Bioventus Inc.

05/06/2026 | Press release | Distributed by Public on 05/06/2026 05:49

Quarterly Report for Quarter Ending March 28, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of Bioventus Inc.'s (sometimes referred to as "we," "us," "our," "Bioventus" or "the Company") financial condition and results of operations should be read in conjunction with the "Special Note Regarding Forward-Looking Statements" and our unaudited consolidated condensed financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission ("SEC") on March 5, 2026 ("2025 10-K").
Executive Summary
We are a global medical device company focused on helping patients recover and live life to the fullest by relieving pain and addressing musculoskeletal challenges through a diverse portfolio of high-quality, innovative, and clinically proven solutions. We operate our business through two reporting segments, U.S. and International, and our portfolio of products is comprised of five patient-focused areas, grouped into three businesses based on clinical use: (i) Pain Treatments, (ii) Surgical Solutions, and (iii) Restorative Therapies.
•Pain Treatments, consisting of:
◦Knee Osteoarthritis ("KOA"): Our product portfolio includes a range of intra-articular, hyaluronic acid ("HA") injections that help relieve patient discomfort and improve quality of life. In the U.S., we also distribute the XCELL Platelet-Rich Plasma ("PRP") system, a technology that is synergistic with our existing physician call points, as many surgeons who use HA also use PRP.
◦Peripheral Nerve Stimulation ("PNS"): We are focused on developing and commercializing a full portfolio of peripheral nerve stimulation products with solutions for acute, temporary and chronic pain.
•Surgical Solutions, consisting of:
◦Ultrasonics: Our Ultrasonics business offers precision bone resection for patients with degenerative spine conditions and spinal deformities. This portfolio also enables precision bone cutting in ultrasonic neuro and general surgery to address brain tumors and pathologies of the liver and other organs.
◦Bone Graft Substitutes ("BGS"): Our BGS product portfolio includes a range of products that facilitate optimal bone fusion following a surgical procedure.
•Restorative Therapies, consisting of:
◦Fracture Care: We provide low-intensity pulse ultrasound to help patients who suffer from bone fractures that do not heal through traditional methods. We plan to expand our U.S. clinical fracture care indications to address the healing of additional fresh fractures, especially for high-risk patients.
The following table sets forth total net sales, net income (loss) and Adjusted EBITDA for the periods presented:
Three Months Ended
March 28, 2026 March 29, 2025
Net sales $ 132,089 $ 123,876
Net income (loss) $ 3,946 $ (3,322)
Adjusted EBITDA(a)
$ 23,915 $ 19,212
Income (loss) per Class A common stock:
Basic $ 0.05 $ (0.04)
Diluted $ 0.04 $ (0.04)
(a)See below under Results of Operations-Adjusted EBITDA for a reconciliation of net income (loss) to Adjusted EBITDA.
Significant Developments
On March 27, 2026, the Company made a discretionary principal prepayment of $22.0 million on the 2025 Term Loan to reduce the amount of its long-term debt, driven by strong operating cash flows. The reduction in long-term debt lowered interest payments and borrowing costs and improved the Company's financial metrics.
Results of Operations
For a description of the components of our results of operations, refer to Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2025 10-K.
The following table sets forth components of our consolidated condensed statements of operations as a percentage of net sales for the periods presented:
Three Months Ended
March 28, 2026 March 29, 2025
Net sales 100.0 % 100.0 %
Cost of sales (includes depreciation & amortization)
31.3 % 33.0 %
Gross profit 68.7 % 67.0 %
Selling, general and administrative expense 59.3 % 59.3 %
Research and development expense 1.9 % 2.4 %
Restructuring costs 0.3 % - %
Depreciation and amortization 0.8 % 1.3 %
Loss on disposals - % 0.1 %
Operating income 6.4 % 3.9 %
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented:
Three Months Ended
(in thousands) March 28, 2026 March 29, 2025
Net income (loss) $ 3,946 $ (3,322)
Interest expense, net 4,326 7,509
Income tax expense (benefit), net 571 (95)
Depreciation and amortization(a)
11,205 11,865
Restructuring costs(b)
454 -
Equity compensation(c)
3,264 2,414
Shareholder litigation costs(d)
19 23
Loss on disposals(e)
- 81
Other items(f)
130 737
Adjusted EBITDA $ 23,915 $ 19,212
(a)Includes for the three months ended March 28, 2026 and March 29, 2025, respectively, depreciation and amortization of $10.1 million and $10.3 million in cost of sales and $1.1 million and $1.6 million in operating expenses presented in the consolidated condensed statements of operations and comprehensive income (loss).
