Q3 2023 Paragon 28 Inc Earnings Call
Good afternoon, and welcome to Paragon 28 third quarter 2023 earnings Conference call.
Speaker 1: Good afternoon and welcome to Paragon 28's third quarter 2023 earnings conference call. Currently participants are in 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 and I would now like to hand the conference over to your host today, Mr Matthew Brinkman, Senior Vice President of Strategy and Investor Relations.
Currently participants are in listen only mode, we'll 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, and I would now like to hand, the conference over to your host today, Mr. Matthew Brinkman Senior Vice President of strategy and Investor Relations.
Speaker 2: Mr. Brinkman, please go ahead. Good afternoon, and thank you for joining Paragon 28's third quarter 2023 financial results.
Mr. Brinkman. Please go ahead good afternoon, and thank you for joining Paragon 28 third quarter 2023 financial result in earnings call presenting on today's call are Albert <unk>, Chairman and Chief Executive Officer, and Steve Deitsch, Chief Financial Officer.
Speaker 3: Presenting on today's call are Albert DaCosta, Chairman and Chief Executive Officer, and Steve Deitch, Chief Financial Officer.
Speaker 4: Before we begin, I would 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 1995. Forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or prediction of future events, results, or performance.
Before we begin I would 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 1095.
Forward looking statements include statements made as to the Companys or managements intentions hopes beliefs expectations or predictions of future events results or performance.
Speaker 5: These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from those forward-looking statements.
Forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results to differ materially from those forward looking statements.
Speaker 6: All forward-looking statements are based upon current available information, and Paragraph 28 assumes no obligation except as required by law to update these statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today.
All forward looking statements are based upon current available information and Paragon 28 assumes no obligation except as required by law to update these statements additional information concerning certain risks and uncertainties that may impact. These forward looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today.
Speaker 7: During this presentation, we will refer to the non-GAAP financial measures of adjusted EBITDA and cognitive currency net revenue growth. A reconciliation to the most comparable GAAP financial measure, net income, and reported net revenue growth is contained in our press release issued earlier today. And with that, I will now turn the call over to Alan.
During this presentation, we will refer to the non-GAAP financial measures of adjusted EBITDA and constant currency net revenue growth a reconciliation to the most comparable GAAP financial measure net income and reported net revenue growth is contained in our press release issued earlier today and with that I will now turn the call over to Albert.
Thanks, Jeff good.
Speaker 8: Thanks, Matt. Good afternoon and thank you for joining us for our third quarter 2023 earnings call. I will start things off with a review of our recent performance, followed by highlights from the quarter.
And thank you for joining us for our third quarter 2023 earnings call I will start things off with a review of our recent performance followed by highlights from the quarter.
Speaker 9: Then I'll pass it over to Steve to provide further details on our financial results, an overview of our new and improved credit facility, which we also announced today, and an update on our 2023 financial guidance.
Then I'll pass it over to Steve to provide further details on our financial results and overview of our new and improved credit facility, which we also announced today and an update on our 2023 financial guidance.
To kick things off global revenue was $155 $8 million for the first nine months of 2023, representing 20% reported growth and 21% constant currency growth respectively.
Speaker 10: To kick things off, global revenue was $155.8 million for the first nine months of 2023, representing 20% reported growth and 21% constant currency growth, respectively.
Speaker 11: Our balanced business model continues to drive our revenue growth well above the estimated market growth rate of 7%, with meaningful growth contributions from each of the five-foot and ankle subsegments.
Our balanced business model continues to drive our revenue growth well above the estimated market growth rate at 7% with meaningful growth contributions from each of the five foot and ankle sub segments.
Speaker 12: Third quarter 2023 global revenue was $52.8 million, representing 15% reported in constant currency growth compared to the third quarter of 2022.
Third quarter 2023, global revenue was $52 $8 million, representing 15% reported and constant currency growth compared to the third quarter of 2022.
Speaker 13: I am very pleased with this performance given the tough 30% prior year constant currency growth comparison and the short-term supply chain disruption.
Very pleased with this performance given the tough 30% prior year constant currency growth comparison in the short term supply chain disruptions.
We continued to execute on our U S strategies that have and will continue to drive strong and sustainable growth.
Speaker 14: We continue to execute on our U.S. strategies that have and will continue to drive strong and sustainable growth.
Speaker 15: During the third quarter of 2023, we increased our U.S. producing sales roster by almost 20 percent to 257 compared to the third quarter of 2022, while increasing our surgeon customer base by 9 percent to a record 2,061 customers.
During the third quarter of 2023, we increased our U S producing sales roster by almost 20% to 257 compared to the third quarter of 2022.
While increasing our surgeon customer base by 9% to a record 2061 customers.
Speaker 16: We also continue to see nice levels of year-over-year revenue gains from both legacy producing sales representatives and surging customers.
We also continue to see nice levels of year over year revenue gains from both legacy producing sales representatives and surgeon customers driven by new product launches combined with solid sales force execution and leading medical education.
Speaker 17: driven by new product launches, combined with solid Salesforce execution and leading medical education.
Speaker 18: Further, we have several important and exciting product launches happening in the coming months in tandem with recent launches, which will provide additional growth opportunities in the US.
Further we have several important and exciting product launches happening in the coming months in tandem with recent launches, which will provide additional growth opportunities in the U S.
Our international business continued to perform exceptionally during the third quarter of 2023, and we continue to be excited by the opportunity we have in both our most established markets as well as other increasingly important markets.
Our growth is ultimately driven by our ability to bring innovative and relevant new technologies to market, which help our surgeon customers improve patient outcomes.
Speaker 19: Our growth is ultimately driven by our ability to bring innovative and relevant new technologies to market, which help our surgeon customers improve foot and ankle patient outcomes.
Speaker 20: As a reminder, we typically launch 5 to 10 products each year, and this year will be no different.
As a reminder, we typically launch five to 10 products each year and this year will be no different.
Speaker 21: This year, we've launched six products to date, including our second metatarsal shortening system, the Gorilla Supermalleolar Osteotomy Plating and Wedge System, the JAWS Great White
This year, we've launched six products to date, including our second metatarsal shortening system.
<unk> and Supervalu, Ola osteotomy plating and web system.
Josh Great White Knight and our staple system.
Speaker 22: beast cortical fiber bone graft and two soft tissue products with the reinforced extra osseous repair system and bridge line adaptive tape.
<unk> cortical fiber bone graft and two soft tissue products with the reinforced extra osseous repair system and bridge line adaptive Tate.
Speaker 23: I also continue to be thrilled about the depth and quality of our product pipeline with over 20 active projects in development, including several substantial launches planned in the next few quarters and beyond.
I also continue to be thrilled about the depth and quality of our product pipeline with over 20 active projects in development, including several substantial launches planned in the next few quarters and beyond.
Finally.
Speaker 24: Finally, we are closely following GLP-1 developments and potential foot and ankle market implications.
We are closely following <unk> developments and potential foot and ankle market implications at the same time, we are focused first and foremost on executing our business strategy to improve foot and ankle patient outcomes.
Speaker 25: At the same time, we are focused first and foremost on executing our business strategy to improve foot and ankle patient outcomes.
Speaker 26: I'll start by saying the market that we are exclusively focused on, foot and ankle, is truly a gem. Today, the global foot and ankle market is estimated to be more than $4.9 billion, growing rapidly at about 7%, with potential for growth acceleration driven by new technologies such as Smart 28, that we believe have the potential to reduce current levels of foot and ankle complications.
