Bioventus Inc.

Thank you for standing by and welcome to BioVentus Incorporated Second Quarter 2023 Earnings Conference Call. I will now turn the call over to your host for today, Mr. Dave Crawford, Vice President of Investor Relations. Please go ahead.

Thanks, Joanne. Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVentus 2023 Second Quarter Earnings Conference Call. With me this morning are Tony Beal, CEO, and Mark Singleton, Senior Vice President and CFO. Tony will begin his remarks with an update on our business and outlook for the second half of the year, followed by a review of the quarter. Mark will offer further detail of our second quarter results and discuss our 2023 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the investor section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risk 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, 2022. as well as our most recent Form 10-Q, and other company filings made with the SEC. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as a date made. Although it may voluntarily do so from time to time, the company 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 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 investor relations portion of our website at bioventus.com. And now I'll turn the call over to Tony.

Thanks Dave and good morning everyone. Thank you for your continued interest in BioVentus. Let me begin by saying that I'm encouraged by our results for the quarter. Our dedicated employees are diligently addressing last year's challenges as we focus on improving our execution, delivering on our commitments, and enhancing our business. Before discussing the quarter's performance, I want to take a few minutes to reflect on our progress made the first half of the year to solidify our financial position and then discuss our priorities for the remainder of the year as we strive to deliver improved growth, profitability, and predictability. Our leadership team and I are focused on the near term and continue to aggressively address the issues impacting last year's performance. Our attention remains on delivering sustainable, profitable growth, and we have a laser-like focus on remaining compliant with our debt covenants and reducing leverage. We believe that this will better position our next CEO to more quickly turn his or her attention to maximizing the long-term opportunities for BioVentus. As I stated last quarter, we won't be able to reverse all of the recent headwinds in the single quarter, but we believe the strong results over the first half of the year, combined with our ability to further solidify the business over the course of the next several quarters, will enable us to rebuild our balance sheet and regain credibility with our investors. During the quarter, we significantly improved our financial position while we also undertook important steps to strategically assess our growth and investment opportunities. Let me provide further context. First, we executed our financial plan for the quarter and achieved revenue in the range of our expectations while we maintained thorough control of expenses similar to the first quarter. So far in the first half of the year, adjusted EBITDA is up nearly $16 million. Compared to prior year, this growth equates to more than 50% increase. In addition, we achieved a significant pay down of our debt in part with the proceeds from the closing of our wound business divestiture, but also from strong cash generation. Cashflow was enhanced by our targeted work to reduce working capital across selected areas of the business where inefficiencies arose during our recent acquisitions and employee turnover. Second, from a strategic perspective, we furthered our analysis and dialogue with our board of directors, on an assessment of our growth and investment opportunities as we evaluate which areas to prioritize as we move forward. Due to our current leverage and desire to accelerate the improvement in our profitability, we need to be selective in the areas we choose to invest. We intend to focus our investments where we believe we can achieve sustainable, profitable growth. As we continue into the second half of the year, we plan to review the hierarchy or areas for improved investment with our board. Additionally, We plan to keep pressure on the business to maintain the cost control exemplified during the first half of the year. As we begin the second half of the year, we're confident in taking prudent steps to enhance our financial metrics and diligently execute our plan. As we look to build on our momentum for the remainder of the year, we remain focused in the following areas. First, delivering our sales plan through continued strong double-digit revenue growth in surgical solutions and our international business. while maintaining volume growth and share gain access across our EHA portfolio as we return to growth through price stabilization expected to start in the fourth quarter. Second, maintaining spending discipline, but in selected areas, begin to seed some investment back into the business for future growth. And third, continuing to improve our operating efficiencies to bolster cash flow and enhance internal controls. With our strong start to the year, I'm confident in our revenue and earnings growth opportunities and ability to reduce leverage as we move forward. Across our business, we participate in large, growing markets and provide innovative, differentiated products for our patients. Now, let me turn to our second quarter results. For the quarter, revenue of $137 million declined 2% compared to the same period a year ago. However, when considering the impact of our wound business divestiture, growth was even to prior year. More importantly, our adjusted EBITDA increased to $28 million compared to $22 million in the prior year. Adjusted EBITDA was above our expectations due in part to stringent control of our expenses. Across pain treatments, while we continue to be impacted by the decline in our average selling price for Duralane and Jelson, we once again saw double-digit increase in sales volume with significant double-digit gain in volume for Duralane. As we continue to take market share, with our clinically differentiated and complete portfolio offering. We continue to anticipate price erosion to subside as we progress through 2023 and into early 2024. Meanwhile, across our HA portfolio, we believe that market growth combined with an increase in share from lower selling prices will continue to drive volume growth. While for the year we expect an overall reduction in HA revenue of high single to low double digits due to the impact of lower selling price, we expect to see year-over-year revenue growth return in the fourth quarter of this year. Now turning to surgical solutions, as we previewed last quarter, we saw a slowdown in revenue growth due to increased distributor churn in bone graft substitutes. Looking ahead in the second half of the year, we expect growth to accelerate as we increase our distributor base and gain from recent large account wins to offset these losses. Additionally, Our ultrasonics portfolio for the quarter grew double digits, and we expect the momentum across ultrasonics to continue through the second half of the year. One aspect which is bolstering growth in ultrasonics is a program we initiated this year to sell the Nexus generators rather than place them on consignment and accounts. While a small portion of revenue, the program results are ahead of expectation, and we believe customers who purchase the generators will use more disposable scalpels due to the investment made. We believe our overall smaller market share and market growth rates provide a very strong backdrop for continued market penetration and growth across both ultrasonics and bone graft substitutes. Within restorative therapies, organic revenue fell low single digits when removing the impact of our wound business divestiture. Revenue growth and advanced rehabilitation benefited from accelerated placements of vector weight-bearing systems, which were expected to be installed in the third quarter. this acceleration pulled forward some revenue into the second quarter. Exogen revenue was down compared to prior year, but revenue increased sequentially and reflects an improving trend we're experiencing across the business as we continue to reengage with positions after our Salesforce realignment last year. Finally, our international segment grew 16%. Constant currency growth was 17%. Growth was driven by strength across surgical solutions business, as well as strong growth in exogen. Additionally, we recently hired David Rennie as our new general manager for international business. David is a strategic leader with a track record of delivering profitable growth across several medical device segments. With David on board, we anticipate maintaining double-digit growth in our national segment as we proceed throughout the year. Finally, I'm pleased with our ability to address last year's headwinds and achieve meaningful improvement in our financial results and liquidity. While more work is required, we remain focused on executing our business plan, prioritizing those areas we believe are most meaningful in driving increased profitability, improving our balance sheet, and enhancing our operating efficiencies and internal controls as we work to restore your confidence in BioDentist.

