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Bioventus Reports Second Quarter Financial Results; Introduces Full Year 2023 Financial Guidance

DURHAM, N.C., Aug. 08, 2023 (GLOBE NEWSWIRE) -- Bioventus Inc. (Nasdaq: BVS) ("Bioventus" or "the Company"), a global leader in innovations for active healing, today reported financial results for the three and six months ended July 1, 2023.

Q2 Financial Summary:

  • Net Sales of $137.1 million, down $3.3 million, or 2.3%, year-over-year as reported (2.3% constant currency*), excluding revenues from divested assets, underlying organic sales decreased $0.5 million, or 0.3% year-over-year
  • Net Loss from continuing operations of $4.7 million, compared to Net Loss from continuing operations $7.7 million in prior-year period
  • Adjusted EBITDA* of $28.2 million increased 26.1%, compared to $22.3 million in prior-year period
  • Loss per share of Class A common stock from continuing operations of $0.06, compared to a loss of $0.11 in prior-year period
  • Non-GAAP earnings per share of Class A common stock from continuing operations* of $0.14, compared to $0.10 in prior-year period

Recent Highlights:

The Company has taken multiple steps in recent months intended to stabilize operations and improve its financial position, including the following:

  • Closed the sale of our Wound Business, generating $31.0 million in net proceeds, which was used to repay debt
  • Repaid $60.3 million of our term loan and revolver
  • Total net leverage ratio, calculated in accordance with our Amended 2019 Credit Agreement, reduced to 4.33 compared to 5.50 at December 31, 2022.

“We are pleased with our team’s strong execution in the second quarter resulting in significant growth in adjusted EBITDA and cash flow,” commented Tony Bihl, Bioventus’ interim chief executive officer. “We remain committed to strengthening our financial position, enhancing liquidity and improving profitability as we accelerate revenue growth and maintain spending discipline over the long-term to create value for our stakeholders.”

     

Second Quarter 2023 Financial Results:

The following table represents net sales by geographic region, and by vertical, for the three months ended July 1, 2023 and July 2, 2022, respectively:

 Three months ended Change as Reported Constant Currency* Change
 July 1, 2023 July 2, 2022 $ % %
U.S.         
Pain Treatments$55,617 $58,055 $(2,438) (4.2%) (4.2%)
Restorative Therapies 31,844  35,433  (3,589) (10.1)% (10.1)%
Surgical Solutions 33,386  32,822  564  1.7% 1.7%
Total U.S. net sales 120,847  126,310  (5,463) (4.3)% (4.3)%
International         
Pain Treatments 6,024  5,859  165  2.8% 3.5%
Restorative Therapies 4,774  4,469  305  6.8% 7.8%
Surgical Solutions 5,424  3,693  1,731  46.9% 47.6%
Total International net sales 16,222  14,021  2,201  15.7% 16.5%
Total net sales$137,069 $140,331 $(3,262) (2.3)% (2.3)%

Total net sales were $137.1 million compared to $140.3 million for the second quarter, a decline of 2.3%. Strong volumes in Surgical Solutions and 15.7% growth in international revenue was more than offset by the impact of lower Pain Treatment pricing and Wound Business divestiture.

Gross margin of 65.0% was down compared to prior year gross margin of 68.9%. Non-GAAP gross margin of 74.0% declined from 76.8% in the prior year period due to product mix and the impact of lower pricing in Pain Treatments.

Operating income improved $10.1 million to $6.8 million compared to a loss of $3.3 million in the second quarter of 2022 driven by disciplined cost management and a reduction in equity-based compensation. Operating margin was 4.9% compared to (2.4%) in the prior year period.

Non-GAAP operating income* improved $9.3 million to $27.6 million compared to $18.3 million in the prior year. Non-GAAP operating margin was 20.1% versus 13.1% second quarter of 2022.

Net loss from continuing operations was $4.7 million (or $0.06 per share of Class A common stock from continuing operations) compared to a net loss of $7.7 million (or $0.11 per share of Class A common stock from continuing operations) in second quarter of 2022.

