Good afternoon. My name is Craig Bijou. I'm one of the medical device analysts here at BofA. It's a pleasure to welcome Paragon 28. From the company, Albert DaCosta, the CEO, and Steve Deitsch, CFO. Thank you, Albert and Steve. Thanks for having me back. Want to start, you reported Q1 results last week. Just kinda wanna start it with maybe a little bit of a recap. Obviously, growth was pretty strong, 27% constant currency basis on what was a pretty tough comp in the prior year. If you could just go into a little bit of what drove the strength in the quarter. I know you had mentioned 20%+ growth in the U.S., across all of your foot and ankle segments. You know, but maybe I'll push you a little bit on that too and see if there's anything that stood out in the quarter, but would love to hear your view. Yes. Maybe I'll take that one. look, I think Q1 was a great quarter, obviously. It's one of our best quarters as a publicly traded company, if not the best quarter so far. I think it was a reflection of us hitting on a few cylinders, right? We launched a couple of key products last year. I think those products were pretty influential. We had some investments we made into our sales force expansion that I felt like paid off. We're returning to a more normal season. I think this was really the first quarter that we started feeling back to pre-COVID levels, you know. Typically in a normal season for us, we see some spillover from Q4 into Q1. The one caveat that I'll say there is, it's, we also saw a pretty nice boost in our fracture fixation, so our non-elective procedures, which were plus 20%, right? Two segments for us that tend to be non-elective are the fracture fixation segment, obviously, and in Charcot reconstruction, which is less elective. Just all around, it felt like the business was firing on all cylinders, and we had a great quarter on a great comp. We had 25% growth last Q1, and we had 23% growth, I think, Q1 of 2021. All that being said, I felt like it was just a great quarter for Paragon. Great. Thanks. You know, you did leave guidance unchanged, and we talked about that on the call. That was Steve, by the way. We'll blame him. I'll direct the question at him. You know, despite the strong growth in the first half, you know, the guidance then implies, you know, slower growth in the second half. My math, it's about 17% or for the rest of the year, so 17%. Just wanted to understand with some of the seasonality dynamics that you do highlight, how should we think about what you're expecting for the rest of the year, and then maybe kinda go into a little bit of the cadence and how, you know, quarter by quarter, we should be thinking about the seasonality impact. No, it's a good question. you know, it's something that Albert and I have really been consistent about, is making sure that we reflect the strength of our business, which is stronger than it's ever been right now, but also taking into account things that we can't control, things like potential changes in elective procedures due to macroeconomic factors. To be clear that we are not experiencing right now. We're having, you know, we had a great first quarter and a good start to the second quarter. you know, our guidance, particularly the low end of the range, just reflects the potential for elective procedures that would slow down due to any macroeconomic influences on them. that's, you know, a pretty consistent... Our approach to guidance is, you know, re-reflect the strength of our business, but also acknowledge that, you know, we're still in uncertain macroeconomic environments. Got it. Helpful. Maybe one more on kinda Q1 revenue. We've seen ortho procedures pretty strong from a lot of different companies, and not every single ortho market is the same. Hips and knees are obviously different than foot and ankle. Albert, you talked about this a little bit, how Q4 spilled over into Q1. You know, is there a pent-up demand that kinda came through in Q1 that drove some of that, you know, procedure volume? You know, obviously, we see it in some of the hip and knee numbers. That was very strong. You know, it's probably not to that extent, but is there anything in there? You know, just broadly on pent-up demand from COVID, you know, how does that impact the foot and ankle market? Yeah. I'll start off by saying I think COVID itself played a part in elective energy, right? I think everyone went through the same emotions during lockdown periods and post-lockdown periods to just think, okay, this is probably a perfect time for me to be off my feet, right? We've got hybrid work environments. People started remodeling their homes. Just, I think naturally speaking, people thought, you know, maybe I'll go ahead and treat this nagging condition that I've had for a while. That being said, I think we do have some pent-up energy that way. We've got people who have committed to elective procedures. When it comes to OR time, I think there's probably a priority that goes to some of the other, you know, counterparts in orthopedics. Hips and knees might have seen a bigger influence from some of that. I feel like foot and ankle might not see a bolus. We'll just carry a pent-up energy here for some time moving forward. Again, elective procedures do naturally have some carryover into Q1, just people who try to get it scheduled in Q4 and they couldn't for whatever reason. Again, our trauma, our nonelective business did really well as well. It's just I feel like our medical education, we were training record numbers of people. Our sales force has really expanded both in numbers and productivity. New products, again, contributing nicely to the success of the company. I felt like Q1 was just a reflection of a strong business. A, a follow-up on that and just if hips and knees were