Now, I'd like to turn the call over to Mark.

Thanks, Tony, and good morning, everyone. Let me start by saying I'm proud of our team's execution of our financial plan through the first half of the year as we focused our attention on improving our liquidity position and reducing our cost structure. Revenue for the second quarter was $137 million, which is 2% lower compared to the prior year. On a constant currency basis, sales were 2% lower compared to the prior year. Adjusting for the divestiture of our wound business, which closed in May, revenue growth was even with the prior year. In addition, we saw a significant increase in adjusted EBITDA from $22 million to $28 million. The $6 million increase was primarily driven by lower operating expenses from our focus on reducing spending and benefits from our restructuring initiated at the start of the year. In addition, we realized accruals from our private payer contracts related to HA below our planning assumptions due to lower than expected invoices during the quarter, which helped to boost adjusted EBITDA. Across pain treatments, sales declined 4% compared to the prior year as we focused continued pricing pressure due to the move from WAC to ASP in our HA portfolio. Partially offsetting the headwind, from the move to ASP was double-digit volume growth for both Duralane and Suparts. Meanwhile, volume was flat for Gelson compared to the last year, but we anticipate Gelson volume growth to accelerate in the second half of the year. In surgical solutions, we grew 6%, slightly below our recent trend of double-digit growth. Ultrasonics maintained double-digit growth, but was partially offset as growth slowed as expected for our bone graft substitute business. We expect double-digit growth for the second half of the year given the continued momentum in ultrasonics and growth accelerating in BGS from new account wins. Finally, restorative therapies fell 8% driven largely by the impact of our wound business divestiture in May. On an organic basis, restorative therapies declined 2% as they declined in exogen more than offset growth and advanced rehabilitation. As Tony highlighted, revenue was over $1 million higher than expected due to the acceleration of sales from advanced rehabilitation into the second quarter, which were previously planned to occur in the third quarter. The impact of this timing, we believe, will cause organic revenue to decline in the third quarter. Moving down the income statement, adjusted gross margin of 74% was down 280 basis points compared to the prior year and was primarily driven by two factors. First, we were impacted by the increased percentage of HA revenue going through private payers and the decline in our overall ASP. Second, we had an unfavorable product mix giving higher revenue from our advanced rehabilitation portfolio. As highlighted earlier, overall adjusted total operating expenses were almost $16 million lower compared to the prior year. The reduction in expense resulted from benefits of our restructuring, in the wound business divestiture combined with spending discipline across general and administrative expenses and reduced investment in research and development. Now turning to our bottom line financial metrics, adjusted EBITDA totaled $28 million compared to $22 million in the prior year. Lower operating expenses more than offset a decline in gross margin and lower revenue from our wound divestiture. Adjusted operating income increased to $28 million from $18 million in the prior year. Adjusted net income totaled $11 million compared to $9 million a year ago. Adjusted earnings per share were 14 cents for the quarter compared to 10 cents in the prior year. Now turning to the balance sheet and cash flow statement. We ended the quarter with $29 million of cash on hand and $386 million of debt outstanding. we had $7 million drawn on our revolving credit facility at the end of the second quarter. Given our strong cash flow and proceeds from the wound business divestiture, we reduced our overall bank borrowings outstanding by $60 million. Operating cash flow represented an inflow of $11 million for the quarter as we saw improvement in working capital. With our adjusted EBITDA for the first half of the year ahead of our expectations, We remain well within compliance with our leverage and interest coverage covenants at the end of the second quarter. Finally, with the closing of our wound business divestiture and additional confirmatory invoices related to our HA business, we are now providing 2023 sales and earnings guidance. We expect 2023 revenue to be in the range of $490 million to $505 million. In addition, we anticipate adjusted EBITDA to be in the range of $75 million to $80 million for the full year 2023 adjusted diluted loss per share guidance to be a loss of 24 cents to a loss of 20 cents. In closing, we remain focused on enhancing our control environment and liquidity as we drive improved financial performance through increased revenue, higher operating margin, and disciplined expense management. Operator, please open the line for questions.

At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Chase Knickerbocker with Gregg Hallam Capital Group. Your line is open.

Good morning, everyone. Thanks for taking our questions and congrats on the progress here. If we look out at the pain business, You know, maybe it's good to give kind of us a little bit of a look at that turning to positive in Q4. If we look out next year as ASPs start to, you know, potentially improve, how should we be thinking about the growth rates of this business now? I mean, has this market changed at all, or should we be thinking, as you guys are growing volumes ahead of the market, that you can put forth a growth rate that is ahead of market rates as well, which is typically, let's say, mid-single digit, 6%, 7%. I mean, is that the right way to think about this business next year? Are you guys growing above that kind of market rate?

Hey, good morning, Chase. Thanks for your question. Tony Beal here. Let me start and then ask Mark to add any comments. First of all, as we've mentioned in the call in over a number of quarters, we are growing volume faster than market with double-digit growth and This is a market that's growing arguably 3% to 5% in the U.S. year over year. So we're taking share even in the challenge market for us today. I think what we see as the market, as time stabilizes, again, with our good base of contracting, with the fantastic sales force we have and our ability to have a very strong footprint in the accounts, we're very bullish on our ability to outgrow the market. I don't want to give you any specific numbers, but I think we feel very strongly that we have good strength ahead of us and You know, very differentiated product in drilling and a great portfolio with the addition of gels and soup parts on top of that. So I feel real good about it. And, you know, I'll leave it to Marcus or any additional comment.

Yeah, no, I think Tony covered it all well said. I would just emphasize that. You know, diving deeper into this business, we have a lot better handle on the dynamics of this coming from WAC to ASP. And managing our pricing and the volume growth throughout all of our challenges over the past year has been consistent. And we expect that to remain that way into 2024. And as we've talked about as well, you know, we'll see declines in price in 3Q on Jelson and into 4Q on Jelson and Duralane. We expect to start to turn the corner on that in 4Q. And then Jelson should turn the corner beginning of 2024. But there'll be less variability in this business as well, just from the rebates that we've talked about, you know, that we had challenges we had last year. The rebates with our payers are a lot less and a lot more profitable for us going into 2024.

