Bioventus Inc.

Good day and welcome to the BioVentus first quarter 2024 earnings conference call. All participants will be in 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 your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to hand the call over to Dave Crawford, Vice President of Investor Relations. Please go ahead.

Thanks, Andrea, and good morning, everyone, and thanks for joining us. It is my pleasure to welcome you to the BioVentus 2024 First Quarter Earnings Conference Call. With me this morning are Rob Claypool, President and CEO, and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our 2024 priorities and our business. Mark will provide detail of our first quarter results and discuss our updated 2024 financial guidance. We will finish the call with Q&A. Our presentation for today's call is available on the investor 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 a new reliance upon any forward-looking statements which speak only as the date that they were 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 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 GAF. We generally refer to these 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. Now, I'll turn the call over to Rob.

Thanks, Dave. Good morning, everyone, and thank you for joining our call this morning. We're off to a very strong start to the year, and our BioVentus team is driving significant improvements across our business. During our last call, I introduced the three priorities we're focused on, accelerating revenue growth, improving profitability, and enhancing our liquidity position. I'd like to begin today by reviewing our progress. With respect to our first priority, accelerating revenue growth, we delivered 15% organic revenue growth in Q1 after removing the impact of our wound divestiture. Our team generated this strong performance through better strategic focus and disciplined execution of the plan that we established at the beginning of this year. Let me share a few of the highlights. With respect to our HA business, the material impact from the reimbursement change is behind us, and we delivered double-digit growth in Q1, which was propelled by significant volume growth in Duralane, our single-injection therapies. Duralane now accounts for over two-thirds of our total HA revenue, and we believe we have a platform for sustained growth with this clinically differentiated therapy for several reasons. First, the market continues to shift from multi-injection therapies to single injection, which is why it's the fastest-growing segment of the HA market with projected annual growth in the mid-single digits. Next, the awareness and recognition of Duralane's compelling clinical differentiation is spreading. which is why more clinicians and patients are making it their preferred choice. Positive impact from this market growth and clinical differentiation is augmented by the fact that BioVentis now has the most preferred payer coverage in the U.S. in the single injection market, thanks to our team's successful contracting strategy. BioVentis also has the largest fully dedicated HA commercial team in the U.S., and our team is doing a great job shifting their time and efforts to target larger accounts, which is producing early gains. All of these volume growth drivers will be supported by continued sequential price increases that we expect will ramp up during the second half of this year. And we currently only have about a 25 percent market share in the single injection market, which further enables us to grow our HA business well above market over the next few years. As a result of this powerful combination and our expectations for the remainder of the year, We anticipate HA revenue growth in 2024 to be high single digits to double digits, which is an increase from what we previously shared. Regarding surgical solutions, we also accelerated to double digit growth across both ultrasonics and bone graft substitutes in the first quarter. Let's talk about ultrasonics first. I'm encouraged by our progress with our Q1 performance, but even more excited about our long-term potential with this business. Our unique technology provides surgeons with more control, and versatility while saving them valuable time, which is why we believe our technology can become the standard of care. Meanwhile, our bone graft substitutes team is strengthening our commercial execution with both existing and new distributors, which resulted in above-market growth in Q1. As a result of our momentum with both ultrasonics and BGS businesses, we now expect double-digit growth across surgical solutions in 2024. And with respect to our international segment, Q1 growth was below our expectations due to the timing of some shipments. While the team is focused on driving more consistent quarterly results in the short term, we remain very optimistic regarding the long-term growth potential of this business. And I'll tell you, Mark and I were in Europe a few weeks ago to dive into the business, collaborate with our team on our growth priorities, meet with customers, And our visit confirmed for us that our international business possesses significant untapped potential, which is why we expect strong and sustainable double-digit growth as we build out our international presence with a targeted focus on the products and geographies that will generate the highest ROI. Now I'll shift to our second focus area, boosting profitability. I'll start by highlighting that we have a very healthy, peer-leading gross margin in the mid-'70s. The reason I mention this is because when our first priority of accelerating revenue growth is combined with a gross margin in the 70s, it paves the way for sustained increases in our EBITDA and operating margin. So as a result of our Q1 revenue acceleration and healthy gross margin, we drove over a 300 basis point increase in our adjusted EBITDA margin. And as mentioned during our last call, revenue growth is not our only tool to improve our profitability. we will continuously explore areas where we can reduce costs over the coming months and years to either invest in more productive initiatives with a higher ROI or to drop the savings to our bottom line to further accelerate our margin expansion. And now I'll turn to our third major focus area, improving our liquidity position. We reduced our net leverage ratio to below four times at the end of Q1 because of our increase in adjusted EBITDA. The reduction in net leverage to below four times was significantly ahead of our prior expectation of achieving this target by the end of 2024. We will stay focused on this priority as we expect to continue to steadily pay down our debt in the quarters ahead, and we are committed to reducing our net leverage ratio to around three times as we exit 2025. That concludes my update on our three priorities. Before turning it over to Mark to dive deeper into our financials, I want to emphasize that although we have significant work ahead of us, I'm excited about the excellent teamwork that's taking place across our organization to advance our business. We are improving our fundamentals every single day in many areas, ranging from better sales operations to enhance our customer experience, to more disciplined supply chain and inventory management to support our growth and improve our future cash flow. to dispassionate and closely tracked resource reallocation based on our priorities. Moving forward, my leadership team and I will be laser focused on consistently delivering strong results quarter after quarter and year after year across each of our three priority areas. And as we continue to accelerate revenue growth, boost our operating margin, and generate increased free cash flow, we expect our valuation multiple to align with our peers. which will translate into significant shareholder value creation. I'll turn the call over to Mark.