Paragon 28 Inc (FNA) 2022 Q4 法說會逐字稿

Good afternoon and welcome to Paragon 28's Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes and I would now like to hand the conference over to your host today, Mr. Matthew Brinckman. Mr. Brinckman, please go ahead.

Good afternoon and thank you for joining Paragon 28's fourth quarter 2022 financial results and earnings call. 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 will include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include statements made as the company's or management's 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 result to differ materially from these forward-looking statements.

All forward-looking statements are based upon current available information and Paragon 28 assumes no obligation, except as required by law, to update these statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings and in the press release that was issued earlier today.

During this presentation, we will 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'll turn the call over to Albert.

Thanks, Matt. Good afternoon and welcome to our fourth quarter 2022 earnings call. Throughout this call, I will provide an overview of our fourth quarter and 2022 annual performance, followed by a business update. Steve will then provide additional detail regarding our fourth quarter and full-year 2022 results, plus an overview of our 2023 financial guidance. We will then open the call to Q&A.

To kick things off, total net revenue for the fourth quarter and full-year of 2022 was USD 51.5 million and USD 181.4 million respectively, contributing to a 25% constant currency growth rate for the year, which exceeded the top end of our preliminary estimates, pre-announced on January 10th. We estimate our revenue growth in 2022 as well over 3 times the growth rate of the overall global foot and ankle market, which we estimate to be 7% and to be approaching $5 billion annually.

Importantly, during 2022, which was our first full-year as a publicly traded company, we made any strategic and opportunistic investments, P28 for strong momentum for years to come. These included expanding research and development investments by over 50%, expanding our US sales force by almost 15%, doubling the size of our international team and putting in place scalable, operating and corporate infrastructures to enable our growth mission to improve foot and ankle patient outcomes.

As we think about our future growth and capital deployment, investments in new product development and sales force expansion will continue to be our top priorities. These investments will drive our future commercial success and will enable P28 to increase its profitability and cash flow in 2023 and beyond. Speaking of cash, we recently completed a follow-on public stock offering, which bolstered our cash position and importantly increased our FNA common stock liquidity. Steve will discuss each of these topics further in his prepared remarks.

With that, I will share more details on our fourth quarter and full-year 2022 revenue performance. To start, I continue to be impressed with our team's strong execution regardless of the environment. US net revenue for the fourth quarter and full-year of 2022 was USD 45.3 million and USD 158.1 million respectively, contributing to a 22% growth rate for the year. We saw improvements in all key growth indicators in the US, which we will discuss shortly.

International net revenue for the fourth quarter and full-year of 2022 was USD 6.2 million and USD 23.3 million, contributing to 34% reported growth and 47% constant currency growth compared to the full-year of 2021. International revenue growth was driven primarily by our largest international markets of Australia, South Africa and the United Kingdom.

I will now share details around our key US revenue growth drivers. 2022 was a great year for new products for Paragon 28 with 10 launches. Several of these products were entirely new indications or markets for our company, such as external fixation and soft-tissue repair. We kick-started our external fixation business when we launched Monkey Bars Pin-to Bar and Monkey Rings Circular fixation systems, which were highly complementary to existing fracture fixation and Charcot franchises.

In Soft Tissue, we have launched multiple products that span multiple indications in foot and ankle, including the Grappler Suture Anchor, TenoTac 2.0, Paratrooper Plantar Plate and our R3ACT Stabilization System. We're also excited to have augmented other existing product lines with launches of our Gorilla Central Column Fusion Plating System, Phantom Hindfoot TTC Nail 2.0 in [Paraderm], non-fenestrated dermal matrix.

We are incredibly proud of our innovative and broad product portfolio, hosting 75 product families across all foot and ankle markets sub-segments. This continues to be a key differentiator for Paragon 28, enabling deeper relationships with our existing surgeon customers, adding new customers and expanding our excellent sales force. Innovation has been and will continue to be the tip of the spear of our success. In 2023 and beyond, we plan to bring a balance of new and next-generation products to market with over 25 active projects underway, many of which we expect to launch over the next 24 months.

Our innovative and broad product portfolio fits nicely in the hands of our best in class and clinically focused sales team. Our US revenue increased during the fourth quarter of 2022 was driven equally by sales force productivity gains and an increase in the number of our producing sales reps. We ended the fourth quarter of 2022 with 234 producing sales reps, compared to 213 in the fourth quarter of 2021 and 218 in the third quarter of 2022, representing increases of 10% year-over-year and 7% sequentially compared to the third quarter of 2022.