Adjusted EBITDA increased $5.8 million to $28.2 million compared to $22.3 million in the prior year.

Non-GAAP net income and earnings per share of Class A common stock from continuing operations* increased 27.7% and 41.2%, respectively, to $10.9 million or $0.14 per share of Class A common stock from continuing operations* compared to $8.5 million or $0.10 per share of Class A common stock from continuing operations*.

Balance Sheet:

As of July 1, 2023, the Company had $29.4 million in cash and cash equivalents and $385.9 million in debt obligations, compared to $30.2 million in cash and cash equivalents and $418.1 million in debt obligations as of December 31, 2022.

2023 Financial Guidance:

For the twelve months ending December 31, 2023, the Company expects:

  • Net sales of $490 million to $505 million
  • Adjusted EBITDA* of $75 million to $80 million
  • Non-GAAP EPS* of ($0.24) to ($0.20)

The Company does not provide U.S. GAAP financial measures, other than net sales, on a forward-looking basis, because the Company is unable to predict with reasonable certainty the impact and timing of acquisition related expenses, accounting fair-value adjustments, and certain other reconciling items without unreasonable efforts. These items are uncertain, depend on various factors, and could be material to the Company’s results computed in accordance with U.S. GAAP.

Presentation: This press release presents historical results, for the periods presented, of Bioventus Inc., including Bioventus LLC, the predecessor of Bioventus Inc. for financial reporting purposes.

About Bioventus

Bioventus delivers clinically proven, cost-effective products that help people heal quickly and safely. Its mission is to make a difference by helping patients resume and enjoy active lives. The Innovations for Active Healing from Bioventus include offerings for pain treatments, restorative therapies and surgical solutions. Built on a commitment to high quality standards, evidence-based medicine and strong ethical behavior, Bioventus is a trusted partner for physicians worldwide. For more information, visit www.bioventus.com, and follow the Company on LinkedIn and Twitter. Bioventus and the Bioventus logo are registered trademarks of Bioventus LLC.

Second Quarter 2023 Earnings Conference Call:

Management will host a conference call to discuss the Company’s financial results and provide a business update, with a question and answer session, at 8:30 a.m. Eastern Time on August 8, 2023. Those who would like to participate may dial 1-800-715-9871 (domestic and international) and refer to the Bioventus Inc. Conference Call or Conference ID 8443075.

A live webcast of the call and any accompanying materials will also be provided on the investor relations section of the Company's website at https://ir.bioventus.com/.