I'll start by saying the market that we are exclusively focused on foot and ankle is truly a gym.
Today, the global foot and ankle market is estimated to be more than $4 9 billion.
Growing rapidly at about 7% with potential for growth acceleration driven by new technologies, such as smart 28 that we believe have the potential to reduce current levels of foot and ankle complications.
Speaker 27: We are positioned very well in this great market, and we expect share gains to be the primary driver of our growth in the years to come.
We're positioned very well in this great market and we expect share gains to be the primary driver of our growth in the years to come.
Of course, it is impossible to speculate what impact if any <unk> will have on the future of foot and ankle market, but our view is that anything leading to a more active lifestyle could ultimately benefit the foot and ankle market, which is our singular passion and focus.
Speaker 28: Of course it is impossible to speculate what impact, if any, GLP-1s will have on the future foot and ankle market, but our view is that anything leading to a more active lifestyle could ultimately benefit the foot and ankle market, which is our singular passion and
Speaker 29: Our experience generally indicates that foot and ankle patients are typically younger and more active than in other orthopedic and medtech markets. And less obese patients also tend to be better surgery candidates. So we have quite a few reasons to be bullish on our market and our business.
Our experience generally indicates that foot and ankle patients are typically younger and more active than other orthopedic and med tech markets and less of these patients also tend to be better surgery candidates. So we have quite a few reasons to be bullish on our market and our business.
Speaker 30: Our third quarter earnings supplement on our investor relations website includes additional details regarding GLP-1s and the foot and ankle market, as well as a few other topics we are discussing today. With that, I will now turn it over.
Our third quarter earnings supplement on our Investor Relations website includes additional details regarding <unk>, one in the foot and ankle market as well as a few other topics we are discussing today.
With that I will now turn it over to Steve.
Thank you Albert.
Speaker 31: Paragon 28's third quarter 2023 revenue was $52.8 million.
Paragon <unk> third quarter, 2023 revenue was $52 $8 million.
Speaker 32: representing 14.7% and 14.5% reported in constant currency year-over-year growth, respectively.
Representing 14, 7% and 14, 5% reported and constant currency year over year growth respectively.
Our U.S. revenue was $44.6 million, representing 11.5% growth over the prior year quarter.
Our U S revenue was $44 $6 million, representing 11, 5% growth over the prior year quarter.
And a nice sequential increase of $2 $5 million from the second quarter of 2023.
and a nice sequential increase of $2.5 million from the second quarter of 2023.
Our international revenue was $8.2 million, representing 36.2% and 34.7% reported in constant currency year-over-year growth, respectively.
Our international revenue was $8 2 million, representing 36, 2% and 34, 7% reported and constant currency year over year growth respectively.
Supply chain headwinds continued into the third quarter of 2023 as expected.
Supply chain headwinds continued into the third quarter of 2023 as expected, but to a lesser extent than those experienced in the second quarter.
A lesser extent than those experienced in the second quarter.
We continue to expect supply chain headwinds to diminish further during the fourth quarter of 2023.
We continue to expect supply chain headwinds to diminish further during the fourth quarter of 2023.
Adjusted EBITDA for the third quarter of 2023 improved by 54.1% to a $1.2 million loss.
Adjusted EBITDA for the third quarter of 2023 improved by 54, 1% to a $1 $2 million loss.
On a year-to-date basis, our adjusted EBITDA improved by 42.4% to a $5.2 million loss with gross profit margin at 81.9%.
On a year to date basis, our adjusted EBITDA improved by 42, 4% to $5 $2 million loss with gross profit margin at 81, 9%.
Gross profit margin for the quarter was 80.3%.
Gross profit margin for the quarter was 83%.
and was approximately one percentage point less than the third quarter last year due to increased inventory reserve.
It was approximately one percentage point less than the third quarter last year due to increased inventory reserves.
despite making continued growth investments in R&D and selling and marketing throughout 2023.
Despite making continued growth investments in R&D and selling and marketing throughout 2023.
Quarterly operating expenses have remained consistent at approximately $51 million throughout 2023, resulting in continued operating expense leverage and profitability.
Quarterly operating expenses have remained consistent at approximately $51 million throughout 2023.
Resulting in continued operating expense leverage and profitability improvements.
We expect operating leverage and profitability to continue to improve in the fourth quarter of 2023 and beyond which.
We expect operating leverage and profitability to continue to improve in the fourth quarter of 2023 and beyond, which we believe will drive positive adjusted EBITDA on an annual basis beginning in 2024.
Which we believe will drive positive adjusted EBITDA on an annual basis beginning in 2024.
Now turning to cash flow.
Our operating cash use for 2022 and 2023 year-to-date combined totaled approximately $100 million compared to approximately break-even operating cash flow in both 2020 and 2021.
Our operating cash use for 2022, and 2023 year to date combined totaled approximately $100 million.
Compared to approximately breakeven operating cash flow in both 2020 and 2021.
There are three primary drivers of the change in operating cash use.
There are three primary drivers of the change in operating cash use.
First, inventory purchases have been $41 million above our normal operating levels due to supply chain disruptions resulting in temporary stockpiling of inventory.
First inventory purchases have been $41 million above our normal operating levels due to supply chain disruptions, resulting in temporary stockpiling of inventory.
Second, we made $27 million of non-recurring legal settlement payments, which were paid in full earlier this year.
Second we made $27 million of nonrecurring legal settlement payments, which were paid in full earlier this year.
Third we made important targeted growth investments in our business.
Third, we made important targeted growth investments in our business.
resulting in temporal negative adjusted EBITDA equaling a $16 million loss since the start of 2022.
<unk> and temporal negative adjusted EBITDA, equaling a $16 million loss since the start of 2022.
These three items together account for $84 million of the nearly $100 million of operating cash used since the start of 2022.
These three items together account for $84 million of the nearly $100 million of operating cash used since the start of 2022.
Each of these items created cash flow headwinds in 2022 and 2023, but importantly, we believe these three items will become cash flow tailwinds beginning in 2024, and here's why.
Each of these items created cash flow headwinds in 2022 and 2023, but importantly, we believe these three items will become cash flow tailwind beginning in 2024 and here's why.
With supply chain disruptions continuing to abate, over time we expect to return our inventory balances to 2020 and 2021 levels.
With supply chain disruptions continuing to abate over time, we expect to return our inventory balances for 2020 in 2021 levels of operating efficiency.
Our enhanced operations function has great new leadership and team members, material resource planning tools, and committed vendor partners.
Our enhanced operations function has great new leadership and team members material resource planning tools and committed vendor partners and execution plans are underway to drive significant improvements in inventory efficiency as we close 2023 and enter 2024.
and execution plans are underway to drive significant improvements in inventory efficiency as we close 2023 and enter 2024.
Finally, as previously mentioned, we expect positive annual adjusted EBITDA in 2024 and beyond building on the earnings momentum over the last several quarters, leveraging past investments and continuing to make important growth investments to grow our business in multiples of the market growth rate.
Finally, as previously mentioned, we expect positive annual adjusted EBITDA in 2024 and beyond, building on the earnings momentum over the last several quarters, leveraging past investments, and continuing to make important growth investments to grow our business and multiples of the market growth.
