Good day, and welcome to the Bioventus First Quarter 2025 Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Dave Crawford. Please go ahead, sir.

Thanks, Chuck, and good morning, everybody. And thanks for joining us. It's my pleasure to welcome you to the Bioventus 2025 First Quarter Earnings Conference Call. With me this morning are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our business and our 2025 priorities and then provide a brief discussion on the current macro environment. Then Mark will review our first quarter results and discuss our outlook, including our 2025 financial guidance. We'll finish the call with Q&A. A presentation for today's call is available on the Investors section of our website Bioventus.com. Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A Risk Factors of the company's Form 10-K for the year ended December 31, 2024, as such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website at Bioventus.com. And now I will turn the call over to Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. I'm pleased to report that the first quarter of the Bioventus team continued to successfully execute our plan, maintain strong momentum, and delivered yet another quarter of solid financial results as we hope patients recover so they can live life to the fullest. First quarter revenue of $124 million was in line with our internal expectations and reflected above-market organic growth of 5%. As a reminder, our Q1 revenue growth reflects a comparison to strong prior year results with above-normal orders by certain distributors at the end of last year. Adjusted earnings of $0.08 per share increased 33%, reflecting the strength of our peer-leading gross margin, prudent investment in key growth initiatives, and lower interest expense. Even with increased uncertainty in the macro environment, we do not see a material impact from tariffs at this time, and we remain well-positioned for a second-half acceleration in our growth with a strong focus on disciplined execution across the entire Bioventus organization. As a result, we are reiterating our full-year revenue, adjusted EBITDA, and adjusted earnings per share guidance. Now let's take a closer look at our first quarter results and provide an update on our business across the three priorities that I introduced at the start of the year: driving above-market revenue growth, expanding our profitability, and accelerating free cash flow generation. With respect to our first priority, driving above-market revenue growth, starting with Surgical Solutions, revenue advanced 7% driven by double-digit growth in Ultrasonics where we continue to see substantial growth from market expansion with new capital placements. Our value proposition of enhanced precision and control for surgeons, reduced patient blood loss, and increased operating room efficiency continues to resonate well with surgeons and hospital administrators. In Restorative Therapies, Exogen maintained its momentum, highlighted by high single-digit growth in the U.S. We're excited about this performance as it validates our approach to drive the business with higher focus, increased investment, and improved commercial fundamentals. As we look to the rest of the year, we believe that Exogen has the ability to sustain this level of growth. And in pain treatments, growth continues to be driven by double-digit growth in DUROLANE. As we previously discussed, we expect pain treatments growth to accelerate in the second half of the year as we move past challenging comparisons to the prior year and realize the benefit from recent account wins. Before transitioning to our second focus area, I'm excited to share that we are expanding our pain treatment portfolio with the recent addition of a platelet-rich plasma or PRP system. As we have mentioned in the past, we will only add to our portfolio with world-class technology that is synergistic with our patient-based mission and our existing channels and call points. With these criteria in mind, during the first quarter, we signed an agreement with APEX Biologix to be the exclusive distributor of their XCELL PRP system in the U.S. for orthopedics and sports medicine. PRP is a large and fast-growing market, and our research indicates that the majority of surgeons using our HA treatments also use PRP in their practice. So clearly, we believe the opportunity in PRP is synergistic with our sales force. Further, the XCELL system is designed for increased physician efficiency and precision as it reduces the procedural time and provides a customizable treatment solution for different patient applications. We believe these factors offer a significant competitive advantage. While the PRP revenue impact for 2025 is expected to be immaterial, we are excited about this portfolio expansion and adding another potential growth driver that leverages our existing HA commercial leadership and footprint. Turning to our second focus area, expanding profitability: We continue to strongly believe that our peer-leading gross margin, combined with the expected acceleration of revenue growth in the second half of the year will enable us to achieve at least 100 basis points of adjusted EBITDA margin expansion for the year. Even when considering the macro environment, we are prepared to swiftly adapt and prioritize spending if needed, to help ensure we achieve this goal. And with respect to our third focus area, consistent with what we have shared in the past, we expect to nearly double cash from operations this year compared to last year. It is customary to see a significant acceleration in cash flow starting in the second quarter, and we are already seeing the drivers supporting this improvement with our reduction in interest expense and one-time cash costs. Let me conclude by reiterating that although the macroeconomic environment has become more dynamic since our last earnings call just two months ago, at this time, we do not see a material impact based on the current schedule of expected tariffs. Nevertheless, we are being vigilant and continuously monitoring and planning for any potential changes. It's important to note that Bioventus has established a solid foundation, which we believe provides flexibility in navigating an uncertain macro environment and allows us to sustain the momentum that we've generated over the past two years. We have significantly enhanced our financial liquidity and cash flow generation. We've assembled a diverse portfolio of short, mid-, and long-term growth drivers, and each business is well positioned as the market or growth leader in large growing markets with favorable demographic trends. Almost all of our revenue is comprised of consumable products or therapies, many of which help to delay more expensive procedures. And finally, our dedicated team has displayed agility and resiliency in responding to change while driving strategic improvements. Challenges are not new to Bioventus, and given our substantial and ongoing progress in elevating our team, our processes, and our performance, we view the current climate as another opportunity to distinguish ourselves from our competition and how we serve our customers and patients globally as we continue marching towards becoming a $1 billion high growth, high margin, high cash flow company that generates significant value for all of our stakeholders. Now I'll turn the call over to Mark.