The webcast will be archived on the Company’s website at https://ir.bioventus.com/ and available for replay until August 7, 2024.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements concerning our future financial results and liquidity; our ability to continue as a going concern; the impact of our recent amendment to our Credit Agreement on our financial condition, operations, and liquidity; our business strategy, position and operations; and expected sales trends, opportunities, market position and growth. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause our actual results to differ materially from those contemplated in this press release include, but are not limited to, the risk that the previously identified material weaknesses or new material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner; we might not be able to continue to fund our operations for at least the next twelve months as a going concern; we might not meet certain of our debt covenants under our Credit Agreement and might be required to repay our indebtedness; risks associated with the disposition of our Wound Business and expected impacts on our business; restrictions on operations and other costs associated with our indebtedness; our ability to complete acquisitions or successfully integrate new businesses, products or technologies in a cost-effective and non-disruptive manner; we maintain cash at financial institutions, often in balance that exceed federally insured limits; we are subject to securities class action litigation and may be subject to similar or other litigation in the future, which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes; our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel; we are highly dependent on a limited number of products; our long-term growth depends on our ability to develop, acquire and commercialize new products, line extensions or expanded indications; we may be unable to successfully commercialize newly developed or acquired products or therapies in the United States; demand for our existing portfolio of products and any new products, line extensions or expanded indications depends on the continued and future acceptance of our products by physicians, patients, third-party payers and others in the medical community; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Administration (FDA) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; failure to achieve and maintain adequate levels of coverage and/or reimbursement for our products or future products, the procedures using our products, such as our hyaluronic acid (HA) viscosupplements, or future products we may seek to commercialize; pricing pressure and other competitive factors; governments outside the United States might not provide coverage or reimbursement of our products; we compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do; the reclassification of our HA products from medical devices to drugs in the United States by the FDA could negatively impact our ability to market these products and may require that we conduct costly additional clinical studies to support current or future indications for use of those products; our failure to properly manage our anticipated growth and strengthen our brands; risks related to product liability claims; fluctuations in demand for our products; issues relating to the supply of our products, potential supply chain disruptions and the increased cost of parts and components used to manufacture our products due to inflation; our reliance on a limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture our products; failure to maintain contractual relationships; security breaches, unauthorized disclosure of information, denial of service attacks or the perception that confidential information in our possession is not secure; failure of key information technology and communications systems, process or sites; risks related to international sales and operations; risks related to our debt and future capital needs; failure to comply with extensive governmental regulation relevant to us and our products; we may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits; the FDA regulatory process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products; if clinical studies of our future product candidates do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to expand the indications for or commercialize these products; legislative or regulatory reforms; our business may continue to experience adverse impacts as a result of the COVID-19 pandemic or similar epidemics; risks related to intellectual property matters; and the other risks identified in our Annual Report on Form 10-K for the year ended December 31, 2022, as updated by Bioventus' subsequent Quarterly Report on Form 10-Q for the quarter ended April 1, 2023 and as may be further updated from time to time in Bioventus’ other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and the Investor Relations page of Bioventus’ website at https://ir.bioventus.com. Except to the extent required by law, the Company undertakes no obligation to update or review any estimate, projection, or forward-looking statement. Actual results may differ materially from those set forth in the forward-looking statements.

 


BIOVENTUS INC.

Consolidated balance sheets
As of July 1, 2023 and December 31, 2022
(Amounts in thousands, except share amounts) (unaudited)
    
    
 July 1, 2023 December 31, 2022
Assets   
Current assets:   
Cash and cash equivalents$29,389  $30,186 
Accounts receivable, net 119,636   136,295 
Inventory 96,276   84,766 
Prepaid and other current assets 15,337   18,551 
Current assets attributable to discontinued operations    2,777 
Total current assets 260,638   272,575 
Property and equipment, net 41,862   27,456 
Goodwill 7,462   7,462 
Intangible assets, net 505,223   639,851 
Operating lease assets 15,238   16,690 
Investment and other assets 6,539   2,621 
Long-term assets attributable to discontinued operations    405,994 
Total assets$836,962  $1,372,649 
Liabilities and Members’ Equity   
Current liabilities:   
Accounts payable$41,364  $36,697 
Accrued liabilities 121,748   111,570 
Current portion of long-term debt 11,320   33,056 
Other current liabilities 4,672   3,607 
Current liabilities attributable to discontinued operations    119,087 
Total current liabilities 179,104   304,017 
Long-term debt, less current portion 374,568   385,010 
Deferred income taxes    2,248 
Contingent consideration 17,958   17,431 
Other long-term liabilities 31,991   22,810 
Long-term liabilities attributable to discontinued operations    228,911 
Total liabilities 603,621   960,427 
Stockholders’ Equity:   
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued   
Class A common stock, $0.001 par value, 250,000,000 shares authorized as of July 1, 2023 and December 31, 2022, 62,804,506 and 62,063,014 shares issued and outstanding as of July 1, 2023 and December 31, 2022, respectively 63   62 
Class B common stock, $0.001 par value, 50,000,000 shares authorized, 15,786,737 shares issued and outstanding as of July 1, 2023 and December 31, 2022 16   16 
Additional paid-in capital 490,598   490,576 
Accumulated deficit (308,137)  (165,306)
Accumulated other comprehensive income (loss) 655   (110)
Total stockholders’ equity attributable to Bioventus Inc. 183,195   325,238 
Noncontrolling interest 50,146   86,984 
Total stockholders’ equity 233,341   412,222 
Total liabilities and stockholders’ equity$836,962  $1,372,649 

 

 


BIOVENTUS INC.

