Bioventus Inc. (BVS) Q3 2026 Earnings Call Transcript

I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations, and Treasurer. Please go ahead.

Thanks, Drew, and good afternoon, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVentus 2026 Third Quarter Earnings Conference Call. With me this afternoon are Rob Claypool, President and CEO, and Mark Singleton, Senior Vice President and CFO. Rob will provide an update on our 2026 priorities and the third quarter highlights, and then Mark will review the third quarter results and discuss the update to our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investor's 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, It 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 31st, 2025. 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 foreign-looking statements, We should speak only as of the date made, although the company may voluntarily do so from time to time, and undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or other ones, 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 and 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, bioventus.com. And now, I will turn the call over to Ron.

Thank you, Dave. Good afternoon, everyone, and thanks for joining our call today. Bioventus continued to build on its positive momentum in the third quarter. Delivering a solid financial performance and encouraging leading indicators across our growth drivers. These results reinforce our conviction and our ability to create sustainable, long-term value for shareholders. Before going through the details on the third quarter, I will take a moment to provide a brief update on the strategic review we disclosed on our Q2 earnings call. With the assistance of our advisors, we continue to evaluate a range of strategic options for the company. As you may recall, this review was prompted by an unsolicited acquisition proposal and multiple expressions of interest. The process is ongoing, and we will continue to take the time necessary to fully assess all options and determine the best path forward for our shareholders. We are not able to provide further details at this time and will not be answering any questions regarding the strategic review. Turning to the third quarter, I'll update you on the three priorities we outlined at the start of the year. One, accelerating long-term revenue growth with increased investment in the four growth drivers, peripheral nerve stimulation, platelet-rich plasma, ultrasonics, and our international business. Two, increasing earnings even with a higher level of investment in these four growth drivers. And three, continuing to strengthen cash flow and enhance capital allocation optionality. Let me expand on each priority, starting with accelerating long-term revenue growth. Overall, third quarter revenue grew 3%, led by strong growth of 6% in paying treatments. This performance was partially offset by softness in bone graft substitutes within Surgical Solutions, which continued to face near-term headwinds. Excluding BGS, revenue growth for the rest of the business was 6% for the quarter, reflecting strong underlying momentum within each of the growth drivers. Let me highlight a few examples of the progress we are achieving with the growth drivers, starting with platelet-rich plasma, where momentum continues to build with sequential growth in the number of capital placements. Even more encouraging is the meaningful ramp-up in disposable reorders. During the third quarter, revenue from PRP disposable kits exceeded revenue from capital placements, which is an important indicator of future growth. We are pleased to see the growing adoption of our customizable solution and its potential to displace competitive offerings. In addition, we recently secured exclusive rights from our PRP partner, Apex Biologics, to offer our solution in sports medicine accounts. This agreement broadens the addressable market and creates an additional avenue for growth as we continue to build commercial momentum. Next, our P&S business continues to gain traction, strengthening our confidence in both the market opportunity and the vast potential for our product offering. Physician feedback is very encouraging as clinicians gain more experience with talisman, providing further validation of our differentiated technology and launch strategy. Key performance indicators reinforce this progress. Trial to permanent conversion rates are exceeding plans, the time from trial to permanent implant placement has shortened, and the number of physicians trained grew by more than 50 percent quarter over quarter. Collectively, these trends point to growing physician engagement and improving conversion efficiency, key drivers for continued revenue growth acceleration. We've also strengthened P&S leadership and commercial capabilities by hiring a best-in-class marketing leader, expanding our commercial infrastructure, equipping the team with more effective competitive selling and targeting tools, and increasing our presence at key medical congresses and industry meetings. Learnings in the initial launch phase, combined with these investments, position us to accelerate market adoption and capitalize on this significant growth opportunity. Turning to Ultrasonics, we saw very strong double-digit revenue growth this quarter. Investments in marketing and surgeon training are driving increased surgeon adoption, accelerated disposables growth, and new account wins. We expect this momentum to continue into the fourth quarter, paving the way for further growth acceleration in 2027. Finally, international revenue accelerated 16% in Q3, as we begin to see the impact from talent additions and the team's successful focus on select markets. We are encouraged by the speed of execution, the depth of the opportunity pipeline, and our customer win rates. We expect to deliver strong double-digit growth in the fourth quarter and for the full year, turning to our second priority, increasing earnings even as we invest in future growth drivers. The third quarter again demonstrated the underlying earnings power and resilience of BioVentus's business. Despite increased investment in the growth initiatives, we delivered an adjusted EBITDA margin of 20%, an improvement of 70 basis points compared to the prior year period. Looking ahead, we now expect full-year adjusted EBITDA margin to be above the prior year level, reflecting our ability to balance strategic investment with operating discipline. With strong operating performance and significant interest expense savings, we delivered adjusted EPS of $0.17 in the quarter, which advanced 13% versus the prior year. And on a year-to-date basis, adjusted EPS has increased by 18 percent, underscoring our continued ability to grow earnings while investing in the opportunities that will drive long-term value for shareholders. As we close out the year, we expect to see sequential acceleration in revenue growth and earnings while continuing to increase our investments to drive growth and deliver on the full-year adjusted EPS guidance we provided at the beginning of the year. This reflects the strength of our business model, supported by the earnings power generated from solid revenue growth, our stable peer-leading gross margin, and the disciplined focus on operating expense management. Turning to our third priority, accelerated cash flow, we delivered another strong quarter with cash from operations of $21 million. This strong cash generation funded the repayment of an additional $19 million of our term loan, bringing year-to-date term loan repayments to $65 million. This enabled us to achieve an important financial milestone of lowering net debt at the end of the quarter to below $200 million. Overall, we continue to execute on our strategic priorities, driving increased conviction in our strategy and growing confidence in the strength of the portfolio and investment approach as we build BioVentus into a leading $1 million MedTech company that delivers exceptional value for customers.

