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ENGLEWOOD, CO - Paragon 28, Inc. (NYSE:FNA), a medical device company specializing in orthopedic surgical instruments, announced today that it will restate its financial statements for the fiscal year ended December 31, 2023, and the quarterly periods ended March 31, 2023, June 30, 2023, September 30, 2023, and March 31, 2024. The decision, made by the company's Audit Committee in consultation with management, follows the discovery of errors related to inventory accounting.
The identified errors involve miscalculations in the company's excess and obsolete inventory reserve, leading to an overstatement of inventory and an understatement in the cost of goods sold for the specified periods. As a result, for the fiscal year ended December 31, 2023, the cost of goods sold was understated by $8.4 million, and inventories were overstated by $8.0 million. For the quarter ended March 31, 2024, the cost of goods sold was understated by $1.7 million, and inventories were overstated by $9.7 million.
Due to these errors, the company has also identified one or more material weaknesses in its internal control over financial reporting. Consequently, the effectiveness of internal control over financial reporting as of December 31, 2023, and disclosure controls and procedures as of December 31, 2023, and March 31, 2024, have been deemed ineffective. The company's independent public accounting firm, Deloitte & Touche LLP, has been informed of these matters.
Paragon 28 is committed to amending its Annual Report for the year ended December 31, 2023, and its quarterly report for the quarter ended March 31, 2024, as soon as practicable. The company will update various sections within these reports to reflect the restated financial information.
In other recent news, Paragon 28, a medical device firm specializing in foot and ankle treatments, reported robust growth in its first quarter of 2024. The company's global revenue rose to $61.1 million, a 17.4% increase from the previous year, driven by balanced growth across all foot and ankle subsegments. U.S. net revenue increased by 13.5% to $51.1 million, while international revenue saw a surge of over 42%.
The company launched six new products and expanded both its U.S. sales representatives and surgeon customer base. Despite reporting a $5.5 million loss in adjusted EBITDA, Paragon 28 maintains its full-year net revenue guidance of $249 million to $259 million. The firm anticipates continued growth propelled by market share gains, especially in the bunion market.
InvestingPro Insights
In light of Paragon 28's recent announcement regarding financial restatements, investors may be seeking additional context to gauge the company's financial health. According to InvestingPro data, Paragon 28 has a market capitalization of $719.19 million, with a significant revenue growth of 17.38% in the last twelve months as of Q1 2024. Despite the restatement issues, the company has demonstrated a strong gross profit margin of 79.21% in the same period.
InvestingPro Tips indicate that while analysts do not expect Paragon 28 to be profitable this year, the company operates with a moderate level of debt and its liquid assets exceed short-term obligations. This suggests a level of financial stability that may reassure investors in light of the current accounting concerns. Moreover, the company has experienced a strong return over the last month, with a 26.75% price total return. It's important to note that Paragon 28 does not pay a dividend to shareholders, which could be a consideration for income-focused investors.
For those looking to delve deeper into Paragon 28's financial metrics and receive additional InvestingPro Tips, visit https://www.investing.com/pro/FNA. There are more tips available that could provide further insights into the company's performance and outlook. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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