Consolidated statements of operations and comprehensive loss
(Amounts in thousands, except share and per share data, unaudited)   
    
 Three Months Ended Six months ended
 July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Net sales$137,069  $140,331  $256,128  $257,621 
Cost of sales (including depreciation and amortization
of $12,301, $9,684, $26,640, and $18,902 respectively)
 47,946   43,677   93,086   85,265 
Gross profit 89,123   96,654   163,042   172,356 
Selling, general and administrative expense 74,844   89,620   155,702   175,744 
Research and development expense 3,398   6,366   7,169   13,294 
Restructuring costs 620   1,007   937   1,584 
Change in fair value of contingent consideration 240   273   527   542 
Depreciation and amortization 2,294   2,696   4,423   5,950 
Impairment of assets       78,615    
Loss on disposal of a business 977      977    
Operating income (loss) 6,750   (3,308)  (85,308)  (24,758)
Interest expense, net 10,587   2,578   20,281   1,028 
Other expense (income) 513   604   (1,075)  241 
Other expense 11,100   3,182   19,206   1,269 
Loss before income taxes (4,350)  (6,490)  (104,514)  (26,027)
Income tax expense (benefit), net 381   1,244   235   (3,888)
Net loss from continuing operations (4,731)  (7,734)  (104,749)  (22,139)
Loss from discontinued operations, net of tax    (280)  (74,429)  (681)
Net loss (4,731)  (8,014)  (179,178)  (22,820)
Loss attributable to noncontrolling interest -
continuing operations
 1,050   762   21,410   4,291 
Loss attributable to noncontrolling interest -
discontinued operations
       14,937    
Net loss attributable to Bioventus Inc.$(3,681) $(7,252) $(142,831) $(18,529)
        
Net loss from continuing operations$(4,731) $(7,734) $(104,749) $(22,139)
Other comprehensive income (loss), net of tax       
Change in foreign currency translation adjustments 303   (507)  960   (1,189)
Comprehensive loss (4,428)  (8,241)  (103,789)  (23,328)
Comprehensive loss attributable to noncontrolling interest -
continuing operations
 989   868   21,215   4,537 
Comprehensive loss attributable to noncontrolling interest -
discontinued operations
       14,937    
Comprehensive loss attributable to Bioventus Inc.$(3,439) $(7,373) $(67,637) $(18,791)
        
Loss per share of Class A common stock from continuing operations, basic and diluted:$(0.06) $(0.11) $(1.34) $(0.29)
Loss per share of Class A common stock from discontinued operations, basic and diluted:       (0.95)  (0.01)
Loss per share of Class A common stock, basic and diluted$(0.06) $(0.11) $(2.29) $(0.30)
Weighted-average shares of Class A common stock
outstanding:
       
Basic and diluted 62,551,285   61,475,350   62,338,018   60,977,556 
        


 


BIOVENTUS INC.

Consolidated condensed statements of cash flows
(Amounts in thousands, unaudited)
    
