Q4 2023 Paragon 28 Inc Earnings Call

February 29, 2024

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Good afternoon, and welcome to Paragon 20, Eights fourth 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.

Operator: 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. I would now like to hand the conference over to your host today, Mr. Matthew Brinckman, SVP of Strategy and Investor Relations. Mr. Brinckman, please go ahead when you're ready.

As a reminder, this call is being recorded for replay purposes.

I would now like to hand, the conference over to your host today, Mr. Matthew Brinkman SVP of strategy and Investor Relations. Mr. <unk>. Please go ahead when you're ready.

Matt Brinckman: Good afternoon, and thank you for joining Paragon 28's fourth quarter 2023 financial results and earnings. Presenting on today's call are Albert DaCosta, Chairman and Chief Executive Officer, and Steve Deitsch, Chief Financial Officer. 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 1992. 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. 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 expressed in these forward-looking statements.

Good afternoon, and thank you for joining Paragon 20, eights fourth quarter 2023 financial result in earnings call presenting on today's call are Alberta, Cosmic Chairman and Chief Executive Officer, and Steve Deitsch, Chief Financial Officer.

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.

You made pursuant to the safe Harbor provision 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.

These forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results to differ materially from these forward looking statements.

All forward looking statements are based upon current available information and <unk> assumes no obligation except as required by law to update those statements.

Matt Brinckman: All forward-looking statements are based upon current available information, and Paragon 28 assumes no obligation, except as required by law, to update those. 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. During this presentation, we will refer to the non-GAAP financial measure of adjusted EBITDA and constant currency net revenue. A reconciliation to the most comparable gap 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 Matt. Thanks, Matt.

Additional information concerning certain risks and uncertainties that may impact. These forward looking statements is contained from time to time.

Our SEC filings and in the press release that was issued earlier today.

During this presentation, we'll refer to the non-GAAP financial measure 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, Matt Good afternoon, and thank you for joining us for our fourth quarter 2023 earnings call.

Albert DaCosta: Good afternoon, and thank you for joining us for our fourth quarter 2023 earnings call. I will start things off with a review of our recent performance, followed by highlights from the quarter. And I'll pass it over to Steve to provide further details on our fourth quarter and full year financial results and an overview of our 2024 revenue guidance. But before diving into the results, I want to acknowledge our team's amazing work throughout 2023. This was a transformative year for Paragon 28, and we made significant progress in our transition into a more scalable organization for our next phase of growth. I want to thank this team for their unwavering resilience and teamwork to get us where we are today and for advancing our mission to improve foot and ankle patient outcomes.

I'll start things off with a review of our recent performance followed by highlights from the quarter.

And I'll pass it over to Steve to provide further details on our fourth quarter and full year financial results and an overview of our 2020 for revenue guidance.

Before diving into the results I wanted to acknowledge our team's amazing work throughout 2023. This.

This was a transformative year for Paragon 28, and we made significant progress in our transition into a more scalable organization for our next phase of growth.

I want to thank this team for their unwavering resilience and teamwork to get us where we are today and for advancing our mission to improve foot and ankle patient outcomes.

Albert DaCosta: Now turning to results, global revenue for the full year 2023 was $216.4 million, representing 19.3% reported growth and 19.7% constant currency growth, in line with the top end of our preliminary revenue results provided on January 8. Once again, we saw balanced growth across all the five foot and ankle subsegments, growing the entire business at nearly three times our overall market growth rate of 7%. Fourth quarter, 23, global revenue was $60.6 million, representing 17.6% reported growth and 17.3% constant currency growth compared to the fourth quarter of 22.

Now turning to results global revenue for the full year 2023 was $216 4 million.

Representing 19, 3% reported growth and 19, 7% constant currency growth in line with the top end of our preliminary revenue results provided on January eight.

Once again, we saw balanced growth across all the five foot and ankle sub segments growing the entire business at nearly three times, our overall market growth rate of 7%.

Fourth quarter 23, global revenue was $66 million.

Representing 17, 6% reported growth and 17, 3% constant currency growth compared to the fourth quarter of 'twenty two.

Albert DaCosta: We saw a nice 14.7% step up compared to the third quarter of 23, reflective of the normalized seasonality we expected. This compares favorably to the 11% 3rd to 4th quarter net revenue step up we saw in 22 and reflects the improving supply chain environment. Looking at the U.S. business performance, I am pleased to say that our growth accelerated nicely compared to the third quarter. We have a lot to be positive about beyond the fourth quarter top line performance.

We saw a nice 14, 7% step up compared to the third quarter of 23 reflective of the normalized seasonality we expected this year. This.

This compares favorably to the 11% third to fourth quarter net revenue step up we saw in 'twenty, two and reflects the improving supply chain environment.

Looking at the U S business performance I am pleased to say that our growth accelerated nicely compared to the third quarter, we have a lot to be positive about beyond the fourth quarter topline performance in.

Albert DaCosta: In the fourth quarter of 23, we increased our U.S. producing sales roster by almost 14 percent, 266 reps compared to the fourth quarter of 22, and grew our surgeon customer base by 9% to a record 2,215 surgeons. Both our rep roster and surgeon base are larger than ever, and these metrics are strongly indicative of our future growth potential as we expect to continue driving productivity increases on legacy products and new product launches. We've done a lot to bolster our medical education program, including the launch of a second mobile lab late in 23 specifically designed for more metro markets. With this new mobile lab, we're able to cover more ground in the U.S., meeting our surgeons and reps at their respective sites of care for highly focused and efficient training.

In the fourth quarter of 'twenty, three we increased our U S producing sales roster by almost 14% 266 reps compared to the fourth quarter of 2002.

And grew our surgeon customer base by 9% to a record 2215 surgeon.

Both our rep roster and surgeon base, our larger than ever and these metrics are strongly indicative of our future growth potential as we expect to continue driving productivity increases on legacy products and new product launches.

You've done a lot to bolster our medical education program, including the launch of a second mobile lab late in 'twenty, three specifically designed for more metro markets.

With this new mobile App, we're able to cover more ground in the U S meeting, our surgeons and reps at their respective sites of care for highly focused and efficient training.

Our international business continues to do very well, we've invested heavily in our core markets and have established a direct or directly managed commercial model and 13 of our 22 international markets.

Albert DaCosta: Our international business continues to do very well. We've invested heavily in our core markets and have established a direct or directly managed commercial model in 13 of our 22 international markets. We still have positive runway for P-28 internationally as we continue to drive regional investments in our teams and infrastructure, as well as regulatory initiatives like EUMDR to clear and launch more new products. In short, we continue to build momentum, and I'm excited about what the future holds for FNA and the surgeon community internationally. Now I want to shine a light on our innovation, which is critical to our growth and our mission to improve foot and ankle performance. In the fourth quarter of 23, we launched two new solutions with the Jaws Great White Nitenol Staple System and the BEAST cortical fiber bone graft, which were both great additions to our portfolio.

We still have positive runway for peak 28 internationally as we continue to drive regional investments in our teams and infrastructure as well as regulatory initiatives like <unk> and <unk>.

And launch more new products.

In short, we continue to build momentum and I'm excited for what the future holds for M&A and the surgeon community internationally.

Now I want to shine a light on our innovation, which is critical to our growth and our mission to improve foot and ankle outcomes.

In the fourth quarter of 'twenty, three we launched two new solutions with the jaws, great White Knight and all staple system.

And the Beast cortical fiber bone graft, which were both great additions to our portfolio.

Albert DaCosta: And now we're off to the races to start 24 with five meaningful product launches and one limited market release announced already in the first quarter. It's important to note that these products launched so far in 24 are in high-growth foot and ankle segments like bunion, soft tissue, and minimally invasive surgery. On soft tissue, we have launched three solutions with the Grappler Nautilus Anchor, Ridgeline Tape, and Mr. Tenon Harvester, all of which will typically be used in conjunction with other procedures and are highly complementary to our existing plating and screw system.

And now we're off to the races to start 24, five meaningful product launches and one limited market release announced already in the first quarter.

It is important to note that these products launched so far in 'twenty four are in high growth foot and ankle segments like bunion soft tissue and minimally invasive surgery.

And soft tissue, we have launched three solutions with the <unk> notwithstanding.

Which line tape and Mr. Tenant Harvester, all of which will typically be used in conjunction with other procedures and are highly complementary to our existing plating and screw systems.

Albert DaCosta: Another solution is our FG-2000 Power Console and Burr System, designed specifically for the extremities and optimized for MIS surgery. This system features disposable handpieces and instruments that help streamline workflow and minimize the need for sterilization between cases, which allows surgeons to turn more cases in a day. Lastly, we launched the Precision MIS Bunion System and have our new Lapidus plant, the Buniomatic Unlimited Market Relief. With these two solutions, P28 boasts a substantial range of offerings for treating bunions.