Thank you, Rob, and good afternoon, everyone. Let me start by saying I am excited about our ability to continue to increase profitability and deliver strong cash flow as we continue to invest in our future growth drivers. Turning to headline results for the third quarter, revenue of $142 million increased 3% compared to the prior year period. Growth was driven by strength and pain treatments, along with strong performance in other areas of the portfolio, which was partially offset by a slowdown in BGS within Surgical Solutions. Adjusted EBITDA of $28 million increased nearly $2 million compared to the prior year period and grew faster than revenue growth. Additionally, adjusted EBITDA margin of 20% expanded 70 basis points compared to the third quarter last year. And adjusted earnings were $0.17 per diluted share for the quarter of 13% compared to $0.15 in the prior year period. Now let me provide some additional commentary on the quarterly revenue. In global pain treatments, we delivered strong growth with revenue of $71 million, representing a 6% increase compared to the prior year. Pain treatments is up 9% year-to-date, reflecting the strength of our broad HA portfolio, the differentiation of Duralane, and the strong early traction we are seeing with PRP and P&L. Yes. Moving to Surgical Solutions, revenue in Q3 totaled $51 million, which was an increase of 1% compared to the prior year. In ultrasonics, we delivered strong double-digit growth with continued progress in capital placements and continued acceleration in disposable volume as we drive new surge in adoption. As Rob mentioned, the momentum with our strong underlying fundamentals support very strong growth for the fourth quarter and into 2027. As it relates to BGS, revenue came in lower than expected as strong volume from new large IDN accounts was offset by modest softness in spine procedures, temporary delays in adding new distributors, and some competitive dynamics in the synthetic market. We implemented changes late in the third quarter and are seeing positive trends to start the fourth quarter. We continue to believe that these factors are transitory, and we continue to have strong conviction in our IDN strategy, the clinical and economic value proposition, and the long-term opportunity for this business. In restorative therapies, revenue of $21 million declined 3%. The quarter's results were driven by an impact to volume due to higher vacancies in the Exogen sales force that have since been filled. Finally, international revenue of $18 million grew 16% compared to the prior year period, or 18% on a constant currency basis, primarily due to the strong double-digit growth in the ultrasonics and HA businesses. Our growth outlook for international continues to be very strong, and we expect to generate more than 20% growth in the fourth quarter and continued excellent growth in 2027. Moving down the income statement, adjusted gross margin of 75% was slightly lower than the prior year period, primarily due to product mix. With respect to operating expenses, we remain disciplined with our spending while appropriately investing in our growth drivers and achieve adjusted EBITDA margin of 20% in the quarter. Turning to the balance sheet and cash flow statement, we continue to generate strong cash flow. Cash flow from operations totaled $21 million during the quarter, and we ended the period with $31 million of cash on hand and $230 million of outstanding debt. During the quarter, we reduced debt by an additional $19 million, bringing the total debt repayment for the year to $65 million. We continue to expect our net leverage ratio to be below one and a half times by the end of this year. This stronger financial position is expected to drive further interest expense savings while enhancing our ability to strategically deploy capital towards the highest value opportunities. As a result of strong earnings and outlook for the business, we are reaffirming our full-year adjusted earnings per share guidance of $0.75 to $0.79 per diluted share. We are adjusted, or previously provided, cash from operations guidance of $84 million to $89 million, and presenting adjusted cash from operations in the same range, which excludes the cash flow impact of the company's review of potential strategic alternatives. With lower revenue expectations, primarily in BGS, we now expect 2026 revenue of $590 million to $595 million. This guidance reflects the expectations of mid-single-digit revenue growth in Q4 and sequential acceleration. In closing, we delivered a strong performance across key strategic segments of the business. The successful investments in our growth drivers, Discipline execution, enhanced profitability, and strong cash flow position us very well to increase our momentum and build a leading medtech company that creates meaningful long-term value for our shareholders. Operator, please open the line for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. The first question comes from Caitlin Roberts with Kennecourt Genuity. Please go ahead.