 Three Months Ended Six months ended
 July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Operating activities:       
Net loss$        (4,731) $(8,014) $(179,178) $(22,820)
Less: Loss from discontinued operations, net of tax    (280)  (74,429)  (681)
Loss from continuing operations (4,731)  (7,734)  (104,749)  (22,139)
Adjustments to reconcile net loss to net cash from operating activities:       
Depreciation and amortization 14,600   12,384   31,073   24,863 
Equity based compensation (2,732)  4,616   (886)  9,505 
Change in fair value of contingent consideration 240   273   527   542 
Change in fair value of interest rate swap    (272)     (4,196)
Impairment of assets       78,615    
Deferred income taxes (876)  (10,680)  (3,540)  (27,698)
Unrealized loss on foreign currency fluctuations (146)  976   601   1,020 
Loss on disposal of a business 977      977    
Other, net 476   1,558   1,779   2,913 
Changes in working capital 2,987   1,818   11,057   (2,890)
Net cash from operating activities - continuing operations 10,795   2,939   15,454   (18,080)
Net cash from operating activities - discontinued operations       (2,169)   
Net cash from operating activities 10,795   2,939   13,285   (18,080)
Investing activities:       
Proceeds from sale of a business 34,897      34,897    
Investment held in trust for the acquisition of CartiHeal    (50,000)     (50,000)
Acquisitions, net of cash acquired    5      (231)
Purchase of property and equipment (1,397)  (2,030)  (4,957)  (4,990)
Investments and acquisition of distribution rights          (1,478)
Net cash from investing activities - continuing operations 33,500   (52,025)  29,940   (56,699)
Net cash from investing activities - discontinued operations       (11,506)   
Net cash from investing activities 33,500   (52,025)  18,434   (56,699)
Financing activities:       
Proceeds from issuance of Class A and B common stock 139   2,177   223   4,257 
Tax withholdings on equity-based compensation          (3,352)
Borrowing on revolver    10,000   49,000   25,000 
Payment on revolver (22,000)     (42,000)   
Debt refinancing costs (1,993)     (3,661)   
Payments on long-term debt (38,264)  (4,510)  (38,264)  (9,019)
Other, net (130)  (12)  (166)  (26)
Net cash from financing activities (62,248)  7,655   (34,868)  16,860 
Effect of exchange rate changes on cash 240   (222)  701   (293)
Net change in cash, cash equivalents and restricted cash (17,713)  (41,653)  (2,448)  (58,212)
Cash, cash equivalents and restricted cash at the beginning of the period 47,102   82,654   31,837   99,213 
Cash, cash equivalents and restricted cash at the end of the period$29,389  $41,001  $29,389  $   41,001 

 


Use of Non-GAAP Financial Measures

Organic Revenue Growth

The Company defines the term “organic revenue” as revenue in the stated period excluding the impact from business acquisitions and divestitures. The Company uses the related term “organic revenue growth” to refer to the financial performance metric of comparing the stated period's organic revenue with the comparable reported revenue of the corresponding period in the prior year. The Company believes that these non-GAAP financial measures, when taken together with GAAP financial measures, allow the Company and its investors to better measure the Company’s performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Company’s performance with prior and future periods and relative comparisons to its peers. The Company excludes the effect of acquisitions and divestitures because these activities can have a significant impact on the Company's reported results, which the Company believes makes comparisons of long-term performance trends difficult for management and investors.

Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income from continuing operations, and Non-GAAP Earnings per share of Class A Common Stock from continuing operations

We present Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income from continuing operations, and Non-GAAP Earnings per share of Class A common stock from continuing operations, all non-GAAP financial measures, to supplement our GAAP financial reporting, because we believe these measures are useful indicators of our operating performance. Beginning in the first quarter of 2023, we revised our presentation of Non-GAAP measures to remove the foreign exchange adjustment and include financial restructuring costs. The prior year has been recast to conform to the current period.

We define Adjusted EBITDA as net loss from continuing operations before depreciation and amortization, provision of income taxes and interest expense (income), net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and related costs, impairments of goodwill, impairment of assets, restructuring and succession charges, equity compensation expense, financial restructuring costs and other items. See the table below for a reconciliation of net (loss) income from continuing operations to Adjusted EBITDA. Our management uses Adjusted EBITDA principally as a measure of our operating performance and believes that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections.

Our management uses Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin and Non-GAAP Net Income from continuing operations principally as measures of our operating performance and believes that these non-GAAP financial measures are useful to better understand the long term performance of our core business and to facilitate comparison of our results to those of peer companies. Our management also uses these non-GAAP financial measures for planning purposes, including the preparation of our annual operating budget and financial projections.

We define Non-GAAP Gross Profit as gross profit, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization included in the cost of goods sold and acquisition and related costs in the cost of goods sold. We define Non-GAAP Gross Margin as Non-GAAP Gross Profit divided by net sales. See the table below for a reconciliation of gross profit and gross margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin.