Another solution is our FTE 2000 power console and burst system designed specifically for the extremities and optimized for mis surgery.

This system features disposable hand pieces and instruments that help streamline workflow and minimize the need for sterilization between cases, which allows surgeons to turn more cases in a day.

Lastly, we launched precision Ms Bunion system and have our new lapidus plant the <unk> on limited market release.

These two solutions.

Eight both substantial range of offerings for treating bunions.

Albert DaCosta: Ultimately, our goal as a leader in foot and ankle and a real partner to our surgeons is to give surgeons multiple options to treat each patient's unique condition. We expect that these early 2024 product launches will generally start having a nice impact on top line in the second half of the year and substantially contribute in 2025. I'm so proud of the design teams and engineers that brought these truly innovative solutions to life.

Ultimately our goal is a leader in foot and ankle and a real partner to our surgeons is to give surgeons multiple options to treat each patient's unique condition.

We expect that these early 2024 product launches will generally start having a nice impact on top line in the second half of the year and substantially contribute in 2025.

I am so proud of the design teams and engineers that brought these truly innovative solutions to life and we're excited to see them all hit the market.

Albert DaCosta: And we're excited to see them all hit the market. Of course, it's only February, and we have a lot more to look forward to in 2024 on the product front with over 25 active projects, including our first reveal of the Smart28 platform expected midyear. Smart28 software has already been incredibly beneficial for our internal development, and we are excited to share it once it is ready.

Of course, it's only February and we have a lot more to look forward to in 2024 on the product front with over 25 active projects, including our first reveal of the smart 28 platform expected mid year.

The smart 28 software has already been incredibly beneficial for our internal development and we are excited to share it once ready.

Albert DaCosta: Our balanced and innovative portfolio galvanizes P28 as a strong partner to the surgeon community and an ideal home for the most passionate foot and ankle sales. In closing, I am pleased with the progress we made in 2023 but even more excited about 2024 and beyond. We've made significant investments in 23 to enhance our infrastructure, teams, and processes to enable P28 to realize its full potential. We also fortified our balance sheet and combined this with our focus on profitability and cash flow improvement. We have plenty of liquidity to get us to cash flow break even.

Our balanced and innovative portfolio galvanized is <unk> 28, as a strong partner to the surgeon community and an ideal home for the most passionate foot and ankle salespeople.

In closing I am pleased with the progress we made in 2023, but even more excited about 2024 and beyond.

We made significant investments in 'twenty three to enhance our infrastructure teams and processes to enable <unk> 28 to realize its full potential.

We also fortified our balance sheet and combined with our focus on profitability and cash flow improvements, we have plenty of liquidity to get us to cash flow breakeven on.

Albert DaCosta: Underlying demand for foot and ankle products continues to be very strong, and we are in a great position to execute on our mission to improve foot and ankle patient outcomes across the globe. With that, I will now turn it over to you. Thank you, Albert.

Underlying demand in foot and ankle continues to be very strong and we're in a great position to execute on our mission to improve foot and ankle patient outcomes across the globe.

With that I will now turn it over to Steve.

Thank you Albert.

Stephen M. Deitsch: Paragon 28's fourth quarter 2023 revenue was $60.6 million, representing 17.6% and 17.3% reported in constant currency year over year growth respectively. Our U.S. revenue was $51.7 million, representing 14.1% growth over the prior year quarter. Our international revenue was $8.9 million, representing 43.1% and 40.7% reported in constant currency year-over-year growth. Importantly, we continue to see solid, balanced growth from each of our foot and ankle segments. The supply chain headwinds continued into the fourth quarter, but they were in line with our expectations and were far less significant than the impacts we experienced during the second and third quarters of 2023. Importantly, our supply chain environment continues to improve. Gross profit margin for the quarter was 74.5% compared to 81.5% in the fourth quarter of 22.

<unk> 2008 fourth quarter of 2023 revenue was $66 million, representing 17, 6% and 17, 3% reported and constant currency year over year growth respectively.

Our U S revenue was $51 $7 million.

<unk> <unk> thousand 14, 1% growth over the prior year quarter.

Our international revenue was $8 9 million, representing 43, 1% and 47% reported and constant currency year over year growth.

Importantly, we continued to see solid balanced growth from each of our foot and ankle segments.

Supply chain headwinds continued into the fourth quarter, but were in line with our expectations and we are far less significant than the impact we experienced during the second and third quarters of 2023 importantly.

Importantly, our supply chain environment continues to improve.

Gross profit margin for the quarter was 74, 5% compared to 81, 5% in the fourth quarter of 'twenty two.

Stephen M. Deitsch: For the full year 23, gross profit margin was 79.9% compared to 82.1% for the full year 22, related to the recent inventory stockpile. The company recorded non-cash inventory write-downs totaling $4 million during the fourth quarter of 2023, which reduced the fourth quarter and full year 23 gross profit margin by 6.6 and 1.8 percentage points, respectively. This adjustment had no impact on our operations during the fourth quarter, and we expect our annual gross profit margins to continue to be approximately 80 percent going forward. We've also continued to drive significant operating leverage. Fourth quarter 2023 SG&A and R&D expenses combined were $56.4 million, a 10.5% increase compared to the fourth quarter of 22. And importantly, the increase from the prior year was driven by increases in R&D and sales and marketing initiatives. Adjusted EBITDA for the fourth quarter of 2023 was a $4.4 million loss compared to a $1.5 million loss in the prior year period.

For the full year 'twenty three gross profit margin was 79, 9% compared to 82, 1% for the full year 'twenty two.

Related to the recent inventory stockpiling.

The company recorded noncash inventory write downs totaling $4 million during the fourth quarter of 'twenty three.

Which reduced fourth quarter and full year 2003, gross profit margins by $6 six and one eight percentage points respectively.

This adjustment had no impact on our operations during the fourth quarter and.

And we expect our annual gross profit margin to continue to be approximately 80% going forward.

We've also continued to drive significant operating leverage.

Quarter, 2023, SG&A and R&D expenses combined were $56 4 million or 10, 5% increase compared to the fourth quarter of 'twenty two.

And importantly, the increase from the prior year was driven by increases in R&D and sales and marketing initiatives.

Adjusted EBITDA for the fourth quarter of 2023 was a $4 $4 million loss compared to a $1 $5 million loss in the prior year period.

Stephen M. Deitsch: For the full year 2023, adjusted EBITDA was a $9.7 million loss, an improvement of $1 million compared to the prior year period. Both fourth quarter and full year 2023 adjusted EBITDA included the $4 million inventory right. We expect operating leverage to continue to improve in 2024, and we are committed to driving positive adjusted EBITDA on an annual basis beginning this year. Now turning to cash flow and liquidity, our operating cash use for 22 and 23 combined totaled approximately $113 million compared to approximately break-even operating cash flow in both 20 and 21.

For the full year 2023, adjusted EBITDA was $9 $7 million loss, an improvement of $1 million compared to the prior year period.

Both fourth quarter and full year 2023, adjusted EBITDA included the 4 million inventory write down.

We expect operating leverage to continue to improve in 2024, and we are committed to driving positive adjusted EBITDA on an annual basis beginning this year.

Now turning to cash flow and liquidity.

Our operating cash used for 'twenty, two and 'twenty three combined totaled approximately $113 million compared to approximately breakeven operating cash flow in both 2020 one.

Stephen M. Deitsch: On our last earnings call, we noted three specific items contributing to most of the operating cash use during 22 and 23, including inventory stockpile, a non-recurring legal settlement, and negative adjusted EBITDA. We believe the cash flow headwinds associated with each of these items will become a tailwind throughout 2024 and beyond. We have approximately $125 million of total liquidity, consisting of $75 million of cash on the balance sheet and $50 million available through our credit facility.

On our last earnings call. We noted three specific items contributing to most of the operating cash use during 'twenty, two and 'twenty three including inventory stockpiling.

A nonrecurring legal settlement and negative adjusted EBITDA.

We believe the cash flow headwinds associated with each of these items will become a tailwind throughout 2024 and beyond.

We have approximately $125 million of total liquidity consisting of $75 million of cash on the balance sheet and $50 million available through our credit facility.

Stephen M. Deitsch: As we continue to lever our growth investments made in 22 and 23, and continue to execute on our plans to improve inventory efficiency, we expect our liquidity will allow us to reach cash flow break. Now, turning to our 2024 Revenue Guide, we feel great about our start to 24, and the first quarter is developing in line with our expectations.

