innovative new products will be a catalyst for improvements in foot and ankle clinical results. We also expect the market to benefit from favorable macro trends including an aging population, increased incidence of obesity and diabetes, as well as the broader patient population's desire to pursue a more active lifestyle.

Track record of launching innovative new products will be a catalyst for improvements in foot and ankle clinical results. We also expect the market to benefit from favorable macro trends, including an aging population increased incidence of obesity and diabetes as well as the broader patient populations desire to pursue a more active life.

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Speaker 3: Our SMART 28 initiatives will also be an important driver of improving patient outcomes. We have branded our enabling technologies initiatives as SMART 28. SMART 28 is a key focus area for us and is a key element of our mission to improve foot and ankle outcomes in patients' lives.

Our smart 28 initiatives will also be an important driver of improving patient outcomes. We have branded our enabling technologies initiatives of smart 28, Smart 28 is a key focus area for us and is a key element of our mission to improve outcomes in patients lives Smart 28 has three elements are pre.

Speaker 3: SMART 28 has three elements, a preoperative planning element, intraoperative support, and postoperative evaluation. Within each category, we have or expect to have specialized products designed to improve overall patient outcomes and improve surgical efficiency.

<unk> planning element intra operative support and post operative evaluation.

Within each category, we have or expect to have specialized products designed to improve overall patient outcomes and improve surgical efficiency.

Speaker 3: Within preoperative planning, we are developing patient-specific algorithms to provide surgeons a better understanding of the patient's needs before they even get to the surgical center. In intraoperative support, we have developed and continue to evaluate tools such as surgical guided technologies that can help improve reproducibility and assist with the live procedure.

Within preoperative planning, we are developing patient specific algorithms to provide surgeons, a better understanding of the patients' needs before they even get to the surgical center.

And intraoperative support we have developed and continue to evaluate tools such as surgical guided technologies that can help improve reproducibility and assist with the live procedure.

Speaker 3: And finally, for post-operative support, we will continue to evaluate opportunities around AI solutions, data collection and aggregation, and tools to validate procedural outcomes.

And finally for post operative support we will continue to evaluate opportunities around AI solutions data collection, and aggregation and tools to validate procedural outcomes.

Speaker 3: Additionally, we will continue to make significant investments to expand our global sales force. A leading and innovative product line combined with our entrepreneurial and clinically oriented culture has allowed us to attract, build, and retain a leading sales force exclusively focused on the foot and ankle market.

Additionally, we will continue to make significant investments to expand our global sales force.

Leading and innovative product line combined with our entrepreneurial and clinically oriented culture has allowed us to attract build and retain our leading sales force exclusively focused on the flip medical market.

Speaker 3: Our U.S. sales force has grown significantly over the last several years and consists primarily of independent sales representatives, the majority of whom are exclusive. As of September 30th, 2021, it included approximately 200 producing sales representatives, which accounted for most of our U.S. revenue in the third quarter.

Our U S sales force has grown significantly over the last several years and consists primarily of independent sales representatives. The majority of whom are exclusive.

As of September 30th 'twenty 'twenty. One it included approximately 200, producing sales representatives, which accounted for most of our U S revenue in the third quarter.

Speaker 3: We began selling outside the United States in late 2016. As of September 30th, 2021, we sell our products in 23 countries. And year-to-date through September 30th, 2021, our international business contributed approximately 12% of our revenue.

We began selling outside the United States in late 2016.

As of September 30th 2021 we sell our products in 23 countries and year to date through September 30 of 2021, our international business contributed approximately 12% of our revenue.

Paragon 28, both in the U S and the international markets is well positioned to be the company of choice for foot and ankle sales representatives looking for unlimited opportunity to grow with an exclusively focus foot and ankle company that boasts a full suite of innovative products and is not part of a larger multi channel company.

Speaker 3: Paragon 28, both in the U.S. and international markets, is well-positioned to be the company of choice for foot and ankle sales representatives looking for unlimited opportunity to grow with an exclusively focused foot and ankle company that boasts a full suite of innovative products and is not part of a larger multi-channel company.

Speaker 3: Continued excellence in medical education and new targeted marketing initiatives are also important parts of our growth agenda.

Continued excellence in medical education, and new targeted marketing initiatives are also important parts of our growth agenda.

Speaker 3: Medical education is a strength of Paragon 28, and will continue to be a key part of our strategy to improve foot and ankle patient outcomes and grow our business. Our medical education team and infrastructure are best in class. Late in 2019, we opened a new, dedicated 250-person auditorium and a 40-station cadaveric lab at our Denver headquarters. This facility is now used almost every week for hands-on training and learning with physicians and our commercial team.

Medical education is a strength of Paragon 28, and will continue to be a key part of our strategy to improve foot and ankle patient outcomes and grow our business our medical education team and infrastructure are best in class.

Late in 2019, we opened a new dedicated 250 person auditoriums and a 40 station cat of Eric Lab at our Denver headquarters. This facility is now used almost every week for hands on training and learning with physicians and our commercial team.

Speaker 3: In addition, we offer many regional medical education programs and virtual seminars.

In addition, we offer many regional medical education programs and virtual seminars.

Speaker 3: Digital and direct-to-patient marketing initiatives are becoming a greater focus for Paragon 28 as certain sub-segments of the foot and ankle market are well-suited for us to articulate the benefits of our products to patients and surgeons.

Digital and direct to patient marketing initiatives are becoming a greater focus for Paragon 28, a certain sub segments of the foot and ankle market are well suited for us to articulate the benefits of our products to patients and surgeons.

Speaker 3: We believe our marketing initiatives will raise patient awareness of the benefits of our solutions with an approach that keeps physicians as the ultimate and final arbiter of patient care.

We believe our marketing initiatives will raise patient awareness of the benefits of our solutions with an approach that keeps physicians as the ultimate and final arbiter of patient care.

Finally.

Speaker 3: Business development is an important part of our future growth plan.

Business development is an important part of our future growth plan in the second quarter of this year Paragon 28 completed the acquisition of the assets of added aboard the <unk>. This is a good example of the type of acquisitions that we look forward to complement our portfolio with unique technology.

Speaker 3: In the second quarter of this year, Paragon 28 completed the acquisition of the assets of Additive Orthopedics. This is a good example of the type of acquisitions that we look for to complement our portfolio with unique technology.

Speaker 3: Additive gave us the first in the world and only FDA approved, patented Total Tailor Spacer.

Additive gave us the first in the world and only FDA approved patented total Taylor spacer.