(b)Restructuring costs primarily resulted from severance associated with the elimination of several positions and the consolidation of certain administrative functions and roles.
(c)Includes compensation expense resulting from awards granted under our equity-based compensation plans.
(d)Costs incurred as a result of certain shareholder litigation unrelated to our ongoing operations.
(e)Represents the loss on the disposal of the Advanced Rehabilitation Business.
(f)Other items during the three months ended March 28, 2026 primarily consisted of individually immaterial items that are not indicative of the Company's ongoing operating performance.
Other items during the three months ended March 29, 2025 primarily consisted of $0.5 million of expenses related to the divestiture of the Advanced Rehabilitation Business, which was completed on December 31, 2024.
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Non-GAAP Financial Measures - Adjusted EBITDA
We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator for management to measure operating performance and for planning purposes, including the preparation of our annual operating budget and financial projections. We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We define Adjusted EBITDA as net income (loss) before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and divestiture related costs, certain shareholder litigation costs, impairment of assets, restructuring costs, equity-based compensation expense, debt refinancing, loss on extinguishment of debt, and other items. Adjusted EBITDA by segment consists of net sales and costs directly attributable to a segment, as well as an allocation of corporate overhead costs primarily based on a ratio of net sales by segment to total consolidated net sales.
Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or as superior to, the financial information prepared and presented in accordance with U.S. GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures might not provide a complete understanding of the Company's performance and should be reviewed in conjunction with U.S. GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Quarterly Report on Form 10-Q, including all tables referencing Adjusted EBITDA to its most directly comparable U.S. GAAP measure.
Net Sales
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
U.S.
Pain Treatments $ 56,157 $ 52,686 $ 3,471 6.6 %
Surgical Solutions 42,541 40,844 1,697 4.2 %
Restorative Therapies 17,747 16,990 757 4.5 %
Total U.S. net sales 116,445 110,520 5,925 5.4 %
International
Pain Treatments 7,269 6,232 1,037 16.6 %
Surgical Solutions 5,487 4,390 1,097 25.0 %
Restorative Therapies 2,888 2,734 154 5.6 %
Total International net sales 15,644 13,356 2,288 17.1 %
Total net sales $ 132,089 $ 123,876 $ 8,213 6.6 %
U.S.
Net sales for the period increased $5.9 million, or 5.4%, compared to the prior year period. Net sales from Pain Treatments increased $3.5 million driven by favorable rebates compared to the prior year period. As previously disclosed, during the third quarter of 2025, a large private insurance payer informed us that it had implemented changes to its claims data management and billing systems, which the Company estimated could result in significantly higher rebate volumes for our HA viscosupplement products than previously estimated or experienced. During the first quarter of 2026, we received the first deferred rebate billings processed under the payer's updated billing methodology. The rebate claims reflected in these billings were at the low end of our estimated range of possible outcomes. Based on this information, we reduced accrued rebates to this contract by $4.2 million during the first quarter of 2026. This increase was partially offset by a 1.7% decline in HA volume.
Net sales from Surgical Solutions increased $1.7 million due to volume growth in BGS. The $0.8 million increase in Restorative Therapies was attributable to a higher net average selling price ("ASP") for our EXOGEN Bone Stimulation System.
International
Net sales increased $2.3 million, or 17.1%, compared to the prior year period, primarily due to volume growth in Ultrasonics and Pain Treatments, driven by Durolane.
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Gross Profit and Gross Margin
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
U.S. $ 82,040 $ 75,529 $ 6,511 8.6 %
International 8,729 7,527 1,202 16.0 %
Total $ 90,769 $ 83,056 $ 7,713 9.3 %
Three Months Ended
March 28, 2026 March 29, 2025 Change
U.S. 70.5 % 68.3 % 2.2 %
International 55.8 % 56.4 % (0.6 %)
Total 68.7 % 67.0 % 1.7 %
U.S.