As we continue to lever our growth investments made in 'twenty, two and 'twenty three and continue to execute on our plans to improve inventory efficiency.

We expect our liquidity will allow us to reach cash flow breakeven.

Now turning to our 2020 for revenue guidance.

We feel great about our start to 24 in the first quarter is developing in line with our expectations. Among other things our revenue guidance takes into consideration the improving supply chain environment.

Stephen M. Deitsch: Among other things, our revenue guidance takes into consideration the improving supply chain environment and an expanded sales channel armed with several exciting and high-impact new product launches. Further, it assumes the foot and ankle market continues to outpace broader orthopedic market growth, which is consistent with the demand we have seen to start the year. And, of course, our view is also balanced with respect to what we can't control, including the macroeconomic environment.

And an expanded sales channel armed with several exciting and high impact new product launches.

Further it assumes the foot and ankle market continues to outpace broader orthopedic market growth.

This is consistent with the demand we have seen to start the year.

And of course, our view is also balanced with respect to what we can't control, including the macroeconomic environment.

Operator: For the full year of 2024, we estimate net revenue to be between $249 million and $259 million, representing a range of 15% to 20% growth. P28 grew net revenue 25.8% reported and 27.1% constant currency in the first quarter of 2023, making the first quarter of 2024 our toughest growth comparison of the year. Additionally, we have one left billing day in the first quarter of 24, which creates a 100 to 200 basis point headwind. Beyond the first quarter, we anticipate seasonality will continue to be more normal. We also expect quarterly growth rates for the rest of the year to be higher than in the first quarter of 24, given the dynamics of the year-over-year growth rate comparisons and the timing of our new product launch. Lastly, our net revenue guidance also assumes foreign currency translation rates remain consistent with current translation. That is the end of our prepared remarks. If you would like to ask a question, please press star followed by one on your telephone keypad now. And when preparing to ask your question, please ensure that your phone is unmuted locally.

For the full year of 2024, we estimate net revenue to be between $249 million and $259 million.

Representing a range of 15% to 20% growth.

<unk> 28 grew net revenue 25, 8% reported and 27, 1% constant currency in the first quarter of 2023, making the first quarter of 'twenty four our toughest growth comparison of the year.

Additionally, we have one less billing day in the first quarter of 'twenty, four which creates a 100 to 200 basis point headwind.

Beyond the first quarter, we anticipate seasonality will continue to be more normal.

We also expect quarterly growth rates for the rest of the year are likely to be higher than in the first quarter of 'twenty four given dynamics of the year over year growth rate comparisons and the timing of our new product launches.

Lastly, our net revenue guidance also assumes foreign currency translation rates remain consistent with current translation rates.

That is the end of our prepared remarks.

Okay.

If you would like to ask a question. Please press star followed by one on your telephone keypad now and when preparing to ask you. A question. Please ensure your phone is on mute locally.

Stephen M. Deitsch: Our first question today is from the line of Matthew O'Brien of Piper Sandler. Thanks for taking the questions. Maybe just talk a little bit about, for starters, Q4. And especially domestically, I know it was a nice step up sequentially from Q3. But we have been kind of flatlining a little bit in terms of tier stack growth. So what are you seeing in the marketplace domestically? How big of a headwind was the supply chain issue still in Q4? And is that behind you now at this point as we head into 2020? Hey Matt, it's Steve.

Our first question today is from the line of Matthew O'brien of Piper Sandler Your line is now.

Alright, thanks for taking the questions, maybe just talk a little bit about for starters, Q4, and especially domestically I know it was a nice step up sequentially from Q3, but we have been kind of flat lining a little bit in terms of two year stacked growth. So what are you seeing in the marketplace domestically how big of a headwind was the supply chain.

And if you're still in Q4 and is that behind you now at this point as we head into 2024.

Hey, Matt it's Steve Thanks for the question and we continue to see our U S business strengthen and importantly, we continue to see the supply chain headwinds lessen and as we begin the year, we're largely through the headwinds and we're really pleased to see that we still have a few select.

Stephen M. Deitsch: Thanks for the question. And importantly, we continue to see the supply chain headwinds lessen. And as we begin the year, we're largely through the headwinds, and we're really pleased to see that.

Stephen M. Deitsch: We still have a few select SKUs, but by and large, we are in really good shape and really pleased to see that U.S. business improved so much sequentially compared to the third quarter. And it was, I think, a record sequential improvement into the fourth quarter for us at 14%. So, really, happy about that. And also, our supply chain team has done a really nice job of rectifying the challenges that really impacted us heavily in the second and third quarters of last year. I got it.

Skus, but by and large we are in really good shape and really pleased to see that U S business improved so much sequentially compared to the third quarter.

And it was I think a record sequential improvement into the fourth quarter for us at 14%.

So really really happy about that and also our supply chain team has done a really nice job of rectifying the challenges that really impacted us heavily in the second and third quarters of last year.

Got it and then on the guidance side nice to see.

Stephen M. Deitsch: And then on the guidance side, you know, nice to see the high end of the range still touching 20 on a pretty difficult comparison here. So maybe just talk a little bit about the range here that we're seeing, low end to high end, what's embedded in there as far as market growth is concerned. And then Steve, I didn't hear you talk about adjusted EBITDA this year. I thought we were expecting to break even this year. Is that is that right?

At the high end of the range still touching 20 off of a pretty difficult comparison here. So maybe just talk a little bit about.

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Range here that we're seeing low end to high end, what's embedded in there as far as market growth and then Steve I didn't hear you talk about adjusted EBITDA. This year I thought we were expecting breakeven. This year is that is that right. Thank you.

Albert DaCosta: Yeah, happy to answer both of those. So I would start with, and then Albert will come in here on our guide for this year. We're incredibly confident in this business. We've really gotten off to a strong start this year. And we've consistently said this is a 20% or better top-line growth business. So the top end of our guidance reflects that. And what drives that, the tip of the spear, as we've said before, is our innovative and broad product portfolio. And we also have some really exciting new launches to add to that broad portfolio that we've just put in place and are just getting going. So the products and then also our growth are enabled by our incredible commercial team, which grows in size and quality every quarter. So it's exciting to have this terrific portfolio and an expanding portfolio, and that gets us to the high end of the range, which is consistent with what we've talked about in the past. When you think about the low end, you know, we've typically said we can't control certain things like the macroeconomic environment.

Yeah happy to answer both of those so I would start with and then Albert will come in here on the on our guide for this year, we're incredibly confident in this business.

We've really gotten off to a strong start this year and we've consistently said this is a 20% or better topline growth business. So the top end of our guidance reflects that and what drives that the tip of the spear as we've said before is our innovative and broad product portfolio and we also have some really exciting new launches to add to that.

Broad portfolio that we've just put in place and are just getting going.

So the products and then also our growth is enabled by our incredible commercial team, which grows in size and quality every quarter. So.

It's exciting to have this terrific portfolio and an expanding portfolio and that gets us to the high end of the range, which is consistent with what we've talked about in the past when you think about the low end, we've typically said we can't.

<unk> controls certain things like the macroeconomic environment, so consistent with the way we've done this before the 15% takes into account certain things that are outside of our control so 15% to 20%. It's two to three times the market growth rate of 7%, So pretty pleased with that kind of a guide going into this year.

Stephen M. Deitsch: So consistent with the way we've done this before, the 15% takes into account certain things that are outside of our control. So 15 to 20%, you know, it's two to three times the market growth rate of 7%. So pretty pleased with that kind of a guide going into this year as we start the year. And then Albert, I know, has some comments on the tech. Yeah, no, absolutely.

As we as we start the year and then Albert I know has some comments on the tech, yes, no absolutely and Hey, Matt How're you doing.

Albert DaCosta: And hey, Matt, how are you doing? You know, it's interesting, just coming off a conference season; we got to showcase some of the new products there. And the energy was pretty amazing surrounding that. I think it's just kicking this year off with a wonderful push. You know, we launched several new products in the bunion space. We had a couple of soft tissue introductions, and a couple things on beta launch. But wow, we had a really, really good reception for that.

It's interesting just coming off a conference season.

We got to showcase some of the new products there.

The energy was pretty amazing surrounding that and I think it is just kicking this year off with a wonderful push we launched several new products in the Bunyan space. We had a couple of soft tissue introductions, a couple of things on beta launch but.

While we had a really really good reception on that the products are kind.

Albert DaCosta: The products are kind of jazzing up our internal teams as well, so we've got a lot of positivity and good momentum going into the year. And I didn't answer your second question, Matt.

Kind of jazz and our internal teams as well. So we've got we've got a lot of positivity and good momentum going into the year.

