Paragon 28, Inc.

Global Q3 2024 revenue was a record $62.3 million, up 18.1% reported and 17.6% constant currency. U.S. revenue was $51.2 million, up 14.8% reported, and international revenue was $11.2 million, up 35.7% reported and 32.8% constant currency. Gross margin was 74.1% versus 75.0% in Q2 2024. Operating expense was $54.6 million, or 87.6% of net revenue, improved 969 basis points year over year and 500 basis points sequentially. Adjusted EBITDA was a profit of $432,000, improving $3.2 million year over year and $3.4 million sequentially. Free cash flow was a use of $6.3 million versus a use of $20.7 million a year ago; DSO was 52 days, DPO was 118 days, and inventory days were 545. Cash and liquidity totaled $89.1 million, including $39.1 million of cash and $50 million available on the credit facility. Full-year 2024 net revenue guidance was raised to $252 million-$256 million, representing 16.5% to 18.3% growth at current FX. Management expects gross margin to stabilize around 75% for full-year 2024 and said Q4 should show the full effect of restructuring, with improved sequential earnings and free cash flow.

Albert DaCosta framed 2024 as a pivotal year, emphasizing 13 product launches year-to-date, strong commercial execution, and a broader strategy to drive sustainable, profitable growth. He said sales choppiness early in Q3 abated by quarter-end and that momentum into Q4 makes him optimistic the issue is behind them. He repeatedly highlighted the strength of the product portfolio, including SMART 28, Phantom Fibula Nail, and the short stem tibia implant, and said these launches should create meaningful momentum into 2025 and beyond.

Chadi Chahine focused on operating leverage, saying the company is ahead of schedule on its priorities of EBITDA positivity in 2025 and cash flow positivity in 2026. He cited gross margin of 74.1% and said it should stabilize around 75% for full-year 2024, while Q3 operating expense was $54.6 million, including $986,000 of non-recurring severance costs. He highlighted free cash flow improvement to a use of $6.3 million, working capital progress with DSO of 52 days, DPO of 118 days, and inventory days of 545, and noted $89.1 million of total liquidity. He also said the company is comfortable with its capital structure and does not see an operational need for incremental dilutive capital.

Analysts focused on whether Q3 softness in the foot and ankle market persisted, but management said the issue was more “choppiness” than segment-specific softness and that it mostly abated by the end of Q3. Questions also centered on how much of the 2024 product-launch benefit will carry into 2025; management said launches typically take 6 months to a year to ramp and expects a meaningful boost next year, especially from second-half launches. Analysts pressed on inventory levels and margin recovery, and Chadi said inventory reduction will take time, while gross margin is now viewed as having a floor around 75% rather than a quick return to 80%+.