Hi. Thanks so much for taking the questions. Maybe just to start on BGS, I would love a little bit more color on the headwinds that you noted. And just, you know, with the spine market softness you called out, any concerns that that could potentially impact, you know, ultrasonics going forward?

Yeah, thanks, Caitlin. This is Rob. So, yeah, there were two primary drivers behind the Q3 BGS performance, both of which we view as transitory. First was we addressed some of the competitive dynamics in the synthetic market late in Q3 and already seeing positive results there with October tracking ahead. And second is that what you mentioned and what Mark mentioned, that slowdown in spine procedural volume and the number of new distributors we added, which are now ramping back up. So I think it's really important to note there that we're already seeing positive results with October after the actions we took and ahead of our expectations and just long-term, very excited about our IDN strategy in this space, which is gaining significant momentum. Awesome. As it relates to the procedures, it doesn't really impact from an ultrasonic standpoint. Keep in mind, we have relatively small business there, large market. We're changing the standard of care in that space, and so our strong volume was able to overcome anything that may have been happening from a procedural standpoint in that space.

Understood. And just turning to Exogen, expectations for, you know, the recovery here with the positions filled that you noted and how much of, you know, that potential recovery is built into the revised revenue expectations?

Yeah, well, for Exogen overall, we're making really good progress in refining commercial data analytics and targeting. And we talked a little bit about that last time and our messaging to help the team continue to get more efficient and effective in growing the business. So overall, this year, we expect the growth to be low single digits, which, you know, per your comment is towards the lower end of the range that we targeted for the year. And that's factored into Q4 as well. But, you know, going forward, we expect this business to grow in the low-signal-digit to mid-signal-digit range consistent with what we've mentioned in the past.

Great. Thanks so much.

Thank you, Caitlin. Thank you. The next question comes from Larry Solo with CJS Securities. Please go ahead.

