Bioventus Inc. — Q1 2024 Form 10-Q
Business context and period. Bioventus develops and sells medical-device treatments across Pain Treatments, Surgical Solutions and Restorative Therapies. This unaudited 10-Q covers the 13 weeks ended March 30, 2024; the comparable quarter ended April 1, 2023. Unless stated otherwise, amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $129.5 million | $119.1 million |
| Gross profit / margin | $88.4 million / 68.3% | $73.9 million / 62.1% |
| Operating income (loss) | $5.3 million | $(92.1) million |
| Net loss from continuing operations | $(6.0) million | $(100.0) million |
| Net loss attributable to Bioventus Inc. | $(4.6) million | $(139.2) million |
| Adjusted EBITDA, non-GAAP | $22.6 million | $17.0 million |
| Net cash from operating activities, continuing operations | $(6.0) million | $4.7 million |
Sales increased 8.7% year over year. U.S. sales rose 9.9% to $114.3 million, while International sales were nearly flat at $15.2 million. Pain Treatments and Surgical Solutions grew; Restorative Therapies declined, principally reflecting the Wound Business divestiture. Gross margin expanded 6.2 percentage points, which management attributed primarily to product mix. Adjusted EBITDA is a non-GAAP measure; the company’s reconciliation adds back specified costs, including equity compensation, litigation and financial restructuring costs.
Q1 operating cash use reflected annual compensation and bonus timing, higher interest payments, and increased inventory purchases. Investing cash outflow was $1.0 million; financing cash outflow was $4.2 million. Cash and cash equivalents were $25.2 million at March 30, down from $37.0 million at year-end. Current assets were $265.9 million and current liabilities $173.3 million.
At quarter-end, balance-sheet debt was $391.2 million, including $35.8 million classified as current; the underlying term-loan and revolver balances were $379.4 million and $15.0 million, respectively, before unamortized debt costs and discount. The term facilities mature in October 2026 and the revolver in October 2025. Interest rates were 9.82%. The company reported compliance with its financial covenants at quarter-end. Its amended credit agreement also requires at least $10 million of defined liquidity at each month-end during a specified period; the revolver capacity is scheduled to reduce by $5 million on June 30, 2024.
Material changes, outlook and risks
- U.S. Pain Treatments sales grew 23.5% and Surgical Solutions 19.0%; U.S. Restorative Therapies sales fell 17.8%. International sales increased 0.6%. Management cited volume growth in Pain Treatments and Surgical Solutions, and Exogen growth, among the drivers of U.S. results.
- The prior-year comparison included a $78.6 million non-cash impairment related to the Wound Business and $74.4 million of discontinued-operation losses associated with CartiHeal. These items materially increased the prior-year reported loss; the 2023 and 2024 net-loss totals are therefore not directly comparable as measures of underlying performance.
- Management stated that cash, expected operating cash flows and available credit are expected to cover anticipated needs for at least 12 months from issuance of the financial statements. The filing also identifies potential funding and covenant risks, and notes that additional financing may not be available on acceptable terms. It does not provide a numerical sales or earnings outlook.
- Bioventus received five-year EU certification for its Exogen Bone Stimulation System in April 2024. Risks include debt and liquidity needs, reimbursement and pricing pressures, regulatory changes, product concentration, and execution of product development and commercialization.
- A securities class action’s Exchange Act claims remain in discovery; related derivative cases were consolidated and stayed in May 2024. The company says the claims lack merit, but the outcome and any loss are not presently estimable. The Misonix former-distributor litigation was affirmed in the company’s favor on appeal in March 2024.
- The company reported disclosure controls effective at a reasonable-assurance level and no material changes to internal control over financial reporting during the quarter. The filing’s forward-looking risk discussion nonetheless identifies possible effects from previously identified or future material weaknesses.
Important facts for investors to verify
- Whether operating cash flow improves and the company maintains the credit agreement’s defined minimum liquidity, particularly as revolver capacity steps down.
- Debt repayment capacity, interest costs, covenant headroom and refinancing options ahead of the October 2025 revolver and October 2026 term-loan maturities.
- Whether growth in Pain Treatments and Surgical Solutions continues and offsets weakness in Restorative Therapies and the divested Wound Business.
- Progress and financial implications of the securities litigation, regulatory and reimbursement changes, and the Wound Business’s potential earn-out and deferred consideration.
- How reported GAAP results compare with Adjusted EBITDA, including the nature and persistence of costs excluded from that non-GAAP measure.