Now I'd like to share some information on our new and improved senior credit facility.
Now I'd like to share some information on our new and improved senior credit facility.
As you know, we previously had a $90 million senior credit facility with $30 million drawn.
As you know, we previously had a $90 million senior credit facility with $30 million drawn.
The new $150 million senior credit facility with ARIES announced today expands our available borrowings by $60 million, and importantly, it is non-dilutive with no equity sweeteners such as warrants.
The new $150 million senior credit facility with Ares announced today <unk>.
<unk>, our available borrowings by $60 million and importantly, it is non dilutive with no equity sweeteners such as warrants.
Further it is competitively and similarly priced to our previous facility.
Further, it's competitively and similarly priced to our previous facility.
With this transaction, we drew 100 million that closed today, bringing the company's total pro forma liquidity to just under $150 million.
With this transaction, we drew $100 million at close today, bringing the company's total pro forma liquidity to just under $150 million, including approximately $100 million of pro forma cash as of September 30, 2023.
Including approximately $100 million of pro forma cash as of September 32023.
We believe this level of liquidity reinforces P28's pathway to cash flow breakeven given our expected continued improvements in earnings and cash flow into 2024 and beyond.
We believe this level of liquidity reinforces $2 28 pathway to cash flow breakeven given our expected continued improvements in earnings and cash flow into 2024 and beyond.
Finally, on this topic, we are thrilled to partner with a high-quality lender such as Aries as we continue to rapidly grow our business. Now, turning
Finally on this topic, we are thrilled to partner with a high quality lenders such as areas as we continue to rapidly grow our business.
Now turning to our 2023 revenue guidance.
The foot and ankle market is strong our business fundamentals and leading indicators are positive and we have great confidence in our growth prospects.
The foot and ankle market is strong. Our business fundamentals and leading indicators are positive, and we have great confidence in our growth prospect.
Our updated 2023 revenue guidance accounts for these factors, including the improving supply chain environment, but also factors in the continued uncertain macroeconomic environment.
Our updated 2023 revenue guidance accounts for these factors, including the improving supply chain environment, but also factors in the continued uncertain macroeconomic environment.
For the full year of 2023, we are reaffirming our previous net revenue guidance range of $214 million to $218 million.
For the full year of 2023, we are reaffirming our previous net revenue guidance range of $214 million to $218 million.
And at midpoint, this guidance range implies 19% reported and 20% constant currency year-over-year growth.
And at midpoint this guidance range implies, 19% reported and 20% constant currency year over year growth.
Our net revenue guidance also assumes foreign currency translation rates remain consistent with current translation rates. That is the end of the webinar.
Our net revenue guidance also assumes foreign currency translation rates remain consistent with current translation rates.
That is the end of our prepared remarks.
Thank you we will now open the.
Thank you. We will now open the line for questions. If you have a question, please register this now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press star and then two.
Your line for questions. If you have a question. Please would you say this now by pressing star followed by the number one on your telephone keypad.
You change your mind I would like to be removed from Nicky. Please press star and then K.
Our first question today comes from Matthew O'brien with Piper Sandler.
Our first question today comes from Matthew O'Brien with Piper Sandler. Matthew, please go ahead, your line is now open.
Please go ahead. Your line is now open.
Oh afternoon. Thanks, so much for taking the questions I guess for starters, maybe kind of the Alberta, Steve but the Q3 result up assessment tough comp was really impressive to see.
Afternoon. Thanks so much for taking the question. I guess for starters, maybe, I don't know if it's at Albert or Steve, but the Q3 result off of Session Top was really impressive to see.
especially the sequential bump when we're not getting that from a lot of ortho companies this quarter. So, can you just talk about some of the improvements that you saw from a productivity supply chain perspective that got you there? And I guess just kind of wrapping into that question, how come you didn't take maybe the low end of the guidance range up a little bit, just given what we saw here in Q3?
Especially the sequential bump when we're not getting that sort of a lot of ortho companies. This quarter. So can you just talk about some of the <unk>.
Some of the improvements that you saw from our productivity supply chain perspective that got you there and I guess just kind of wrapping into that question. How come you didn't take maybe the low end of our guidance range up a little bit just given what we saw here in Q3.
Yeah, maybe I'll take a start on that one, Matt, and great to hear from you. I gotta tell you, we were pretty pleased with our team's performance in Q3. I think it's a couple of things that you saw there that led to a sequential increase there. One is, you know, some of the product launches in
Yes, maybe I'll take a start on that one then great to hear from you.
I got to tell you we were pretty pleased with our team's performance in Q3 I think it's a couple of things that you saw there that led to a sequential increase there one is some of the product launches in <unk>.
in last year and in the beginning of this year I think started to influence us there a bit.
Last year in the beginning of this year I think started to influence us they're a bit we did start to see some improvements in the supply chain that we have discussed in the Q2 call in and I think that's we're expecting that to continue to improve through the rest of this year.
We did start to see some improvements in the supply chain that we had discussed in the Q2 call and
And I think that's, we're expecting that to continue to improve through the rest of this year.
And then just executing our medical education plan has been going really well, we launched a second mobile lab.
second mobile lab in Q3.
In Q3, and I think youre, starting to see some of those things paying off and allowing us to execute nicely.
And I think you're starting to see some of those things paying off and allowing us to execute.
Yeah, hey, Matt, it's Steve. And on the second part of the question, we really just took a look at a full year, you know, taking into account our business being very strong fundamentals, leading indicators, etc, including
Yeah, Hey, Matt It's Stephen on the second part of the question. We really just took a look at the full year taking into account our business being very strong fundamentals, leading indicators et cetera, including maybe the record number of producing sales reps that we had in the third quarter and a record number of customers.
The the record number of producing sales reps that we had in the 3rd quarter and a record number of customers again, but also balancing that with. The fact that we're not completely through the, the challenge with the supply chain, it is getting better. It got better in the 3rd quarter. We expected to get 4th, continue to get better in the 4th quarter. But we've taken that into account in the low range and also.
Again, but also balancing that with the fact that we're not completely through the challenge with the supply chain. It is getting better it got better in the third quarter, we expect it to get fourth continue to get better in the fourth quarter, but we've taken that into account in the low range.
And also.
just the overall general macroeconomic environment and uncertainty. So that that would be that is the when you think about the low range, think about, you know, supply chain potential impacts and also any kind of worsening in the macroeconomic environment.
Just the overall general macroeconomic environment and uncertainty.
That is the when you think about the low range think about supply chain potential impacts and also.
Any kind of worsening in the macroeconomic environment.
Got it, that's helpful. And then second question, Steve, is probably for you. Just specifically on the ARIES facility, I mean, that's a big step up from what you had before. Just talk maybe a little bit about the breathing room. I don't know what the right analogy is to use here, but the breathing room that that provides to get you to cashflow break even or positive and kind of the timeframe for that specifically after getting to adjust it even to positive next year. Thanks.
Got it that's helpful. And then second question, Steve is probably for you just specifically on the on the Ares facility I mean, that's a big step up from what you had before just talk maybe a little bit about the.
The breathing room I don't know what the right analogy is to use here, but the breathing room to that that provides to get you to cash flow.
Breakeven or positive in terms of the timeframe for that specifically after getting to adjusted EBITDA positive next year. Thanks.
Yes, we're really excited to put that in place it's competitively priced agreement.
