Q4 2024 Bioventus Inc Earnings Call
Good morning, and welcome to the bio Ventas fourth quarter 2024 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask question.
Operator: Good morning and welcome to the Bioventus 4th Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded.
To ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Dave Crawford, Vice President Investor Relations and Treasurer. Please go ahead.
David Crawford: I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations and Treasurer. Please go ahead. Thanks Drew and good morning everyone and thanks for joining us.
Speaker Change: Thanks drew and good morning, everyone and thanks for joining us and it's my pleasure to welcome you to the bio that this 2020 for fourth quarter earnings Conference call with me. This morning are Rob <unk>, President and CEO, Mark <unk> Senior Vice President and CFO, Rob will begin his remarks with an update on our business and lay out our 2025 priorities Marc will provide.
David Crawford: It is my pleasure to welcome you to the Bioventus 2024 fourth quarter earnings conference call. With me this morning are Rob Claypool, President and CEO, Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our business and lay out our 2025 priorities. Mark will provide detail on our fourth quarter results and discuss our 2025 financial guidance and we will finish the call with a Q&A.
Mark: On our fourth quarter results and discuss our 2025 financial guidance and we will finish the call with Q&A.
David Crawford: The presentation for today's call is available on the investor section of our website, Bioventus.com.
Mark: A presentation for today's call is available on the investors section of our website at <unk> Dot com.
David Crawford: But before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A risk factors of the company's Form 10-K for the year ended December 31st, 2024, as such factors may be updated from time to time in the company's other filings made with the SEC. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as the date made.
Mark: Before we begin I would like to remind everyone that our remarks today contain forward looking statements are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including the risks and uncertainties described in the company's filings with the SEC, including item one a risk factors.
Mark: So the company's Form 10-K for the year ended December 31, 2024, and such factors may be updated from time to time in the Companys. Other filings made with the SEC you are cautioned not to place undue reliance upon any forward looking statements, which speak only as the date.
David Crawford: Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities law. This call will also include references to certain financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. We will generally refer to these as non-GAAP or adjusted financial measures.
Mark: Although it may voluntarily do so from time to time the company undertakes no commitment to update or revise the forward looking statements whether as a result of new information future events or otherwise, except as required by applicable securities laws.
Mark: This call will also include references to certain financial measures that are not calculated in accordance with U S. Generally accepted accounting principles or GAAP, we will.
Mark: Generally refer to these as non-GAAP or adjusted financial measures important disclosures about the definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investors section of our website.
David Crawford: Important disclosures about the definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website at Bioventus.com.
Mark: Dot com and now I will turn the call over to Rob. Thank you, Dave Good morning, everyone and thanks for joining our call today I'm pleased to report that the biomet and his team delivered another strong quarter, concluding a very successful and transformational year for our company.
Robert Claypoole: And now I will turn the call over to Rob. Thank you, Dave. Good morning, everyone, and thanks for joining our call today.
Robert Claypoole: I'm pleased to report that the Bioventus team delivered another strong quarter, concluding a very successful and transformational year for our company. I want to express my gratitude to our talented team for embracing the improvements we are making across our company and for helping over one million patients last year recover and live life to the fullest. Looking forward, we believe we're well-positioned to build on this positive momentum in 2025 and beyond, driving above-market revenue growth through a multitude of diverse growth drivers for the short, mid, and long term, while also enhancing profitability and accelerating cash flow to create significant shareholder value.
Mark: I wanted to express my gratitude to our talented team for embracing the improvements we are making across our company and for helping over 1 million patients last year recover and live life to the fullest.
Mark: Looking forward, we believe we're well positioned to build on this positive momentum in 2025 and beyond driving above market revenue growth through a multitude of diverse growth drivers for the short mid and long term, while also enhancing profitability and accelerating cash flow to create significant shareholder value.
Robert Claypoole: Now that I've surpassed my one-year anniversary with Bioventus, it's an appropriate time to briefly reflect on the meaningful progress our company has made to position us for continued success. I'll categorize our progress into three areas, strategy, people, and execution. First, with respect to our growth strategy, we completed a comprehensive review of all of our markets and established a framework for sustained and profitable growth. This plan has aligned our entire organization around a common vision and is already serving as a strategic roadmap for organic and inorganic opportunities to optimize our portfolio, commercial and operational improvements, and select high ROI investments to support our business.
Speaker Change: I'm Gonna have surpassed my one year anniversary with bio Ventas, it's an appropriate time to briefly reflect on the meaningful progress. Our company has made to position us for continued success.
Speaker Change: I'll categorize our progress into three areas strategy people and execution.
Speaker Change: First with respect to our growth strategy, we completed a comprehensive review of all of our markets and established a framework for sustained and profitable growth.