Great. Thanks. Good afternoon, everybody. Could you maybe just give us a little more color, just granularity on the guidance, revised revenue guidance, like $12.5 million at the midpoint? Is that all BGS, or are we hitting that kind of 2% bar you set for PRP and P&S? I don't even give numbers there, but has anything else changed across the P&L in terms of on the top line?

Yeah, I'll start. So we're lowering the full-year guidance by, as you mentioned, by approximately $12 million at the midpoint of the guidance range. Again, more than half of that is from Q3, and that was primarily driven by VGS, as mentioned. And then for Q4, the remainder of the reduction is due to VGS and the timing and contribution of new reps that we're onboarding. So, you know, all that said, we expect a sequential acceleration in Q4 to mid-single-digit growth. And I'm pleased to say that, you know, we're already seeing positive traction there with the first month of the quarter.

Okay. And on the BGS, so the competitive dynamics, is that pricing, I'm taking it? Is that, you know, and was that kind of the, you know, if you had to kind of bucket those three things, are they kind of split evenly or is one heavier than the other? I mean, I know you've been walking away from some business. You know, is that discretionarily? Is that continuing still on, you know, at least, you know, at some point, I mean, in some respects?

Yeah, yeah. You know, in the third quarter, really due to the two factors that we mentioned, the competitive dynamics and the synthetic space, you know, again, already seeing positive results after taking the actions, you know, late in the quarter. And then second, that slowdown in procedural volume and the number of new distributors that we added, which are now ramping back up. So those are the two primary causes for Q3 spread across the two of them. And, you know, again, just can't emphasize enough that we're already seeing positive results in October. We don't usually talk about the current quarter, you know, in a call, but I think it's important here to mention that seeing positive results with October are ahead of our Expectations and, you know, longer term, we got just excited. We're gaining a lot of momentum with the idea and strategy that we've talked about before, already seeing some nice gains there and expect that to contribute going forward.

Okay, I appreciate all that. Okay, thank you.

Thanks, Larry. Thank you. The next question comes from Chase Knickerbocker with Craig Hallam. Please go ahead.

Good afternoon. Thanks for taking the questions. Sorry for another one on BGS here, but could you maybe just, with a little bit more detail, was the weakness isolated to signifuse specifically? Maybe just talk about how OsteoAMP performed in the quarter kind of relative to signifuse. Thanks.

Yeah, Chase. So, primarily, we saw the impact in the quarter to the synthetic space, you know, and again, that's because of some of the competitive dynamics, et cetera. But, you know, when we mentioned the second reason of the slowdown in procedural volume and the number of new distributors added, obviously, that's across the portfolio, just not in the synthetic space. So the good news, again, I'll repeat a little bit here, but we took the actions at the end of September, and we're already seeing really positive traction there with October tracking ahead. So I think that just underscores for us that we identified the right areas to focus on, took the actions early in the fourth quarter, but we're seeing an impact from the actions that we took.

And if we just think about kind of what the right expectations by segment are in Q4, you kind of talked about the changes to guidance, but maybe just a little bit more specifically on how, you know, quickly you think that could bounce back from those two, specifically to surgical, from those two specific headwinds. And then just the second piece, we've heard from some competitors that seemingly some larger customers are more willing to separate out biologics RFPs. Can you just speak to what you're seeing from a customer perspective? Are you getting more kind of inbounds on participating in those RFP processes specifically for biologics? Thanks.

Thanks, Chase. This is Mark. I'll start with just kind of going through the revenue when you look at it from the third quarter to fourth quarter sequentially. Overall, restorative therapies or exogen would expect that growth rate to improve a little bit into 4Q. Again, we have the vacancies in 3Q. We have those filled. Obviously, we have to get them on board, but from a growth perspective, we actually expect it to improve, even though that's part of the guidance reduction. And from a pain perspective, you know, great growth in 3Q, as we talked about. When we look into 4Q, we'll see a slightly lower growth rate, not much. But really, you've got to remember, when we look into last year, our growth rate was 14% and 15% overall for AHA. So, it was a strong quarter in pain last year that we're comparing to. But, you know, still feel really good about the growth drivers and about our AHA business within pain. From a surgical perspective, ultrasonics, again, had a really strong quarter with double-digit growth. Obviously, we talked about the struggles that we've had with BGS. And we look into fourth quarter, you know, as we talked about, BGS will be lower than our original expectations from a guidance perspective. But we do expect the growth to accelerate into fourth quarter. So, that's kind of, you know, walking through that. And as Rob also pointed out, we are seeing some early signs of traction and improvement in fourth quarter in BGS. From biological RFPs, I'm going to let Rob take that one.