getting priority, and we kind of heard that, you know, and maybe even an extra surgery day, and obviously that's more inpatient. You know, could that be building up even more pent-up demand for foot and ankle procedures? I mean, is that, is that a way to think about it that maybe, you know, because you guys are deferred for some of the more, you know, for the hip and knee procedures that maybe, you know, when that pent-up demand in hips and knees eases, that maybe you guys see, you know, procedure acceleration to some extent? There's 2 ways I'm gonna answer that. The first one is, I think, more recent. I think what we started to see in Q4 was hospitals really navigating through staffing issues that had plagued us for the last 2 years, really. That freed up some OR time for, like, hips and knees and other segments to see that backlog recover. Generally speaking, the reason we see some spillover into Q1 is 'cause every year pre-COVID, we have a carryover. People who try to get some elective procedures scheduled in Q4, they just can't get it, you know, scheduled in time, those carry over, and they say, "I'll just go ahead and do it in January," even though their deductibles have reset and they're starting the new year fresh, right? Generally speaking, I think foot and ankle has shown that we are not exposed to really these pent-up boluses that just kick in, but we do just keep an energy around foot and ankle. I think there is an elective energy right now carrying us into this year that's a little bit more normal. Got it. That's helpful. I'm gonna let you kinda talk a little bit on the foot and ankle market. You know, a lot of companies and even some of the larger players lump foot and ankle with trauma, so it's, you know, investor from an investor perspective, we don't necessarily have the, you know, the best visibility into the market. Mm-hmm. Obviously, you guys are exclusively focused on foot and ankle. You know, maybe, you know, it's a $5 billion global market, you know, maybe just talk about some of the key drivers, you know, procedure-wise, technology-wise. I know, you know, the investor community or the investment community is focused on bunion repair, total ankle, and we see that, but not necessarily on, you know, the broader scope of foot and ankle procedures. You know, maybe. Yeah. maybe let you run a little bit with the market. Sure. Well, I'll start off by just reminding people, I think foot and ankle is one of the youngest segments of orthopedics. That means we still don't have real clear definitions on how we should be treating a lot of these conditions. Excuse me. Higher complication rates than maybe some of our counterparts, and that lends itself to tons of room for innovation and better technology, better systems, better instruments, better tools for, to help surgeons achieve better outcomes for patients. That just means the market itself is really susceptible to a lot of expansion from here. It reminds me to, you know, the early stages of hips and knees, where we knew polyethylene was gonna last for about five years, they were asking patients to wait as long as they could to get their hip or knee replaced 'cause they wanted one revision in someone's lifetime. As the technology improved there, they started treating people earlier and earlier and were maintaining more active lifestyles, et cetera. Foot and ankle is in those stages. As we have higher complication rates, you still have people, you know, prolonging the treatment of those conditions. Paragon's challenge is to see how we can improve outcomes for patients, keep more active, maintain active lifestyles, and et cetera. The other part of that is I'd say the global market is about $5 billion. U.S. is a little bit more than half of that in our estimates. Tons of TAM, right? We believe the TAM here is in excess of $10 billion, and it's for all those things that I just called out. The ankle market in particular, the ankle replacement, happens to be one of the youngest pieces in an overall young market, right? It gets a lot of attention, almost disproportionate amounts of attention, and it's exciting. This is giving patients an option that can maintain an active lifestyle. The technology's evolving really quickly and so there's a spotlight on it, but it is still a relatively small piece of a bigger market. We break the market up into five sub-segments. We've got fracture fixation, we've got flat foot, which is also known as PCFD. We've got forefoot, which lumps hammer toes and bunions and all the forefoot procedures together. We have Charcot. We have ankle, and ankle includes ankle fusion and total ankle replacement. Excuse me. Each one of those markets has a unique story to tell, different complication rates, different considerations, some more susceptible to soft tissue limitations, some more bony type considerations. Generally speaking, every one of those markets has huge opportunity for us to be innovative, improve outcomes for patients, and ultimately expand and play a significant part in this market. You know, it's a high single-digit growth market overall. I guess, you know, your view on the sustainability or the durability of that high single-digit growth. I mean, how many years can that go? I mean, I'm sure there's different factors, the innovation that you talked about and, you know, some pricing kind of your mixed benefit from some of the innovations too, I would assume. I will say, and I speak for myself here, but I, I feel like there's probably not another company out there that is as obsessed about improving outcomes for patients as we are. That means that our technology, our systems, everything has a look and feel to it that's very attributable to Paragon's passion, right? We feel like we're contributing to some of the growth of