Got it. And maybe specifically on Duralane, I mean, the volume growth in the background, I think, has been very, very strong. Maybe talk about What's the chief driver there? Is it your clinical differentiated kind of profile there, or is it a lower acquisition cost for your providers, or is it Aetna kind of turning on and being a little bit more of a driver? Maybe just walk investors through that.

Chase, Tony, again, as you might imagine, it's a combination of everything, right? Clearly a differentiated product, that's a game changer in many, many ways, but we are also well-contracted in this marketplace. A number of our contracts have us as the lead or sole position with some of the insurers, and that is helping us a lot. And then, as I said before, I think our sales team is just executing very, very well in that space. So it's a combination of all those things. I think a lesser product may not do as well, and lesser contracting may not be as advantageous. So I think the combination of things, we've positioned ourselves nicely to grow in this market that single injection is – is currently about 50% of the market and expected to be the fastest growing of the three segments. So, you know, we love our position. We love our contract position. I think we'll continue to grow here.

Just last one for me, guys. If we kind of think about the model, you know, beginning to improve here, obviously with, you know, with the quarter and the guidance, how are we thinking about divestitures now? Is there still another divestiture that you guys believe still needs to be made to give you guys some headroom on the leverage? Or, you know, is the model recovering? you know, better than you might have expected.

Yeah, thanks, Chase. Tony, again, you know, guess what I'd say about divestiture. We've continued, as I said during the script, our strategic discussion with the board about this topic. I will say that we've narrowed our focus. It's probably no longer everything's on the table. We are focused on, you know, the desire to reduce debt, to simplify the business, to enable appropriate investment in all of our remaining businesses. So, you know, our thought is we can't invest in everything. We're the ones that provide sustainable, profitable growth. I would say that we will proceed if we can achieve a deal that substantially reduces our debt and is accretive to improving our leverage ratio. That sounds good for us. And we're not desperate. So we think it makes sense to look very hard. We think it makes sense to evaluate these options. We don't feel that we must do anything. But I think generally speaking, my desire is to resolve this on my watch so that a new CEO is free to focus on building the business from there. So more to come as we progress.

Thanks for the questions, guys. Thank you.

And your next question comes from the line of Kyle Rose with Canaccord Genuity. Your line is open.

Hi, everyone. This is Caitlin on for Kyle Rose. Thanks for taking the questions. Just briefly on Exogen, so you saw, you know, growth, I think, OUS this quarter, and last quarter you saw growth in the U.S. Can you just kind of remind us where you kind of expect to be on this business going into the second half of the year? Thank you.

Hi, Caitlin. Tony, let me start. Yeah, thanks for the question. I think the Exogen business, as we said, did see sequential growth. this quarter, quarter over quarter, and that was encouraging. There are some signs of strength there. We look for this business, as we've said over time, to be flat to sort of plus or minus 1% in its current state. We had a recent meeting where our field sales team got together with the back office claims processing team in Memphis, Tennessee, our operating facility there, and outstanding engagement. What we're finding is we've got this We had some disruption in our restructuring of sales last year. We've got a lot of reps who are somewhat new to the process, but they're coming up the learning curve fast. But I think at this meeting, there was a great deal of interaction. How do we best succeed in moving a device that's placed through successful billing process? And I'm optimistic that as we keep on doing that, this business is going to come back to a flat-ish to slightly growing business. We're looking for better progress as we move through the rest of the year, and we'll stay focused here.

Awesome. Thank you. And then just touching again on the private payer contracts, I think you mentioned last quarter initiating a strategic review. Was there anything that you found particularly interesting and that would help kind of clear it? I know it wasn't as much of a headwind this quarter, but just clearing it going forward. Thank you.

Yeah, maybe, Tony, I'll start here and then turn it over to Mark for additional comment. We did do a rather deep dive analysis. We mentioned that we were using an outside consulting firm to look at our contracting, our sales deployment, et cetera. We had a great meeting with a good team of people for a three-day deep dive on it. And I think the outcome of it was we like our position in contracting. We obviously want to drive to gaining more of the non-contract business position. that comes with these contracts and so we talked about the strategies and plans to be able to do more of that activity i think we also spent some time talking about how we can better integrate our contracting function with our sales team so that once we win a contract we know exactly how to win in the accounts and you know excellent plans going forward with that to be very tactical in terms of of creating a a project team that will work on this in in deeper diligence So I think overall, we're pretty pleased with our current position. As you probably know, a number of our rebates have been renegotiated down over time. And so we think we're well positioned. We just got to get more of our share of the non-contracted business and we'll keep pressing forward. But I can't say enough about a terrific sales team that has executed for us here. And, you know, double digit volume growth is market share every quarter. This has been really, really strong performance. So Mark, anything you'd add?

Yeah, thanks, Tony. I agree. I came away from the meeting being very encouraged with this business and a bright future ahead to continue on our execution. I think, you know, as far as the financial side of this, we have significant improvement in our controls and our processes around the HA business and understanding the dynamics from the payers, you know, approaching our accruals, you know, today. With caution, we're being very cautious with our accrual levels and really going a lot deeper, spending a lot of time on detailing out our process and understanding this at a lot more detailed operationalized approach with this. And just to emphasize with Tony, the variability of this business, too, from a rebate perspective gets a lot smaller and going forward as well. But between our significant improvement in process that the team spent a lot of time on, And our approach on accrual, we feel very good about the situation and our ability to continue to grow this volumes at double digits.

Yeah, I'd just love to make another comment to that. I think that to emphasize Mark's point, the no surprises mantra here is our ability to get better control over the rebate process and the invoicing has moved dramatically There's always more work to do. It still has its challenges, but so much different in terms of how we look at every invoice and analyze it. We're closely with our partners. We've seen dramatic improvement, and it's going to reduce, we're confident it's going to reduce the variability we've seen, improve our predictability, and I think you'll see that reflected in our messages as we go forward.

Great. Thank you so much.

Thank you.

And your next question comes from the line of Robbie Marcus with J.P. Morgan. Your line is open.

Oh, great. Thanks for taking the questions. Maybe to start and pick up on some of the other questions, you know, since the company went public, there's been a lot of M&A, a lot of additions to the portfolio, some subtractions. You know, how do you think of the overall portfolio today? Is it in the right spot for going forward? And how do you feel about the potential for more additions or subtractions here?