Gross profit increased $6.5 million, or 8.6%, compared to the prior year period, driven by revenue growth across all of our businesses, favorable rebates, and a $0.4 million refund related to certain vendor tariffs. The resulting gross margin increase of 2.2% was primarily attributable to: (i) a 0.7% benefit from favorable rebates; (ii) a 0.5% increase from lower depreciation and amortization expense; and (iii) a 0.4% benefit from vendor tariffs. The remainder was attributable to favorable foreign currency movements and other items.
International
Gross profit increased $1.2 million, or 16.0% compared to the prior year period, primarily due to revenue growth in all businesses. Gross margin decreased slightly by 0.6% due to one-time costs for servicing and repairs.
Selling, General and Administrative Expense
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Selling, general and administrative expense $ 78,325 $ 73,502 $ 4,823 6.6 %
Selling, general and administrative expenses increased by $4.8 million, or 6.6%, compared to the prior year period, primarily due to: (i) a $3.1 million increase in compensation-related costs driven by higher wages, bonuses and commissions; and (ii) a $0.8 million increase in stock-based compensation. The remainder of the increase was attributable to various miscellaneous items.
Research and Development Expense
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Research and development expense $ 2,467 $ 3,011 $ (544) (18.1 %)
Research and development expense decreased by $0.5 million, or 18.1%, compared to the prior year period, primarily due to a reduction in consulting expenses resulting from the completion of certain projects.
Restructuring Costs
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Restructuring costs
NM - Not meaningful
$ 454 $ - $ 454 NM
Restructuring costs incurred during the first quarter of 2026 primarily related to severance costs associated with a restructuring plan initiated in 2025 that focused on the elimination of several positions to optimize our organizational structure.
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Depreciation and Amortization
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Depreciation and amortization $ 1,107 $ 1,593 $ (486) (30.5 %)
Depreciation and amortization decreased during the three months ended March 28, 2026 compared to the prior year period, primarily due to certain information technology assets being fully depreciated in 2025.
Loss on Disposals
The loss on disposals during the three months ended March 29, 2025 related to the sale of the Advanced Rehabilitation Business.
Other Expense
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Interest expense, net $ 4,326 $ 7,509 $ (3,183) (42.4 %)
Other (income) expense (427) 777 (1,204) (155.0 %)
Interest expense, net decreased by $3.2 million during the three months ended March 28, 2026 compared to the prior year period, primarily due to lower debt outstanding and reduced interest rates and applicable margins following the completion of our debt refinancing in the third quarter of 2025. Other income, net during the three months ended March 28, 2026 was driven by foreign currency gains, compared to foreign currency losses in the prior year period.
Income Tax Expense (Benefit), Net
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Income tax expense (benefit), net $ 571 $ (95) $ 666 NM
Effective tax rate 12.6 % 2.8 % 9.8 %
Our effective tax rate was 12.6% for the three months ended March 28, 2026, primarily reflecting income earned in foreign jurisdictions. The effective tax rate of 2.8% for the three months ended March 29, 2025 was driven by the divestiture of the Advanced Rehabilitation Business and foreign income, partially offset by the release of certain reserves for uncertain tax positions.
Noncontrolling Interest
Subsequent to the IPO and related transactions, we became the sole managing member of BV LLC, holding ownership interests of 81.1% and 81.0% as of March 28, 2026 and December 31, 2025, respectively. We consolidate BV LLC's financial statements as we have both a majority economic interest and sole voting control over BV LLC. The portion of BV LLC not owned by us-18.9% as of March 28, 2026-is reflected as a noncontrolling interest, representing the share of BV LLC owned by the Continuing LLC Owner. Period-over-period changes in noncontrolling interest reflect the allocation of net income or loss attributable to the Continuing LLC Owner.
Segment Adjusted EBITDA
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
U.S. $ 21,142 $ 17,055 $ 4,087 24.0 %
International $ 2,773 $ 2,157 $ 616 28.6 %
U.S.
Adjusted EBITDA increased $4.1 million, or 24.0%, compared to the prior year period, primarily due to higher gross profit driven by increased sales, favorable rebates, and favorable foreign currency movements. These improvements were partially offset by higher compensation-related costs.
International
Adjusted EBITDA increased $0.6 million, or 28.6%, compared to the prior year period, primarily due to higher gross profit driven by increased sales, partially offset with higher compensation-related costs.