Didn't answer your second question, Matt So positive EBITDA, absolutely. We will we will have positive EBITDA on an annual basis this year.

Stephen M. Deitsch: So positive EBITDA, absolutely. We will have positive EBITDA on an annual basis this year. Great. Thanks. Appreciate that. You got it.

Great. Thanks, I appreciate that.

You got it thank you.

Operator: Thank you. Thank you. Our next question today is from the line of Greg Bijou, Bank of America.

Thank you. Our next question today is from the line of Craig Bijou of Bank of America. Your line is now.

Operator: Greg, your line is, Good afternoon. Thanks for taking the questions. Maybe to follow up on some of the products, Albert or Steve, and how to think about the contribution from, you know, especially the Bunyan products. You guys mentioned how well that market is growing. And then you also mentioned Smart 28.

Good afternoon, and thanks for thanks for taking the questions.

Maybe to follow up on some of the products.

Albert or Steven how to think about the contribution from especially the bunyan products you guys mentioned, how well that market is growing and then you also mentioned smart 28 so.

Albert DaCosta: So we've been hearing a lot about it. I think there's a lot of excitement around it. We'd love to understand kind of how you're monetizing that and what exactly you are going to bring to the market this year. You have it.

Been hearing a lot about is I think theres a lot of excitement around it would love to understand kind of how you're monetizing that and what exactly you are going to bring to the market. This year.

You got it Hey, Craig good to hear from you. It was great to see a lot of you at the double AOS conference as well I know I talked a lot of your ears are just getting into some of the technology that we're so excited about.

Albert DaCosta: And hey, Craig, good to hear from you. It's great to see a lot of you at the AALS conference as well. I know I've talked a lot of your ears off just getting into some of the technology that we're so excited about. In the bunion space, you know, there's, I think I'll start off by saying we've always been a company that respects that there are easily four, maybe five different pathologies that relate to bunions, and each one of those pathologies really has different considerations for surgeons. And so we've been the company that's trying to give surgeons meaningful opportunities to address the unique aspects of each of those different pathologies. And you could see that with some of the products we launched during this conference season, right? The buniomatic to start with is addressing more severe type cases where we tend to go further back into the toe to correct it.

On the Bunyan space.

I think I'll start off by saying, we've always been a company that respects that theirs.

Usually four maybe five different pathologies that relate to bunions and in each one of those paths allergies really have different considerations resurgence and so we've been the company that's trying to give surgeons meaningful opportunities to address the unique aspects of each of those different paths allergies and you can see that with some of the products we launched <unk>.

This conference season right.

The <unk> to start addressing more severe type cases, where we tend to go further back into the toe to corrected.

Albert DaCosta: The guide gives surgeons a sense of comfort that even though the patient's not in a weight-bearing position, we can replicate some of those important aspects so that our correction is giving surgeons the correction that is really important when the patient's going to bear weight. So that system, the ability for surgeons to create such reproducibility with that has been pretty exciting. And I think when surgeons get their hands on it, they immediately understand that aspect, and they're pretty excited. On the other part, we just introduced minimally invasive surgery for bunions. It's the Precision MIS bunion product. That product is pretty exciting as well. In Europe, they really started doing this probably 10 plus years ago, so the U.S. is a little bit late to the game there, but it did give us a chance to really learn about the complexities of that procedure, the benefits, how to perfectly address it, and so we've got the Precision MIS system that has a really unique guide that gives surgeons the ability to kind of dial in the correction in every single plane. That's really nice This guide can give you a good sense of comfort, and a single surgeon can do that by himself or herself.

The guide give surgeons a sense of comfort that even though the patients not in a weight bearing position. We can replicate some of those important aspects. So that our correction is giving surgeons. The correction that is really important when the patient is going to bear weight. So that that system. The ability for surgeons to create such reproducibility with that has been pretty exciting and I think when.

Surgeons get their hands on it they immediately understand that aspect and they are pretty excited the.

The other part we just introduced minimally invasive surgery for Bunions its the precision Ms plenty of product.

That product is pretty exciting as well in Europe. They really started doing this probably 10 plus years ago. So the U S is a little bit late to the game there.

But it didn't give us a chance to really learn about the complexities of that procedure the benefits how to perfectly address it and so we've got the precision in mis system that has a really unique guide that gives surgeons the ability to kind of dial in the correction in every single plane.

That's really nice when you're going through a small incision and you don't have the visibility that you're used to in the operating room. This guide can give you a good sense of comfort and a single surgeon can do that by him or herself. The other thing the drawback to some of these <unk> surgeries as we tend to use birth and that saw blades and so we've launched the first ever.

Albert DaCosta: The other thing, the drawback to some of these MIS surgeries is that we tend to use burrs and not saw blades, and so we've launched the first ever completely disposable hand piece that has the perfect combination of torque and speed to allow surgeons to comfortably burr the joint and prepare that for, and not the joint, sorry, their osteotomy, and prepare that for fusion with the comfort that we're not overdoing it on the speed We also launched a product, and I won't go too deep on the rest of them, but you know this is my sweet spot. We also launched a first of its kind. It's a tendon harvester for flat foot reconstruction, or PCFD. That product is really, really unique. It allows the surgeons to not have to do such a dramatic incision and to access the real bottom side of the foot to get that tendon harvested.

Completely disposable handpiece that has the perfect combination of torque and speed to allow surgeons to comfort Lee bird the joint and prepare that for.

The joint sorry, there osteotomy and prepare that for fusion.

With the comfort that we're not overdoing it on the speed and we're not going to burn and charter bone, which compromise some of the healing characteristics. There. So just a really amazing complement we also launched the product and I won't go too deep on the rest of these but.

This is my sweet spot.

We also launched a first of its kind its attendant harvester for.

Flat foot reconstruction or PC FTE.

That product is really really unique it allows the surgeons to not have to do such a dramatic incision and to access the real bottom side of the fight to get that tenant harvested.

Albert DaCosta: It really is the first of its kind. I'll tell you, every surgeon that's put their hands on that product so far has been pretty excited to use it, so we're optimistic about all of that. And I'll leave the soft tissue stuff maybe for another conversation, but we've got some really exciting things on the soft tissue side as well. Thank you for the question. I'm really excited about that. You did ask a question about SMART 28.

It really is a first of its kind and I will tell you every surgeon thats put their hands on that product. So far has been pretty excited to use. It. So we're optimistic about all of that and I'll leave the soft tissue stuff maybe for another conversation, but we've got some really exciting things on the soft tissue side as well. So thank you for the question really excited about that you did ask a question about smart 28.

Right.

Albert DaCosta: We still expect to launch our first module of SMART 28 near about the mid-point of the year. That product, you know how excited I am about that. Our general theme around a lot of these procedures is how important the millimeters of correction are, and we're really working on systems that are going to give surgeons the sense of confidence that they're going to have those millimeters addressed in every single procedure they do. So when we see that system, that module, I think it's going to create an aha moment for a lot of the market there that might not totally understand what SM I will tell you, this year, in particular, has a lot of big key product launches that make this a pretty exciting time for us. Great, thanks.

We still expect to launch our first module of smart 28.

About the mid Mark of the year that.

Of that product.

How excited I am about that our general theme around a lot of these procedures is how important the millimeters of correction or.

We're really working on systems that are going to give surgeons the sense of confidence that they're going to have those millimeters address every single procedure. They do so.

And we see that system that module I think it's going to create an aha moment for a lot of the market there that might not totally understand what smart 28 means.

But when we introduced that we're pretty excited that it's going to make a lot of sense to you all and thats coming about the mid Mark we've got a bunch of products slated for the end of the year.

I will tell you. This year in particular has a lot of big key product launches that that makes this a pretty exciting time for us.

Great, Thanks, and maybe to follow up on one of Matt's questions earlier.

Stephen M. Deitsch: And maybe to follow up on one of Matt's questions earlier, on US and OUS, and really how to think about those growth rates going forward. And if you have your 20% growth target, or what do you guys consider your revenue growth, you know, longer term, or, or just how to think about it? the growth of the company. What's the split between the U.S. and O.U.S.?

On U S O U S and really how to think about those growth rates going forward.

If you had 20% growth target or would you guys consider your revenue growth.

Longer term or or just how to think about the growth of the company.

The split in the U S and O U S.

Stephen M. Deitsch: In 23, we saw it a little bit lower in the U.S., so should we assume that U.S. growth is slightly below that 20 percent level or would be, you know, less than the overall company? Just maybe a little bit of color on how to think about that in 24. And maybe not. Yeah, happy to be happy to help with that. I think it's clear to us that our 23 growth rate in the US was impacted by the supply chain issues that we have managed largely through at this point. And we posted a 16% growth rate. Into the fourth quarter, we increased by 300 basis points from the third quarter.