Speaker 3: This product can change the lives of certain foot and ankle patients, patients who otherwise would require either a complicated fusion procedure or possibly even foot amputation.

This product can change the lives of certain foot and ankle patients patients, who otherwise would require either a complicated fusion procedure or possibly even foot amputation.

Speaker 3: In summary, Peridot 28 is exclusively and passionately focused on the large and fast growing foot and ankle market. We will develop technologies enabled by Smart 28 initiatives that we expect will deliver better clinical outcomes and drive market share gains via our best in class sales channel and potentially accelerate growth in the foot and ankle orthopedic market.

In summary, Paragon 'twenty is exclusively and passionately focused on the large and fast growing foot and ankle market. We will develop technologies enabled by smart 28 initiatives that we expect will deliver better clinical outcomes and drive market share gains via our best in class sales channel and potentially accelerate.

And the flip Nagel orthopedic market.

Speaker 3: I am more excited now than I have ever been about the future of Paragon 28 and its potential to shape a better future for foot and ankle patients. I will now turn it over to Steve who will provide a summary of our third quarter financial performance and provide revenue guidance for the fourth quarter of 2021.

I am more excited now than I have ever been about the future of Paragon 28, and its potential to shape, a better future for foot and ankle patients.

I'll now turn it over to Steve who will provide a summary of our third quarter financial performance and provide revenue guidance for the fourth quarter of 2021.

Speaker 4: Steve? Thank you, Albert. Moving to our third quarter 2021 financial results.

Steve Thank you Albert moving to our third quarter 2021 financial results.

Speaker 4: Paragon's revenue for the third quarter of 2021 was $35.9 million, representing growth of 18% above the third quarter of 2020 and 45% above the third quarter of 2019.

<unk> revenue for the third quarter of 2021 was $35 $9 million representing growth of 18% above the third quarter of 2020, and 45% above the third quarter of 2019.

Speaker 4: U.S. revenue for the third quarter of 2021 was $31.9 million.

U S revenue for the third quarter of 2021 was $31 $9 million.

Speaker 4: representing growth of 16% above the third quarter of 2020 and 43% above the third quarter of 2019.

Representing growth of 16% above the third quarter of 2020.

43% above the third quarter of 2019.

Speaker 4: Our U.S. revenue in the third quarter of 2021 was also 2% sequentially above the second quarter of 2021, despite COVID headwinds experienced in August and September .

Our U S revenue in the third quarter of 2021 was also 2% sequentially above the second quarter of 2021, despite COVID-19 headwinds experienced in August and September.

Speaker 4: Our U.S. revenue growth was driven by the strategies previously outlined by Albert, including new products, outstanding medical education, and expansion of our sales force.

Our U S revenue growth was driven by this strategy as previously outlined by Albert including New products Outstanding Medical education and expansion of our sales force.

Speaker 4: International revenue for the third quarter of 2021 was $4 million, representing growth of 42% above the third quarter of 2020, and 68% above the third quarter of 2019. This growth was achieved despite COVID-related surgery deferrals, and our largest international market served, including Australia, South Africa, and the United Kingdom.

International revenue for the third quarter of 2021 was $4 million representing growth of 42% above the third quarter of 2020, and 68% above the third quarter of 2019. This growth was achieved despite COVID-19 related surgery deferrals in our largest international market.

Served including Australia, South Africa, and the United Kingdom.

Gross profit margin for the third quarter of 2021 was 82% compared to 76, 7% in the third quarter of 2020.

Speaker 4: Gross profit margin for the third quarter of 2021 was 80.2% compared to 76.7% in the third quarter of 2020. Paragon 28 sold a greater mix of higher gross profit margin products and had decreased excess and obsolete inventory expenses during the third quarter of 2021, which both contributed to the improvement in gross profit margin.

Paragon 28 sold a greater mix of higher gross profit margin products and had decreased excess and obsolete inventory expenses during the third quarter of 2021, which both contributed to the improvement in gross profit margin.

Speaker 4: During the three months ended September 30, 2020, the company incurred a $500,000 or 1.7% of net revenue.

During the three months ended September 32020, the company incurred a $500000 or one 7% of net revenue excess and obsolete inventory adjustment, resulting from disruptions in the supply chain purchasing processes. During the COVID-19, pandemic research and development expense was $4 $1 million or <unk> <unk>.

Speaker 4: excess and obsolete inventory adjustment resulting from disruptions in the supply chain purchasing processes during the COVID-19 pandemic. Research and development expense was $4.1 million or 11.4% of revenue for the third quarter of 2021 compared to $2.3 million or 7.8% of revenue in the third quarter of 2020.

11, 4% of revenue for the third quarter of 2021 compared to $2 $3 million or seven 8% of revenue in the third quarter of 2020.

Speaker 4: The increase in research and development expenses was due to additional investments in new product development efforts and our quality management system, including increased personnel expenses.

The increase in research and development expenses was due to additional investments in new product development efforts and our quality management system, including increased personnel expenses.

Speaker 4: Kelling general and administrative expense was $29 million, or 80.8% of revenue for the third quarter of 2021, compared to $17 million, or 56% of revenue in the third quarter of 2020.

Selling general and administrative expense was $29 million or 88% of revenue for the third quarter of 2021 compared to $17 million or 56% of revenue in the third quarter of 2020.

Speaker 4: The company was able to return to a more normalized level of sales and marketing activities during the third quarter of 2021, including making additional investments in the expansion of our U.S. sales force and increased medical education and trade show activities.

The company was able to return to a more normalized level of sales and marketing activities. During the third quarter of 2021, including making additional investments in the expansion of our U S sales force and increased medical education and trade show activity. Additionally.

Speaker 4: Additionally, during 2021, the company made investments in its administrative functions, including people, processes, and systems in preparation to be a publicly traded company.

Additionally, during 2021, the company made investments and it's an administrative functions, including people processes and systems in preparation to be a publicly traded company.

Speaker 4: The company also incurred additional third-party legal expenses during 2021.

The company also incurred additional third party legal expenses during 2021.

Speaker 4: Adjusted EBITDA for the third quarter of 2021 was negative $1 million compared to $6.3 million in the third quarter of 2020. The decrease was driven primarily by the previously mentioned increases in operating expenses offset partially by increased gross profit driven by higher revenue.

Adjusted EBITDA for the third quarter of 2021 was negative $1 million compared to $6 3 million in the third quarter of 2020.

The decrease was driven primarily by the previously mentioned increases in operating expenses offset partially by increased gross profit driven by higher revenue.