Thanks, Rob, and good morning, everyone. Let me begin by saying that I am pleased with the start of the year and the progress we are making to improve and strengthen our company and our performance. Turning to our headline results for the first quarter. Revenue of $124 million declined 4%, reflecting the impact of our advanced rehabilitation divestiture at the end of last year. Adjusting for the divestiture, organic growth was 5% with solid growth across all three businesses. Organic growth for the quarter was below our annual expectation given two fewer selling days and above-normal orders by certain distributors at the end of last year. Adjusted EBITDA of over $19 million was $3 million lower than the prior year, primarily due to the divestiture and an unexpected $1.1 million foreign currency loss from the revaluation of payables on our balance sheet. The currency loss related to payables designated in Swedish krona, which appreciated 11% in the quarter. Now let me provide some additional commentary on our quarterly revenue. Surgical Solutions revenue grew by 7%, driven by strong double-digit growth in Ultrasonics, with capital sales in the U.S. up by more than 50% compared to the prior year. As expected, bone graft substitutes growth slowed but is expected to accelerate in the second half of the year due to our recently added distributors. In pain treatments, revenue increased 4% compared to the prior year as certain distributors bought less this quarter following higher purchases at the end of last year. This impacted growth by approximately 3 to 4 percentage points. Shifting to restorative therapies, the divestiture of our Advanced Rehabilitation business resulted in a 35% decline in revenue. Excluding the impact of the divestiture, organic growth was 4% as we maintained above-market growth in Exogen demand with demonstrated improvement in commercial effectiveness and sales force execution. Finally, revenue from our International segment declined 12% compared to the prior year, while organic growth was 1%. Double-digit growth across Surgical Solutions was offset by lower sales of Exogen due to the timing of certain distributor orders shifting to the second quarter. Moving down the income statement: Adjusted gross margin of 75% was 70 basis points lower than last year due to channel mix and higher freight costs. Adjusted total operating expenses declined $3 million as increased investment in our growth initiatives was more than offset by direct expense savings related to the advanced rehabilitation divestiture. Now for further detail on our bottom-line financial metrics: adjusted operating income decreased to $18 million from $20 million in the prior year. Adjusted net income of $6 million increased 32% compared to $5 million in the prior year. This growth is a result of the reduction in interest expense, which is $3 million lower than last year. And finally, adjusted earnings were $0.08 per share for the quarter, an increase of $0.02 compared to the prior year. Now shifting to the balance sheet and cash flow statement: We ended the quarter with $23 million in cash on hand and $346 million in outstanding debt, which included $10 million drawn on our revolving credit facility. As expected, operating cash flow was an outflow totaling $19 million, given the timing of employee annual bonus payments and other annual costs like our insurance premiums. Absent these outflows of approximately $27 million, operating cash flow for the first quarter would have been positive. Consequently, we are confident that cash from operations will accelerate in the second quarter and throughout the remainder of the year, and we continue to expect 2025 cash from operations to nearly double compared to 2024. In addition, given the projected strong cash flow and increase in adjusted EBITDA, we expect our net leverage to decrease below 2.5x by the end of 2025. Finally, we are pleased to be reaffirming our 2025 financial guidance, which was provided on March 11. This includes organic revenue growth of 6% to 8%, adjusted EBITDA of $112 million to $116 million and EPS of $0.64 to $0.68. This full-year financial guidance reflects expected strong acceleration in the second half of the year. While we continue to closely monitor the macro environment for any signs of deviations in medical procedural volume and changing tariff landscape, at this time, we believe the anticipated impact is minimal and manageable. Our current full-year 2025 guidance incorporates the impact of recent tariffs, which is slightly less than $1 million as many of our products, including raw materials and subcomponents are made in the U.S. and our HA therapies currently fall under an exemption from pharmaceutical products. In closing, we continue to execute our business plan and believe we are well positioned to create shareholder value through strengthening our growth, profitability, and cash flow over the coming quarters in the long term.