this market, and we feel like things like enabling technologies, SMART 28, one of those initiatives, that could even accelerate some of this market's potential and see some of the TAM there, right? Sure. Technology is desperately needed where we still have complication rates as high as we do. We're not just making things fancy to make things fancy, we're actually addressing real things here, right? We're so committed to that objective, and it's so exciting every day when we wake up that we get to play a significant part in a really exciting market. One more on kind of, I guess, big picture market. You talked about total ankle, I feel, you know, us in the investment community have been talking about total ankle since, you know, other companies that have since been taken out. You know, I guess, where are we in that curve in, you know, the transition from fusion to arthroplasty? Yeah. I mean, we see it in other joints, so inevitably it's going to happen. Mm-hmm. Where are we? You know, how quickly can we get to, you know, a bigger piece of that being total ankle replacement? Mm-hmm. -versus, fusions? I'll start off by saying I think there's a role for both, right? The word fusion carries a stigma to it, but it doesn't necessarily. The outcomes for ankle fusions could be pretty strong. Right now I think there's still patients with certain deformities that exclude them from consideration in total ankle and maybe move them into fusion candidates. The idea of keeping motion, maintaining active lifestyles, the impact of fusion on the adjacent joints is pretty extreme. There is an opportunity to keep expanding the indications for total ankle with more and more of those deformity considerations designed into the system, right? I would say as it stands today, there's still a very distinct role for both, and outcomes for ankle fusions are not bad, right? If people could get over the idea of a fusion, right, it actually can allow them to maintain a pretty good lifestyle with an ankle fused. We are seeing more and more fusions going in today with the anticipation of taking those down later into a total ankle replacement and restoring some of the motion to the adjacent joints, which could preserve that from arthritic changes, et cetera. It's a very exciting topic. It is a very hot topic right now in the foot and ankle market, and it's an exciting piece for us because we see the runway to continue to expand our offering in both of those indications only growing. Got it. Great. Thanks for kind of that overview on the market. Then maybe now a little bit more focused on you guys specifically. I think you launched 10 products in 2022, and several of them, and correct me if I'm wrong on that, but I think several of them filled holes in your offering. Now when we think about one kind of, and maybe you'll say this, maybe you won't, contribution to growth or how to think about, you know, how much that drove growth in 2022, and what it can be in 2023 incrementally. Then also wanna talk about, you know, the products that you're gonna launch in 2023, and if there are other holes that you're looking to fill this year. The only caveat I'll say to that to answer that question is the word filling a hole sounds like me too, right? That is there's no part of our DNA that's wired to fill our bag with stuff, right? I get the question, but I just wanted to give that caveat. Fair. The other caveat that I'll give is I have 75+ children, and I don't favor one child over the other. All of my children are my favorites, and that's honestly the way we manage the business. Our business design is to be balanced across the full spectrum of foot and ankle. We wanna take advantage of such a broad and dynamic market, and we you know our aspiration is to help define the space, right? That's first and foremost for us. That being said, there's still some indications we're not participating in, a couple of those we hit last year, XFIX being one of them. The beginning of the year, we launched a more of a fracture fixation pin to bar system. Around second quarter, I think we launched a circular fixator more for ankle and Charcot reconstruction. Two very influential products. Two products that fueled a lot of attention to medical education. It attracted sales folks that had a lot of experience in those key areas, and we launched a pretty novel system. You know, our philosophy on product development is we don't touch it unless we can make it better. If we can contribute in a meaningful way to better outcomes, we'll develop it. If we can't, that might be a good opportunity for M&A or a tuck-in or some other consideration. We wanna be available to every indication in foot and ankle. This year is no different than any year for Paragon. I think we're expecting to launch somewhere between 6 and 10 products this year. We do try to balance our development strategies, some bigger scope projects, some mid-size and some on the smaller side line extensions, things like that, but every one of them keeping the same energy as the day we started. The one thing that I would potentially call out is our expectation that later this year, maybe early next year, we're expecting to beta launch one of our SMART 28 modules. I think that's gonna be one of the first times you get to see the Disior platform at work and what it could mean to surgeons and patients, I think it's gonna be pretty influential for foot and ankle. I think I don't wanna over-glamorize it, but we think this could be one of the most significant tools yet to really improve outcomes, to really take chunks out of those complication rates and give surgeons more visibility to the deformity, the planning, and the prediction of the outcome they're at. I hit a lot of topics there. Mm-hmm. So far this year, we've launched one