Hey, thanks for the question, Robbie. Tony, let me start. First of all, you know, as I rejoined the company in April, one of my comments to the employees and to our board was, you know, I think of people, product, and process, and I think look at BioVentus and think that We've got a super team of people, and they're very forward-facing and very anxious to be part of the solution as we turn the business around and improve. I was completely impressed with the product portfolio. I think while you can argue about some of the numbers associated with these acquisitions, the products underlying are fantastic. The Masonics Ultrasonics is an exciting product with lots of potential. The Bionis acquisition gave us market-leading positions. in the rehab space. And we got this asset called Talisman in peripheral nerve stem, which I think has real potential. It's sort of a sleeper right now, but hopefully we'll be talking about that as we advance that through the regulatory processes. So we've got terrific products. As we said, our challenge is it's hard to invest in all of them at an adequate level to really achieve sustainable, profitable growth. And that's why Wound was first on the target. I think it was difficult with the critical mass we had or lack of critical mass. to be successful and wound, and so that divestiture made a huge sense for us. And we continue to look, as I stated without going into details, good discussion with our board. It's been an absolutely fantastic back and forth, very open dialogue, and we've narrowed our focus and said there may still be some of the things we need to trim, but we'll do it if it makes sense and if we can get the appropriate return. Other than that, there are no problem areas in this portfolio that I see. upside and opportunity. I see the HA and the excellent business as excellent sort of anchor points or foundation points, and I see it being able to build on these other products. So, yes, we have some more work to do, but it's because we have good products and just can't do it all.

Got it. And you talked about reiterating the view for mid to high single-digit decline in the HA business. with the Gelson 3 flat in the quarter but should return to growth in the second half of the year. Maybe just speak to what's driving that assumption and your view for the HA product line going forward, let's say 2024 or beyond, once we lap the anniversary of the change in reimbursement and what your competitive positioning is today versus prior.

Yeah, let me start with that one and then turn it over to Mark for some detail. First of all, it's Duralane that we say will begin to turn late this year. Jelson actually, we don't see the positive turn in the settling of pricing until into 2024. So Jelson will take a bit longer to see its recovery. But Duralane is the lead in this product portfolio. And we think that by the fourth quarter, we'll begin to see that begin to make the right turn. As I said before, the portfolio is excellent. We are sitting squarely in number two position in the market. In HA, it's a nice market, as I said, 3% to 5%-ish growth, but we are taking share. And we think there's opportunity to continue on that pace. And so we like this business. It's a very profitable business. I think some of that gets lost in all the tales of woe we've gone through with HA, but it's an underlying very profitable business. We've got a strong position. I think our single injection product has very strong possibility of being a lead in the market in the future. And we intend to continue to drive that. So we're bullish on the AHA business. It does have some more headwinds in front of it. But from a market capture perspective, a share capture perspective, it has been successful. And we believe it will continue to be successful. So, you know, a nice marketplace continuing to go. And our portfolio has continued to help us in that way. Let me ask Mark any other comments you'd add to that.

No, I really agree with what you said, Tony. I think, you know, from a pricing perspective, you've done a good job of managing and understanding the price declines that are in the marketplace with the CMS reimbursement formula coming from WAC to ASP. It's become a lot more predictable, you know, through the first half of the year. I'd say it's slightly favorable to our expectations, and we'll continue – to manage price going into next year consistent with what we've talked about. We'll see some more declines in Gelson and 4Q, and then start to see some of that stabilize into the first part of next year. So overall, we'll start to be able to sequentially increase prices into the future. and feel good about the overall portfolio. I think, you know, Jelson volume in the quarter was slightly down, but what we expect going forward is for that to start to increase in 3Q and 4Q as our sales team starts to focus a lot more on non-contracted business and executing that in our portfolio and drafting off of the contracted business that we have. And we feel, you know, with those dynamics that we'll continue to be successful in this space that we view as highly attractive.

Great, thanks, and maybe one last one from me. You know, there's been a lot going on at the business, and there's been a pretty decent amount of change in revenues and restructuring. Maybe just give us an update on the health of the employee morale at the company, and have you seen an increase in voluntary turnover at the company, you know, since you started the restructuring? Thanks.

Yeah, thanks, Robbie. Look, I... didn't have all of the history as I walked in the door, but as you might imagine, I expected there might be a team that was a little bit whipped and feeling negative about the business. I found the opposite. I found people anxious to be part of the solution. I found people very forward-looking in their view. It was one of the pleasant surprises I found in the organization. Yes, we've lost some talent. We've also added some new really strong leadership A new leader on my staff in operations, Mike Crowe, who comes with a pedigree from Abbott, Kavitian, J&J, Kelly Stefaniak, who's taken over the regulatory affairs team and really moving the needle and the standards up where we need them to be. Also a background from Abbott, Laboree, and others. And then, as I mentioned, David Rennie in the international. So we've been able to attract some real marquee players to the team. to supplement what was already a really, really strong team. This is not my area of challenge. We got a good team. They want to be part of the solution. A couple of good quarters, as you might imagine, when the organization feel like they're winning, that builds momentum. And our objective as a management team is to build on that momentum and drive this forward. So yeah, you can probably find some people who don't feel good about things, but I'll bet you there's more who feel like they're part of the solution, want to be part of the solution, are going to watch this story as it continues to improve. So I'm excited about it. I think our sales teams have held together amazingly and have done a great job for us as well. So I think there's many areas of success. I could go on and on about it, but I'm positive in that aspect of where we are as a business, and I think it's going to be our strength.

I would just add to that and that I would say overall our turnover is not that different than what you'd see in the industry from what we look at. Really, you know, agree with Tony's comment is the morale of the company is in a lot better place, you know, today than it was at the beginning of the year. And also using some of this turnover for two things. One, to raise the level of talent as using that as an opportunity to bring in people like Tony talked about, you know, from Abbott and other medical device companies that really raises the bar. and processes and what good looks like for all of the people around them. So we're really trying to use this as an opportunity to strengthen our team and build on the momentum that we have. And we're also able to identify some positions where people left that we can actually learn to live without and execute our business at a high level without some of those positions. And some of that's showing up on our expense line as well. There's no red flags here for me and really feel good about the position that we're in to be able to bring strong talent into the organization.

Great. Thanks a lot.

Thanks, Robbie.

There are no further questions at this time. I would now like to turn the conference over to Mr. Tony Beale for final comments. Please go ahead.

Well, thanks, everyone, for your continued interest in BioVentus. We achieved significant improvement in our financial position through strong execution of our business plan. We're confident in our ability to deliver on our revenue and earnings commitment for the year, along with continuing to improve our processes and controls. My leadership team and I lead a dedicated team of employees that are focused on our mission and stakeholder value creation.

Thanks again. Look forward to talking in the future.

This concludes today's conference call. You may now disconnect. Thank you. you Thank you. Thank you.

Thank you.