A competitively priced agreement, it's it is a step up from what we had before. We went from 90 million to 150 million dollars of available credit.
It is a step up from what we had before we went from $90 million to $150 million of available credit.
And and we did that for a couple of reasons. One, it provides just a reinforcement of our pathway to cash flow break even.
And we did that for a couple of reasons. One it provides just a reinforcement of our pathway to cash flow breakeven.
Um, we have spent more on cash over the last two years than we've historically spent, particularly on things like inventory.
We have spent more in cash over the last two years than we've historically spent particularly on things like inventory and also we finalized our legal settlement and we also.
And also, we finalized our legal settlement and we also invested in the business and we ran actually EBITDA losses over the last two years.
<unk> in the business and we ran actually EBITDA losses over the last two years and as we look forward, we expect those to reverse and really improve our cash flow, but this this agreement gives us a backstop of cushion per se and we hope that gives investors just visibility that there is an absolutely clear path runway.
And as we look forward, we expect those to reverse and really improve our cash flow. But this this agreement gives us.
a backstop, a cushion per se, and we hope that gives investors just visibility that there is an absolutely clear path runway to break even. And, you know, we felt that before, but we feel with this augmenting it, I think it's even more of a reason to believe for people that aren't potentially as close to the business as Albert and I.
To breakeven.
Felt that before but we feel with this augmenting it I think it's even more of a reason to believe for people that are potentially as close to the business as Albert.
Got it thanks, so much.
Got it thanks, Matt.
Our next question comes from Craig Bijou with Bank of America.
question comes from Craig Bijou with Bank of America. Craig please go ahead your line is open.
Please go ahead your line is open.
Good afternoon, guys, and thanks for taking the questions. Congrats on a strong quarter on a very tough comp. So, good to see. I wanted to start with the international business. I know it's, you know, only 15, you know, maybe a little bit less of your total business, but you've been putting up some pretty strong growth there. So, you know, Albert, maybe talk about.
Good afternoon, guys. Thanks for taking my questions Congrats on the strong quarter.
On a very tough comp so good to see.
I wanted to start with the international business I know, it's only 15.
Maybe a little bit less.
Of your total business, which you've been putting up some some pretty strong growth there. So.
Albert maybe talk about.
You know, the markets, you know, your opportunity there, is it, you know, expanding foot and ankle procedures in certain markets? Are you taking share? Just maybe a little bit more color on the international strategy and maybe how sustainable this level of growth is for the next couple of years.
The markets your opportunity there is it <unk>.
Pending foot and ankle procedures in certain markets or are you taking share just maybe a little bit more color on the international strategy and maybe how sustainable this level of growth is for the next couple of years.
Yes, great to hear from me, Craig and maybe I'll take a stab at this and anything I Miss Steve can shed some color on it as well, but generally speaking I will tell you. When we first entered the international market, we were paying special attention to any variances in preferences in just the style and structure.
Yeah, great to hear from you, Craig. And maybe I'll take a stab at this and anything I miss, Steve can shed some color on it as well. But generally speaking, I'll tell you, when we first entered the international market, we were paying special attention to any variances and preferences and just the style and structure of our kits being so specifically designed
Of our kids.
Being so specifically designed for the U S.
was something that we were vetting, and the response of that was really, really strong. And so the very first countries we entered, like South Africa,
It's something that we were vetting and the response of of that was really really strong and so the very first countries, we entered like South Africa.
have shown us that the setup of Paragon 28 is going to be very influential in the international market. It gave us a lot of confidence about that moving forward. On the other side of that equation, I'll tell you, our goal here is to do something powerful in the foot and ankle space, and we can't do that as a U.S.-only company. And it means that we need to bring in the styles and preferences from all over the world.
Shown us that the setup of Paragon 28 is going to be very influential in the international market gave us a lot of confidence about that moving forward on the other side of that equation I'll tell you.
Our goal here is to do something powerful in the flood ankle space and we can't do that as a U S. Only company and it means that we need to bring in the styles and preferences from all over the world.
And and that's what we're doing every day. We made some pretty significant investments in the infrastructure, the organization moving forward. We also take every single country As a separate entity and we determine what the best structure is going to be for that environment and who the key opinion leaders are and we start kind of
And that's what we're doing every day, we made some pretty significant investments in the <unk>.
Infrastructure the organization moving forward, we also take every single country.
As a separate entity and we determine what the best structure is going to be for that environment and who the key opinion leaders are and we start kind of feeling our way into each country. So we don't go into anything with a preconceived notion on how we should be structured and I think thats paying off.
feeling our way into each country. So we don't go into anything with a preconceived notion on how we should be structured. And I think that's paying off.
And so, generally speaking, I'll tell you one, we're thrilled that this is taking us in the right direction towards fulfilling our mission to improve outcomes for foot and ankle and doing it from a global perspective.
And so generally speaking I will tell you one we're thrilled that this is taking us in the right direction towards fulfilling our mission to improve outcomes for foot and ankle and doing it from a global perspective to it's another piece of diversity for us both geographically and even from a style and a preference Stan.
Two, it's another piece of diversity for us, both geographically and even from a style and a preference.
standpoint. So we're thrilled about that piece as well. And then third, it's just building a stronger business for us from a revenue perspective. And we continue to see a lot of opportunity there to continue to expand that. And so I think the runway is still really long and strong for us there.
Point, so we're thrilled about that piece as well and then third it's just building a stronger business for us from a revenue perspective, and we continue to see a lot of opportunity there to continue to expand that and so I think the runway is still really long and strong for us there.
Yeah, and I would just add, Craig, that the when you look at our overall market share, we're at about 4%.
And I would just add Craig that the when you look at our overall market share we are at about 4%.
global market share in the $5 billion foot and ankle market, and we're even less than that internationally. So we have an extensive runway and
Global market share in the $5 billion foot and ankle market and we're even less than that internationally. So we have <unk>.
<unk> of runway and.
And the investments that we've made are going to continue to yield our businesses in the UK and Australia and South Africa where we have larger businesses are just killing it right now, honestly. And thanks to those teams for the great work on the ground. But it's also in new markets as well that we're really just getting our teams going in. So a lot of runway in existing markets.
And the investments that we've made are going to continue to yield our businesses in the UK and in Australia, and South Africa, where we have.
Larger businesses are just killing it right now honestly and thanks to those teams for the great work on the ground, but it's also in new markets as well that were really just getting our team is going in and so a lot of runway in existing markets new markets markets, where we've been before but havent had that big of a.
new markets, markets where we've been before but haven't had that big of a beachhead, and just a very large vibrant market for us as we move forward.
A beachhead and just a very large vibrant market for us as we move forward.
Thanks, guys very very helpful.
Thanks, guys. Very, very helpful. And maybe shifting to the U.S. market, you know, a number of competitors have been talking about launching new products. So, Albert, maybe we'd love to get your kind of view of the competitive landscape. You know, obviously, it's always been competitive, but has it gotten more competitive in the U.S. or, I guess, globally? And maybe just some of your thoughts on how you guys are positioned versus some of
Maybe shifting to the U S market.
A number of competitors have been talking about launching launching new products.
So.
Maybe but love to get your kind of view of the competitive landscape.
Obviously, it's always been competitive but.
Has it gotten more competitive in the U S or I guess globally.
And then maybe just some of your thoughts on how you guys are positioned.