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Liquidity and Capital Resources
Sources of Liquidity
Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures. We expect these needs to continue as we develop and market new products and further expand into international markets.
On July 31, 2025, we entered into the 2025 Credit Agreement that provides for a $300.0 million term loan (the "2025 Term Loan") and a $100.0 million revolving credit facility (the "2025 Revolver"). Proceeds from the 2025 Credit Agreement, including $30.0 million in borrowings under its revolver and $2.6 million in available cash, were used to fully repay the outstanding balance under the 2019 Credit and Guaranty Agreement, as amended, which totaled $332.6 million as of July 31, 2025.
On August 1, 2025, we entered into two interest rate swaps to mitigate the interest rate risk associated with our floating-rate SOFR-based borrowings under the 2025 Credit Agreement. Under the terms of swaps, we pay a fixed interest rate in exchange for SOFR-based variable interest throughout the life of the instruments. The interest rate swaps have a weighted average fixed interest rate of 3.60% and an aggregate notional value of $150.0 million, or 50.0% of the 2025 Term Loan.
The five-year 2025 Revolver includes an initial annual commitment fee of 0.30%, calculated based on the average daily amount of the available revolving commitment, which includes revolving and swingline loans as well as letters of credit ("LOC"). The commitment fee is payable quarterly in arrears on the last day of each calendar quarter and at maturity. The commitment rate is subject to adjustment based on our leverage ratio. Swingline loans are available as base rate option loans and LOCs are limited to $7.5 million under the 2025 Credit Agreement.
On March 31, 2026, we made our $3.8 million scheduled principal payment on the 2025 Term Loan. In addition, on March 27, 2026 and April 30, 2026, we elected to make discretionary prepayments of $22.0 million and $10.0 million, respectively, on the 2025 Term Loan. These prepayments were made to reduce future interest expense, and we believe the prepayments align with our capital optimization strategy and liquidity objectives. As of March 28, 2026, we had $98.4 million available on the 2025 Revolver, net of $1.6 million in outstanding LOCs. This availability, combined with our existing cash balances and expected cash flows from operations, provides us with sufficient liquidity to meet our near-term obligations and supports ongoing operations for the next twelve months.
We anticipate that, to the extent additional capital is required, we will seek funding through a combination of equity financings, the incurrence of additional indebtedness, or other strategic sources of capital. Our ability to access these sources will depend on market conditions, our financial performance, and other factors.
We may explore divestiture opportunities for non-core assets to improve our liquidity position. In addition, we may raise additional funds to finance future cash needs through receivables or royalty financings or corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. If we raise additional funds through collaboration and licensing arrangements with third parties, it might be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that might not be favorable to us. We cannot be certain that additional funding will be available on acceptable terms, or at all. Any failure to raise capital in the future might have a negative impact on our financial condition and our ability to pursue our business strategies.
Future Cash Requirements
The following table summarizes material changes to our estimated future cash requirements associated with debt and related obligations:
Remainder of 2026 Thereafter Total
Long-term debt(a)
$ 15,000 $ 259,250 $ 274,250
Interest payments on long-term debt obligations(a)
14,198 59,768 73,966
$ 29,198 $ 319,018 $ 348,216
(a)Refer to Item 1. Financial Information-Notes to the Unaudited Consolidated Condensed Financial Statements-Note 4. Financial Instruments in this report for further information regarding our long-term debt obligations.
Other than the above changes to debt and related obligations, there have been no material changes to our estimated future cash requirements as disclosed in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2025 10-K.
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We enter into contracts in the ordinary course of business with various third parties for development, collaboration and other services. These agreements generally include provisions allowing for termination upon notice. In the event of cancellation, payments typically consist of amounts due for services rendered or expenses incurred through the termination date, including non-cancellable obligations of our service providers. Certain agreements also contain contingent provisions that may require payment upon the occurrence of specified events. For additional information regarding commitments and contingencies, refer to Item 1. Financial Information-Notes to the Unaudited Consolidated Condensed Financial Statements-Note 11. Commitments and Contingencies.