Yeah, so Chase, on that, you know, what the RFPs or the RFQs with large accounts, particularly with the IDNs, You know, they're putting out new requests for proposals with, you know, set formularies, and we're seeing that across the portfolio. What I think is most important there is that they're basing the decision-making on the clinical and economic value of each of the individual products. So, we like that they're getting their hands around it, and we like, you know, that they're basing it on that combination of clinical and economic value, and I think that's why we're seeing a lot of traction there is because of our strong combination of clinical and economic value. So, really, really support what's happening there, and we're gaining traction and already seeing a nice contribution to our growth within that space from the activity with those large accounts.

Scott, maybe just last for me, you know, it's a little bit tough for us sometimes to get a sense for kind of some of the specifics around P&S just with it being in pain. Can you maybe just give us a sense for your expectations for kind of growth contribution from P&S next year? Thank you.

Yeah, thanks, Chase. So, you know, as it relates to, you know, specifics for 2027, you know, not going to, you know, obviously give any formal guidance or get too specific there, but I will give you some context on P&S. I mean, again, really excited by what we saw in Q3, which included the expansion of the team, new customers, new trials, which led to new implants, and just very positive feedback about both our trial device and the power of our permanent implant talisman. And as we alluded to, the leading indicators that we have are getting more and more defined, and they're tracking ahead of our launch plan. And we're just learning a lot about how to maximize our success with this business over the coming years. And I'll tell you, you know, that's what this year is all about. We're investing in and activating our growth drivers while also very diligently analyzing our performance to shape the future decisions and investments to maximize our success. So, hey, you know, I fully expect the learnings, investments, revenue growth to keep ramping strongly, not just in Q4, but, you know, per your question, And throughout 2027 and the future years, and while I don't get specific on 27, we fully expect to scale this business to over $100 million in the coming years.

Thank you, guys. Thanks, Chase. Thank you. The next question comes from Mike Potoski with Barrington Research. Please go ahead.

Hey, good evening, guys. So I guess I was wondering, the $13 million in incremental investment you guys sort of charted the course for at the beginning of the year, how far into that are you? And, you know, are you going to end up sort of investing that incremental $13 million, or is it going to come in less? Or can you just speak to where you are on that? Thanks.

Sure, yeah, great question, Mike. We've accelerated our investments, actually, beyond the $13 million to almost $15 million, you know. So a couple million more this year, and similar to what we've conveyed in the past, more than half of that's going to P&S, given the tremendous opportunity there and our build-out of the business. But, you know, really across all of them, we're investing in an exciting range of commercial activities and gathering a lot of data-backed insights on just how to best unlock the full potential of the growth driver. So, you know, I'd say in general, the fact that we're accelerating the investments beyond the $13 million, you know, to $15 million in the back half here just demonstrates how much we're learning and the insights we're gaining and, you know, how confident we are in increasing our investment given in certain areas because of the positive traction that we're seeing. So, and again, as it relates back to our earnings, you know, it's nice to be able to drive up our investment like this and still deliver strong earnings for the quarter, and we expect to continue those investments going here through the fourth quarter, and, you know, not at the same rate in 2027, but, of course, we'll be investing in those growth drivers in 2027 as well.

Sure, and appreciate all the data points you gave around PRP and PNS. I'm just curious, Rob, are you guys affirming sort of the 2% lift that you were expecting at the beginning of the year on those two, or are you essentially saying that there may be some timing that maybe 2% incremental associated with those two initiatives may not come in?