<unk> and.

In 'twenty, three and we saw it a little bit lower in the U S. So should we should we assume that the U S growth.

It's slightly below that 20% level would be.

Less than the overall company, just maybe a little bit of color on how to think about that in 'twenty four and maybe not.

Yeah happy to happy to help with that I think.

It's clear to us that are 23 growth rate in the U S was impacted by the supply chain issues that we have managed largely through at this point.

And we posted a 16% growth rate into the fourth quarter, we accelerated 300 basis points from the third quarter. So we were pleased to see that.

Stephen M. Deitsch: So we were pleased to see that. We expect this business in the US to be a 20% grower. And we talk about the overall business being 20% or greater. But this US business is that type of performance.

We expect this business in the U S to be a 20% grower and we talk about the overall business is 20% or greater but this U S business is.

That type of a performance and it's a very very large market.

Stephen M. Deitsch: And it's a very, very large market. We still have a very large or small market share. And we think we have the most innovative portfolio in the marketplace and an expanding portfolio. So we're going to continue to grow these things in multiples of markets. And we're excited to get the supply chain challenges behind us. Thank you.

Still have a very large or small market share and we think we have the most innovative portfolio in the marketplace and an expanding portfolio. So we're going to continue to grow this thing at multiples of markets and we're excited to get the supply chain challenges behind us.

Thank you. Our next question today is from the line of George centers.

Stephen M. Deitsch: Our next question today is from the line of George Sellers of Stevens Inc. George, your line is now open. Hey, good afternoon, and thanks for taking the question. Maybe looking at the international piece of the business, I'm just curious if you could help parse out a little bit some of the growth drivers there, you know, how much of that growth is related to increasing your direct sales exposure versus adding new surgeons or, you know, getting your existing surgeons to use more of your device portfolio. You know, well, what are some of the puts and takes that are really driving that, you know, 40% plus growth Hey, George, Steve, I'll start, and then Albert will talk about this.

Stephens Inc. George Your line is now.

Hey, good afternoon, and thanks for taking the question.

Maybe looking at the international piece of the business I'm. Just curious if you could help parse out a little bit some of the growth drivers there how much of that growth is related to increasing your direct sales exposure versus.

Adding new surgeons or.

Getting your existing surgeons to use more of your of your device portfolio. What are some of the puts and takes that are really driving that.

40% plus growth that we've seen.

Hey, George It's Steve I'll start and then Albert will talk about this this has been a really exciting year in time for our international business and we expect that momentum to continue.

Stephen M. Deitsch: This has been a really exciting year in time for our international business, and we expect that momentum to continue. A 44% constant currency growth rate in 23 is a pretty good sized number as that business is scaled.

At 44% constant currency growth rate in 'twenty three is on a pretty on a pretty good sized number as that business has scaled.

Stephen M. Deitsch: We've invested there, George. So we've invested in teams, systems, medical education, and a lot of areas post IPO to really give us some firepower there to take advantage of the market. We talked about our US market share being small, but it's even smaller internationally. So this is an area of focus for us. And specifically where the growth came from in 23 was a lot of different places.

We've invested there George so we've invested in teams systems medical education, and a lot of areas post IPO to really give us some firepower there to take advantage of the market, we talk about our U S market share being small, but it's even smaller internationally. So so this is an area of focus.

For us specifically, where the growth came from <unk> 23 was a lot of different places.

Stephen M. Deitsch: Our big three markets of the UK, Australia, and South Africa had amazing years. And maybe, you know, specifically, I'll call out the UK. They were awarded our country of the year at the recent international sales meeting, and they've just done an amazing job. It's a big market. We've got a big business developing there. And we've got great leadership and a great sales team. So there are a lot of good things going on there. And then we also have markets that aren't new to us, but markets that we've invested more in, and we put new teams in place and more folks on the ground, places like Germany, Italy, new relationships in Spain, Canada. We're looking at Japan later in this year, maybe early next.

Our big three markets of the UK, Australia, and South Africa had amazing years, and maybe specifically I'll call out the UK. They were awarded our country of the year.

<unk> International sales meeting and they've just done an amazing job, it's a big market, we've got a big business developing there and we've got great leadership in <unk>.

And a great sales team so.

A lot of good things going on there and.

And then we also have.

Markets that aren't new to us, but markets that we've invested more in and we put new teams in place and more folks on the ground places like Germany, Italy, new relationships in Spain, Canada.

We're looking at later in this year at Japan, maybe early 'twenty five so.

Albert DaCosta: So a lot of exciting things are on tap outside the US. And one thing, and hey, by the way, great to hear from you, George. But one other thing I'll add to that is, you know, there's a regulatory delay that we sort of experience in the international market. So it's a little bit different than what we have here in the U.S. So what you tend to see is that when we launch a product here, it can take one, two years plus before we might have access to some of those products internationally. So it really is a combination.

Lot of exciting things on tap outside the U S.

One thing hey by the way great to hear from you George but one other thing I'll add to that as you know there is a regulatory.

The delay that we sort of experience in the international market. So it's a little bit different than what we have here in the U S. So what you tend to see is that when we launch a product here it could take one too.

Years, plus before we might have access to some of those products internationally. So it really is a combination one we're very selective when we looked at new countries and opportunities. There we want to make sure. We're a very clinically oriented organization our product development strategy is typically very clinically oriented.

Albert DaCosta: One, we're very selective when we look at new countries and opportunities there. We want to make sure we're a very clinically-oriented organization. Our product development strategy is typically very clinically-oriented, and we want to make sure we find partners and territories that match that, very academic-type countries. And so we're very selective about where we go.

We want to make sure we find partners in territories that match that.

Very academic type countries.

So we're very selective about where we go but so far the reception everywhere, we have gotten has been overwhelmingly positive.

Albert DaCosta: But so far, the reception everywhere we have gone has been overwhelmingly positive. The second piece of that is, like I mentioned, you tend to see some of the legacy products go into these territories, and then you see a staggered introduction of subsequent products. And so that, for us, is pretty exciting because we continue to have opportunities to grow even those more established territories that we've been in really since 2017, 2018, which was when we started focusing on some of the international opportunities. So just a really good combination of all of those things together.

Second piece of that is like I mentioned, you tend to see some of the legacy products go into these territories and then you see a staggered introduction of subsequent products.

So that for us is pretty exciting because we continue to have opportunities to grow even those more established territories that we've been in really since 2017, 2018, which was when we started.

Focusing on some of the international opportunity. So just a really good combination of all of those things together and like Steve mentioned the investments that we're making there are really paying off we're getting quality people, representing our product the best way that we would envision.

Albert DaCosta: And like Steve mentioned, the investments that we're making there are really paying off. We're getting quality people representing our product in the best way that we would imagine. And it's a real partnership. And then the last piece that I always tell our team is, if we're going to be in a country, we want to be there. We don't want to just sell products into these countries.

And it's a real partnership and then the last piece that I always tell our team is if we're going to be in a country. We want to be there. We don't want to just sell products into these countries, we really want to participate we want to meet.

Albert DaCosta: We really want to participate. We want to meet the key opinion leaders. We want to hear what they're saying at the podium when they're having discussions about technology and approaches to different procedures. We want to actually be present there. And so that means a lot to us that we're having the successes we're having in this international market because we can't be a meaningful change in the foot and ankle market unless we're a global company. And this is our chance to do it. Okay, thanks, really appreciate all that color. And then on the product side of things, obviously, there are some exciting things here that have been talked about in the first quarter so far as we think about the remainder of the year. How are y'all?

Key opinion leaders, we want to hear what they're saying on the podium.

They are having discussions about technology and approaches to different procedures, we wanted to actually be present, there and so that means a lot to us that we're having the successes we're having in this international market because.

We can't be.

A meaningful change to the foot and ankle market unless we're a global company and this is our chance to do it.

Okay. Thanks, really appreciate all that color and then on the product side of things.

Some some exciting things here.

<unk> been talked about.

First quarter, so far as we think about the remainder of the year.

How are you all how should we think about the sort of.

Albert DaCosta: How should we think about the sort of, What percent, I guess, of the new devices or how significant of the new devices you're expecting throughout the remainder of the year will be more of the sort of single-use type devices, like the Mr. Tendon Harvester versus the CapEx spin type devices? Yeah, that's a great question, George. And we've got a few products throughout the year. By the way, this year, one of the things that's most exciting is I think it's really less line extensions type introductions this year and some real new introductions in areas we haven't really participated in yet, absent some of the bunion areas, but a lot of really exciting areas. And it's balanced across all the subsegments of the foot and ankle.