Tax Receivable Agreement
The BV LLC Agreement provides for the payment of certain distributions to the Continuing LLC Owner in amounts sufficient to cover the income taxes imposed with respect to the allocation of taxable income from BV LLC as well as obligations within the TRA. Under the TRA, we are required to make cash payments to the Continuing LLC Owner equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (1) increases in the tax basis of assets of BV LLC resulting from (a) any future redemptions or exchanges of LLC Interests, and (b) certain distributions (or deemed distributions) by BV LLC and (2) certain other tax benefits arising from payments under the TRA. We expect the amount of the cash payments required to be made under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing LLC Owner, the amount of gain recognized by the Continuing LLC Owner, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing LLC Owner under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA.
Indebtedness
The 2025 Credit Agreement contains affirmative and negative covenants applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict our ability to, subject to negotiated exceptions, incur additional indebtedness, liens on our assets, engage in acquisitions or dispositions, pay dividends or make other distributions, enter into transactions with affiliated persons, make investments, change the nature of our business or organizational documents, or prepay or make modifications to other indebtedness that would adversely affect the lenders.
The 2025 Credit Agreement also contains financial covenants including a maximum consolidated total net leverage ratio of 3.50 to 1.00. We may elect to increase such ratio level by 0.50 to 1.00 following certain permitted acquisitions. A minimum interest coverage ratio of 2.50 to 1.00 must also be maintained. The 2025 Revolver also includes standard provisions related to conditions of borrowing and customary events of default. We were in compliance with the financial covenants under the 2025 Credit Agreement as of March 28, 2026. We do not expect any of these covenants or restrictions to affect or limit our ability to conduct business in the ordinary course.
On March 27, 2026, we made a discretionary prepayment of $22.0 million on the 2025 Term Loan. As of March 28, 2026, we had an outstanding balance of $272.1 million under the 2025 Term Loan, net of original issue discount and deferred financing costs.
Refer to Item 1. Financial Information-Notes Unaudited Consolidated Condensed Financial Statements-Note 4. Financial Instruments for further details on the Company's indebtedness.
Other
For information regarding Commitments and Contingencies, refer to Item 1. Financial Information-Notes to the Unaudited Consolidated Condensed Financial Statements-Note 11. Commitments and Contingencies of this Quarterly Report on Form 10-Q.
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Information Regarding Cash Flows
Cash and cash equivalents as of March 28, 2026 totaled $35.8 million, compared to $51.2 million as of December 31, 2025. The change in cash was primarily due to the following:
Three Months Ended Change
(in thousands, except for percentage) March 28, 2026 March 29, 2025 $ %
Net cash from operating activities $ 8,934 $ (19,331) $ 28,265 (146.2 %)
Net cash from investing activities (574) (826) 252 (30.5 %)
Net cash from financing activities (23,144) 947 (24,091) NM
Effect of exchange rate changes on cash (608) 430 (1,038) (241.4 %)
Net change in cash, cash equivalents $ (15,392) $ (18,780) $ 3,388 (18.0 %)
Operating Activities
Net cash inflows from operating activities increased by $28.3 million compared to the prior year period, primarily due to higher cash collections on net sales, lower interest payments resulting from reduced debt levels and favorable interest rates, favorable timing of payments, and a decrease in bonus payments, partially offset by higher compensation-related costs.
Investing Activities
Net cash outflows from investing activities decreased by $0.3 million compared to the prior year period, due to lower capital expenditures. Capital expenditures in both periods primarily related to information technology investments.
Financing Activities
Net cash outflows from financing activities totaled $23.1 million for the three months ended March 28, 2026, primarily due to a $22.0 million discretionary prepayment of long-term debt. Net cash inflows from financing activities totaled $0.9 million for the three months ended March 29, 2025, driven by $10.0 million of net borrowings under our previous revolving credit facility, largely offset by a $9.0 million payment of contingent consideration related to a prior acquisition.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
There have been no material changes to our contractual obligations as disclosed in our 2025 10-K.
Critical Accounting Estimates
Our discussion of operating results is based upon the unaudited consolidated condensed financial statements and accompanying notes, which have been prepared in accordance with U.S. GAAP. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our estimates are based on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from these estimates. In the event we dispose of assets before the end of their previously stated useful life, we may incur an impairment charge. Our critical accounting estimates are detailed in Part II. Item 7. Management's Discussion and Analysis of Financial condition and Results of Operations of our 2025 10-K and we have no material changes to such disclosures.
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