Yeah, so, you know, as you alluded to there, really exciting traction with both. Currently tracking a little shy of the 200 basis points, but we'll see what we can do in Q4. I'd say either way, I couldn't be more excited about progress that we're making with both of them and the potential to enhance our overall growth profile, not just with those two, but all of our key growth drivers. So, we'll let you know where we land after the year.

Okay. One more quick one, and then I'll get off. In terms of the ultrasonics momentum, is it primarily getting deeper in with docs in terms of just driving better utilization with sort of the guys you have relationships with, or are you really expanding the footprint of docs that are utilizing your ultrasonics? Thanks.

Yeah, thanks, Mike. Really all of the above. You know, the investments are working. They're having a clear impact. The team's doing an excellent job. Just to address a couple of points, we're ahead of schedule on new users or surge in adoption, which is a really important leading indicator for us. We're also expanding our capital and placements. And then, you know, perhaps most importantly, we're seeing very positive, continuous, sequential growth trends in disposables. So that's what really fueled the double-digit growth in Q3 is that combination. And, you know, we look at this business as, you know, we're in the early innings with activating the real potential of ultrasonics and just really looking forward to the path forward with this business.

All right. Great. Thanks.

Thank you, Mike.

Thank you. And we have a follow-up from Larry Solow with CGS Securities. Please go ahead.

Great. I appreciate the extra time. Just on the – I'm curious, as Mike alluded to, so you said the investment expense is actually spending that up a couple million or up a couple million run rate. Where have you been able to cut the costs on that SG&A line or at least keep SG&A relatively flat, I guess, year-over-year on an adjusted basis? If we take out the, you know, you had a $3.5 million strategic alternative expense that you took out there. But on a just a basis, if it's, you know, keeping it flat on similar revenue year over year, continuing to invest, you could just give us a little more color on where you've been able to, you know, take some costs out of the P&M.

Yeah, Larry, this is Mark. Thanks for the question. Well, first, you know, we talked about our largest shortfall in revenue in 3Q and for guidance from a BGS perspective. That business is our lowest variable margin business compared to, you know, other businesses that have very lucrative variable margins. So, you know, when we miss on that, you know, the profit that we lose isn't as material as it would be in some of the other businesses. But I also think this is a testament to the, you know, powerful P&L that we do have when we're driving above market growth, and the gross margins that we have really gives us the control over P&L. And, you know, we have the commissions come out for BGS, but then there's other levers that we have, you know, from a variable spending perspective that come out as well. And I think, you know, we've done a good job as a team over the last few years of really demonstrating the discipline to management of all of our costs. You know, most importantly, as Rob talked about in one of the earlier questions, amongst that, you know, prioritizing our spending and still being able to, you know, make significant investments into the business that allows us to continue the momentum and the fuel that we're putting into these growth drivers of, you know, starting out the year of investing 13 million, you know, that's up to 15 million. And so really, you know, overall, just the power of the P&L, the fact that we missed in our least, you know, lowest variable margin business is really the dynamics that's going on in P&L, but it really just speaks to the strength of the powerful P&L that we do have.

I appreciate that. That makes a lot of sense. I'd like to squeeze one more in. I know you don't want to answer any questions on this specific process, but thoughts just from a rough timeline, you know, basis, Would you like to, you know, optimally like to have something done by year-end? Is that maybe a soft goal, soft target, if you will? Like, is there any, just any color on potential timing would be great if you can offer anything.

Yeah, thanks, Larry. You know, as noted in the prepared remarks, the strategic review remains ongoing and really not able to comment further at this time about any of the details. So, thanks for that.

I appreciate that. I figured I'd try. Okay, thank you.

Thanks, Larry. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Rob Claypool for any closing remarks.

Thanks, everyone. We delivered another strong quarter and are excited about the underlying momentum across our growth drivers. We're confident in our ability to deliver above-market revenue growth, increased earnings, and accelerate cash flow to create significant shareholder value.

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