Versus some of some of the.
new, maybe not new entrants, but new products that are coming out into the market. Sure.
New move.
No new entrants with new products that are coming out into the market.
Sure.
Well, for starters, I'll tell you, we love competition. I think you might hear the same thing from some of our competitors about us. But our goal here is to improve outcomes for foot and ankle surgery. And, and I think, you know, the more competition we have, the more we kind of challenge each other to think about things in a different way. And, and I think that makes it exciting. And, and I think that's, just generally speaking, it's good for the entire market.
Well for starters I will tell you we love competition I think you might hear the same thing from some of our competitors about us but.
Our goal here is to improve outcomes for foot and ankle surgery.
And I think the more competition, we have the more we kind of challenge each other to think about things in a different way and I think that makes it exciting and I think thats just generally speaking it's good for the entire market from our perspective.
From our perspective, we feel, and I can speak on our behalf, but we feel like.
We feel.
And I can speak on our behalf, but we feel like.
Um, we care so much about foot and ankle. Um, this is all we care about. Right? And so when we go to bed at night, when we wake up in the morning, and when we have dinner, I mean, these are the thoughts that we're going through is how can we improve these procedures? What are we not thinking about yet?
We care so much about foot and ankle. This is all we care about right and so when we go to bed at night, when we wake up in the morning, and when we have dinner I mean these are the thoughts that we're going through is how can we improve these procedures. What are we not thinking about yet how can we support our surgeons better.
how can we support our surgeons better? How can we enhance our own offering? How can we you know continue to proliferate our offering in this space?
How can we enhance our own offering how can we continue to proliferate our offering in this space.
I know for us, that's what drives us every day. It's what keeps us motivated, and so I think that piece.
I know for us that's what drives US every day, it's what keeps us motivated and so I think that piece.
creates better product. It has a sincerity to it that is pretty unique to Paragon. There's a look and feel to our development strategy and our commitment to research and our communications with surgeons that that is pretty unique and I think that positions us really well to compete in this space and will continue to benefit us moving forward.
Creates better product it has a sincerity to it that is pretty unique to Paragon theres look and feel to our development strategy and our commitment to research and our communications with surgeons that is pretty unique and I think that positions us really well to compete in this space and we will continue to benefit us moving forward.
One last thing I'll add there just thanks for taking the questions. I think
One last thing I'll add there just thanks for taking the questions I think.
Yeah, I was I was just going to add one more piece to that. And it's just, you know, every competitor kind of has a key area that that they're most excited about. I think Paragon is one of the companies that's really kind of
Yes, I was just going to add one more piece to that and it's just every competitor kind of has a key area that that theyre. Most excited about I think paragon is one of the companies Thats really kind of.
consistently excited about the entire foot and ankle market. And so from a competition standpoint, maybe to address that part of your question, is there's just different pockets of competition depending on which sub-segment of the foot and ankle market we look at.
Consistently excited about the entire foot medical markets and so from a competition standpoint, maybe to address that part of your question is theres just different pockets of competition, depending on which sub segment of the foot and ankle market we look at.
Thanks Albert.
Okay.
Our next question comes from Neil Chatterjee with B Reilly. Please go ahead, your line is now open.
Our next question comes from Neil Chatterji with B Riley. Please go ahead. Your line is now open.
Hi, This is anderson on for Neil. Thank you for taking the questions first could you just update us on sales force productivity in the third quarter and any plans for continued sales force expansion into 'twenty four.
Hi, this is Anderson on for Neil. Thank you for taking the questions first. Could you just update us on Salesforce productivity in the third quarter and any plans for continued Salesforce expansion into 24?
Yeah, happy to. And thanks for the question. This is Steve. To start with, we increased our producing sales reps by almost 20% during the quarter compared to last year. And when you look at the productivity of our underlying reps, our legacy reps, legacy producing reps continued to show nice gains.
Yes happy to and thanks for the question this is Steve.
We start with we increased our producing sales reps by almost 20% during the quarter compared to last year.
And when you when you look at the productivity of our underlying reps our legacy reps legacy producing reps continued to show nice gains.
And overall, the actual revenue per producing rep actually came down just a touch from last year because we've added so many new reps.
And overall the actual revenue per producing rep actually came down just a touch from last year, because we've added so many new reps and Thats just the nature of adding additional reps into the the algebra here, but.
And that's just the nature of adding additional reps into the the algebra here. But continuing to drive productivity across legacy reps, we're continuing to see new reps that are, you know, relatively new additions to Paragon 28 scale up their businesses in nice ways. So I'm really excited about the KPIs when we think about.
Turning to drive productivity across legacy reps, we're continuing to see new reps that are.
Relatively new additions to Paragon 28 scale up their businesses and nice ways. So really excited about the kpis when we think about.
number of reps, producing reps, and opportunities for continued gains as we go forward.
Number of reps producing reps and opportunities for continued gains as we go forward.
Okay, great. Thank you and then how is surgeon training progressing and how many were trends in the third quarter and what was the split between U S and O U S.
Okay, great, thank you. And then how is surge in training progressing and how many were trained in the third quarter and what was the split between U.S. and O.U.S.?
Yeah, we continue to roll along. Literally, you know, we've got another mobile lab that we just launched that's going across the country. So two labs now in place, and we continue to train in excess of 500 surgeons per quarter.
Yes, we continue to roll along literally we've got another mobile lab that we just launched that's going across the country. So two labs now in place and we continue to train in excess of 500 surgeons per quarter.
Um, so strong, you know, we and one of the key things about our surgeon trainings that we we've said this in the past is it's not just new surgeons that come to see us.
So strong we and one of the key things about our surgeon training. So we said this in the past is it's not just new surgeons that come to see us.
Here in Denver and also on the road, it's our legacy customers that have opportunities to see all of our new products and have opportunities to see products that they may not be currently using as much as they'd like to, that they want to see it and try it again. So we're seeing new customers, we're seeing existing customers, and we're also getting a lot of our new reps the opportunity to be trained on our products at the same time, which drives some efficiency for us from a cost perspective. For more information, visit www.FEMA.gov
Here in Denver and also on the road.
<unk>.
<unk> customers that have opportunities to see all of our new products have opportunities to see products that they may not be currently.
Using as much as they'd like to do they want to see it and try it again.
So we're seeing new customers, we're seeing existing customers. We're also getting a lot of our new reps the opportunity to be trained on our products at the same time, which drive some efficiency for us from a cost perspective.
Alright. Thank you that's all for us.
Thank you Mike Sanderson.
Our next question comes from William <unk> with Canaccord. Please go ahead. Your line is now open.
Our next question comes from William Plovnek with Canaccord, please go ahead your line is now open.
Hi, This is Kevin <unk> on for Bill Thanks for taking my questions.
Hi, this is Kaylin Cronon for Bell. Thanks for taking the questions. Just on the supply issues, can you provide some more color on what is improving? And are you really expecting these challenges to bleed into 2024 as well? I think you talked last quarter that mainly the issues were with sterile package, which is a lot of your new products. Are new products you continue to launch also kind of experiencing those supply challenges?
The supply issues can you give us a color on what is.
Hey, what's up on what's improving are you really expecting these challenges to bleed into 2024 as well I think you talked last quarter that.
Mainly the issues were with scale package, which is a lot of your new products.
Price will continue to launch also kind of experiencing the supply challenges.