And the first question will come from Chase Knickerbocker with Craig Hallum.

I just wanted to start in pain, maybe kind of a bigger picture kind of competitive question. Can you just kind of give us an update on the market and how you see it? I mean, are you seeing kind of any increased competition in the single injection space kind of give us an update on the multi-shot? I know it's a little bit more of a competitive environment out there. And then can you just kind of level set us? Was there any price benefit for DUROLANE in the quarter on a year-over-year basis? And then kind of how you expect the year to kind of play out from that perspective?

Chase, it's Rob. Yes. On the first one, we continue to see a shift from multi-injection to single-injection in this space. From our perspective, that's fine for a few different reasons. We have a really strong clinical value proposition with DUROLANE and a strong contract backbone. Those two combined, along with our dedicated commercial organization, are driving good growth in that space, which again showed double-digit growth in the first quarter, and it also carries a higher profitability for us in the single-injection space. So we expect that to continue. From a competitive standpoint, the competitors that we've had in the past still exist today. We feel good about competing against them, given that combination that I just mentioned with our clinical value proposition and contracts and really dedicated sales force. So regarding the pricing, I'll turn that over to Mark.

Yes. Thanks, Chase. When you look at our CMS price, as you're pointing to, it increased year-over-year. But as we've discussed before, there are a lot of differences between CMS and our financial ASP over the long term. Directionally, these will come together and trend in the same way, but in the short term, there are lots of different things that can affect it like payments from a rebate perspective, and CMS is based on cash while the ASP from a financial perspective is based on accruals, and then you have lots of dynamics with distributor inventory that can influence it from a quarter-on-quarter basis. But overall, from a specifically DUROLANE perspective, the CMS ASP was up 10%. But from a financial ASP, it was just slightly positive.

Got it. Can you remind us about the tougher Q2 comparison for pain and what factors were influencing that? I apologize if I missed it. You also mentioned some account wins. Could you provide more details about those and explain what is supporting the expected growth ramp in the second half?

Yes. So just regarding Q2 for this category, again, last year at this time, a competitor had supply challenges that led to some additional volume. We also had some of the favorable rebate accruals. So those are some of the onetime comparables that will be out of the way as we move to the second half of the year. And then what was the second part of the question, Chase?

You had mentioned some recent account wins and that they're supporting the acceleration in the second half of the year for pain. Can you just kind of give us more detail there on what supports it?

Yes. Thank you. So I'm not going to go into detail on those because they're fresh wins. What we're working on now is converting those accounts and penetrating them to increase volume. But promising wins. In terms of what's driving them, it really goes back to the same combination that we've mentioned, reinforced quarter after quarter, which is we have this clear clinical differentiation with DUROLANE, and the more doctors and patients that experience it, the more well-known that clinical differentiation becomes. Additionally, we're leveraging the strong contract presence we have, which gives us an opportunity to drive significant penetration volume in the market. We also have a really hungry team that's out there focused on this each day. So that combination is leading to those account wins. I also want to mention that we're getting smarter in our targeting regarding which accounts we want to prioritize to drive volume in the quarters and years ahead.

Just last for me. It sounds like pharmaceutical tariffs are incoming. Can you kind of give us your assumptions around your exposure there? And how you see that playing out, as well as any sort of avenues for you to adjust to incoming tariffs?

Yes. Well, as Mark mentioned, pharma is currently excluded. I think speculating on hypothetical situations might not be productive given how much things are changing day-to-day, week-to-week. But I will emphasize that we’re vigilant and monitoring the changing environment, and we’ve already planned for a number of different scenarios. Right now, we’re focused on what we can control, which is significant—like growing above the market, expanding our profitability, and increasing our cash flow. So if something changes in that area, we’ll be sure to talk to you about it.