and a half products. We launched a second metatarsal shortening system, which is a really nice complement to our forefoot franchise. That plays a key part alongside things like bunions and hammertoes. We launched in kind of a beta mode, we launched a supramalleolar system that actually I think this week is gonna get a little bit more of a broad scale introduction to the market. That is a realignment procedure for ankle in preparation for a total ankle replacement. We wanna get everything balanced and in line with the ground so that we could go ahead and put a total ankle in with good alignment. That's a system that we just launched as well. Two so far, one and a half, and a lot more coming. Yeah. You highlighted soft tissue as one area. Yes. A couple years ago that, you know, you didn't have many products at all. Mm-hmm. You know, I know you launched a couple and, you know, it's, I guess it's bigger piece of the wallet... Mm-hmm ... if you will, in a surgery that you can get. I mean, is that still kind of the philosophy, and have you been seeing that with the products that you've actually launched or that you launched last year? Yeah. I think soft tissue really plays a key part in our ambitions here. By the way, I feel like I'm hogging the stage from Steve, so I'll ask Steve some in a minute. We'll get a finance question here. We really think that at least industry has been laser-sharp focused in on bony deformities, without really paying as much respect as we should to the imbalance or balance of soft tissue that exists around those bony deformities. When we make corrections, restoring balance to the soft tissue is probably more important, right? That could be one of the leading contributions to some of the complications that we're experiencing, is just not addressing enough of the soft tissue balance after we do these things right. That's why we think it could be such a nice complement to our motivations here to improve outcomes. We've launched several products, but there's a ton of research that we've done that is gonna influence a whole barrage of developments from here moving forward on the soft tissue side, and we're really looking at some exciting things like less scar-mediated healing and more regenerative healing mechanisms, and how we can trigger physiologic properties in the body to do what we think we could get it to do and balance those structures. Got it. All right, Steve. I'll let Albert have a break. On the P&L, you know, pretty straightforward questions, I guess. Obviously, gross margin came in a little bit higher than we're expecting, a little bit higher than what you guys have been doing. I know you've kind of stuck with, you know, 80%+ gross margin is where we should be. Maybe just talk about kind of what drove that. You know, as we think about some of the product launches that are coming, you know, what kind of impact does that have, in particular, you know, the enabling tech piece? Obviously, that's a little bit, maybe not a 2023 impact, more of a 2024 impact, but we'd just love to kinda hear how we should be thinking about gross margin. Yeah. No, it's a great question, and an important question because it all starts with gross profit dollars when you think about the leverage in our P&L. you know, when you think about our gross profit margins, they're really influenced by two key things, getting competitively priced products into our customers that reflect the value of our products, but also are sustainable and a price that works for our hospitals. We're cognizant to partner well with hospitals to get a value for us and a value for them. Our national accounts teams work hard to get our products appropriately priced for both sides of the partnership. Our team that works in day in and day out to get product available at competitive pricing. We've got a very strong group of outside contractors that make these products for us. They've been great partners for us, and they wanna work with us because they recognize the growth that we've experienced and the potential for us to continue to expand and grow. You know, we've been able to increase our gross profit margins in an inflationary environment without increasing prices to our customers. That's, you know, been really successful for us. We expect our margins to remain strong. You know, as we expand internationally, somebody asked a question, will we see an erosion in our margins? I said you may see a little bit of a step down in gross margin, but overall profit margins will continue to expand because Germany, for example, where we expect to do more business there in the future, lower prices on products, but a more efficient distribution channel as compared to the U.S., net-net, a very profitable business opportunity for us. 80% is a good barometer of where we think long, you know, midterm, long-term model should be at. We expect to do better than 80%. I think the lowest we've delivered is 81% since we've gone public. 