As a reminder, producing sales reps log revenue in each month of the quarter and account for well over 90% of our US revenue. Sales force productivity gains in our expanded sales force resulted in P28 doing business with well over 2000 US surgeon customers, including almost 700 US producing surgeons during the fourth quarter, both records in double-digit percentage increases compared to the prior year.

In closing, a sincere thanking to all P28 team members around the world who continue to deliver day-in and day-out. During 2022, we made investments that will drive our long-term growth and benefit our shareholders. I couldn't be more excited about our future together at Paragon 28. I will now turn it over to Steve.

Thank you, Albert. Moving to our fourth quarter and full-year 2022 financial results. Expanding on Albert's earlier comments, Paragon 28's net revenue for the fourth quarter of 2022 was $51.5 million, representing 20% reported growth and 22% constant currency growth compared to the fourth quarter of 2021. Foreign currency headwinds reduced reported quarterly net revenue and net revenue growth by approximately $700,000 or approximately 2 percentage points respectively.

Our full-year net revenue for 2022 was $181.4 million, representing 23% reported growth and 25% constant currency growth compared to the fourth quarter of 2021. Foreign currency headwinds reduced reported annual net revenue and net revenue growth by approximately 2.1 and 2 percentage points respectively. Gross profit margin was 82% for both of the quarters of 2022 and 2021. Gross profit margin for the full year of 2022 was 82% compared to 81% for 2021. The increase for the full year of 2022 was primarily due to lower excess and obsolete inventory expense in the first half of 2022.

Research and development costs were $6.6 million or 13% of revenue for the fourth quarter of 2022 compared to $4.9 million or 11% of revenue for the fourth quarter of 2021. Research and development costs were $24.7 million or 14% of revenue for the full year of 2022, compared to $16.1 million or 11% of revenue for the full year of 2021. During 2022, research and development increased by more than 50%, significantly advancing our product development activities, including SMART 28.

Selling, general and administrative expense was $44.5 million or approximately 86% of revenue for the fourth quarter of 2022, compared to $35 million or 82% revenue in the fourth quarter of 2021. Selling, general and administrative expense was $159.3 million or approximately 88% of revenue for the full year of 2022 compared to $114.3 million or 78% of revenue for the full year of 2021.

During 2022, we made significant investments in selling and marketing, including nearly 15% expansion of our sales force and trained a record number of surgeons in person. We also made important investments in corporate and operational infrastructures, including the successful launch of SAP.

Adjusted EBITDA for the fourth quarter of 2022 was a $1.5 million loss, compared to $100,000 of income for the fourth quarter of 2021. We experienced sequential quarterly improvements in both adjusted EBITDA and adjusted EBITDA margins during each quarter of 2022. Adjusted EBITDA for the full year of 2022 was a $10.7 million loss compared to $3.1 million of income for the full year of 2021, reflecting the additional opportunistic investments made during 2022.

P28's revenue growth rates are expected to continue well above market growth rates and this expected revenue growth, combined with leveraging of investments made in 2022 and earlier will bring P28 closer to breakeven adjusted EBITDA on an annualized basis during 2023.

Turning to liquidity. Total liquidity was approximately $100 million at December 31, 2022, which includes up to $60 million of cash available via our credit facility. We had 2 first quarter 2023 events that impacted our liquidity position, including a legal settlement, which includes $21 million of additional payments in the first half of 2023 and our recent follow-on offering where we raised $69 million of net proceeds by selling 4.3 million shares of common stock.

The follow-on offering also had a secondary component with 3.2 million shares sold to new and existing institutional shareholders. The follow-on offering increased our public float by approximately 30% and we have seen a nice increase in FNA daily volume since completing the follow-on offering.

Accounting for these recent events, we have almost $150 million of pro forma liquidity as of December 31, 2022, including nearly $90 million of cash. We are pleased with our liquidity position, which we expect to enable us to reach cash flow breakeven, as we expect to see continued improvements in operating leverage and more normalized cash flow.

Turning to our 2023 net revenue guidance. Notwithstanding the strong momentum in our business, we remain mindful of the uncertain economic environment and its potential impact on future elective foot and ankle procedures. We estimate full year 2023 revenue of $214 million to $218 million, representing 18% to 20% reported growth.