We define Non-GAAP Operating Income as operating income, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, impairments of goodwill, impairment of assets, restructuring and succession charges, loss on disposal of a business, financial restructuring costs, and other items. Non-GAAP Operating Margin is defined as Non-GAAP Operating Income divided by net sales. See the table below for a reconciliation of operating (loss) income and operating margin to Non-GAAP Operating Income and Non-GAAP Operating Margin.

We define Non-GAAP Operating Expense as operating expenses, adjusted to exclude certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, impairments of goodwill, impairment of assets, loss on disposal of a business, restructuring and succession charges, financial restructuring costs and other items. See the table below for a reconciliation of operating expenses to Non-GAAP Operating Expenses.

We define Non-GAAP R&D as research and development, adjusted to exclude certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, and other items. See the table below for a reconciliation of operating expenses to Non-GAAP R&D.

We define Non-GAAP Net Income from continuing operations as Net Income from continuing operations, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, impairments of goodwill, impairment of assets, loss on disposal of a business, financial restructuring costs, other items and the tax effect of adjusting items. See the table below for a reconciliation of Net (Loss) Income from continuing operations to Non-GAAP Net Income from continuing operations.

We define Non-GAAP Earnings per Class A share from continuing operations as Earnings per Class A share, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, impairments of goodwill, impairment of assets, loss on disposal of a business, financial restructuring costs, other items and the tax effect of adjusting items divided by weighted average number of shares of Class A common stock outstanding during the period. See the table below for a reconciliation of loss per Class A share to Non-GAAP Earnings per Class A share.

Net Sales, International Net Sales Growth and Constant Currency Basis

Net Sales, International Net Sales Growth and Constant Currency Basis are non-GAAP measures, which are calculated by translating current and prior year results at the same foreign currency exchange rate. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to facilitate the comparison sales in foreign currencies to prior periods and analyze net sales performance without the impact of changes in foreign currency exchange rates.

Limitations of the Usefulness of Non-GAAP Measures

Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or as superior to, the financial information prepared and presented in accordance with GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of the non-GAAP measures provided in this press release, including in the tables below, to their most directly comparable GAAP measures. Additionally, the Company does not provide U.S. GAAP financial measures on a forward-looking basis because the Company is unable to predict with reasonable certainty the impact and timing of acquisitions related expenses, accounting fair-value adjustments and certain other reconciling items without unreasonable efforts. These items are uncertain, depend on various factors, and could be material to the Company’s results computed in accordance with U.S. GAAP.


Reconciliation of Net (Loss) Income from Continuing Operations to Adjusted EBITDA (unaudited)

 Three Months Ended Six Months Ended Twelve Months Ended
($, thousands)July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022 December 31, 2022
Net loss from continuing operations$(4,731) $(7,734) $(104,749) $ (22,139) $(236,097)
Interest expense, net 10,587   2,578   20,281   1,028   25,795 
Income tax expense (benefit), net 381   1,244    235   (3,888)  (50,508)
Depreciation and amortization(a) 14,600   12,384   31,073   24,863   66,803 
Acquisition and related costs(b) 1,448   5,994   2,623   13,972   27,081 
Restructuring and succession charges(c) 620   1,695   937   2,272   7,453 
Equity compensation(d) (2,732)  4,616   (886)  9,505   17,585 
Financial restructuring costs(e) 1,257      6,587       
Impairment of assets(f)       78,615      10,285 
Impairment of goodwill(g)             189,197 
Loss on disposal of a business(h) 977      977       
Other items(i) 5,751   1,552   9,416   3,888   8,465 
Adjusted EBITDA$28,158  $22,329  $45,109  $29,501  $66,059 


(a)Includes for the three months ended July 1, 2023 and July 2, 2022 and the six months ended July 1, 2023 and July 2, 2022, respectively, depreciation and amortization of $12,301, $9,684, $26,640 and $18,902 in cost of sales and $2,299, $2,700, $4,433 and $5,961 in operating expenses presented in the consolidated statements of operations and comprehensive loss.