Speaker 4: Net loss was $5.1 million for the third quarter of 2021, compared to net income of $3.8 million in the third quarter of 2020.

Net loss was $5 1 million for the third quarter of 2021 compared to net income of $3 $8 million in the third quarter of 2020.

Speaker 4: This $8.9 million decrease reflected the previously discussed $7.3 million decrease in adjusted EBITDA plus a $700,000 increase in stock-based compensation and a $900,000 increase in depreciation and amortization expense.

This $8 $9 million decrease reflected the previously discussed $7 $3 million decrease in adjusted EBITDA, plus the $700000 increase in stock based compensation and a $900000 increase in depreciation and amortization expense.

Speaker 4: Cash flow from operations was negative $5.1 million for the third quarter of 2021, compared to negative $5.3 million for the third quarter of 2020.

Cash flow from operations was negative $5 $1 million for the third quarter of 2021 compared to negative $5 $3 million for the third quarter of 2020.

The third quarter of 2021 operating cash flow was driven by the net loss of $5 $1 million and working capital usage of $4 $8 million, including inventory purchases of $3 3 million offset partially by noncash expenses of $4 $8 million.

Free cash flow was negative $9 million for the third quarter of 2021 compared to negative $7 8 million for the third quarter of 2020, primarily driven by increased purchases of surgical instrumentation during the third quarter of 2021.

Speaker 4: Our cash balance on September 30, 2021 was $7.9 million.

Our cash balance on September 32021 was $7 $9 million.

Speaker 4: With a total of $26 million of borrowings outstanding on our senior credit facility, Paragon 28 has approximately $44 million of additional borrowing capability under its senior credit facilities on September 30, 2021. Our IPO, completed on April 19, 2021, provided the company with $131 million of net cash proceeds.

With a total of 26 million of borrowings outstanding on our senior credit facility. Paragon 28 has approximately $44 million of additional borrowing capability under its senior credit facilities at September 32021, our IPO completed on April 19, 2021 provided the company with 131 million.

Net cash proceeds finally, turning to our financial outlook for the remainder of 2021, our estimated fourth quarter 2021 revenue guidance range is $38 million to $39 million.

Speaker 4: Finally, turning to our financial outlook for the remainder of 2021, our estimated fourth quarter 2021 revenue guidance range is $38 to $39 million, representing 10% year-over-year growth at the midpoint.

Representing 10% year over year growth at the midpoint.

Speaker 4: COVID-19 patient deferrals and surgical disruptions from staffing shortages have been taken into account in our fourth quarter revenue guidance.

COVID-19 patient deferrals and surgical disruptions from staffing shortages have been taken into account in our fourth quarter revenue guidance. That's the end of our prepared remarks, operator, please open the lines for questions and answers.

Speaker 4: That's the end of our prepared remarks. Operator, please open the lines for questions and answers.

Speaker 1: Thank you. We will now proceed with the Q&A. If you would like to ask a question, you can press star 1 on your telephone keypad. If you would like to withdraw your question, you can press star 2. Please ensure you are unmuted locally when asking your question.

Thank you we will now proceed the Q&A if you'd like to ask a question you compress star one on your telephone keypad. If you would like to withdraw your question you can press star two.

Please ensure you're on mute you likely when asking your question.

Speaker 1: Our first question for today comes from Craig Bijou from Bank of America. Craig, your line is now open.

Our first question for today comes from Craig Bijou from Bank of America, Craig. Your line is now open.

Hey, good morning, guys. Thanks, Thanks for taking the questions and congrats on a very strong quarter.

Speaker 5: Good morning guys. Thanks. Thanks for taking the questions and congrats on a very strong quarter

Strong first quarter.

Speaker 5: strong first quarter. Let me start with just the Q4 guidance and how you got to where you did. Maybe if you can talk a little bit about the trends that you saw August , September , and then October , and then maybe even into November , and what the underlying assumptions for your guidance are for the rest of the year. Is it status quo? Does it get a little bit better? Just any color on that would be great.

Let me start with just the Q4 guidance.

And how you got to where you did maybe if you can talk a little bit about the trends that you saw.

August September and then October and then maybe even into November and what the assumption the underlying assumptions for your guidance are for the rest of the year or is it status quo does it get a little bit better.

Any color on that would be great.

Great. Thank you Craig.

Speaker 4: Great. Thank you, Craig. As you know, our guidance for the fourth quarter is $38 to $39 million, and what we've incorporated into that

As you know our guidance for the fourth quarter is 38% to $39 million.

And what we've incorporated into that guidance is the COVID-19 headwinds that we've experienced in the fourth quarter to continue on.

Speaker 4: that we've experienced in the fourth quarter to continue on.

Speaker 4: And, you know, similar to the third quarter where we experienced headwinds, we forecasted those to continue.

And similar to the third quarter, where we experienced headwinds we forecasted those to continue into the fourth quarter.

Speaker 4: And what we know, though, is our business is resilient and performs well despite these challenges from the COVID headwinds.

And what we know though is our business is resilient and performs well. Despite these challenges from the COVID-19 headwinds with our 18% growth in the third quarter.

Speaker 4: With our 18% growth in the third quarter, we were able to pivot and continue to make progress and drive growth with many of our product lines and train a number of new surgeons to use our product.

We were able to pivot and continue to make progress and drive growth.

Many of our product lines and train a number of new surgeons to use our products as well.

Speaker 4: So we've continued to assess the market, assess the headwinds. It's a dynamic environment, as you know, and three of our largest markets outside the United States are in South Africa, the United Kingdom, and Australia, which really have sort of stop-and-go environments from time to time with COVID.

So we've continued to.

Assess the market assess the headwinds it's a dynamic environment as you know in three of our largest markets outside the United States or in.

South Africa, the United Kingdom, and Australia, which really have sort of stop and go environments from time to time with Covid. So so we take a tempered approach when we're looking at our growth prospects for the fourth quarter and we've continued to assume a significant fairly significant amount of headwind similar to what we've seen in the last three.

Speaker 4: So we take a tempered approach when we're looking at our growth prospects for the fourth quarter. And we've continued to assume a significant, fairly significant amount of headwinds, similar to what we've seen the last three or

Or four months.

Great that's helpful and maybe kind of taking a step back and a little bit of a bigger picture longer term question.

Speaker 5: Great. That's helpful. And maybe kind of taking a step back and a little bit of a bigger picture, a longer term question. Obviously, you guys have highlighted the growth of the foot and ankle market. There are several different categories within that market as you guys have laid out. So.