We have had a terrific start to 2023 and we estimate first quarter net revenue year-over-year reported growth to be in excess of 20%, despite P28's strong growth comp of 25% for the first quarter of 2022. We expect strong performances in each quarter of 2023, but our third quarter is estimated to be the lowest year-over-year growth quarter of 2023, as the third quarter of 2022 was last year's strongest growth quarter at nearly 30%. Our revenue guidance also assumes currency translation rates remain consistent with current translation rates. That is the end of our prepared remarks.

(Operator Instructions) First question is from the line of Kyle Rose with Canaccord.

I wanted to start on the product side of the business. Just first, maybe just talk a little bit about the ankle portfolio, where you're at as far as the rollout and the adoption of the total ankle and how we should think about the tail is fitting in there when we move forward through the year? And then Soft Tissue expect for obviously big in '22, just wondering if you could frame those launches for us as we head into '23? I mean where are they in the terms of the launch? And then any major new products we should expect that are similar in I guess, in scope when we move into '23?

You got, great to hear from you, Kyle and I'll take a shot at this one. In just warning, you loaded that question with a lot of subparts, so -- but it's right in my wheelhouse. First off, maybe to answer the question about Ankle, the Ankle segment for us has been pretty exciting really since just before COVID, where we launched a couple of our key Ankle Fusion products, the TTC Nail and the ankle fusion plating system we launched just before COVID. And then on the backside of COVID in 2020, we launched the total anchor replacement.

So some really significant launches there. And they happen to be products that are pretty heavy on the medical education side. So we really didn't see those products kick into their momentum until mid-2021 and 2022 is a pretty exciting year for those products as they started to take off. I will say on the total ankle side, one of the amazing things there is, I think that's a part of our portfolio that never stops growing, right? We'll continue to look and expand that offering into more and more indications around ankle replacement.

And I think that even ties directly to the total Talus replacement that you mentioned, which was one of our acquisitions in '21 of the Additive Orthopedics line. That product is really, really exciting for how it complements everything around the ankle and gives surgeons options that didn't exist before. And so there's a lot of excitement around all of those products in our ankle portfolio.

One area that we launched really late in '22 was the beginning of the supramalleolar system, which is a realignment of the ankle. And we launched a part of that and more of a beta launch and you're going to see some of that really kicking in Q1 here as we continue to expand that supramalleolar offering and that's going to be one more complementary piece to the ankle portfolio. And so that's been an exciting area there.

As far as Disior and Additive Orthopedics, Additive Orthopedics was instantly complementary to what we do. And so we saw some really nice traction with that one. The Disior software acquisition was more of an internal project in the beginning phases where we started using that in our own development strategies in answering some questions in lightning speed. And so we were pretty excited to use that in-house. But you can expect to start to see some of the commercial introduction here in the next 12 months, maybe a limited launch at the end of this year and then maybe some continued launches on that platform next year. And I'm really excited about that because I think once you see it, you're -- it's hard to unsee it and you're really going to start to appreciate what the benefit can be to the foot and ankle surgeon and more importantly to patients as we're improving outcomes there.

So Kyle, I appreciate the question. I hope I answered all the parts of that, oh, I think you had one more question about the Ex Fix and Soft Tissue. Yes, amazing launches for us last year. The Ex Fix in particular is one that, that was a space in the market where we really didn't participate yet. And so that was a really nice introduction for us and we saw great momentum last year. Actually momentum that exceeded our expectations and then we launched a couple of really key products in the Soft Tissue space.

The Soft Tissue is a little bit different in that. I think there's a Soft Tissue component that you can expect to see in almost every indication around foot and ankle. And so the soft tissue portfolio is something you're going to continue to see expanding over time. And it's really exciting for us to be able to participate in almost every aspect of a foot and ankle surgery today, with improved technology that hopefully is going to mean something to the outcome for these patients.

And then I'm going to be greedy, just ask one follow-up. It's just, look, you went public in '21, you made some big investments in the commercial structure, as well as training. You just completed another financing. How should we think about what that does with respect to pulling forward some investments you might have made in the future? Or just what you'll be doing now that you've got a stronger balance sheet from here?