Thank you for standing by and welcome to BioVentus Incorporated Second Quarter 2023 Earnings Conference Call. I will now turn the call over to your host for today, Mr. Dave Crawford, Vice President of Investor Relations. Please go ahead.

Thanks, Joanne. Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVentus 2023 Second Quarter Earnings Conference Call. With me this morning are Tony Beal, CEO, and Mark Singleton, Senior Vice President and CFO. Tony will begin his remarks with an update on our business and outlook for the second half of the year, followed by a review of the quarter. Mark will offer further detail of our second quarter results and discuss our 2023 financial guidance. We will 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 may contain forward-looking statements that are based on current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risk 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, 2022. as well as our most recent Form 10-Q, and other company filings made with the SEC. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as the date made. Although it may voluntarily do so from time to time, the company 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 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 investor relations portion of our website at bioventus.com. And now I'll turn the call over to Tony.

Thanks Dave and good morning everyone. Thank you for your continued interest in BioVentus. Let me begin by saying that I'm encouraged by our results for the quarter. Our dedicated employees are diligently addressing last year's challenges as we focus on improving our execution, delivering on our commitments, and enhancing our business. Before discussing the quarter's performance, I want to take a few minutes to reflect on our progress made the first half of the year to solidify our financial position and then discuss our priorities for the remainder of the year as we strive to deliver improved growth, profitability, and predictability. Our leadership team and I are focused on the near term and continue to aggressively address the issues impacting last year's performance. Our attention remains on delivering sustainable, profitable growth, and we have a laser-like focus on remaining compliant with our debt covenants and reducing leverage. We believe that this will better position our next CEO to more quickly turn his or her attention to maximizing the long-term opportunities for BioVentus. As I stated last quarter, we won't be able to reverse all of the recent headwinds in the single quarter, but we believe the strong results over the first half of the year, combined with our ability to further solidify the business over the course of the next several quarters, will enable us to rebuild our balance sheet and regain credibility with our investors. During the quarter, we significantly improved our financial position while we also undertook important steps to strategically assess our growth and investment opportunities. Let me provide further context. First, we executed our financial plan for the quarter and achieved revenue in the range of our expectations while we maintained thorough control of expenses similar to the first quarter. So far in the first half of the year, adjusted EBITDA is up nearly $16 million. Compared to prior year, this growth equates to more than 50% increase. In addition, we achieved a significant pay down of our debt in part with the proceeds from the closing of our wound business divestiture, but also from strong cash generation. Cash flow was enhanced by our targeted work to reduce working capital across selected areas of the business where inefficiencies arose during our recent acquisitions and employee turnover. Second, from a strategic perspective, we furthered our analysis and dialogue with our board of directors on an assessment of our growth and investment opportunities as we evaluate which areas to prioritize as we move forward. Due to our current leverage and desire to accelerate the improvement in our profitability, we need to be selective in the areas we choose to invest. We intend to focus our investments where we believe we can achieve sustainable, profitable growth. As we continue into the second half of the year, we plan to review the hierarchy or areas for improved investment with our board. Additionally, We plan to keep pressure on the business to maintain the cost control exemplified during the first half of the year. As we begin the second half of the year, we're confident in taking prudent steps to enhance our financial metrics and diligently execute our plan. As we look to build on our momentum for the remainder of the year, we remain focused in the following areas. First, delivering our sales plan through continued strong double-digit revenue growth in surgical solutions and our international business. while maintaining volume growth and share gain access across our EHA portfolio as we return to growth through price stabilization expected to start in the fourth quarter. Second, maintaining spending discipline, but in selective areas, begin to seed some investment back into the business for future growth. And third, continuing to improve our operating efficiencies to bolster cash flow and enhance internal controls. With our strong start to the year, I'm confident in our revenue and earnings growth opportunities and ability to reduce leverage as we move forward. Across our business, we participate in large, growing markets and provide innovative, differentiated products for our patients. Now let me turn to our second quarter results. For the quarter, revenue of $137 million declined 2% compared to the same period a year ago. However, when considering the impact of our wound business divestiture, growth was even to prior year. More importantly, our adjusted EBITDA increased to $28 million compared to $22 million in the prior year. Adjusted EBITDA was above our expectations due in part to stringent control of our expenses. Across pain treatments, while we continue to be impacted by the decline in our average selling price for Duralane and Jelson, we once again saw double-digit increase in sales volume with significant double-digit gain in volume for Duralane. As we continue to take market share, with our clinically differentiated and complete portfolio offering. We continue to anticipate price erosion to subside as we progress through 2023 and into early 2024. Meanwhile, across our HA portfolio, we believe that market growth combined with an increase in share from lower selling prices will continue to drive volume growth. While for the year we expect an overall reduction in HA revenue of high single to low double digits due to the impact of lower selling price, we expect to see year-over-year revenue growth return in the fourth quarter of this year. Now, turning to surgical solutions, as we previewed last quarter, we saw a slowdown in revenue growth due to increased distributor churn in bone graft substitutes. Looking ahead in the second half of the year, we expect growth to accelerate as we increase our distributor base and gain from recent large account wins to offset these losses. Additionally, Our ultrasonics portfolio for the quarter grew double digits, and we expect the momentum across ultrasonics to continue through the second half of the year. One aspect which is bolstering growth in ultrasonics is a program we initiated this year to sell the Nexus generators rather than place them on consignment and accounts. While a small portion of revenue, the program results are ahead of expectation, and we believe customers who purchase the generators will use more disposable scalpels due to the investment made. We believe our overall smaller market share and market growth rates provide a very strong backdrop for continued market penetration and growth across both ultrasonics and bone graft substitutes. Within restorative therapies, organic revenue fell low single digits when removing the impact of our wound business divestiture. Revenue growth and advanced rehabilitation benefited from accelerated placements of vector weight-bearing systems, which were expected to be installed in the third quarter. this acceleration pulled forward some revenue into the second quarter. Exogen revenue was down compared to prior year, but revenue increased sequentially and reflects an improving trend we're experiencing across the business as we continue to reengage with positions after our Salesforce realignment last year. Finally, our international segment grew 16%. Constant currency growth was 17%. Growth was driven by strength across surgical solutions business, as well as strong growth in exogen. Additionally, we recently hired David Rennie as our new general manager for international business. David is a strategic leader with a track record of delivering profitable growth across several medical device segments. With David on board, we anticipate maintaining double-digit growth in our international segment as we proceed throughout the year. Finally, I'm pleased with our ability to address last year's headwinds and achieve meaningful improvement in our financial results and liquidity. While more work is required, we remain focused on executing our business plan, prioritizing those areas we believe are most meaningful in driving increased profitability, improving our balance sheet, and enhancing our operating efficiencies and internal controls as we work to restore your confidence in BioDentist. Now, I'd like to turn the call over to Mark.