Obviously, you guys have highlighted the growth of the foot and ankle market.

There are several different categories within that market is as you guys have laid out.

So.

Speaker 5: with different growth rates and different dynamics, each of them. So.

With with different growth rates and different dynamics each of them. So.

Speaker 5: Maybe if there's any color you can provide on kind of where you see strong opportunities within the foot and ankle market, places where you

If the if there's any color you can provide on kind of where you see them.

Strong opportunities in the foot and ankle market.

Places where you.

Speaker 5: where you're poised to either take share or grow above the market. Just trying to understand kind of your focus areas, your target areas, and where you guys think you can really drive the growth.

Where you're poised to either take share or grow above the market just trying to understand kind of your focus areas youre target areas.

Where do you guys think you can.

Really drive the growth.

Speaker 3: Thanks for that question, Craig. It's Albert, and I'll happily answer that portion of it as much as I can. The reality is we've defined the market as pretty broad and diverse, which is one of the things that excites us the most. We've classified it, really, as six different sub-segments, seven if you include biologics, which really is blended across all the.

Thanks for that question Craig It's Albert.

And I'll I'll happily answer that portion of it as much as I can are there the reality.

As we define the market is pretty broad and diverse which is one of the things that excites us. The most we've classified it really has six different sub segments. Seven if you include biologics, which really is blended across all of the sex.

Speaker 3: And each of those have different opportunities and different indications for us to address.

And each of those have different opportunities in different indications for us to address now I'll tell you one of the things that's really benefited Paragon 28 is our approach to the market has been really balanced across all of those sub segments and moving forward. We expect to continue to do the same I would tell you there's different levels of complexity.

Speaker 6: I'll tell you one of the things that's really benefited Paragon 28 is our approach to the market has been really balanced across all those sub-segments and moving forward we expect to continue to do the same. I would tell you there's different levels of complexity and considerations for some of these segments that are definitely attractive for a company who's had a really nice cadence for product development.

And considerations for some of these segments that.

Are definitely attractive for a company who's had a really nice cadence for product development.

Speaker 6: Things like ankle is really maybe in a younger phase.

Things like ankle is really maybe in a younger phase versus some of the more traditional segments like flat foot reconstruction might be alright, and so what our approach is going to be a very similar we're going to we're going to look at all of those in a blended fashion.

Speaker 6: versus some of the more traditional segments like flat foot reconstruction.

Speaker 6: All right, and so our approach is going to be very similar. We're going to look at all of those in a blended fashion. I'll tell you that we're excited about the market and what it presents to us in terms of opportunities for product development. If I look at our pipeline of development, I could tell you it's really nicely blended across all of those subsets.

I will tell you that we're excited about the market and what it presents to us in terms of opportunities for product development. If I look at our pipeline of development I can tell you its really nicely blended across all of those sub segments and.

Speaker 6: And we've got 30 projects in development today, of which we expect around 22 of those projects to be launching in the next two years. And again, I'll repeat that those projects that we're going to be launching are blended across all the subsets.

And we've got 30 projects in development today of which we expect around 22 of those projects to be launching in the next two years and again I'll repeat that those projects that we're going to be launching our our blended across all of the sub segments pretty nicely.

Speaker 5: Got it. Helpful. And thanks for that. I'll hop back in queue, but congrats again on a strong first quarter.

Got it helpful and thanks for that I'll hop back in queue, but congrats again on a strong first quarter.

Thank you thanks, Greg.

Yeah.

Speaker 1: Thank you Craig. Our next question comes from Matthew O'Brien from Piper Sandler. Matthew, your line is now open.

Thank you Craig our next question comes from Matthew O'brien from Piper Sandler Matthew Your line is now open.

Speaker 7: Thanks, and I appreciate you guys taking my questions. I'm not sure if this is for Albert or Steve, but just in looking at the Q3 results domestically and you know, the growth sequentially is not something we're seeing across most of surgical med tech and especially not in orthopedics, so can you talk a little bit more about what drove that growth sequentially? I know Steve you sort of touched on the doc training a little bit.

Thanks, and I appreciate you guys, taking my questions.

I'm not sure. If this is for Albert or Steve, but just in looking at the Q3 results domestically.

And you know the growth sequentially is not something we're seeing across most of surgical med tech and especially not in orthopedics. So can you talk a little bit more about what drove that growth sequentially. I know, Steve you sort of touched on the Doc training, a little bit, but but again it was surprising to see great to see what really drove that sequential improvement.

Speaker 7: But again, it was surprising to see great to see what really drove that sequential improvement.

Speaker 6: Hey Matt, thank you. This is Albert, I'll tackle that one as well. You know, it's really the basics of Paragon28's business that

Hey, Matt. Thank you this is Albert I'll tackle that one as well.

You you know, it's really the basics of Paragon 20 eights business that.

Speaker 6: It's almost reminiscent of the 2020 year, where we made some investments in sales rep training, medical education as a whole with surgeons, looking at some of the marketing aspects.

It's almost reminiscent of the 2020 year, where we made some investments and sales rep training.

Medical education as a whole with surgeons.

Looking at some of the marketing aspects new product development.

Speaker 6: new product development, and really Salesforce expansion would be areas that I'd highlight.

And really sales force expansion would be areas that I'd highlight.

Speaker 6: Earlier this year we made an acquisition, we acquired the assets of Additive Orthopedics.

Earlier this year, we made an acquisition the we acquired the assets of additive orthopedics.

Speaker 3: That product line compliments so nicely with our portfolio and some of that also contributed to the tailwinds that we saw going into Q3 to really offset some of the headwinds that we were seeing with COVID out in the marketplace. So we're proud of that sequential quarter-over-quarter growth.

That product line complements so nicely with our portfolio.

And and some of that also contributed to the tailwind that we saw going.

Going into Q3 to really offset some of the headwinds that we're seeing with COVID-19 out in the marketplace. So we're proud of that.

That sequential quarter over quarter growth.

Speaker 6: We're also really proud of the growth that we achieved in 2020, given the abnormal year that we were experiencing there, and it really proved to us that the fundamentals were in place. To highlight, even last weekend here, we had three different courses being conducted at our medical education facility on site, so we had around 25 sales.

We're also really proud of the growth that we achieved in 2020, given the abnormal year that we were experiencing there and it really proved to us that the.

<unk> metals, where we are in place to highlight even last weekend here, we had three different courses.

<unk> conducted at our medical education facility on site. So we had around 25 sales.

