Bioventus Inc.

Good day and welcome to the BioVentus second quarter 2024 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 your touchtone 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 of Investor Relations. Please go ahead.

Thanks, Danielle, and good morning, everyone. And thanks for joining us. It is my pleasure to welcome you to the BioVetis 2024 Second 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. And Mark will provide detail of our second quarter results and discuss our updated 2024 financial guidance. We'll finish the call with Q&A. The presentation for today's call is available in the Investors section of our website, fileventis.com. But before I begin, I would like to remind everyone that our remarks today 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 risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including items 1A risk factors of the company's Form 10-K for the year ended December 31st, 2023. As such, factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made. Although 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 the U.S. generally accepted accounting principles or GAAP. We refer to these as non-GAAP or adjusted financial measures. Important disclosures about the 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 Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. We're off to an excellent start to 2024 thanks to the efforts of our BioVentus team across all functions and geographies. In the beginning of this year, we established new strategic priorities and aggressive goals for our team, and they have responded very well with their strong customer focus, agility, and execution, along with a continuous improvement mindset to produce favorable results for the first half of the year. And while I'm encouraged by our clear progress this year, I'm even more enthused about the potential of our business for long-term growth and margin enhancement in the years ahead. Let's take a look at our performance across the three priorities I introduced at the start of the year. Accelerating revenue growth, improving profitability, and enhancing our liquidity position. With respect to our first priority, accelerating revenue growth, we delivered organic revenue growth of 14% in the second quarter when removing the impact of our wound business divestiture. This marks the third straight quarter of double-digit organic growth. And because of our first half performance, and expected momentum continuing into the second half, we now anticipate delivering double-digit organic growth for the full year. I'll share just a few highlights regarding our revenue. Starting with surgical solutions, we accelerated our double-digit growth in the second quarter with a strong performance in both ultrasonics and bone graft substitutes. With respect to ultrasonics, our team once again doubled the number of generators sold compared to the prior year. which is a leading indicator for expected acceleration of our disposable portfolio. And moving forward, we believe we have an incredible opportunity to invest and create transformational growth in multiple ways, including building our base in the spine market, penetrating additional high-potential growth segments, including neurosurgery, and by investing in new geographies. We're looking forward to leveraging this powerful combination to drive sustained double-digit growth in the years ahead. Simultaneously, our bone graft substitutes team continued to strengthen our commercial execution and growth with both existing and new distributors to further our market share gains. We also continued to advance innovation within our BGS portfolio with the recent FDA clearance for our osteo-amp cannula, unlocking new opportunities for future growth in minimally invasive surgery in the spine segment. With respect to our HA business for osteoarthritis, the team delivered double-digit growth again in the second quarter, propelled by significant demand for Duralane, our single-injection therapy. We have a solid platform for sustained growth in HA with our clinical differentiation, dedicated commercial team, strength of our private payer coverage, and significant opportunities for geographic expansion. Moving along, after years of decline, we grew our exogen business for the third straight quarter, and we expect mid-single-digit growth for the year. Keep in mind that this business previously generated over $100 million in annual revenue, but a lack of prioritization led to a significant decline. Now our team has returned the business to growth, and with their focus on the fundamentals, such as medical education, product enhancements, and commercial execution, we have the potential to grow this business back over $100 million. The improved performance of our Exogen business is one of the clear indications that we have new momentum at BioVentus. Next, I'd like to briefly mention that we have made the strategic decision to divest our advanced rehabilitation business. We are highlighting this today and in our 10Q because we may sign an agreement during the third quarter. This prudent decision reflects our deep respect for our advanced rehabilitation team, our customers, and the many patients who benefit from this life-changing technology. Our goal is for the business to be positioned in an environment that enables the higher focus and prioritization it deserves. This potential divestiture will also allow BioVentus to better focus on execution within our core businesses, continue accelerating our revenue, and enhance our liquidity. Now I'll shift to our second focus area, boosting profitability. With our peer-leading gross margin and our accelerated revenue growth, we significantly increased our adjusted EBITDA and operating margins. Adjusted EBITDA for the quarter was its highest to date at over $34 million, and we drove a 224 basis point increase in our adjusted EBITDA margin compared to the prior year. We now have an opportunity to invest selectively in high potential areas to drive long-term profitable growth. including areas like R&D, medical education, commercial productivity, and our supply chain in the second half of the year. Even with these increased investments, we will continue to grow the bottom line faster than our top line, and we project our overall 2024 adjusted EBITDA margin to expand by more than 100 basis points compared to the prior year. We believe this level of annual margin improvement is sustainable as we capitalize on revenue acceleration, preserve our high gross margins with supply chain improvements, and reallocate or reduce operational expenditures to invest in higher ROI initiatives or drop the savings to the bottom line. And now I'll turn to our third major focus area, improving our liquidity position. We further reduced our net leverage ratio at the end of the second quarter with the increase in adjusted EBITDA and reduction in debt. Equally important, I want to highlight the significant increase in cash flow for the quarter. We are encouraged by the faster-than-anticipated reduction in our leverage ratio, and we will remain very focused on this priority moving forward. Given our progress, we're confident we can reduce our net leverage ratio to below three times before we exit 2025. That concludes my update on our three priorities. Before turning it over to Mark to dive deeper into our financials, I'll mention that since joining BioVentus just seven months ago, I've had the opportunity to continuously engage with many employees, customers, and shareholders, and I want to take a moment to express my appreciation to all of our stakeholders. With your help, we're transforming BioVentus And I'm confident that the work that's taking place across our organization to improve our fundamentals and unlock new long-term growth will advance our business and create significant shareholder value. Now I'll turn the call over to Mark.