Bioventus Inc.

Good day, and welcome to the BioVentus, Inc. fourth quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations. Please go ahead.

Thanks, Betsy, and good morning, everyone, and thanks for joining us. It is my pleasure to welcome you to the BioVentus 2023 Fourth Quarter Earnings Conference Call. With me this morning are Rob Claypool, CEO, and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with his initial impressions and learnings since joining as CEO and then lay out our priorities for 2024. Mark will provide detail of our fourth quarter and full year results and outline our 2024 financial guidance. We will finish the call with Q&A. The presentation for today's call is available in the Investors section of our website, bioventus.com. But before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A risk factors of the company's Form 10-K for the year ended December 31, 2023, and as such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as 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 for 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 section of our website at bioventus.com. Now I will turn the call over to Rob.

Thanks, Dave. Good morning, everyone, and thank you for your continued interest in BioVentus. I'm honored to be part of the BioVentus team and lead an outstanding company focused on helping patients recover and lead active lives. I'd like to start by thanking Tony Beal for his leadership in spearheading BioVentus' progress in overcoming significant challenges and setting a foundation upon which we can build. Tony and I have had an exceptionally smooth, I'd even say world-class transition and I'm grateful to them for that. As Dave mentioned, I'd like to first share my impressions and early learnings from my first two months as CEO, and then discuss our top priorities for 2024. Over the past two months, I've had the opportunity to meet with many team members from around the globe at our different locations, participate in each of our national sales meetings, visit customers in person for our surgical, HA, and exogen businesses, and engage in one-on-one conversations with key opinion leaders and patients virtually for P&S and rehab. And with each meeting, I've listened, probed, and learned firsthand about our current position in the market, our challenges, and the future potential of our diverse business. And this early, in-depth engagement with our employees and customers has provided me with the following perspective. BioVentus is well positioned in large market segments with excellent technology and a talented team who is eager to accelerate the company's growth and profitability across each of our businesses. I'm not sharing this perspective with you casually or loosely. I've had the privilege of leading various therapeutic categories within MedTech with several leading companies over the past 20 years, and this experience has provided me with a strong foundation to evaluate the opportunities for BioVentus. Consider this. We hold a leadership position across roughly two-thirds of our product portfolio, while in the remaining one-third of our portfolio, we are growing faster than the market. And we are in markets with favorable demographic tailwinds, enabling sustained growth. In addition, we've started to improve our business processes, and we've built momentum throughout 2023 as we exceeded our financial objectives. Mark will tell you all about that in a few minutes. This combination of healthy market dynamics, progress with our business fundamentals, and exceeding our objectives is providing our team with the energy and the confidence to further advance our business. With all this in mind, when I decided to join the company, it was because of BioVentus' diverse market-leading portfolio and the prospect to create significant shareholder value. And I feel even stronger about the potential of BioVentus today than I did two months ago. And there's so many challenges for us to tackle, but we will approach every day with a continuous improvement mindset. And we cannot wait to show everyone what BioVentus can and will achieve. All right, please allow me to transition and highlight the three areas we will prioritize in 2024. First, accelerating our revenue growth. Second, improving our operational efficiency and boosting our future profitability. And third, improving our cash flow and liquidity position. Let me provide further context on these three areas. First, as we have discussed in the past, 2024 will be the second year of our planned turnaround with a focus on accelerating revenue growth across our business, fueled by increasing growth across our HA and surgical solutions businesses, along with continued above-market growth in our international segment. Across each business, we are going to focus on improving our basic commercial fundamentals to drive stronger execution. With respect to our HA business, we expect volume growth to remain above market as we leverage the clinical differentiation of Duralane along with the shift from multiple injection therapy to single injection therapy. And we expect that our strong volume growth combined with improving price dynamics will accelerate revenue as the headwinds from the past year and a half subside throughout the year. Regarding surgical solutions, we see growth accelerating for this business as well. We expect the market-leading technology of our ultrasonics platform to continue to produce double-digit growth. Meanwhile, the work done by the team to strengthen our bone graft substitutes business enabled us to return to above-market growth in the fourth quarter, which we expect to maintain in 2024. And we have a tremendous opportunity to build our international business with expected strong double-digit growth. So overall, our financial plan calls for a meaningful increase in our revenue growth compared to the last two years. The second focus area, improving our operational efficiency and boosting our future profitability through better prioritization, greater organizational efficiency, and reductions in our operational expenditures. Regarding prioritization, With many different growth opportunities in front of us, it's important for us to be very disciplined in prioritizing and funding initiatives that deliver sustainable value to our shareholders. Over the past two months, we've made progress with driving more disciplined strategic focus and reducing our top business priorities. Now we'll start to reallocate our resources to maximize the return on our investments. With respect to organizational efficiency, we're a diverse company that has evolved through several acquisitions. And while our organization demonstrates fantastic teamwork daily, it's clear we have a significant opportunity to better integrate our business processes across functions and locations to streamline our work and drive speed so that it's easier for our customers to do business with us and so that we can devote more of our energy to generating profitable growth. With this in mind, improving our organizational efficiency is a key priority. And regarding our operational expenditures, the team captured material savings last year and will continue to examine areas where we can reduce our expenses to either invest in more productive initiatives or to drop these savings to our bottom line to accelerate our margin expansion. As mentioned, our third major focus area is improving our cash flow and liquidity position. This year, driving improved cash flow is a metric my leadership team and I have as part of our incentive compensation. We expect to see a material change in our operating cash flow this year by lowering costs related to our acquisition integrations and debt restructuring. We also plan to drive a reduction in inventories in the second half of the year to further augment our cash flow. With respect to our liquidity position, We reduced our leverage over this past year by more than a full turn of EBITDA, but it remains above our target range. Recent amendment to our term loan was an important step in providing flexibility through next year. Our improved cash generation enables us to reduce our debt throughout the year with the expectation that our leverage is below four turns by year end. All right, that concludes my remarks about my initial impressions and our priorities for the year. Before turning it over to Mark, let me just, and he's going to dive deeper into our financials, let me just say again how excited I am to be leading BioVentus. While significant work remains, I'm encouraged by our ability to address last year's headwinds and improve our financial results and liquidity. And now over the coming quarters, we will focus on steadily improving our business fundamentals and our performance as we work to build your confidence in BioVentus. I'll turn the call over to Mark.