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

Bioventus, Inc.
Bioventus, Inc.

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

ANNUNCIO PUBBLICITARIO

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, 2023

Gross 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, 2022

Gross 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, 2023

Gross 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, 2022

Gross 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