Includes for the years ended December 31, 2022, depreciation and amortization of $45,622 in cost of sales and $21,181 in operating expenses.
  
(b) Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, and changes in fair value of contingent consideration.
  
(c) Costs incurred were the result of adopting restructuring plans to reduce headcount, reorganize management structure, and to consolidate certain facilities.
  
(d) Includes compensation expense resulting from awards granted under the Company’s equity-based compensation plans. The three and six months ended July 1, 2023 include the reversal of equity compensation expenses totaling $3.8 million related to the transition of our executive leadership.
  
(e)Financial restructuring costs which include advisory fees and debt amendment related costs.
  
(f)Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to our decision to divest the business.
  
(g)Represents a non-cash impairment charge due to the decline in the Company’s market capitalization.
  
(h)  Represents the loss on disposal of the Wound Business.
  
 (i) Other items primarily includes charges associated with strategic transactions, such as potential acquisitions or divestitures, incremental one-time consulting costs related to the recertification of certain products to comply with the new and extensive EU MDR requirements and costs attributable to MOTYS. During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We incurred $0.3 million and $1.2 million, respectively, during the three and six months ended July 1, 2023 related to MOTYS. We expect to incur up to $0.5 million in remaining expenditures. Other items for the three and six months ended July 1, 2023 also includes severance costs totaling $2.3 million related to the transition of our executive leadership.

   

 Reconciliation of Other Reported GAAP Measures to Non-GAAP Measures

Three Months Ended July 1, 2023Gross Profit Operating Expenses(a) R&D Operating Income Net Loss Continuing Operations EPS from Continuing Operations(j)
Reported GAAP measure$89,123  $78,975 $3,398 $6,750  $(4,731) $(0.06)
Reported GAAP margin 65.0%      4.9%    
Depreciation and amortization(b) 12,301   2,294  5  14,600   14,600   0.19 
Acquisition and related costs(c)    1,448    1,448   1,448   0.02 
Restructuring and succession charges(d)    620    620   620   0.01 
Financial restructuring costs(f)    1,257    1,257   1,257   0.02 
Loss on disposal of a business(g)    977    977   977   0.01 
Other items(h)    1,675  274  1,949   1,949   0.02 
Tax effect of adjusting items(i)           (5,234)  (0.07)
Non-GAAP measure$101,424  $70,704 $3,119 $27,601  $10,886  $0.14 
Non-GAAP margin 74.0%      20.1%    
 Non-GAAP Gross Margin Non-GAAP Operating Expenses Non-GAAP R&D Non-GAAP Operating Income Non-GAAP Net Income Adjusted EPS Continuing Operations


Three Months Ended July 2, 2022Gross Profit Operating Expenses(a) R&D Operating Loss Net Loss Continuing Operations EPS from Continuing Operations(j)
Reported GAAP measure$96,654  $93,596 $6,366 $(3,308) $(7,734) $(0.11)
Reported GAAP margin 68.9%     (2.4)%    
Depreciation and amortization(b) 9,684   2,694  6  12,384   12,384   0.16 
Acquisition and related costs(c) 1,402   4,592    5,994   5,994   0.08 
Restructuring and succession charges(d)    1,695    1,695   1,695   0.02 
Other items(h)    768  784  1,552   1,552   0.02 
Tax effect of adjusting items(i)           (5,370)  (0.07)
Non-GAAP measure$107,740  $83,847 $5,576 $18,317  $8,521  $0.10 
Non-GAAP margin 76.8%      13.1%    
 Non-GAAP Gross Margin Non-GAAP Operating Expenses Non-GAAP R&D Non-GAAP Operating Income Non-GAAP Net Income Adjusted EPS Continuing Operations