Yeah, Caitlin, thanks for the question. It's Steve. I would tell you that we, as expected, we saw continued improvements in the availability of all of the products that we had less availability in the second quarter, including sterile package products.
Yes, Caitlin and thanks for the question, Steve I would tell you that we as expected. We saw continued improvements in the availability of all of the products that we had less availability in the second quarter, including sterile packaged products.
The, the sterile package products continue to be the, the area of our supply chain that is still slower than we would like it to be, but it's consistent with what we had planned. So, so we're, while we still have some.
Sterile packaged products continue to be the area of our supply chain that is still slower than we would like it to be but it's consistent with what we had planned.
So we are while we still have some quote unquote headwinds with sterile pack products theyre not inconsistent with what we had expected.
quote-unquote headwinds with sterile pack products, they're not inconsistent with what we had expected three or four months ago.
Three or four months ago, and we do expect those two to really yield and not be a headwind for us as we get into the first part of 2024.
And we do expect those to really yield and not be a headwind for us as we get into the first part of 2024. Great, thanks for taking the question.
Great. Thanks for taking the question.
Thank you.
The next question comes from George <unk> with Stephens, Inc.
Please go ahead. Your line is now open.
Hey, good afternoon, and thanks for taking the question.
Maybe to shift our pipeline a little bit, clearly some exciting things, hey, clearly some exciting things coming.
Maybe to shift your pipeline a little bit clearly some exciting things.
Clearly some exciting thanks Kevin.
By the end of the year, and then also next year. I'm just curious if you could give us some additional color on where some of those devices are in terms of the sub segments, maybe, you know, those
By the end of the year and then also next year I'm just curious if you could give us some additional color on.
Where some of those devices are in terms of the sub segments maybe those.
Devices are extensions for things that are already in your portfolio or entering new indications. And then also any detail on maybe the cadence of some of those launches. I know I'll put a lot in that one question. Hopefully I can repeat anything if I need to.
Devices are.
Extensions for things that are already in your portfolio or entering.
New new indications.
Indications and then also any detail on maybe the cadence of some of those launches.
Now I'll put a lot in that one question hopefully.
I can repeat anything if I need to.
Yes.
Yes, George this is Albert and I'll, maybe take a stab at it and this is my sweet spot and I Love you trying to get as much information you can about future launches, which is always hard for me not to divulge but.
Now, how you doing, George? This is Albert and I'll maybe take a stab at it. You know, this is my sweet spot and I love you trying to get as much information you can about future launches, which is always hard for me not to divulge, but.
Look, we are as excited as we've ever been about some of the products that we're expecting to launch next year.
Look we are as excited as we've ever been about some of the products that we're expecting to launch next year.
And the short answer to most of your questions is yes, yes, and yes, right? We do have a few line extensions that we expect to introduce next year.
The short answer to most of your questions is yes, yes, and yes right.
We do.
Have a few line extensions that we expect to introduce next year.
We are expecting to cover every aspect of foot and ankle surgery. So all the subsegments, we've got some introductions going into next year. I wouldn't say that.
Our expecting to cover every aspect of foot and ankle surgery. So all of the sub segments. We've got some introductions going into next year.
I wouldn't say that.
Any of my children are more special than the other children, but there are a couple of products that we think have a pretty significant opportunity. At least we're anticipating they could be pretty significant in terms of improving outcomes for patients, which you know is a pickle point for us.
Any of my children are more special than the other children, but there are a couple of products that we think has a pre.
Significant opportunity at least we're anticipating there could be pretty significant in terms of improving outcomes for patients, which you know is.
Is it pickup point for us So yes, we've got a couple of really exciting things launching next year, including our first module smart 28, which we've been kind of letting the world know, we expect to launch that early next year or at least the first half of next year, we might see some limited launches a little bit earlier than that based on some regulatory approvals.
So yeah, we've got a couple of really exciting things launching next year, including our first module of Smart28, which we.
Kind of letting the world know we expect to launch that early next year, or at least the first half of next year, we might see some limited launches a little bit earlier than that, based on some regulatory approvals, but.
That is something that we've got a lot of excitement around.
That is something that we've got a lot of excitement around not to underplay. Some of the product launches. We've launched this year and we still have somewhere between 2% and four products that we might be launching it.
underplay some of the product launches we've launched this year, and we still have somewhere between two and four products that we might be launching at the tail end of this year, so a lot of exciting stuff in terms of product development. And our goal is to influence everything that could possibly afflict
At the tail end of this year, so a lot of exciting stuff in terms of product development and our goal is to influence everything that could possibly afflict, a lower extremity patient and every time, we launch one of these products I think we get closer and closer to that goal. So we've got a lot of exciting things coming in and I love that question.
A lower extremity patient and every time we launch one of these products, I think we get closer and closer to that goal. So we've got a lot of exciting things coming and and I love that question. So product development is what really tickles me every day that I get to come to work and see what we're doing there.
Product development is what really tickled to be everyday that I get to come to work and see what we're doing there.
Okay, that's really helpful and we're looking forward to hearing some more details about those in the future. Maybe to shift back a little bit to the performance in the quarter, could you give us some additional color maybe on how some of the sub-segments trended on a monthly basis and, you know, specifically relative to your expectations?
Okay. That's really helpful and we're looking forward to hearing some more details about those in the future maybe two.
Shift back a little bit to the performance in the quarter could you give us some additional color may be on.
How some of the sub segments trended on a monthly basis and.
Specifically relative to your expectations.
Yeah, maybe I'll start and then and Albert can can come back in Georgia. Thanks. Looking forward to seeing you next week.
Yes, maybe I'll start and then Albert can come back and Jordan. Thanks, looking forward to seeing you next week.
Look every one of our segments performed well in the third quarter and also on a year to date basis.
Look, every one of our segments performed well in the third quarter and also on a year-to-date basis.
the benefit of our business having such a strong presence in each of these segments. And that's going to continue to be that way as we go forward. And Albert says he doesn't have favorite children, but other than, you know, other than a few things like Paragon 28 is one of his top two children. So, look, everything is performing well. You know, in singling out things we typically don't do. So we don't want to break stride with that. So, you know, each subsegment is important to us and grew for us.
The benefit of our business, having such a strong presence in each of these segments.
And thats going to continue to be that way as we go forward and Albert says he doesn't have favorite children, but other than that.
Other than a few things like Paragon 28 is one of his top two children. So.
Look everything is performing well and singling out things, we typically don't do so we don't want to break stride with that so each each subsegment is important to us and grew for us.
Okay understood. Thank you all again for the time.
You got it thanks, George George.
You got it. Thanks, George.
Our next question comes from Brandon <unk> with William Blair.
Our next question comes from Brandon Vazquez with William Blair. Please go ahead Brandon your line is
Please go ahead Brendan your line is open.
Hi, everyone, thanks for taking the question. Congrats on a nice quarter. I want to ask 1 on the guidance. It implies a nice.
Hi, everyone. Thanks for taking the question congrats on a nice quarter.
I wanted to ask one on the guidance.
It implies a nice rebound in Q4, but I'm kind of curious if you use kind of the low end versus the high end for what's implied in Q4, it's a relatively wide range at least for Q4, specifically if I'm doing my math right something like low teens growth to over 20% growth for Q4. So maybe you can talk about what gets you to the low end or the high.
rebound in Q4, but I'm kind of curious if you use kind of the low end versus the high end for what's implied in Q4. It's a relatively wide range, at least for Q4 specifically. If I'm doing my math right, something like low teens growth to over 20% growth for Q4. So maybe you can talk about what gets you to the low end of the high or the high end of that guidance as you go into Q4.
