Paragon 28, Inc. (NYSE:FNA) Q3 2023 Earnings Call Transcript

Steve Deitsch: Yeah. And I would just add, Craig, that the — when you look at our overall market share, we are at about 4% global market share in the $5 billion foot and ankle market and we are even less than that internationally. So we have an extensive runway. And the investments that we have made are going to continue to yield our businesses in the U.K. and in Australia and South Africa, where we have larger businesses or just killing it right now, honestly and thanks to those teams for the great work on the ground. But it’s also in new markets as well that we are really just getting our teams going in. So a lot of runway in existing markets, new markets, markets where we have been before, but haven’t had that big of a beachhead and just a very large vibrant market for us as we move forward.

Craig Bijou: Thanks, guys. Very helpful. And maybe shifting to the U.S. market, a number of competitors have been talking about launching new products. So, Albert, maybe I would love to get your kind of view of the competitive landscape, obviously, it’s always been competitive. But has it gotten more competitive in the U.S., or I guess, globally? And maybe just some of your thoughts on how you guys are positioned versus some of the new — maybe not new entrants, but new products that are coming out into the market?

Albert DaCosta: Sure. Well, for starters, I will tell you, we love competition. I think you might hear the same thing from some of our competitors about us. But our goal here is to improve outcomes for foot and ankle surgery. And I think the more competition we have, the more we kind of challenge each other to think about things in a different way and I think that makes it exciting and I think that’s just, generally speaking, it’s good for the entire market. From our perspective, we feel — and I could speak on our behalf, but we feel like we care so much about foot and ankle. This is all we care about, right? And so when we go to bed at night, when we wake up in the morning and when we have dinner, I mean, these are the thoughts that we are going through is how can we improve these procedures?

What are we not thinking about yet? How can we support our surgeons better? How can we enhance our own offering? How can we continue to proliferate our offering in this space? I know for us, that’s what drives us every day. It’s what keeps us motivated. And so I think that piece creates better product. It has a sincerity to it that is pretty unique to Paragon. There’s a look and feel to our development strategy and our commitment to research and our communications with surgeons that is pretty unique and I think that positions us really well to compete in this space and will continue to benefit us moving forward. One last thing I will add there, just…

Craig Bijou: Thanks for taking the questions, guys.

Albert DaCosta: I think — yeah, I was just going to add one more piece to that and it’s just — every competitor kind of has a key area that they are most excited about. I think Paragon is one of the companies that’s really kind of consistently excited about the entire foot and ankle market. And so from a competition standpoint, maybe to address that part of your question is, there’s just different pockets of competition depending on which sub-segment of the foot and ankle market we look at.

Craig Bijou: Thanks, Albert.

Operator: Our next question comes from Neil Chatterji with B. Riley. Please go ahead. Your line is now open.

Unidentified Analyst: Hi. This is Anderson [ph] on for Neil. Thank you for taking the questions. First, could you just update us on sales force productivity in the third quarter and any plans for continued sales force expansion into 2024?

Steve Deitsch: Yeah. Happy too and thanks for the question. This is Steve. The — we — to start with, we increased our producing sales reps by almost 20% during the quarter compared to last year. And when you look at the productivity of our underlying reps, our legacy reps, legacy producing reps continued to show nice gains. And overall, the actual revenue per producing rep actually came down just a touch from last year, because we have added so many new reps and that’s just the nature of adding additional reps into the algebra here. But continuing to drive productivity across legacy reps. We are continuing to see new reps that are relatively new additions to Paragon 28, scale up their businesses in nice ways. So really excited about the KPIs when we think about number of reps, producing reps and opportunities for continued gains as we go forward.

Unidentified Analyst: Okay. Great. Thank you. And then how is surgeon training progressing and how many were trained in the third quarter and what was the split between U.S. and OUS?

Albert DaCosta: Yeah. We continue to roll along literally. We have got another mobile lab that we just launched, that’s going across the country. So two labs now in place and we continue to train in excess of 500 surgeons per quarter, so strong. We — and one of the key things about our surgeon training and we have said this in the past, is it’s not just new surgeons that come to see us here in Denver and also on the road, it’s our legacy customers that have opportunities to see all of our new products and have opportunities to see products that they may not be currently using as much as they would like to, that they want to see it and try it again. So we are seeing new customers, we are seeing existing customers and we are also getting a lot of our new reps, the opportunity to be trained on our products at the same time, which drives some efficiency for us from a cost perspective.

Unidentified Analyst: All right. Thank you. That’s all for us.

Albert DaCosta: Thank you.

Steve Deitsch: Thanks, Anderson.

Operator: Our next question comes from William Plovanic with Canaccord. Please go ahead. Your line is now open.

Caitlin Cronin: Hi. This is Caitlin Cronin on for Bill. Thanks for taking the questions. Just on the supply issues, can you provide some more color on what’s — I mean, what’s — on what’s improving and are you really expecting these challenges to bleed into 2024 as well? I think you talked last quarter that mainly the issues were with sterile package, which is a lot of your new products or new products should continue to launch also kind of experiencing those supply challenges?

Steve Deitsch: Yeah. Caitlin, thanks for the question. It’s Steve. I would tell you that, we — as expected we saw continued improvements in the availability of all of the products that we had less availability in the second quarter, including sterile packaged products. The sterile packaged products continue to be the area of our supply chain that is still slower than we would like it to be, but it’s consistent with what we had planned. So we are — while we still have some headwinds with sterile packed products, they are not inconsistent with what we had expected three months or four months ago and we do expect those to really yield and not be a headwind for us as we get into the first part of 2024.