Speaker 6: uh... reps that were present for a week of training here on-site uh... during the weekend we actually had two separate courses going on simultaneously where one was called pushing the limits we had uh... surgeons in from all over and we were uh... we believe there's around thirty surgeons attending that course uh... really successful covering really complicated areas of foot and ankle surgery uh... and then in tandem we had uh... eight surgeons being trained on our our new total ankle replacement system apex three d

Reps that were present for a week of training here on site.

During the weekend, we actually had two separate courses going on simultaneously, where one was called pushing the limits. We had surgeons in from all over and we were we believe there's around 30 surgeons attending that course really successful covering really complicated areas of foot and ankle surgery.

And then in tandem we had eight surgeons being trained on our new total ankle replacement system apex three D.

Speaker 6: in our labs. So one, we're making use of the medical education facility. We're really aggressive looking at sales rep expansion, people that match us clinically and can represent the line well and service these cases best. And I think you're seeing a lot of those things support the growth that we were able to see in Q3.

In our labs, so one we're making use of the medical education facility.

Really aggressive looking at sales rep expansion people that match us clinically.

And can represent the line well and service. These cases, best and I think youre seeing a lot of those things support the growth that we were able to see in Q3 as well.

Speaker 7: Okay, that's that's great. Appreciate that. And then Albert, you started touching on this.

Okay. That's great appreciate that and then Albert you started touching on this.

Speaker 7: They're in the last few sentences of what you were saying, but...

They're the last the last few sentences on what you were saying, but.

Speaker 7: As far as the Salesforce goes, you've had, there's a big competitor that consolidated, you know, about a year ago, I think, I think last week.

As far as the sales force goes you've had theres a big competitor that consolidated you know about a year ago, I think I think last week.

Speaker 7: you just finished the IPO. Can you talk about the response you've seen? I know it's early from, you know, turning into a public company in terms of sales rep interest in P28 and then your ability to add these folks. I know it's challenging for some folks or some companies in Ortho right now to add reps, but just the response you've seen so far since the IPO and then the ability to continue adding reps over the next several quarters. Thanks.

You just finished the IPO can you talk about the response, you've seen I know it's early.

From turning into a public company in terms of sales Rep interest in P. 28, and then your ability to add these folks I know it's challenging for some folks there are some companies in.

And ortho right now to add reps, but just the response you've seen so far since the IPO and then the ability to continue adding reps.

Over the next several quarters.

Yeah, absolutely and thanks for the question you know the reality is that Paragon 28 has a few.

Speaker 6: Absolutely. And thanks for the question. You know, the reality is that Paragon 28 has a few.

Speaker 6: key attributes that make us a really attractive landing spot for salespeople. One, the company was really founded by salespeople and specifically foot and ankle salespeople. So the culture of sales, the way we support our sales force, the way we infuse that

Key attributes that make us a really attractive landing spot for salespeople. One the company was really founded by salespeople and specifically foot and ankle salespeople. So the culture of sales the way we support our sales force.

Hey, we infuse that passion of standing in the operating room, representing a product line when we recognize that someone's someone's family members sitting on the table is really important to us and it shapes. The culture here at peak 28, so for our salespeople to look.

Speaker 6: of standing in the operating room representing a product line.

Speaker 6: when we recognize that someone's family member sitting on the table is really important to us and it shapes the culture here at P-28.

Speaker 6: For salespeople to look at Paragon 28's culture, it's really an attractive landing spot for people, right? They want to go to a company that.

Look at Paragon 20, eights culture, it's really an attractive landing spot for people right. They they want to go to a company that understands the needs of standing in the operating room and represents that in high quality product.

Speaker 6: understands the needs of standing in the operating room and represents that in high quality product.

Speaker 6: differentiated product, product that really addresses, meaningfully addresses needs and options.

Differentiated product product that really addresses meaningfully addresses needs and options.

Speaker 6: to service these cases best. So we happen to be a great landing spot. And our culture is also a lot of fun. You know, we enjoy what we do here. We love the team. We really work well together and we have a lot of fun doing what we do. So all of those things make us a natural attraction for salespeople out in the industry.

To service. These cases bad so we happened to be a great landing spot and our culture is also a lot of fun, we enjoy what we do here. We we loved the team we really work well together and we have a lot of fun doing what we do so all of those things make us.

Natural.

Attraction for salespeople out in the industry. The reality is that transitions have been happening almost since the beginning of Paragon 28.

Speaker 6: The reality is that transitions have been happening almost since the beginning of Paragon 28. We've seen a lot of movement in the industry that's pushed people our way. I would tell you that one of the biggest concerns salespeople have had at looking at Paragon 28 is the fear that we were going to be acquired.

We've seen you know a lot of movement in the industry. That's pushed people are away I would tell you that one of the biggest concerns salespeople have had at looking at Paragon 28 is the fear that we were going to be acquired right.

And I think the IPO really did an amazing.

Speaker 6: And I think the IPO really did an amazing transformation of that perception. And now I think people realize that we're looking at a long-term vision of what Paragon 28 can accomplish. And that's given salespeople a newfound comfort at looking at Paragon 28 as a potential landing spot. So I think that's really helped us. In regards to Salesforce expansion, I think it's been a real positive for P28.

Transformation of that perception and and now I think people realize that we're looking at a long term vision of what Paragon 28 can accomplish and that's given salespeople.

New found comfort at looking at Paragon 28, as a potential landing spot. So I think that's really helped us in.

In regards to sales.

Sales force expansion I think it's been a real positive for <unk> 28.

Thank you.

Yeah.

Speaker 1: Thank you Matthew. Our next question comes from Kyle Rose from Canaccord. Kyle your line is now open.

Thank you Mathieu next question comes from Kyle Rose from Canaccord. Your line is now open.

Speaker 8: Great, thank you very much for taking the call. So I had just one more big picture question. Albert, I think you've spoken a lot about the Smart28 ecosystem and just kind of bringing enabling technologies and what you want to build at the organization. Maybe can you kind of help frame for us when you expect some of those initiatives to start showing through from a commercial perspective? And maybe if there's any milestones we should have on our calendar over the course of the next 12 months to kind of monitor some of the progress and work that's being done from a development perspective?

Great. Thank you very much for taking the call.

So I had a just a one more big picture question.

Albert I think you've spoken a lot about the smart 28 ecosystem and just kind of bring in enabling technologies and what you want to build out the organization. Maybe can you kind of help frame us or help frame for us where.