Or the high end of that guidance.
As you go into Q4.
Yeah, Yeah happy to do that and thanks for the question. It's nice to have you on the calls and picking up coverage. So.
Yeah, yeah, happy to do that. And thanks for the question. It's nice to have you on the calls and picking up coverage. So I would say that, you know, we intentionally left
I would say that we intentionally left.
The range at 214 to 218 just account for some potential uncertainties on the downside at the low end of the range related to supply chain and just uncertainties in the macro economic environment.
The range of $2 14 to 2018, just to account for some potential uncertainties on the downside at the low end of the range related to supply chain and just uncertainties in the macroeconomic environment.
You know, there's certainly nothing that's going off plan right now. And, you know, what we're experiencing with the supply chain is consistent with our previous expectations, but the low end accounts for potentially some additional headwind there.
There is certainly nothing that's going off plan right now and what we're experiencing with the supply chain is consistent with our previous expectations, but the low end accounts for potentially some some additional headwind there.
Um, and also just the potential, which we're not experiencing now, to be clear, but, you know, the potential for.
And also just the potential which we're not experiencing now to be clear, but the potential for headwinds from a macroeconomic perspective, and the and the high end would assume the opposite just.
headwinds from a macroeconomic perspective. And the high end would assume the opposite, just continued improvements in supply chain.
Continued improvements in supply chain.
um and and just a really robust foot and ankle elective and non-elective procedural
And just a really robust foot and ankle elective and non elective procedural environment.
Okay, Great and then switching gears, a little bit to the pipeline.
Okay, great. And then, switching gears a little bit to the pipeline, I'll take a shot, too, and try to get – see if I can get any other details out of you. But maybe on SMART 28, if you can give any updates on where you guys are for that product, even if you just – you know, like, are you guys in a point where you have a commercial product? Are you in a regulatory filings? Anything like that would be helpful to understand kind of timing of – and expectations for that first module in SMART 28. Thanks.
I'll take a shot and try to get see if I can get any other details out of you, but maybe on smart 28.
If you can give any updates on where you guys are for that product. Even if you. Just are you guys at a point, where you have a commercial product are you in a regulatory filings or anything like that would be helpful to understand kind of timing.
And expectations for that first module in <unk>. Thanks.
Got it and I appreciate the attempt.
You got it. And I appreciate the attempt and I'll and I'll do my best to answer as much as I can. I will tell you, we are in a regulatory Submission point right now. And we're, we're in good conversations with the FDA there. And so we're we're
But I'll do my best to answer as much as I can I will tell you we are in a regulatory.
Submission point right now and where we are in good conversations with the FDA there and so we're we're excited about the opportunity, but we're being cautious there.
Excited about the opportunity, but we're being cautious there.
We do have a product that, to be honest with you, is internally it's been exceeding our expectations and we're really excited about that introduction. I'm also really excited because I know it's been a little bit difficult for the investment community to really understand why we're so excited about Smart28. And I think when we launch that first module, people are going to start to understand, okay, that's what this means and this is what it looks like and this is how it could influence and support surgeons in a meaningful way.
We do have a product that to be honest with you is internally, it's been exceeding our expectations and we're really excited about that introduction I'm also really excited because I know, it's been a little bit difficult for.
The investment community to really understand why we're so excited about smart 28, and I think when we launched that first module people are going to start to understand okay. That's what this means and this is what it looks like and this is how it did influence and support surgeons in a meaningful way.
And so that launch, we're expecting to be in the first half of next year.
And so that that launch we're expecting to be in the first half of next year.
from more of a broad scale introduction. But we're expecting sort of a beta launch later this year, just predicated on that regulatory filing. So just making sure that the approvals come in as we would anticipate. And if they do, then we'll expect to go to a small scale launch.
More of a broad scale introduction.
But we're expecting sort of a beta launch later this year just predicated on that regulatory filings, so just making sure that the.
The approvals come in as we would anticipate and if they do then we'll expect to go to a small scale launch.
And at that point in time, we might be able to start communicating a little bit more freely what we've got in the pipeline there. So I appreciate the question and I
At that point in time, we might be able to start communicating a little bit more freely what we've got in the pipeline. There. So I appreciate the question.
It's hard for me I'm, a salesperson at hard it's really hard for me not to give you all the details that I would love to give you right now but stay tuned soon yes stay tuned.
It's hard for me. I'm a salesperson at heart. It's really hard for me not to give you all the details that I would love to give you right now, but stay tuned soon. Yeah, stay tuned.
Our next question comes from Mike Matson with Needham. Please go ahead, Mike Your line is open.
Yeah, thanks for taking my questions.
Thanks for taking my questions.
Yes.
In the context of the comp you're up against, the growth was obviously good, but, you know, on a year-over-year basis, it did slow down a little from the prior quarter and first half of the year. I was just wondering if you could maybe quantify the impact of the supply chain issues in the third quarter, how much that took off your growth rate. And then also, I was wondering, some of the other workspace companies have called out having fewer selling days in the quarter. Was that, did that impact your growth at all?
In the context of the comp Youre up against the growth was obviously good but.
On a year over year basis, it did slow down a little from the prior quarter or first half of the year.
Was just wondering if you could maybe quantify the impact of the supply chain issues in the third quarter, how much that market growth rate and then also I was wondering if some of the other companies have called out having fewer selling days in the quarter was that did that impact your growth at all.
Hey, Mike, It's Steve maybe I'll start with the second part of the question because that's an easier one for us and actually we have for the first time.
Hey, Mike, it's Steve. Maybe I'll start with the second part of the question because that's an easier one for us. And actually, we have for the first time an earnings supplement that's out there filed with our earnings release 8K today. So you can see some of the details that we're talking about here on our third quarter performance, some of our commentary around our new credit facility, some of our comments around the U.S. performance, international performance. But thank you.
An earnings supplement that's out there filed with our.
Earnings release 8-K today. So you can see some of the details that we're talking about here on our third quarter performance some of our commentary around.
Our new credit facility some of our comments around the U S performance international performance, but including the impacted selling days. So we certainly did have an impact of selling days, we mentioned that last quarter. When we were giving an update for the for the balance of 2023, we had approximately two last <unk>.
including the impacted selling days. So we certainly did have an impact of selling days. We mentioned that last quarter when we were giving an update for the balance of 2023. We had approximately two less billing days, and our estimates pegged that impact at somewhere between 200 and 300 basis points.
Days in our estimates.
Pegs that impacted somewhere between 203 hundred basis points.
And so it's not insignificant and, you know, we also do have one less billing day next quarter or this quarter we're in compared to last year. So it had an impact for 3Q that was 200, 300 basis points. And then with respect to the supply chain, we haven't quantified that other than to say, and I know this isn't the specificity that you'd like or other folks. It's been pretty significant for us. It's, you know, we've not been able to supply the
And so it's not insignificant and we also do have one less billing day next quarter or this quarter were in compared to last year. So so it had an impact for <unk> that was 200 300 basis points and then with respect to the supply chain, we havent quantified.