Thanks, Tony, and good morning, everyone. Let me start by saying I'm proud of our team's execution of our financial plan through the first half of the year as we focused our attention on improving our liquidity position and reducing our cost structure. Revenue for the second quarter was $137 million, which is 2% lower compared to the prior year. On a constant currency basis, sales were 2% lower compared to the prior year. Adjusting for the divestiture of our wound business, which closed in May, revenue growth was even with the prior year. In addition, we saw a significant increase in adjusted EBITDA from $22 million to $28 million. The $6 million increase was primarily driven by lower operating expenses from our focus on reducing spending and benefits from our restructuring initiated at the start of the year. In addition, we realized accruals from our private payer contracts related to HA below our planning assumptions due to lower than expected invoices during the quarter, which helped to boost adjusted EBITDA. Across pain treatments, sales declined 4% compared to the prior year as we focused continued pricing pressure due to the move from WAC to ASP in our HA portfolio. Partially offsetting the headwind, from the move to ASP was double-digit volume growth for both Duralane and Suparts. Meanwhile, volume was flat for Gelson compared to the last year, but we anticipate Gelson volume growth to accelerate in the second half of the year. In surgical solutions, we grew 6%, slightly below our recent trend of double-digit growth. Ultrasonics maintained double-digit growth, but was partially offset as growth slowed as expected for our bone graft substitute business. We expect double-digit growth for the second half of the year given the continued momentum in ultrasonics and growth accelerating in BGS from new account wins. Finally, restorative therapies fell 8% driven largely by the impact of our wound business divestiture in May. On an organic basis, restorative therapies declined 2% as they declined in exogen more than offset growth and advanced rehabilitation. As Tony highlighted, revenue was over $1 million higher than expected due to the acceleration of sales from advanced rehabilitation into the second quarter, which were previously planned to occur in the third quarter. The impact of this timing, we believe, will cause organic revenue to decline in the third quarter. Moving down the income statement, adjusted gross margin of 74% was down 280 basis points compared to the prior year and was primarily driven by two factors. First, we were impacted by the increased percentage of HA revenue going through private payers and the decline in our overall ASP. Second, we had an unfavorable product mix, giving higher revenue from our advanced rehabilitation portfolio. As highlighted earlier, overall adjusted total operating expenses were almost $16 million lower compared to the prior year. The reduction in expense resulted from benefits of our restructuring, in the wound business divestiture combined with spending discipline across general and administrative expenses and reduce investment in research and development. Now turning to our bottom line financial metrics, adjusted EBITDA totaled $28 million compared to $22 million in the prior year. Lower operating expenses more than offset a decline in gross margin and lower revenue from our wound divestiture. Adjusted operating income increased to $28 million from $18 million in the prior year. Adjusted net income totaled $11 million compared to $9 million a year ago. Adjusted earnings per share were 14 cents for the quarter compared to 10 cents in the prior year. Now turning to the balance sheet and cash flow statement, we ended the quarter with $29 million of cash on hand and $386 million of debt outstanding. we had $7 million drawn on our revolving credit facility at the end of the second quarter. Given our strong cash flow and proceeds from the wound business divestiture, we reduced our overall bank borrowings outstanding by $60 million. Operating cash flow represented an inflow of $11 million for the quarter as we saw improvement in working capital. With our adjusted EBITDA for the first half of the year ahead of our expectations, We remain well within compliance with our leverage and interest coverage covenants at the end of the second quarter. Finally, with the closing of our wound business divestiture and additional confirmatory invoices related to our HA business, we are now providing 2023 sales and earnings guidance. We expect 2023 revenue to be in the range of $490 million to $505 million. In addition, we anticipate adjusted EBITDA to be in the range of $75 million to $80 million for the full year 2023 adjusted diluted loss per share guidance to be a loss of 24 cents to a loss of 20 cents. In closing, we remain focused on enhancing our control environment and liquidity as we drive improved financial performance through increased revenue, higher operating margin, and disciplined expense management.

operator please open the line for questions at this time i would like to remind everyone in order to ask a question press star then the number one on your telephone keypad and your first question comes from the line of chase sneaker bacher with greg hallam capital group your line is open good morning everyone um thanks for taking our questions and uh congrats on the progress here um if we look out at the pain business

You know, maybe it's good to give kind of us a little bit of a look at that turning to positive in Q4. If we look out next year as ASPs start to, you know, potentially improve, how should we be thinking about the growth rates of this business now? I mean, has this market changed at all, or should we be thinking, as you guys are growing volumes ahead of the market, that you can put forth a growth rate that is ahead of market rates as well, which is typically, let's say, mid-single digit, 6%, 7%. I mean, is that the right way to think about this business next year? Are you guys growing above that kind of market rate?

Hey, good morning, Chase. Thanks for your question. Tony Beal here. Let me start and then ask Mark to add any comments. First of all, as we've mentioned in the call in over a number of quarters, we are growing volume faster than market with double-digit growth and This is a market that's growing arguably 3% to 5% in the U.S. year over year. So we're taking share even in the challenge market for us today. I think what we see as the market, as time stabilizes, again, with our good base of contracting, with the fantastic sales force we have and our ability to have a very strong footprint in the accounts, we're very bullish on our ability to outgrow the market. I don't want to give you any specific numbers, but I think we feel very strongly that we have good strength ahead of us and You know, very differentiated product in Durling and a great portfolio with the addition of Gelson and Suparts on top of that. So I feel real good about it. And, you know, I'll leave it to Marcus for any additional comment.

Yeah, no, I think Tony covered it all well said. I would just emphasize that. You know, diving deeper into this business, we have a lot better handle on the dynamics of this coming from WAC to ASP. And managing our pricing and the volume growth throughout all of our challenges over the past year has been consistent. And we expect that to remain that way into 2024. And as we've talked about as well, you know, we'll see declines in price in 3Q on Jelson and into 4Q on Jelson and Duralane. We expect to start to turn the corner on that in 4Q. And then Jelson should turn the corner beginning of 2024. But there'll be less variability in this business as well, just from the rebates that we've talked about, you know, that we had challenges we had last year. The rebates with our payers are a lot less and a lot more profitable for us going into 2024.