And we're going to continue to build investments in those high-growth areas, things like sales force expansion, new product development, continue to provide world-class medical education, but the increases that we saw on a year-over-year basis in 2022 won't continue as we move forward. So while we're going to increase our operating expense investments in those categories, the year-over-year increase in '23 won't be as significant. In fact, it will be less than our expected revenue growth for this year, which is going to drive pretty significant leverage into our P&L as we move forward.

The next question is from the line of Matthew O'Brien with Piper Sandler.

This is Phil on for Matt. I guess just for starters, I'll ask about the guidance, 18% to 20%, not bracketed the Street. I was just hoping to get color on your expectation for Cadence any seasonality. And you mentioned the general macroeconomic landscape, what exactly is built into guidance there? What gets you to the top end of that range and vice versa? And how should we think about any ability for upside to flow through to the EBITDA line?

Good question and maybe I'd start by saying that P28 really is as strong as it's ever been. And our expectation is that we're going to continue to grow far and above the overall foot and ankle market growth rate, which we estimate to be 7% and that's driven by our best-in-class and innovative and broad portfolio. And that combined with our great commercial team are really differentiators for us.

So that is a baseline expectation as part of our guidance and that's what we can control. What we can't control are certain things, uncertainties like inflation and interest rates and their potential impact on foot and ankle elective procedures. So as we begin the year, we're just -- we're looking at that and being prudent thinking through the guidance for the full year. And we're 7 or 8 weeks into the New Year, but we're incredibly excited about what we've done so far.

January and February have been terrific and clearly exceeded our plans. So we expect to grow at least 20% in the first quarter and January and February have us well on our way.

Regarding upside for EBITDA, what we built into our prepared remarks is a $5 million to $10 million improvement in EBITDA compared to 2022 and that continues to give us the ability to make critical investments and opportunistic investments that we see to expand our sales force, to continue accelerating new product development and also continuing to train a number of surgeons program around the world. So we're excited as we can be. Our business is as strong as I've ever seen it. Albert is more excited than I've ever seen him in the 2.5 years I've known him. So onward and upward as we roll into '23.

And I guess just from a competition standpoint, I appreciate your comments about growing 3x the rest of the market. Can you provide any color on who you're taking share from maybe? And where do you see the broader market here in 2023, exiting the COVID era "alongside some of these macroeconomic challenges", do you expect the market to continue to grow perhaps above what it has done historically? Or what are you seeing on that front?

Yes, no, we expect the market to continue to be resilient and we think 7% or above is a sustainable growth rate with the type of environment that we're operating within today. Now if we do see uncertainties develop that change and interest rates continue to go higher, inflation goes higher and that changes employment data and statistics, we can't forecast for that. But what we know about our business is, is that's incredibly resilient. And about a third of our market is non-elective. So we have a nice hedge against recession. And we have proven in the past that we can grow our business even in tough environments and that's really a shout out to our commercial team around not only the U.S., but around the world to figure out a way to get things done.

Next question is from the line of Craig Bijou with Bank of America.

I wanted to start with rep productivity and obviously you had strong rep productivity in '22 and it sounds like your sales force expansion in '23 might not be quite as large as it was in '22, if I'm reading your comments right, Steve? So obviously, that would mean that rep productivity is going to improve again. And I just wanted to get a little bit more color on where you see that productivity coming from? Are you capturing -- are the docs doing more procedures with your products? Are you getting more revenue per case? And so any more detail on that would be great.

And if the impression was given that, we don't expect our sales force to continue to expand, that was erroneous perception or maybe we didn't state it clearly enough, but we continue to expect our sales force to expand. It grew 15% overall in 2022. And in the fourth quarter, we saw the best increase year-over-year in producing rep count that we had seen about 10%. So we have what I would call more balanced growth in the fourth quarter in the U.S. about equal parts sales or excuse me, sales force productivity, as well as increased number of producing reps. And that's what we think back when we were going public, that was the way we really thought about the business, equal parts productivity, equal parts gains and number of sales force.

And so that's really what we're expecting as we move forward. And to answer your other question, we continue to see terrific gains in productivity. And where that starts with is these new products that we're bringing to market. And then the training on these new products for existing surgeons, but also new surgeons that we didn't get to before because maybe we didn't have an Ex Fix or maybe we didn't have an ankle. So that drives productivity. And that's going to continue. We're just getting started on some of these new products. We launched a number of new products in midpoint of 2022. They're really starting to roll so much to the extent that we're buying and making sure that we have enough inventory. We're off to such a great start this year, making sure we can continue to meet the demand for these products. So, equal parts, productivity and sales force expansion as we move forward in the U.S.