What percent I guess of the new devices or how significant of the new devices youre expecting throughout the remainder of the year will be more of the sort of single use type devices like the Mr tendon harvester versus.

The capex spend type devices.

Yes.

That's a great question, George and we've got a few products throughout the year by the way. This year one of the things. That's most exciting is I think it's really less line extensions type introductions this year and some real new introductions in areas. We haven't really participated in yet absent some of the bunyan areas, but.

A lot of really exciting areas and it's balanced across all the sub segments of foot and ankle so youre going to see some things in the trauma.

Albert DaCosta: So you're going to see some things in the trauma arena, you're going to see some things in the Charco arena, you're going to see some things scattered throughout all the five subsegments, which has always been our strategy. I will highlight that we still have 25 plus projects still being developed. And we anticipate, at least for the next three years, a cadence of five to 10 new products hitting the market. I'd probably say that, you know, when we think about some of the soft tissue products, those tend to be more of the sterile pack type products that you're asking about.

Arena Youre going to see some things in the <unk> arena Youre going to see some things scattered throughout all the five sub segments, which has always been our strategy.

I will highlight that we still have 25 plus projects still being developed.

We anticipate at least for the next three years, our cadence of five to 10, new products hitting the market I would probably say that when we think about some of the soft tissue products those tend to be more of the sterile pack type products that you are asking about we have a few pretty big launches later this year that are going to be hardware, but.

Albert DaCosta: We have a few pretty big launches later this year that are going to be hardware, but maybe not as dramatic on the CAPEX side as you would expect from a large joint, like an ankle replacement or some of our counterparts in orthopedics. So, some modest CAPEX associated with those products. But generally speaking, I think we've got really good products hitting the market this year, which is going to drive a lot of momentum, even starting the year but ending it as well. We expect to start to see a real contribution to the growth of this company, you know, in the second half of the year and even into the fourth quarter from some of the products we're launching now and even launched in Q4 of last year. So there is a lot of good stuff there.

<unk>.

Maybe not as dramatic on the Capex side as you would expect from like a large joint.

And ankle replacement or some of our counterparts in orthopedics.

Some modest capex associated with those products, but generally speaking I think we've got really good products hitting the market. This year, which is going to drive a lot of momentum even starting the year, but ending the year as well, we expect to start to see a real contribution to the growth of this company.

Second half of the year and even into 'twenty five from some of the products. We're launching now and even launched in Q4 of last year. So a lot of good stuff there.

Albert DaCosta: Okay, great. Thanks again for taking the question. You got it.

Okay, great. Thanks, again for taking the questions.

You got it.

Operator: Thank you. Our next question today is from the line of Dave Turkaly of Citizens Bank. Dave, your line is now open. Please. Hey, good evening, guys. How are you?

Thank you. Our next question today is from the line of Dave <unk> of citizens Bank. Thank.

Dave Your line is now please go ahead.

Okay.

Good evening guys that way.

Hey.

Stephen M. Deitsch: Hey. You can hear me, right? Yes, yep, yep. Okay, thanks. Maybe Albert, I was wondering if you might share with us, you know, sort of embedded in your guidance, what kind of rep ads you think you might have this year, and maybe for like a target, you know, docs trained or something, anything like that you would like to share with us in terms of how you're getting to those numbers as well would be helpful if you could. You got it.

You can hear me right.

Yes, yes, yes.

Okay.

Sure.

Maybe Albert I was wondering if you might share with us.

Embedded in your guidance.

Sort of what kind of Rep adds do you think you might have this year and maybe.

For like a target docks turning into something anything like that you would like share with us in terms of how youre getting to those numbers that would be helpful. If you could.

Good.

You got it maybe I'll start this question by the way great to hear from you Dave.

Albert DaCosta: Maybe I'll start this question today. By the way, great to hear from you, Dave. Maybe I'll start this question, then I'll turn it over to Steve for some metrics there as well. But, you know, our balanced approach to growth. One of the nice things about the products that we're introducing to the market is that they do generate a lot of interest on the sales side of things. So we get a lot of activity either from surgeons or from sales reps who are really looking at these products and wanting to be a part of this mission to improve foot and ankle outcomes. So it's always an exciting time for us.

Maybe I'll start this question and then I'll turn it over to Steve for some metrics there as well but.

Our balanced approach to growth one of the nice things about the products that we're introducing to the market.

It does generate a lot of interest on the sales side of things. So we get a lot of activity either from surgeons or from sales reps, who are really looking at these products and wanting to be a part of this mission to improve foot and ankle outcomes. So that's always an exciting time for us.

Albert DaCosta: I feel like right now, the visibility as a public company with some of these big launches that could be really meaningful to surgeons is generating a lot more interest than in the past. And so I continue to expect to see a lot more rep type improvements, but we're also really careful. We want to make sure that the sales folks that come on board with us have the same culture and feel about wanting to be a true service to our surgeon partners. And that means that they want to learn everything they can about foot and ankle surgery. They want to really sympathize with what's going on in the operating room so they can provide the best service.

I feel like right now the visibility as a public company with some of these big launches that could be really meaningful to surgeons are generating a lot more interest and then even in the past and so I continue to expect to see a lot more rep type improvements.

But we're also really careful we want to make sure that the sales folks that come on board with US have the same culture and feel about wanting to be a true service to our surgeon partners.

And that means that they want to learn everything they can about foot and ankle surgery. They want to really sympathize with what's going on in the operating room. So they can be the best service. So we're in a wonderful place now we've got an amazing portfolio, it's pretty comprehensive if not one of the most comprehensive and still growing the way it's growing.

Albert DaCosta: So we're in a wonderful place now. We've got an amazing portfolio. It's pretty comprehensive, but it's not one of the most comprehensive and is still growing the way it's growing. I think we could take our choices here and really find the right partners and continue to expand our sales representation. Anything to add to that, Steve?

We could take our choices here and really find the right partners and continue to expand our sales representation.

Nothing to add to that Steve I would just tell you that the.

Stephen M. Deitsch: Yeah, I would just tell you, Turk, that we had an outsized contribution from the growth in the number of producing reps during 23 in the U.S. I mean, we added almost 40 producing reps, or 14% growth. We expected that to be more balanced in terms of the numbers being added, as well as the productivity dollars per, you know, we expect a lot of revenue from these producing reps that have recently joined us and are just getting going. So some really exciting ads to the team, both last year and in the first part of this year. Even some really exciting ads.

We had an outsized contribution from the growth in the number of producing reps during 'twenty three in the U S. I mean, we added almost 40 producing reps are 14% growth.

We expect that to be more balanced in terms of the numbers being added as well as the productivity dollars per we expect a lot of revenue from these these producing reps that recently joined US and are just getting going so.

Really exciting adds to the team both last year and in the first part of this year even.

Some really exciting ads and so we expect.

Stephen M. Deitsch: And so we expect some more balance, though, in terms of the overall math on what's driving the U.S. business, the split between the numbers of reps and actual dollars per rep. Thank you for that. And you mentioned last quarter the step up in inventory that you expected, you know, obviously closing out around 100 million. That, you know, I think that's kind of what you anticipated. I want to make sure that's sort of in line and then also that you think the things you write down are, you know, essentially over it. Yeah, no. I think that's a great question.

Some more balanced though in terms of the overall math on what's driving the U S business the split between numbers of reps in actual dollars per rep.

Thank you for that and you had mentioned last quarter. There was a step up in inventory that you expected, obviously closing at around $100 million.

I think thats kind of what you anticipated I want to make sure that sort of in line and then also that you have.

The write down.

Our.

Essentially over at this point.

Yeah, No I think Thats, a great question and our inventory levels.

Stephen M. Deitsch: And our inventory levels ended up exactly where we had anticipated they would. And as we go into this year, you know, as we've said, we expect significant improvements in operating cash flow and free cash flow. And we believe that, and we have great visibility into that, and it's going to be driven by positive EBITDA. It's going to be driven by leveraging the existing inventory investments we've made. And so we don't expect and aren't planning for, and we will not have the kind of inventory increases that we saw last year.

Ended up exactly where we had anticipated they would.

As we go into this year as.

As we've said, we expect significant improvements in operating cash flow and free cash flow and we believe that and we have great visibility to that and it's going to be driven by positive EBITDA, it's going to be driven by <unk>.

Leveraging the existing inventory investments we've made.

So we don't expect and are planning for an <unk> and we will not have the kind of inventory increases that we saw last year. So that's all going to bode very well from a cash flow perspective improvement in 'twenty four and to your point the adjustments that we made in the fourth quarter was a noncash charge increasing the level of <unk>.