When do you expect some of those initiatives to start showing through from a commercial perspective, and maybe if theres any milestones we should have on our calendar over the course of the next 12 months to kind of monitor some of that some of the progress at night and work that's being done from a development perspective.

Yeah, Hey, and thanks for the question.

Speaker 9: Yeah, hey, thanks for the question.

The reality is that the foot and ankle market is a relatively young segment of orthopedics right and it's broad and diverse theres. Some really complicated areas three dimensional complexity and considering some of these deformities for patients not to mention the soft tissue contributions and other.

Speaker 6: The reality is that the foot and ankle market is a relatively young segment of orthopedics, and it's broad.

Speaker 6: There's some really complicated areas, three dimensional complexity in considering some of these deformities for patients, not to mention the soft tissue contributions and other patient profile type demographics that could influence the procedural outcomes. And so what I'm describing really is a perfect environment for enabling technology.

Patient profile type demographics that could influence the procedural outcomes and so what I'm, describing really is a perfect environment for enabling technologies.

Speaker 6: Paragon's also invested over the years into non-product related research, research that we believe is going to help contribute to a better understanding of some of the ailments of foot and ankle surgery.

<unk> also invested over the over the years into non.

Non product related research research that we believe is going to help contribute to a better understanding of some of the elements of foot and ankle surgery.

Speaker 6: And what we think is that the enabling technologies environment enables us to really bring in dozens of inputs from different research parameters things like

And what we think is that the enabling technologies environment enables us to really bring in.

Dozens of inputs from different research parameters things like Cte weight bearing assessments looking at F. E. A analysis finite element analysis models mathematical models.

Speaker 6: CT weight-bearing assessments, looking at FEA analysis, finite element analysis models, mathematical models.

Speaker 6: looking at MRI data, looking at all of these, even psychological information relative to a patient that can help us shape these procedural considerations and help give different visibility to our surgeon users.

Looking at MRI data looking at all of these even psychological information relative to a patient that can help us shape. These procedural considerations and help give different visibility to our surgeon users and so the smart 28 ecosystem was branded really to identify our opt.

Speaker 6: And so the SMART28 ecosystem was branded really to identify our opportunity there. And we're really excited about what that means in terms of improving patient outcomes, really accelerating those improvements.

<unk>, there and we're really excited about what that means in terms of improving patient outcomes really accelerating those improvements.

Speaker 6: Even our research considerations are accelerated with some of these tools. So we're really excited about it, and we've broken SMART 28 into three different buckets.

Our research considerations are accelerated with some of these tools. So we're really excited about it and we've broken smart 28 into three different buckets, theres, a preoperative bucket, which would be.

Speaker 6: There's a preoperative bucket, which would be like your software planning algorithm, looking at a software platform that can help give the surgeon visibility to that three-dimensional deformity.

Like your software planning algorithm looking at a software platform that can help give the surgeon visibility to that three dimensional deformity and plan that surgery and even understand what the outcome might be from that predictive plan and then create from that assessment tools that might be useful.

Speaker 6: and plan that surgery and even understand what the outcome might be from that predictive plan, and then create from that assessment.

Speaker 6: tools that might be useful in the operating room settings, so things like patient-specific instruments or patient-specific implants.

The operating room, setting so things like patient specific instruments or patient specific implants.

Speaker 6: We could look at things like laser alignment guides or robotics or navigation type systems or sensors and different tools that can reproduce that plan in a reproducible setting.

We could look at things like laser alignment guides or robotics or navigation type systems sensors and different tools that can reproduce that plan.

Reproduce reproducible setting and then lastly, looking at the post operative bucket that would be evaluating how well we recreated a three dimensional position of that floods and frankly, how satisfied the patient is with the outcome and then feed that back into the preoperative plan with some sort of AI.

Speaker 6: And then lastly, looking at the postoperative bucket, that would be evaluating how well we recreated a three-dimensional position of that foot, and frankly, how satisfied the patient is with the outcome, and then feed that back into the preoperative plan with some sort of AI tool.

Speaker 6: What I've just described was really the premise for the acquisition of the assets of additive orthopedics that we did earlier this year.

What I've just.

Just described.

Its really the premise for the acquisition of the assets of additive orthopedics that we did earlier this year.

Speaker 6: They have the first in the world FDA approved total Taylor space.

They have the first in the World FDA approved total Taylor spacer.

Speaker 6: and now we can actually take a CT scan from a patient and evaluate that deformity and Reconstructed talus and provide an option to a patient that really didn't exist years ago

And now we can actually take a CTO scan from a patient and evaluate that deformity and reconstructive talos and provide an option to a patient that really didn't exist years ago.

Speaker 6: an option that really avoids complex ankle fusions because these are pretty big spaces or even amputation in some cases. So what I'm describing is both our SMART 28 initiative, but also the fact that we've got some of these tools already at play and commercial.

An option that really avoids complex ankle fusions, because these are pretty big spaces.

Even amputation in some cases so.

What I am describing as both our smart 28 initiatives, but also the fact that we've got some of these tools already at play in commercial for US the Maven peer XI system.

Speaker 6: the MAVEN PSI system, which we licensed that from Conformis earlier, and we can now do the same for total ankle replacement, where we could take a CT scan of a patient, plan the case, and create patient-specific instruments to create reproducible outcomes for our APEX III patients.

Which we license that from conformance.

Earlier, and we can now do the same for total ankle replacement, where we could take a CTO scan of a patient planned the case and create patient specific instruments to create reproducible outcomes for our apex <unk> total ankle patients rate. We've also got the first ever laser alignment.

Speaker 6: We've also got the first ever laser alignment that we designed for total ankle replacement. So now surgeons in an operating room setting can look at both tibial alignment. They could also look at hip alignment. Very simply, we could also set IE rotation. And so we're looking at those types of tools, some of which you've seen commercial, but we're just getting started really in the SMART 28 initiative. And we're excited about other opportunities that exist.

That we designed for total ankle replacements. So now surgeons in an operating room setting can look at both tibial alignment. They can also look at hip alignment very simply we can also set I E rotation and so we're looking at those types of tools some of which you've seen commercial but we're just getting started really in the smart 28 initiatives.

And and we're excited about other opportunities that exist in that area.

Great. Thank you for that that's very helpful. And then just the other question I have is just I think when I think about the market. What are the things that has impressed me over the last several years is just the ability to drive patient awareness.