Got it. And maybe specifically on Duralane, I mean, the volume growth in the background, I think, has been very, very strong. Maybe talk about What's the chief driver there? Is it your clinical differentiated kind of profile there, or is it a lower acquisition cost for your providers, or is it Aetna kind of turning on and being a little bit more of a driver? Maybe just walk investors through that.

Chase, Tony, again, as you might imagine, it's a combination of everything, right? Clearly a differentiated product, that's a game changer in many, many ways, but we are also well-contracted in this marketplace. A number of our contracts have us as the lead or sole position with some of the insurers, and that is helping us a lot. And then, as I said before, I think our sales team is just executing very, very well in that space. So it's a combination of all those things. I think a lesser product may not do as well, and lesser contracting may not be as advantageous. So I think the combination of things, we've positioned ourselves nicely to grow in this market that single injection is –

is currently about 50 of the market and expected to be the fastest growing of the three segments so you know we love our position we love our contract position i think we'll continue to grow here just last one for me guys um if we if we kind of think about the model you know beginning to improve here obviously with you know with the quarter and the guidance um how are we thinking about divesters now is is there still another divester that you guys believe believe still needs to be made to give you guys some headroom on the leverage or you know is the model recovering you know, better than you might have expected.

Yeah, thanks, Chase. Tony, again, you know, guess what I'd say about divestiture. We've continued, as I said during the script, our strategic discussion with the board about this topic. I will say that we've narrowed our focus. It's probably no longer everything's on the table. We are focused on, you know, the desire to reduce debt, to simplify the business, to enable appropriate investment in all of our remaining businesses. So, you know, our thought is we can't invest in everything. We're the ones that provide sustainable, profitable growth. I would say that we will proceed if we can achieve a deal that substantially reduces our debt and is accretive to improving our leverage ratio. That sounds good for us. And we're not desperate. So we think it makes sense to look very hard. We think it makes sense to evaluate these options. We don't feel that we must do anything. But I think generally speaking, my desire is to resolve this on my watch so that a new CEO is free to focus on building the business from there.

So more to come as we progress.

Thanks for the questions, guys.

Thank you.

And your next question comes from the line of Kyle Rose with Canaccord Genuity. Your line is open.

Hi, everyone. This is Caitlin on for Kyle Rose. Thanks for taking the questions. Just briefly on Exygen, so you saw, you know, growth, I think, OUS this quarter, and last quarter you saw growth in the U.S. Can you just kind of remind us where you kind of expect to be on this business going into the second half of the year? Thank you.

Hi, Caitlin. Tony, let me start. Yeah, thanks for the question. I think the Exygen business, as we said, did see sequential growth. this quarter, quarter over quarter, and that was encouraging. There are some signs of strength there. We look for this business, as we've said over time, to be flat to sort of plus or minus 1% in its current state. We had a recent meeting where our field sales team got together with the back office claims processing team in Memphis, Tennessee, our operating facility there, and outstanding engagement. What we're finding is we've got this We had some disruption in our restructuring of sales last year. We've got a lot of reps who are somewhat new to the process, but they're coming up the learning curve fast. But I think at this meeting, there was a great deal of interaction. How do we best succeed in moving a device that's placed through successful billing process? And I'm optimistic that as we keep on doing that, this business is going to come back to a flat-ish to slightly growing business. We're looking for better progress as we move through the rest of the year, and we'll stay focused here.

Awesome. Thank you. And then just touching again on the private payer contracts, I think you mentioned last quarter initiating a strategic review. Was there anything that you found particularly interesting and that would help kind of clear it? I know it wasn't as much of a headwind this quarter, but just clearing it going forward. Thank you.

Yeah, maybe, Tony, I'll start here and then turn it over to Mark for additional comment. We did do a rather deep dive analysis. We mentioned that we were using an outside consulting firm to look at our contracting, our sales deployment, et cetera. We had a great meeting with a good team of people for a three-day deep dive on it, and I think the outcome of it was we like our position in contracting. We obviously want to drive to gaining more of the non-contract business, that comes with these contracts. And so we talked about the strategies and plans to be able to do more of that activity. I think we also spent some time talking about how we can better integrate our contracting function with our sales team so that once we win a contract, we know exactly how to win in the accounts. And excellent plans going forward with that to be very tactical in terms of creating a project team that will work on this in deeper diligence. So I think overall, we're pretty pleased with our current position. As you probably know, a number of our rebates have been renegotiated down over time. And so we think we're well positioned. We just got to get more of our share of the non-contracted business and we'll keep pressing forward. But I can't say enough about a terrific sales team that has executed for us here. And, you know, double digit volume growth is market share every quarter. This has been really, really strong performance. So Mark, anything you'd add?

Yeah, thanks, Tony. I agree. I came away from the meeting being very encouraged with this business and a bright future ahead to continue on our execution. I think, you know, as far as the financial side of this, we have significant improvement in our controls and our processes around the HA business and understanding the dynamics from the payers, you know, approaching our accruals, you know, today. With caution, we're being very cautious with our accrual levels and really going a lot deeper, spending a lot of time on detailing out our process and understanding this at a lot more detailed operationalized approach with this. And just to emphasize with Tony, the variability of this business, too, from a rebate perspective gets a lot smaller and going forward as well. But between our significant improvement in process that the team spent a lot of time on, And our approach on accrual, we feel very good about the situation and our ability to continue to grow this volume to double digits.

Yeah, I'd just love to make another comment to that. I think that to emphasize Mark's point, the no surprises mantra here is our ability to get better control over the rebate process and the invoicing has moved dramatically There's always more work to do. It still has its challenges, but so much different in terms of how we look at every invoice and analyze it, work closely with our partners. We've seen dramatic improvement, and it's going to reduce, we're confident it's going to reduce the variability we've seen, improve our predictability, and I think you'll see that reflected in our messages as we go forward.

Great. Thank you so much.

Thank you.

And your next question comes from the line of Robbie Marcus with J.P. Morgan. Your line is open.

Oh, great. Thanks for taking the questions. Maybe to start and pick up on some of the other questions, since the company went public, there's been a lot of M&A, a lot of additions to the portfolio, some subtractions. You know, how do you think of the overall portfolio today? Is it in the right spot for going forward? And how do you feel about the potential for more additions or subtractions here?