<unk> dot others other than to say and I know this isn't the specificity that you'd like or other folks it's been pretty significant for us.
We've not been able to supply the product.
at the right place at the right time for all of the potential demand that we have. And so we're really looking forward to getting out of that and getting into next year when we expect that to all be behind us.
At the right place at the right time for all of the potential demand that we have in and so we're really looking forward to getting out of that and getting into next year. When we expect that to all be behind us.
And you know, and then finally, you mentioned the strong comp. I mean, last year, we did grow 30%. So all those things combined, you know, we're really pleased with 15% growth and 20% year to date.
And then finally, you mentioned the strong comp I mean last year, we did grow 30%.
So.
All of those things combined we're really pleased with 15% growth and 20% year to date.
Yeah, Okay understandable and then.
Yeah, okay, understandable. And then, you know, just given the new credit facility and the draws you're taking there, just in terms of modeling interest expense, you know, can you help us out there in terms of kind of what quarterly interest we should be modeling?
Just given the new credit facility.
The draws that you are taking there.
Just in terms of modeling interest expense.
Can you help us out there in terms of kind of what quarterly interest and we should be modeling.
Yes, so we have 100 drawn to give up that interest.
Yeah, so we we have 100 drawn, give us interest rate, I guess.
Yeah, yeah. So it's, it's, it's 650 is the spread on the, or excuse me, 675 is the spread on the term loan and 400 is the spread on the revolver. And we have 75 million out on the term loan and 25 million out on the revolver. And so it's, you know, it's probably in a cash interest of eight to 9 million a year.
Yeah, Yeah. So it's.
It's $6 50 as the spread on.
Excuse me $6 75 is the spread on the term loan and 400 is the spread on the revolver and we have 75 million out on the term loan and 25 million out on the revolver.
And so it's.
It's probably cash interest of $8 million to $9 million a year.
Okay.
On a net basis, because we do have a hundred million, because we do have a hundred million of cash on our balance sheet that's yielding a nice level of interest income. Yeah.
On a net because.
Because we do have a $100 million because we do have a $100 million of cash on our balance sheet, that's yielding a nice level of interest income.
Yeah, exactly so that offset some of it okay. Thank you.
You got it.
Our next question comes from Dave <unk> with JMP Securities.
Our next question comes from Dave Tercali with JMP Securities.
Please go ahead, David your line is open.
Great Good evening.
Greg, good evening. Maybe one for Steve. I'm looking at the slides. Thanks. There's a lot of good info in there. In the inventory component, you know, it looks like you're kind of saying that you think you'll get it back down to, I don't know, I guess something closer to a year's worth of days. It says 817 to 463. Is that right? Yes.
Maybe one for Steve I'm looking at the slides thanks.
Good info in there.
And the inventory component.
It looks like Youre kind of saying that you think you'll get it back down to.
And I guess something closer to.
Years' worth of data that says 817 to 460 degrees.
Are we talking about inventory? I'm sure we'd be thinking about that day number going.
Are we talking about inventory should we be thinking about that number going.
Specifically to that level.
Yes look and Thats, how we came up with the math there to just kind of really demonstrate like the last two years have been atypical for us from a historic peak 28 use of capital and in a lot of it's been driven by the supply chain disruptions and inventory and we've done some stockpiling of inventory.
Yeah, look, and that's how we we came up with a map there to kind of really demonstrate like
The last two years have been atypical for us from a historic P-28 use of capital. And a lot of it's been driven by the supply chain disruptions in inventory. And we've done some stockpiling of inventory. And unfortunately, we've been talking about certain inventories we don't have enough of.
Unfortunately, we have something like we've been talking about certain inventories, we don't have enough up but yes.
But absolutely, where we're at today from an efficiency perspective on our balance sheet is not where we're going to be three years from now.
Absolutely where we're at today from an efficiency perspective on our balance sheet is not where we're going to be three years from now and or even next year.
And or even next year, or even this quarter, we improved from last quarter and the fourth quarter is going to improve compared to the third quarter. So that's going to become a significant area of
Even this quarter, we improved from last quarter and the fourth quarter is going to improve compared to the third quarter. So that's going to become a significant area of cash.
ash flow tailwind for us into next year and beyond.
Cash flow tailwind for us into next year and beyond.
And then we also don't have the any more legal settlement payment.
And then we also don't have any more legal settlement payments and we're also going to be EBITDA positive. Beginning next year is our expectation compared to we've run EBITDA negative. The last two years as we've made some really targeted investments and built a nice investment base.
And we're also going to be EBITDA positive beginning next year is our expectation compared to we've run EBITDA negative the last
two years as we've made some really targeted investments and built a nice investment base.
Help us.
As we go forward, so we're really happy about the progress we're making in our supply chain, this new credit facility, and the visibility that we have to being EBITDA positive in 24 and beyond, and also improving our operating cash flow.
As we go forward. So so we're really happy about the progress.
We are making within our supply chain this new credit facility and the visibility that we have to being EBITDA positive in 'twenty, four and beyond and also improving our operating cash flow.
Thank you for that one quick one.
Thank you for that 1, 1 quick 1, just, I guess. Cap explains or what should we be expecting there moving forward? Is that going to be.
I guess capex plans or what should we be expecting there moving forward is that going to be.
At a consistent level, I'm not sure if you have other investments to make or where you stand on that.
At a consistent level.
Im not sure if you have other investments to make but where do you stand on that front.
Yeah, so we've also, you know, if you look at our investing cash flows the last couple of years, we've had in there a couple of unusual items. We bought our building for $18 million. We purchased Dizzier in 2022 for $19 million.
Yes. So we've also if you look at our investing cash flows in the last couple of years. We've had in there a couple of unusual items, we bought our building for $18 million, we purchased busier in 2022 for $19 million and underlying in there we've had about probably call. It <unk>.
and an underlying in there we've had about I'll probably call it 30 million dollars of.
$30 million of of instrument purchases are about $15 million per year.
of instrument purchases, about 15 million per year. That's sort of the high end of the range for us for instruments.
Sort of the high end of the range for us for instruments, So I would think about instruments.
So, you know, I would think about instruments, you know, if you want to use that in your model, that's what it's been, but I think we can do better than that on an annual basis.
If you want to use that in your model. That's what it's been but I think we can do better than that on an annual basis.
And then other PP&E has been somewhere between 15 and 16 million over the last two years. That's going to come down. We launched SAP, which a lot of that was capitalized over the last year and a half. So we expect not only operating cash improvements compared to the last couple of years, but also the investing cash line will look a lot more interesting next year, too, and beyond.
And then other PP&E has been somewhere between 15 and $16 million over the last two years, that's going to come down we launched SAP, which a lot of that was capitalized over the last year and a half.
So we expect not only operating cash improvements compared to the last couple of years, but also the investing cash line will get will look a lot more interesting next year or two and beyond.
Thank you.
You got it thanks sure.
We have no further questions I'll turn the call back to the management team for any closing comments.
We have no further questions so I'll turn the call back to the management team for any closing
Thank you sorry, thank you for joining the call and in all of your questions and answer we look forward to speaking to you all again in the future. Thank you.
Thank you. Sorry. Thank you for for joining the call and in all of your questions and answer. We look forward to speaking to you all again in the future. Thank you. Thank you.
Thank you.
Thank you everyone for joining us today. This concludes our call and you may now disconnect your line.
Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.