Stephen M. Deitsch: So that's all going to bode very well from a cash flow perspective improvement in 24. And to your point, the adjustments that we made in the fourth quarter were a non-cash charge, increasing the level of reserves on just a much higher level of inventory. So we don't expect adjustments of that order of magnitude, you know, at any time in the future.

Reserves on just a much higher level of inventory. So we don't expect adjustments of that order of magnitude.

At any time in the future.

Albert DaCosta: You know, those kinds of adjustments; you always have inventory adjustments, but not to the size and scale we saw in the fourth quarter. Given that it's just one time, too, I think most people will back it out, but thank you for all that. Yeah, thank you. I appreciate it. One comment just to add to that is, we still respond to my mom, you know, as one of the first investors. It's really important that we keep good records and accounts, everybody is accountable for what we spend and how we invest those dollars. And that's not changed since we became public.

Those kinds of adjustments you always have inventory adjustments, but not to the size and scale, we saw in the fourth quarter.

Given that it's one time too I think most people will back it out but thank you for all that detail.

Yes, thank you, but I appreciate it.

One comment just to add to that is we still.

Bond to my mom is one of the first investors, it's really important that.

We keep good records and account everybody's accountable for what we spend and how we invest those dollars and that's not changed since we've become public. So we take a lot of pride in building an amazing business there.

Operator: So we take a lot of pride in building an amazing business there. Thank you. As a reminder, if you would like any further questions, please dial star one on your telephone keypad now. And our next question today is from the line of Mike Matson of Needham. Yeah, thanks.

Thank you as a reminder, if you would like any further questions. Please dial star one on your telephone keypad now and our next question today is from the line of Mike Matson of Needham <unk> Company. Your line is now.

Yes, I think so.

Albert DaCosta: I appreciate the detail on the bunion products you provided and getting to see them at AOS, but I guess I wanted to ask one just about the kind of market opportunity there for bunions. Can you just remind us, I don't know if you have numbers in terms of the number of bunion procedures, but you know, and then, you know, To what degree do you think these products will drive market share gains and conversions from competitive products versus just expanding the overall market? Yeah, thanks for the question. Maybe I'll start there.

So I appreciate the detail.

Funded products he provided in getting to that.

But I guess I wanted to ask one just about kind of the market opportunity. There in Bunions can you just remind us.

Don't know if you have numbers in terms of the number of funds in procedures, but.

Then.

To what degree do you think these products will do.

Drive market share gains conversions from competitor products versus just expanding the overall market.

Okay.

Yes. Thanks for the question, maybe I'll start here.

Albert DaCosta: The first part of your question, you know, the bunion market today, there are about 400, according to our estimates. I'll preface it by saying that, but there are about 450,000 bunion surgeries done annually in the United States. We do think that that's growing pretty nicely. There are a lot of patients waiting for better technology to get their bunions treated. We've had and continue to have a really strong presence there. We've got some of the best technology, in our opinion, to treat bunions.

The first part of your question.

The bunyan market today, there is about 400, according to our estimates I'll preface it by saying that but there is about 450000 bunions done annually in the United States.

We do think that that's growing pretty nicely. There is a lot of patients waiting for better technology to get their bunions treated.

We have had and continue to have a really strong presence there. We've got some of the best technology in our opinions to treat bunions.

Albert DaCosta: Again, addressing a pretty wide range of options there to make sure that we can address specific considerations for each patient. We're definitely not a one-size-fits-all organization there, and we've got some amazing products to treat that. That being said, I think these products are going to be really complementary and put a spotlight on some of the technology that we have and expand our presence, or continue to expand our presence, in the bunion space, which is a fast-growing, large part of the foot and ankle market as a whole. It is a wonderful balance for us, so I wouldn't say it's more important than fracture fixation or ankle or Charcot or forefoot or Okay, thanks.

Again, addressing a pretty wide optionality there to make sure that we can address specific considerations for each patient.

Definitely not a one size fits all organization, there and we've got some amazing products to treat that.

That being said I think these products are going to be really complementary and put a spotlight on some of the technology that we have and expand our presence our continued to expand our presence.

The bunyan space, which is a fast growing large part of the foot and ankle market as a whole. It is a wonderful balance for us. So I wouldn't say, it's more important than fracture fixation or ankle or charcot or.

<unk> or any of the other procedures, but it is exciting for us to continue to build a really good balanced portfolio create reproducibility with every surgery that we can.

And impact patients in a positive way.

Okay. Thanks.

And then.

Albert DaCosta: And then, yeah, you've got to give the credit facility, you know, increase it, you know, we haven't seen you do a lot of M&A, you know, or wanted to take your temperature there in terms of the outlook, you know, is that something you're still looking at? Or do you feel like you've certainly got quite the engine there internally for developing your own products? Yeah, maybe I'll hit this one.

You've got given the.

Given the credit facility.

The increase.

We haven't seen a lot of M&A.

I wanted to take a temperature there in terms of outlet.

You are still looking at or do you feel like you.

<unk> certainly got quite the engine, they're totally first of off air products.

Yeah.

Yes, maybe I'll hit this one I.

Albert DaCosta: I'll tell you, we are 100% committed to creating an environment for foot and ankle surgery that improves outcomes. I can't think of a better way to say it. And we're also very, I think we are very passionate and excited about what we can build for the foot and ankle. We're aware of areas where maybe we don't have the expertise and the technology in house to do things that are dramatically going to improve those outcomes. So we're always looking for that, and we're very careful about what we consider and how we consider it. But technology that influences better outcomes for foot and ankle patients is always going to be top of mind for us as we're on this mission, right? And this mission is pretty exciting.

I will tell you we are 100% committed too.

Creating an environment for foot and ankle surgery that improves outcomes I can't think of a better way to say it.

And we're also very.

I think we're very passionate and excited about what we can build in foot and ankle we're aware of areas, where maybe we don't have the expertise and the.

The technology in house to do things that are dramatically going to improve those outcomes. So we're always looking for that.

And we're very careful about what we consider in how we consider it but technology that influences better outcomes for foot and ankle patients is always going to be top of mind for us.

As we are on this mission and this mission is pretty exciting as very few times in life that you get a chance to do something so powerful in a N.

Stephen M. Deitsch: It's very few times in life that you get a chance to do something so powerful in a market and influence a market the way we hope to. And so, for us, we're going to keep an open mind to it. I wouldn't say that there are things right now on the burner, but we are always looking for opportunities to continue to expand that technology. Okay, great. Thank you. You've got it, Mike. Our next question today is from the line of Caitlin Cronin of Canaccord Genuity. Caitlin, your line is now open.

Market and influence of market the way, we hope to.

And so that for us we're going to keep an open mind to it.

I Wouldnt say that Theres things right now on the burner, but we are always looking for opportunities to continue to expand that technology.

Okay, great. Thank you.

You got it Mike.

Our next question today is from the line of Caitlin Cronin of Canaccord Genuity, Kevin Your line is now open.

Operator: Hi, thanks for taking the questions. Just to start off, thoughts on Stryker's new footprint technology and if Smart 28 is eventually going to compete with this product? Yeah, thanks for the question, Caitlin. I'll address it. I believe the footprint product is surrounding the total ankle piece.

Hi, Thanks for taking the questions.

Just starting off thoughts on strikers, new footprint technology, and smart <unk> is essentially going to compete with this product.

Yes, thanks for the question Caitlin I'll hit it.

I believe the footprint product is surrounding the total ankle piece.

Albert DaCosta: I think any kind of preoperative planning is a great way for us to be thinking about the future of foot and ankle surgery. I think it connects a lot to what our aspirations are around Smart 28. I think we need to do and have better tools to help diagnose, plan, and predict what the outcome of that is going to be.

I think any kind of preoperative planning.

<unk> is a great way for us to be thinking about the future of foot and ankle surgery I think connects a lot to what our aspirations are around smart 28.

I think we need to do and have better tools to help diagnose to help plan and predict what the output of that is going to be.

Stephen M. Deitsch: And so, to the extent that it can influence better outcomes for foot, for ankle replacement, I think it's a positive move for the market. Okay, and any color on adjusted EBITDA cadence through 2024 as you hit break even on an annual basis? Yeah, hey, Caitlin, it's Steve. I think you can think about it sort of scaling with the revenue bill. And, you know, we did see, I think, the best leverage of our operating expenses that we've seen as a public company during the fourth quarter, with 10% growth on a much higher top line growth. So as we go into this year, you can expect that our operating expenses are going to continue to scale at a much lower rate than overall revenue growth, and that our EBITDA will trend in line as the revenue builds and grows. So that's maybe the simplest way to think about it, but it's the way we run the business, and we don't get in front of ourselves in terms of investments and really anywhere up and down the P&L. Got it. Thanks so much.