And maybe a clarification, I meant that the sales force expansion, it sounds like it wouldn't be at the same rate as it was in '22. But again, correct me if that's wrong?

No, look, we think we can continue to increase our sales force without giving specific guidance on where those are going. We've said we can double that over time. And I think a double-digit increase in our sales force from a producing rep overall perspective as well is very, very feasible and likely for us as we roll forward.

Just obviously, OUS growth was pretty strong in the second half. So any color on how to think about U.S. or U.S. growth in '23?

Yes, look, I think our international business will continue to grow at a rate above our U.S. business because if you think back, we started our international business in late '16. And this year, we did $23 million and so we have a much smaller base, but this should be a high-teens, 25% grower for us, something like that, much starting out high teens, mid-20s to north of that for our international business. And it's a great growth opportunity for us.

Albert mentioned in his remarks that we've expanded our teams and we're really getting a lot of traction even growing faster in our larger markets because of the investments we've made there, but also a lot of new markets that are coming on board.

The next question is from the line of Mike Matson with Needham.

I was wondering if you could talk about just that your outlook for expanding internationally in 2023. Do you have any new countries or anything like that you're planning to enter, any kind of distributor conversions or anything like that?

We've made a number of investments in our 3 big markets what I would call our Big 3, South Africa, Australia and the U.K., investments from leadership, investments in inventory, investments in medical education, not training opportunities. And we expect those markets though we've got pretty good market share there in those 3 markets, we expect those to continue to grow or even accelerate as we move forward. So those 3 are really important to us and we've got great teams and great people in each of those markets.

And we're also really starting to get going and very strategically important companies or countries like Germany, as well as Spain and Italy and Canada. And Albert and I are going to actually be visiting with some of those folks here in the coming weeks and going through their business plans as we move forward because big opportunities, really exciting surgical procedures taking place in those markets then and we believe the international market is not only important from run to drive our top line growth there on a consolidated basis. It's also critical because, our mission is to improve patient outcomes globally. And we know that we can't do that without a really balanced approach to surgical procedures. And there's some great, great surgeons and some great procedures internationally that we can look at and understand and complement our technologies here in the U.S.

And then just within your surgeon customer base, I guess, mainly in the U.S., I shouldn't say surgeons specifically because I wanted to ask about kind of where you feel like you're out with your mix of surgeons and podiatrists. And do you feel like you're growing faster in one of those groups than the other or kind of adequately addressing both of them?

Yes, no, it's a great question and I was looking at it this morning actually, we -- and sorry, I'm flipping a paper here and I'm putting on my glasses if you could see that, Mike, numbers are so small that Matt gave me. But Look, we're about -- there's a much higher mix of podiatry in the foot and ankle market in terms of its overall market just purely because of the number of surgeons that are podiatrists in the marketplace versus orthopedic surgeons.

But we see a disproportionate amount of revenue and a growing amount of revenue from MDs and [DOs]. And so we're approaching 50:50 in terms of the split there. And a lot of that has been driven by these new products and things like Ex Fix things like total ankle, a lot of those are more naturally suited to some of these orthopods. And -- but of course, the DPOs are a very important part of our business and driving a lot of the ankle procedures. But we're seeing a terrific mix and growth in both categories.

Yes and I would just add to that. We really focused on the surgeons who specialize in foot and ankle. And so we've seen a lot of our momentum there. There's a whole other piece of the market that's really your trauma oriented surgeons and some of even the pediatric type surgeons where we still see tons of opportunity and recent launches, additions to our fracture fixation line have drawn a lot of attention for maybe some of those trauma surgeons and even some of the specialists who like to focus on the fracture fixation side of things.

So we have seen some really nice momentum in a lot of those categories, but we still also have a lot of room there to grow.

Next question is from the line of Dave Turkaly with JMP Securities.

Steve, maybe I was wondering if I could maybe get a comment on the -- I might have missed it, but CapEx for the year and just sort of spending plans, I think you said you've done with the SAP. And I know you have the legal settlement coming up, but like sort of outside of the R&D and sales force investments, anything else we should be anticipating?