Speaker 10: Great, thank you for that, that's very helpful. And then just the other question I have is just, I think when I think about the market, one of the things that's impressed me over the last several years is just the ability to drive patient awareness. I know some of your competitors have done that very well. Can you maybe just talk about what plans you have, or if there's any product lines or any specific segments of the market that you think you can drive patient awareness in and really try to drive more procedural growth? Yeah, I'll take.

I know some of your competitors have done that very well could you maybe just talk about what plans you have or if theres any product lines or any specific segments of the market that you think you can you can drive patient awareness and in it and really try to drive more procedural growth.

Yeah, I'll take that one too you know if.

If you break up the foot and ankle market.

Speaker 6: by its six sub-segments, you really see different personalities in each of those, right? Different patient types and different atmosphere for each. I would highlight two areas that I think are relatively prone to direct-to-patient type marketing campaigns. Patients that are really scouring the Internet, looking for better options and solutions, looking for the best surgeons to treat their conditions are the ankle.

It's six sub segments, you really see different personalities in each of those different patient types and different atmosphere for each I would highlight two areas that I think are relatively prone to direct to patient type marketing campaigns patients that are really scouring the internet looking for better options and solutions.

Looking for the best surgeons to treat their conditions are the ankle.

Speaker 6: So for ankle fusion and total ankle replacement and I would say the bunion market as well Those are two areas that we've seen a lot of patient activity

So for ankle fusion and total ankle replacement and I would say the bunyan market as well those are two areas that we've seen a lot of patient activity.

Speaker 6: for better solutions, looking for better outcomes, looking for better surgeons. So I would see some investments in marketing related to those two segments. It's not to say that the other segments aren't opportunities as well, just maybe to the extent of the two that I highlighted.

Or better solutions looking for better outcomes looking for vendors surgeon, So I would see some investments in <unk>.

And marketing related to those two segments, it's not to say that the other segments arent opt.

Our opportunities as well just not maybe to the extent of the two that I highlighted.

Great. Thank you very much.

Of course, thanks, guys. Thank you.

Speaker 1: Thank you Kyle. Our next question for today comes from Dave Kirkley from JMP Securities. Dave, your line is now open.

Thank you Kyle.

Next question for today comes from Dave <unk> from JMP Securities. They've your line is now open.

Speaker 11: Hey, good morning, and congrats as well. You mentioned OUS expansion, and you surely highlighted a bunch of places that you may look to go in your filings. Brazil, Colombia, Japan, as you look at some of these more near-term targets.

Hey, good morning, and congrats as well.

You mentioned the O U S expansion and you shouldn't surely highlighted a bunch of places that you may look to go in your filings.

Brazil, Colombia, Japan as you look at some of these more near term targets.

Speaker 11: I guess just to get your thoughts on timing of those and which are the most important, any sort of details there would be appreciated.

I guess just to get your thoughts on timing.

Timing of those and which are the most important any sort of details there would be appreciated.

Yeah, Hey, Eric how are you doing this is Steve so.

Speaker 4: Yeah. Hey, Turk, how you doing? This is Steve. So as you mentioned, we are focused on those markets, but we're also focused on, you know, some markets that are

As you mentioned, we are focused on those markets, but we're also focused on some markets that are <unk>.

Speaker 4: much closer to us here in the US and Canada, for example. We're starting to look very closely at that market. We're looking at expansion into Western Europe . Our team in the international market has done a terrific job of bringing in really strong leadership with great knowledge of our Western.

Much closer to us here in the U S and Canada. For example, we're starting to look very closely at that market. We're looking at expansion into Western Europe.

Our team in the international market has done a terrific job of bringing in really strong leadership.

With great knowledge of our western European market opportunities.

Speaker 4: So that's going to be an area of focus for us. Japan is a longer term area because of the regulatory requirements there. And then when we look to South America and Central America, you know, we also focus on making sure that we get into markets and with distributors and partners there.

That's going to be an area of focus for us Japan as a longer term area because of the regulatory requirements there.

And then when we look to South America and Central America. We also focus on making sure that we get into markets and with distributors and partners. There that we trust and believe that they have the same kind of focus on doing things the right way the way the Paragon 28 does it every day.

Speaker 4: So, you know, I would say that the nearest term opportunities.

So.

I would say the nearest term opportunities would be western Europe, Canada.

Speaker 4: Europe , Canada, South America, and then on a selective basis South America, Central America, and then more longer term the Asian markets.

South America, and then on a selective basis, South America Central America, and then more longer term the Asian markets.

Got it thank you for that and.

Speaker 11: Congrats on your recent 510K clearance. I guess as we look at sort of X-Fix, I was kind of surprised that was your first offering there. I know you have, I think something like over 20 internal fix fracture products, but given that that's the largest part of your product mix, I'd love to get your thoughts on.

Congrats on your recent five 10-K clearance I guess.

If we look at sort of ex fix.

Kind of surprised that was your first offering there I know you have I think something like over 20 internal fixed.

Fracture products, but given that that's the largest part of your product makes it I'd love to get your thoughts on.

Speaker 11: uh... that product and then sort of uh... the opportunity there should we expect more external uh... uh... products come

That product and then sort of the opportunity there should we expect more external.

Sure.

Our products coming down the pipeline. Thank you.

Yeah.

Speaker 6: So maybe I'll take that one as well.

So maybe I'll take that one as well.

<unk>.

Speaker 6: Look, one of the things that I think is really exciting right now is as our portfolio expands into other indications, we're really able to become the premier foot and ankle provider for our surgeons and ultimately for our customers.

Look one of the things that I think is really exciting right now is.

As our portfolio expands into other indications.

Really able to become the premier foot and ankle provider for our surgeons and ultimately for our customers.

Speaker 6: and the patients here. External fixation was an area that we were a bit delayed in addressing as a company.

The patients here external fixation was an area that we were a bit delayed in addressing as accompany them.

Speaker 6: One of our internal philosophies is if we can't make it better, we're not going to develop it. And so we were really looking at the external fixation market. It's an important complement to the rest of the portfolio. And I've mentioned that the foot and ankle market really is a

One of our internal philosophies is if we can't make it better we're not going to develop it right and so we were really looking at the external fixation market. It's an important complement to the rest of the portfolio and I've mentioned that the foot and ankle market really is.

Every procedure, we do tends to be a combination of three and four different procedures and one different in one surgery. So the ability to address all of those possible indications in a single surgery I think gives us a really nice position in the market. It gives us great conversations with hospital systems.

Speaker 6: Every procedure we do tends to be a combination of three and four different procedures in one surgery. So the ability to address all of those possible indications in a single surgery I think gives us a really nice position in the market, it gives us great conversations with hospital.