And so to the extent that that it can influence better outcomes for for foot.

For the ankle replacement I think it's a positive move for the market.

Okay.

And any color on adjusted EBITDA cadence through 2024, as you hit breakeven on an annual basis.

Yeah, Hey, Caitlin its Steve I think you can think about it sort of scaling with the revenue build.

And we did see I think the best leverage of our operating expenses that we've seen as a public company during the fourth quarter with.

With 10% growth on a on a much higher top line growth. So as we go into this year you can expect that our operating expenses are going to continue to scale at a much less lower rates than overall revenue growth.

And that our EBITDA will trend in line as the revenue builds and grows.

Maybe the simplest way to think about it but it's the way we're running the business.

And we don't get in front of ourselves in terms of investments and really anywhere up and down the P&L.

Got it thanks, so much.

Operator: Our next question today is from the line of Justin Lin of William Blair. Justin, your line, Can you start off kind of high level, can you talk about the strength of the end markets kind of going into 2024? What's the state of the patient backlog, which maybe is less important for your business to have? Curious, how are all these dynamics?

Youre welcome. Thank you.

Our next question today is from the line of Justin Lin of William Blair. Justin Your line is now open.

Hey, guys. Thanks for thanks for taking my questions here.

I guess, let's start off kind of high level can you talk about the strength of the end markets going into 2020 for what's kind of the state of the patient backlog, which maybe is less important for your business now, but I'm. Just curious how are all of these dynamics are trending.

Stephen M. Deitsch: Yeah, maybe I'll start and then Albert and we'll talk a little bit about what he's hearing from surgeons every day. I'd tell you that we were very, very busy. To begin the year, you know, through today, we had a strong start to the year, and markets are buoyant, and we're participating well in those buoyant markets. The fourth quarter was strong.

Yes, maybe I'll start and then Albert will will talk a little bit about what he's hearing from surgeons every day.

I would tell you that we were very very busy.

To begin the year through today, we had a strong start to the year end markets are buoyant and we're participating well in those markets.

The fourth quarter was strong.

Stephen M. Deitsch: You know, I would tell you that the fourth quarter was stronger for us in the first half, and then December was good, but not quite as good as the earlier months, and then we saw a really strong February. So it feels like we've got buoyant markets and are setting us up nicely going into this year, taking advantage of our commercial team's capabilities and this product portfolio and our new products. So, you know, we're excited about the setup for 24. I'll maybe just add one comment to that, Justin.

I would tell you that the fourth quarter was stronger for us at the first half and then descend.

December was good but not quite as good as the earlier months and then we saw really strong February so it feels like we've got buoyant markets.

Setting us up nicely going into this year and to take advantage of our commercial team's capabilities in this product portfolio and our new products. So.

We're excited about the setup for 2012.

I'll, maybe just add one comment to that Justin.

Albert DaCosta: I've mentioned before, I don't think we see too much of a backlog bolus-type thing for the foot and ankle space. I think we capture OR time where we can. I think maybe some of our counterparts in orthopedics see a little bit more of the bolus stuff. I kind of like that, because for us, having pent-up energy, just spreads that over a longer period of time.

Mentioned before I don't think we see too much of a backlog bolus type thing for the foot and ankle space I think we capture a lot of time, where we can I think maybe some of our counterparts in orthopedics C. A little bit more of the bolus stuff I kind of like that because that for us having a pent up energy just it.

It spreads that over a longer period of time, it's a more predictable business piece right, but all that to say I don't think we were seeing as much of a backlog bolus type thing is we are just seeing pent up demand for foot and ankle surgery more on the elective side obviously.

Albert DaCosta: It's a more predictable business piece, right? But all that to say, I don't think we're seeing as much of a backlog bolus-type thing as we are just seeing pent-up demand for foot and ankle surgery. More on the elective side, obviously.

And then maybe I'll just add one more thing. This is this is maybe somewhat anecdotal, but I think it's important.

Albert DaCosta: I mean, maybe I'll just add one more thing. This is maybe somewhat anecdotal, but I think it's important. The hips and knees, I know that they really did have more of a bolus impact in 23. And the commentary that I've read is that that bolus isn't as strong going into 24.

Hips and knees I know that they really did have more of a bolus impact in 'twenty three and the commentary that I read is that that bolus isn't as strong going into 'twenty for that bodes well for foot and ankle surgeons, because theres more operating room availability because of that so.

Albert DaCosta: That bodes well for foot and ankle surgeons because there's more operating room availability because of that. So, I don't know if that will develop into a potential tailwind for these markets that we're in, but I know that when there are fewer large joint orthopedic procedures taking place, it allows our smaller joint folks time to get in there and take advantage of the OR space. Got it. Super helpful color here.

I don't know if that will develop into a potential tailwind for these markets that we're in but.

I know that when theres less.

Large joint orthopedic procedures taken place. It allows our smaller joined folks' time to get in there and take advantage of the LR space.

Got it Super helpful color here.

Stephen M. Deitsch: Next question kind of on your commercial. When you hire new reps, are you kind of going after new territories? Or are they kind of going deeper into accounts?

Just last question kind of on your commercial strategy. When you hire new reps are you kind of going after new territories or are there any kind of going deeper into accounts.

Stephen M. Deitsch: You know, and also, kind of the second part of that question is like, what are the main geographies you're not in today yet that you'd like to kind of expand into? I know you guys talk about the UK, Australia, and South Africa a lot, but just curious. Yeah, so look, the international market is about 45% of the global foot and ankle market. So it's very, very large. And we've got low single-digit market share outside the US, and we have better than that market share in those three big markets, but well below, you know, the rate that we expect to be at in the next three to five years. So in our more established markets, we expect to continue to gain market share there.

And also kind of the second part of that question is like what are the main geographies you are not in today, yet that you'd like to kind of expand into I know you guys talked about the UK, Australia, and South Africa, a lot, but just curious.

Yeah.

Yeah. So look the international market is about 45% of the global foot and ankle market. So very very large and we've got low single digits market share outside the U S and.

We have better than that market share in those three big markets, but well below.

The rate that we expect to be in in the next three to five years. So our more established markets. We expect to continue to aggregate market share there and then some of the other large markets that we're really not participating in meaningfully today like Germany, Italy, Canada, Spain will continue to grow in those markets. We've got.

Stephen M. Deitsch: And then some of the other large markets that we're really not participating in meaningfully today, like Germany, Italy, Canada, Spain, will continue to grow in those markets. We have in Spain, and it or excuse me, in Italy, in Germany, for example, we've got, you know, teams on the ground and facilities and systems in place to take advantage and get our products going there in a more meaningful way. And then we're going to be doing the same in Japan, which is the second largest overall orthopedic market; we're going to get in there early in the 25th, perhaps a little bit late this year, but probably more so into the 25th. So there's a lot of opportunity for everyone. And then you look at South America, and there are some select opportunities we're looking at there in a very disciplined way. But, you know, like Albert said, if we're going to go into a market, we want to go into it in a meaningful way and get focused and not be too spread thin across a lot of different locations. We want to win in the markets we're in.

In Spain in it or excuse me in Italy in Germany for example, we've got.

Teams on the on the ground in facilities and systems in place to take advantage and get our products going there in a more meaningful way.

And then we're going to be doing the same in Japan, which is the second largest overall orthopedic market, we're going to get in there early 25, perhaps a little bit late this year, but probably more so in the 25.

So theres a lot of opportunity and then you look at South America and Theres, some select opportunities we're looking at there on a <unk>.

In a very disciplined way, but we want to like Albert said, if we're going to go into a market. We want to go into it in a meaningful way and get focused and not be too spread thin across a lot of different locations, we want to win in the markets. We're in.

Stephen M. Deitsch: Got it. Thank you. Thank you. And this will conclude today's question and answer session, so I'd like to hand you back to the Paragon. I'll close. Alright, thank you again for your time today. If you have any further questions, please reach out. Otherwise, we look forward to seeing many of you at our future investor and industry conferences. This concludes our call. Have a great day. This concludes today's conference call. Thank you all for joining us. You may now disconnect.

Got it thank you.

Thank you.

And this will conclude today's question answer session. So I'd like to hand back to the Paragon 2018 for closing remarks.

Alright. Thank you again for your time today, if you have any further questions. Please reach out otherwise we look forward to seeing many of you at our future investor and industry conferences. This concludes our call have a great day.

This concludes today's conference call. Thank you all for joining you may now disconnect your lines.

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