Well, when you think of -- hey, Tur, good to hear from you and our free cash flow we talked about for 2022 being atypical for P28 when you think about like the pretty lower levels of overall free cash flow use '21 and prior. So as we go into '23, we expect to see a more normalizing of those increases in working capital, as well as CapEx. And the only unusuals that I would say that are going to be over and above the normal free cash flow items that you would have in your model would be, we've got this legal settlement, another $21 million that will be paid in part this quarter and paid in part in the second quarter.

And then we also could have $5 million to $10 million of other earnout M&A-related payments. But beyond that, it's a pretty normalized year as we roll into '23 and we expect to see pretty significant improvements in free cash flow.

I think you mentioned a dermal matrix as part of your Soft Tissue launches and I was just curious if there's anything you could comment on that because I heard about the other ones and I don't know if I was familiar with that specifically?

Sure. You got it and I'll take that one, Dave, and great to hear from you. I think the non-fenestrated Dermomatrix was something that we were still missing for tissue augmentation and was a really nice complement to a lot of the procedures we're in today and even some procedures that we're not participating in quite yet. So really nice complement. We did have the fenestrated option that was used more for a wound covering. And so the dermal non-fenestrated Dermomatrix does give us some additional options for Soft Tissue augmentation in areas where potentially you don't need that type of fenestrations.

Next question is from the line of Neil Chatterji with B. Riley.

Maybe just first off, I was just kind of curious if you could just talk about the mobile unit for medical education and how that might be helping to raise awareness, I think it was on a (inaudible) if I recall, right? And just curious if that's helping add any traction in certain regions?

Great to hear from you, Neil, by the way and thanks for the question. That mobile lab has been just a beautiful complement to our medical education resources, right? We've got an amazing facility here in Denver. And when it's appropriate, we love to get people here to really understand how we're approaching improvements for better patient outcomes. There are times and even seasons where getting people out of their areas to come to Denver is not the easiest thing to do, especially like Q4 is a great example of that where people are so bogged down with elective procedures. But this was a chance for us to bring medical education to them and really open the opportunities to get people exposed to our technology to bring people in to work with them in that facility.

So I -- that's a roundabout way of saying we're thrilled with the success of the mobile lab from last year. We saw record numbers in Q4, which is not typically the strongest season for medical education and we crushed it with that. So again, beautiful complement. One of the pieces, we've mentioned this before, but Paragon 28 is on a mission to really improve outcomes for patients, to really help with research and understanding limitations that might exist today in our segment and you can't do that without medical education. So that's going to continue to be such an important piece for us moving forward to keep uncovering what we're finding, what we're learning to hear from surgeons who are proficient using our technology. There's so many opportunities for us to help transform this market in a meaningful way and we're going to do it with medical education. So I continue to see that expansion there.

And just one follow-up here. Just curious, I think you kind of touched on it maybe a little bit when you were talking about Disior which is, just curious if there's a broader update on just the SMART 28 initiative. And if things remain on track with the pre-op-planning tools and potentially seeing that, it sounds like maybe like latter half of the year and into 2024. Just curious on expectations for that upon launch?

Yes, absolutely and Neil, you know that I get really excited thinking about what that could mean, right? It's -- we always talk about how complex and what a marvel the foot and ankle environment really is when you start to appreciate how many bones and the interactions of those bones and the Soft Tissues that are related with the lower extremity and the fact that we bear weight and we wear shoes. And so everything gets more complicated and that 3 dimensional awareness is critical to realigning and restoring function to the foot.

There's no better tool that we can think of than software to help give surgeons the 3 dimensional perspective of both diagnosing the deformity, as well as predicting how to best correct and realign the feet, right, for gate and better outcomes. So Disior was one of the most significant pieces for us in our SMART 28 aspirations there and for those reasons that I just mentioned. I would expect to see -- but it's going to be a limited launch, but I'd expect to start to see some commercial introduction of what that technology is later this year, potentially early next year. And I think it's all going to really start to make sense. So we'll launch one of the first modules later this year like I mentioned and I think it's going to give both the investment community, as well as surgeons and all the stakeholders a great understanding of what we've been so excited about and what that could mean to better outcomes.

There are currently no further questions registered. (Operator Instructions) There are no additional questions waiting at this time, so I'll pass the conference back to the management team for any closing remarks.

Thank you again for your time today. We look forward to seeing many of you at future investor and industry conferences, including next week in Las Vegas at the Canaccord Musculoskeletal Conference on Tuesday, March 7 and the AAOS conference the balance of the week. Have a great day.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.