82.9% this most recent quarter, which we're really proud of, and that drove a lot of leverage across our P&L and including a 50% adjusted EBITDA improvement year-over-year. Great. EBITDA loss has come down each of the last five quarters. You guys are pretty close to break even. Yeah. You know, how should we think about EBITDA loss cadence throughout the year? Is it a situation where you may not be EBITDA positive for the full year but maybe Q4 we can see some positive EBITDA? Yeah, I think that's right, Craig. I mean, we said after our finish to 2022 that we expect a $5 million-$10 million improvement in EBITDA. Last year, we were just over a $10 million loss, intentionally, by the way, because we made a lot of terrific investments that we were happy to make and will continue to make. Yeah, we will continue to see improvements in leverage. You know, the last 5 quarters, as you pointed out, have shown sequential improvement each quarter, and EBITDA really follows the gross profit dollar distribution in the quarters of the year. With a concentration of revenue, particularly in the fourth quarter, you see a lot of EBITDA, you know, the best EBITDA quarter of each year. You know, we did -$1.3 million for the 1st quarter of this year. That's probably a good way to think about it for the next couple of quarters and then ramping up as we get into the end of the year to probably a very likely a positive number. In 2024? Can I get you to say that you'll be EBITDA positive in 2024? I don't know if Albert will let me say that. No, look, this business is gonna be a very profitable business and generate free cash flow. You know, whether it's 2024, 2025, or 2026 from a free cash flow perspective, we are gonna continue to see EBITDA improvements. With the type of growth that we anticipate and expect on the top line and our ability to leverage the, a strong investment base that we built over the last couple of years, 2024 is gonna be better than 2023, and we expect 2023 to be approaching break even. Okay. It's amazing having a CFO who keeps reminding us what's important to invest in, right? Yes. Pretty cool. With the last couple minutes, you know, rep surge and productivity is obviously very important to you. It matters a lot to the profitability of the business. You guys have driven rep pro-productivity up significantly over the last, you know, six quarters or so. Yet you're still hiring reps and, you know, you're driving leverage. Would love just kind of your perspective on that balance between, you know, more sales reps, more feet on the street, and, you know, further rep productivity. Foot and ankle is, it's a little bit of a different dynamic than some of the other ortho industries. You know, maybe even talk about kind of where max productivity is for a rep or, you know, how do you think about it from that perspective? Let me start there. I, you know, as the CFO of the company, I, you know, I just want everyone to know that our company doesn't cut people's territories and reduce sizes of territories and opportunities for reps. It's not a one-size-fits-all approach for every territory, and we really leave that up to our distributor partners in these markets and our sales leadership teams to decide what's the best algorithm for growth in each market. We've absolutely got room to expand our number of producing reps, and we think that number will likely double from the 247 that we had in the first quarter of this past year, which was up 18%, which, you know, was the best year-over-year increase that we've shown since we've been a public company. Absolutely, you know, we want to have our distribution partners to be successful, grow and expand their businesses, and what works in city X may be different than what works in city Y, and we wanna rely on, you know, the decisions being made in each territory to what works best there. We take a lot of pride in building amazing technology, we couldn't do what we do without an amazing sales force that's just really focused on servicing these cases the best we can, right? With the best options, the best knowledge of these procedures, just really making sure that every case is as efficient as we could possibly make it. We've got a great sales force. That's great. With only a minute left, I guess, you know, surgeon training, maybe Albert just to talk on surgeon training, how important that is to you, how you balance the spending necessary for surgeon training versus, you know, the yield that you could potentially get out of it. Well, for starters, I'd say a lot of the products we've launched recently lend themselves really nicely, or they're, they tend to be a little bit more prone to the medical education side. Things like total ankle replacement, ankle fusion products, XFIX, those are products that surgeons expect to get their hands on and understand the system fully before they go live, right? That's been a really nice boost to our medical education program. Medical education is something that I feel like we're always looking to optimize. We recently launched the mobile lab, and that showed us just how important it is to find the most effective way to bring that medical education to them when they can't travel in Q4 and they're busy with deductible seasons or, you know, or refine it to where we can really focus laser in on products that are important to that particular surgeon or that group. That's just a good example of how we're always looking to optimize it. A side effect of medical education is, one, we get to keep communicating our research findings, and every development starts with a deep research before we have a product in mind, which is a key thing there so that we don't bias our own research. We wanna make sure we're understanding what's missing here, right? We communicate that to the world. If it's good or bad to our stuff, we're just gonna keep telling people what we're learning as we're learning it. Medical education's the best place to do that. It's also a place to align surgeons to leaders who are talking about different styles and philosophies about addressing these conditions. There's more than one way to address some of these indications, and surgeons love to hear from surgeons what, you know, what their thoughts are and why they're doing what they're doing. It's just all the way around. Then the other side effect of P28 is usually salespeople are traveling to these medical education courses, and they're learning while their surgeons are learning, and it just becomes a very effective tool for us. Great. With that, I think we're out of time. Yeah. Thank you, guys. Thanks, Craig. Thank you.