Six Months Ended July 1, 2023Gross Profit Operating Expenses(a) R&D Operating Loss Net Loss Continuing Operations EPS from Continuing Operations(j)
Reported GAAP measure$163,042  $241,181 $    7,169 $(85,308) $        (104,749) $(1.34)
Reported GAAP margin 63.7%      (33.3%)    
Depreciation and amortization(b) 26,640   4,423  10  31,073   31,073   0.40 
Acquisition and related costs(c)    2,623    2,623   2,623   0.03 
Restructuring and succession charges(d)    937    937   937   0.01 
Impairment of assets(e)    78,615    78,615   78,615   1.01 
Financial restructuring costs(f)    6,587    6,587   6,587   0.08 
Loss on disposal of a business(g)    977    977   977   0.01 
Other items(h)    4,460  1,154  5,614   5,614   0.07 
Tax effect of adjusting items(i)           (27,278)  (0.40)
Non-GAAP measure$189,682  $142,559 $6,005 $41,118  $(5,601) $(0.13)
Non-GAAP margin 74.1%      16.1%    
 Non-GAAP Gross Margin Non-GAAP Operating Expenses Non-GAAP R&D Non-GAAP Operating Income Non-GAAP Net income Continuing Operations Adjusted EPS Continuing Operations


Six Months Ended July 2, 2022Gross Profit Operating
Expenses
(a)
 R&D Operating
Loss
 Net Loss
Continuing
Operations
 EPS from
Continuing
Operations
(j)
Reported GAAP measure$172,356  $183,820 $13,294 $(24,758) $(22,139) $(0.29)
Reported GAAP margin 66.9%      (9.6%)    
Depreciation and amortization(b) 18,902   5,950  11  24,863   24,863   0.32 
Acquisition and related costs(c) 5,607   8,365    13,972   13,972   0.18 
Restructuring and succession charges(d)    2,272    2,272   2,272   0.03 
Other items(h)    3,104  784  3,888   3,888           0.05 
Tax effect of adjusting items(i)           (11,173)  (0.14)
Non-GAAP measure$196,865  $164,129 $12,499 $20,237  $11,683  $0.15 
Non-GAAP margin 76.4%      7.9%    
 Non-GAAP
Gross
Margin
 Non-GAAP
Operating
Expenses
 Non-GAAP R&D Non-GAAP
Operating Income
 Non-GAAP
Net Income
Continuing Operations
 Adjusted
EPS
Continuing Operations


(a)The "Reported GAAP Measure" under the "Operating Expenses" column is a sum of all GAAP operating expense line items, excluding research and development.
  
(b)Includes for the three months ended July 1, 2023 and July 2, 2022 and the six months ended July 1, 2023 and July 2, 2022, respectively, depreciation and amortization of $12,301, $9,684, $26,640 and $18,902 in cost of sales and $2,299, $2,700, $4,433 and $5,961 in operating expenses presented in the consolidated statements of operations and comprehensive loss.
  
(c)Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, and changes in fair value of contingent consideration.
  
(d)Costs incurred were the result of adopting restructuring plans to reduce headcount, reorganize management structure, and to consolidate certain facilities.
  
(e)Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to our decision to divest the business.
  
(f)Financial restructuring costs which include advisory fees and debt amendment related costs.
  
(g)Represents the loss on disposal of the Wound Business.
  
(h)Other items primarily includes charges associated with strategic transactions, such as potential acquisitions or potential divestitures, incremental one-time consulting costs related to the recertification of certain products to comply with the new and extensive EU MDR requirements and MOTYS Costs. Other items for three and six months ended July 1, 2023 also includes severance costs totaling $2.3 million and the reversal of equity compensation expenses totaling $3.8 million related to the transition of our executive leadership.
  
(i)Includes $15.3 million of tax impact related to the impairment of assets, and an estimated tax impact of the remaining adjustments to Non-GAAP Net Income from continuing operations, calculated by applying a rate of 25.1% and 24.8% to those adjustments for the three and six months ended July 1, 2023 and July 2, 2022, respectively.
  
(j)Adjustments are pro-rated to exclude the weighted average non-controlling interest ownership of 20.1% and 20.4%, respectively, for the three and three and six months ended July 1, 2023 and July 2, 2022.

Investor Inquiries and Media:

Dave Crawford
Bioventus
investor.relations@bioventus.com


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