The next question will come from Robbie Marcus with JPMorgan.

Just wanted to follow up there. You guided to first quarter below the low end of the 6% to 8% organic. It came in at 5%. You touched on some of it in the last few questions. But just maybe on organic growth and EBITDA, just speak to the level of confidence and visibility you have to the acceleration in Q2 through Q4?

Thanks, Robbie. This is Mark. When we look at the second half of the year or, I guess, the remaining three quarters in front of us, we talked a little bit about from a first quarter perspective that bone graft substitutes were going to be slow in the first half of the year, and we expect that to start accelerating in the back half of the year. HA, from a seasonality perspective, Q2 last year was our biggest quarter, so Q2 and Q4 are really in front of us. We talked about the recent account wins that we have. From an EBITDA perspective, you can really look at the big jump in EBITDA we had from Q1 to Q2 in 2024. We expect the same in 2025 and then to accelerate from there. The sales increase throughout the year shouldn't lead to large spikes in expense, other than the correlation of commissions that would go with that. As sales drive throughout the year, EBITDA will drop to the bottom line. Again, we are focused on increasing our margin by 100 basis points for that as well. Also, we expect cash flow to accelerate nearly doubling from last time. Therefore, we are confident in the execution we’ve had over the last couple of years.

Robbie, I'll just add on. That growth acceleration in the back half will, as Mark alluded to, occur naturally as we move past some of these unfavorable comparables. We see that in the first quarter with double-digit growth in DUROLANE, double-digit growth in Ultrasonics, and nearly double-digit growth in Exogen in the U.S., and these have been some of the key focus areas for us. They're validating our approach, and once those unfavorable comparables in the first half of the year are behind us, I think we'll see those growth drivers shine a little brighter.

Great. And you've made really good improvements in lowering leverage over the past few years. Maybe just speak to where you are in that journey and the plans for the rest of the year.

Yes. I think we’re right around a 3.25 leverage ratio and expect that to get to around 2.5 by the end of the year. So we really feel good about it, again, from driving revenue and expanding our margin by 100 basis points and delivering the cash flow we expect to be able to achieve that as we accelerate through the last three quarters of the year.

Your next question will come from Caitlin Cronin with Canaccord.

It's Michelle on for Caitlin. Kind of piggybacking off of the last question. Can you maybe talk about what level of leverage you become more constructive on M&A opportunities?

Yes. This is Rob. I'll start by saying that the premise there is the portfolio. We feel really good about the portfolio we have right now and our ability to drive short, mid-, and long-term growth. On top of the existing portfolio we have, we're layering additional growth drivers, which we're really excited about as well. We have in the back half of this year, going through FDA clearance right now, a game-changing technology for our peripheral nerve stimulation business. We have a significant untapped opportunity in our international business. As mentioned today, we're now going to be in the PRP space, which opens up a large and growing market for us. We feel really good about the portfolio we have. The focus from a capital deployment standpoint is really to keep reducing leverage to get it below 2 eventually. That's our focus for now. Nonetheless, as opportunities come along that are synergistic with our mission and with our current business footprint and the channels and call points we have, we're going to pursue those if they help us achieve our goals, which include driving growth, profitability, and cash flow. That's what you saw with the PRP announcement today. So that's our focus at this point.

Got it. That's great. And maybe just one more from us. Has the new OUS business manager started? And if so, maybe what are some of the initiatives they're driving in the early days?

Yes. Thank you. So we just started this month, actually, and we're really excited about that. I mentioned a couple of times in the past that our international business is still quite small, even though many of the products we have are eligible to drive significant growth. With this type of business, when you have a lot of opportunity but you're early in the evolution, we really need a leader who can fly high and low at the same time, driving a powerful overarching growth strategy but also with really disciplined prioritization and very hands-on leadership to improve commercial execution country by country. So that's why we brought on the new leader, and that’s what he’s going to do. We're going to prioritize which countries and which products, refine the go-to-market approach, and put investments in the right place to unlock more significant growth going forward for our international business.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rob Claypoole for any closing remarks. Please go ahead, sir.

Okay. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the first quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve profitability, and accelerate our cash flow to create significant shareholder value. Thanks for joining the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.