Hey, thanks for the question, Robbie. Tony, let me start. First of all, you know, as I rejoined the company in April, one of my comments to the employees and to our board was, you know, I think of people, product, and process. And I think look at BioVentus and think that We've got a super team of people, and they're very forward-facing and very anxious to be part of the solution as we turn the business around and improve. I was completely impressed with the product portfolio. I think while you can argue about some of the numbers associated with these acquisitions, the products underlying are fantastic. The Masonics Ultrasonics is an exciting product with lots of potential. The Bionis acquisition gave us market-leading positions. in the rehab space. And we got this asset called Talisman in peripheral nerve stem, which I think has real potential. It's sort of a sleeper right now, but hopefully we'll be talking about that as we advance that through the regulatory processes. So we've got terrific products. As we said, our challenge is it's hard to invest in all of them at an adequate level to really achieve sustainable, profitable growth. And that's why Wound was first on the target. I think it was difficult with the critical mass we had or lack of critical mass. to be successful and wound, and so that divestiture made a huge sense for us. And we continue to look, as I stated without going into details, good discussion with our board. It's been an absolutely fantastic back and forth, very open dialogue, and we've narrowed our focus and said there may still be some of the things we need to trim, but we'll do it if it makes sense and if we can get the appropriate return. Other than that, there are no problem areas in this portfolio that I see. upside and opportunity. I see the HA and the excellent business as excellent sort of anchor points or foundation points, and I see it being able to build on these other products. So, yes, we have some more work to do, but it's because we have good products and just can't do it all.

Got it. And you talked about reiterating the view for a mid to high single-digit decline in the HA business. with the Gelson 3 flat in the quarter but should return to growth in the second half of the year. Maybe just speak to what's driving that assumption and your view for the HA product line going forward, let's say 2024 or beyond, once we lap the anniversary of the change in reimbursement and what your competitive positioning is today versus prior.

Yeah, let me start with that one and then turn it over to Mark for some detail. First of all, it's Duralane that we say will begin to turn late this year. Jelson actually, we don't see the positive turn in the settling of pricing until into 2024. So Jelson will take a bit longer to see its recovery. But Duralane is the lead in this product portfolio. And we think that by the fourth quarter, we'll begin to see that begin to make the right turn. As I said before, the portfolio is excellent. We are sitting squarely in number two position in the market. In HA, it's a nice market, as I said, 3% to 5%-ish growth, but we are taking share. And we think there's opportunity to continue on that pace. And so we like this business. It's a very profitable business. I think some of that gets lost in all the tales of woe we've gone through with HA, but it's an underlying very profitable business. We've got a strong position. I think our single injection product has very strong possibility of being a lead in the market in the future. And we intend to continue to drive that. So we're bullish on the AHA business. It does have some more headwinds in front of it. But from a market capture perspective, a share capture perspective, it has been successful. And we believe it will continue to be successful. So, you know, a nice marketplace continuing to go. And our portfolio has continued to help us in that way. Let me ask Mark any other comments you'd add to that.

No, I really agree with what you said, Tony. I think, you know, from a pricing perspective, you've done a good job of managing and understanding the price declines that are in the marketplace with the CMS reimbursement formula coming from WAC to ASP. It's become a lot more predictable, you know, through the first half of the year. It's slightly favorable to our expectations, and we'll continue to to manage price going into next year consistent with what we've talked about. We'll see some more declines in Gelson and 4Q and then start to see some of that stabilize into the first part of next year. So, you know, overall, we'll start to be able to sequentially increase prices into the future. and feel good about the overall portfolio. I think, you know, Jelson volume in the quarter was slightly down, but what we expect going forward is for that to start to increase in 3Q and 4Q as our sales team starts to focus a lot more on non-contracted business and executing that in our portfolio and drafting off of the contracted business that we have. And we feel, you know, with those dynamics that we'll continue to be successful in this space that we view as highly attractive.

Great, thanks, and maybe one last one from me. You know, there's been a lot going on at the business, and there's been a pretty decent amount of change in revenues and restructuring. Maybe just give us an update on the health of the employee morale at the company, and have you seen an increase in voluntary turnover at the company, you know, since you started the restructuring? Thanks.

Yeah, thanks, Robbie. Look, I... didn't have all of the history as I walked in the door, but as you might imagine, I expected there might be a team that was a little bit whipped and feeling negative about the business. I found the opposite. I found people anxious to be part of the solution. I found people very forward-looking in their view. It was one of the pleasant surprises I found in the organization. Yes, we've lost some talent. We've also added some new really strong leadership A new leader on my staff in operations, Mike Crowe, who comes with a pedigree from Abbott, Covitti, and J&J. Kelly Stefaniak, who's taken over the regulatory affairs team and really moving the needle and the standards up where we need them to be. Also a background from Abbott, Laboree, and others. And then, as I mentioned, David Rennie in the international. So we've been able to attract some real marquee players to the team. to supplement what was already a really, really strong team. This is not my area of challenge. We got a good team. They want to be part of the solution. A couple of good quarters, as you might imagine, when the organization feel like they're winning, that builds momentum. And our objective as a management team is to build on that momentum and drive this forward. So yeah, you can probably find some people who don't feel good about things, but I'll bet you there's more who feel like they're part of the solution, want to be part of the solution, are going to watch this story as it continues to improve. So I'm excited about it. I think our sales teams have held together amazingly and have done a great job for us as well. So I think there's many areas of success. I could go on and on about it, but I'm positive in that aspect of where we are as a business, and I think it's going to be our strength.

I would just add to that and that I would say overall our turnover is not that different than what you'd see, you know, in the industry from what we look at and really, you know, agree with Tony's comment is the morale of the company is in a lot better place, you know, today than it was at the beginning of the year. And also using some of this turnover for two things. One, to raise the level of talent as using that as an opportunity to bring in people who, Like Tony talked about, you know, from Abbott and other medical device companies, that really raises the bar in processes and what good looks like for all of the people around them. So we're really trying to use this as an opportunity to strengthen our team and build on the momentum that we have. And we're also able to identify some positions where people left that we can actually learn to live without and execute our business at a high level without some of those positions. And some of that's showing up on our expense line as well. So there's no red flags here for me and really feel good about the position that we're in to be able to bring strong talent into the organization.

Great. Thanks a lot. Thanks, Robbie.

There are no further questions at this time. I would now like to turn the conference over to Mr. Tony Beale for final comments. Please go ahead.

Well, thanks everyone for your continued interest in BioVentus. We achieved significant improvement in our financial position through strong execution of our business plan. We're confident in our ability to deliver on our revenue and earnings commitment for the year, along with continuing to improve our processes and controls. My leadership team and I lead a dedicated team of employees that are focused on our mission and stakeholder value creation.

Thanks again. Look forward to talking in the future.

This concludes today's conference call. You may now disconnect.