Speaker 6: The surgeons get a level of comfort and like being able to have a single company there to service all the needs of any one particular surgery. And so I think X-Fix does that really nicely. Circular fixation was the.

The surgeons get a level of comfort and like being able to have a single company there to service all the needs of any one particular surgery and so I think expect does that really nicely.

Circular fixation was was the.

Speaker 6: the beginning of that focus for us. I would expect to see maybe some of the pin-to-bar activity there, and mini-rail would be another interesting area, both for the forefoot and bunion-type indications, as well as trauma in some of those cases. So, the external fixation was a missing piece for us in the portfolio, and we're excited that we've got the attention now, and products hit

Beginning of that focus for us I would expect to see maybe some of the pin to bar activity there.

And many rail would be another interesting area both for the four foot in bunion type indications as well as trauma and some of those cases. So the external fixation was was a missing piece for us in the portfolio and we're excited that we've got the attention now and products hitting the market here in the near future.

Speaker 4: And I would just add, Turk, on that particular product line, I think it really.

I would just add to work on that that particular product line I think it really speaks to the ability of our company to bring products to market that are differentiated.

Speaker 4: of our company to bring products to market that.

Speaker 4: period of time, you know when I joined back at the end of September last year this was a product line in an area that the team had.

In a short period of time when I joined back at the end of September of last year. This was a product line in an area that the team has outlined as we need to get into this space and here. We are just over just over 12 months later.

Speaker 4: We need to get into this space, and here we are just over 12 months later with a product on the market, our first offering, and a differentiated product that we expect to do well.

With the product on the market, our first offering and a differentiated product that we expect to do well.

Thank you.

Thank you Dave as a reminder, if you would like to ask a question you can press star one on your telephone keypad.

Speaker 1: Thank you Dave. As a reminder, if you would like to ask a question, you can press star 1 on your telephone keypad.

Speaker 1: Our next question comes from Mike Mattson from Needham. Mike, your line is now open.

Our next question comes from Mike Matson from Needham Mike. Your line is now open.

Speaker 2: Hi. Good morning. This is David on the mic. Congrats on the first earnings call and thanks for taking the questions. Maybe another product question for you guys. I mean, it seems like maybe one of the last product apps at Paragon currently is soft tissue repair. So, maybe you can talk about, you know, what you have going on there and maybe timing on a potential soft tissue repair launch.

Hi, Good morning. This is David on for Mike Congrats on the first earnings call and thanks for taking the questions.

Maybe another product question for you guys I mean, it seems like maybe one of the last product asset Paragon currently is sort.

Tissue repair.

So maybe you can talk about what you have going on there and maybe timing on a potential soft tissue repair launch.

Speaker 6: Yeah, thanks for the question, David. This is Albert again. I would tell you that soft tissue is really an exciting aspect of foot and ankle surgery.

Yes. Thanks for the question David This is Albert again.

I would tell you that soft tissue is really an exciting aspect of foot and ankle surgery. It's.

Really.

Speaker 9: missing piece in terms of our consideration. We tend to think of

A missing piece in terms of our consideration we tend to think of the bony deformity aspect of some of these elements, but the soft tissue is a really critical driver of that deformity and so soft tissue is a focus for us we've got a lot of activity.

Speaker 6: the bony deformity aspect of some of these ailments, but the soft tissue is a really critical driver of that deformity. And so soft tissue.

Speaker 6: is a focus for us. We've got a lot of activity in that particular arena. That's part of the 22 projects that we're expecting to hit the market here in the next two years.

In that particular arena, that's part of the 22 projects that were expecting to hit the market here in the next two years and we're really excited just like external fixation.

Speaker 6: and we're really excited, just like external fixation.

Got it.

Speaker 6: ability to identify the real needs of that particular indication and develop differentiated products to address those needs.

Our ability to identify the real needs of that particular indication and develop differentiated products to address those needs.

Speaker 6: But then also, we're really excited about what that means in terms of complementing our portfolio and the cases that we service today with additional products to, again, be the premier foot and ankle spot. So soft tissue, you're right, was a piece that we were desperately looking at, just like external fixation.

But then also we're really excited about what that means in terms of complementing our portfolio in the cases that we service today with additional products to again be the premier foot and ankle spot. So soft tissue you're right is what it was a piece that we were desperately looking at just like external fixation.

Speaker 6: And we're really excited about what we've been developing there and we'll be hitting the market here

And we're really excited about what we've been developing there and we will be hitting the market here soon.

Yeah.

Speaker 4: Great. Thanks for that. And then maybe one for Steve. You called out some of these higher margin products benefiting the gross margin. So, I mean, would it be safe to assume that those continue? And maybe in the fourth quarter in 2022, we see some continued gross margin improvement? Thanks for taking the questions. Well, thanks for that, David. Without giving specifics on what we expect our future gross profit margins to be, I would tell you that

Great. Thanks for that and then maybe one for Steve you called out some of these higher margin products benefiting the gross margin so.

I mean would it be safe to assume that those continue and maybe in the fourth quarter and 2022, we see some continued gross margin improvement thanks for taking the questions.

Well thanks.

Thanks for that David without giving specifics on what we expect our future gross profit margins to be I would tell you that.

We're comfortable in the 80% gross product margin range that we've been in the last two years and what we saw.

Speaker 4: And what we saw in this particular quarter compared to last year was we did have some new products that come to market, including many different ankle offerings that we have that in many cases have a.

In this particular quarter compared to last year was we did have some new products that come to market, including many different ankle offerings that we have that.

In many cases have a higher overall gross profit margin. So that was a contributing factor year over year in that regard, but all of our products by and large have had pretty solid gross profit margins. There just happens to be a few that do.

Do better than a bit better than others and some of the ankle products or are those and we saw a nice contribution from those in the third quarter.

Great. Thank you.

Thank you.

Speaker 1: That concludes the Q&A for today. I will hand back over to Albert da Costa for any closing remarks.

That concludes the Q&A for to say I'll hand back over to Albert to Costa for any closing remarks.

Speaker 6: Thank you again for your time today. Steve and I look forward to meeting many of you at future investor and industry conferences, as well as individual meetings. Have a great day.

Thank you again for your time today, Steve and I look forward to meeting many of you at future investor and industry conferences as well as individual meetings have a great day.

Thank you for joining today's call you may now disconnect.

Speaker 12: The.

Uh huh.

Yeah.

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Yeah.

Yeah.

Yeah.

Okay.

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Yeah.