Speaker Change: This plan is aligned our entire organization around a common vision and is already serving as a strategic roadmap for organic and inorganic opportunities to optimize our portfolio.
Speaker Change: Marshall and operational improvements and select high ROI investments to support our business.
Robert Claypoole: Second, in terms of our people, we continue to strengthen the Bioventus team and enhance our culture. We are developing new capabilities internally and recruiting new talent that we believe possess the expertise, experience, and the market knowledge necessary to maximize our growth prospects. We are also improving an already great culture at Bioventus, and we have seen a significant increase in our employee engagement based on our recent survey.
Speaker Change: Second in terms of our people, we continue to strengthen the bio ventas team and enhance our culture.
Speaker Change: We're developing new capabilities internally and recruiting new talent that we believe possess the expertise experience and market knowledge necessary to maximize our growth prospects.
Speaker Change: We are also improving an already great culture at bio Ventas and we have seen a significant increase in our employee engagement based on a recent survey.
Speaker Change: And with respect to execution.
Robert Claypoole: and with respect to execution. There's been a lot of progress and so I'll highlight just a few areas. First, we delivered a strong financial performance in 2024, including double-digit organic revenue growth in all four quarters, along with 150 basis points of adjusted gross margin expansion. And we leveraged this combination to generate enhanced profitability, positive cash flow, and improved liquidity. We also optimized our global portfolio with the successful divestiture of our advanced rehabilitation business. We aligned our commercial and operational strategies and priorities with targeted investments, more disciplined focus, and enhanced accountability. and we have elevated the visibility and the collective ownership of the execution of our key initiatives to my entire executive leadership team.
Speaker Change: A lot of progress so I'll highlight just a few areas first we delivered a strong financial performance in 2024, including double digit organic revenue growth in all four quarters, along with 150 basis points of adjusted gross margin expansion.
Speaker Change: We leveraged this combination to generate enhanced profitability positive cash flow and improved liquidity.
Speaker Change: We also optimized our global portfolio with the successful divestiture of our advanced rehabilitation business.
Speaker Change: We aligned our commercial and operational strategies and priorities with targeted investments more disciplined focus and enhanced accountability.
Speaker Change: And we have elevated the visibility and the collective ownership of the execution of our key initiatives to my entire executive leadership team.
Robert Claypoole: While there's more work to be done, I'm pleased with the progress to date and believe we now have an even stronger foundation for sustained future momentum and success.
Speaker Change: While there's more work to be done I am pleased with the progress to date.
Speaker Change: I believe we now have an even stronger foundation for sustained future momentum and success.
Speaker Change: Now I'll transition and briefly review our performance across the three priorities that I introduced at the start of last year.
Robert Claypoole: Now I'll transition and briefly review our performance across the three priorities that I introduced at the start of last year. accelerating revenue growth, improving profitability, and enhancing our liquidity position. With respect to our first priority, accelerating revenue growth, for 2024 we exceeded our expectations and accelerated revenue growth to 12% and delivered organic growth of 14%. And we ended the year with continued momentum and a strong performance in the fourth quarter with revenue growth of nearly 14%. I'll share just a few highlights. Starting with surgical solutions, our team beat internal expectations and generated double-digit growth again in the fourth quarter, led by ultrasonics, which achieved its highest quarterly growth rate of the year.
Speaker Change: Salaries and revenue growth, improving profitability and enhancing our liquidity position.
Speaker Change: With respect to our first priority accelerating revenue growth for 2024, we exceeded our expectations and accelerated revenue growth to 12% and delivered organic growth of 14% and.
Speaker Change: We ended the year with continued momentum and a strong performance in the fourth quarter with revenue growth of nearly 14%.
Speaker Change: I'll share just a few highlights.
Speaker Change: With surgical solutions, our team beat internal expectations and generated double digit growth again in the fourth quarter led by ultrasonics, which achieved its highest quarterly growth rate of the year.
Robert Claypoole: In pain treatments, our HA portfolio for knee osteoarthritis also exceeded our internal expectations and achieved another quarter of double-digit growth driven by Duralane. And in restorative therapies, exogen generated growth in the fourth quarter, despite a tough count, and we are very pleased with accelerating growth to 7% for the full year 2024 after five years of declines in this business.
Speaker Change: And pain treatments are H a portfolio for knee osteoarthritis also exceeded our internal expectations and achieved another quarter of double digit growth driven by Darling.
Speaker Change: And in restorative therapies.
Speaker Change: Jim generated growth in the fourth quarter, despite a tough comp and.
Speaker Change: And we are very pleased with accelerating growth to 7% for the full year 2024. After five years of declines in this business.
Speaker Change: Turning to our second focus area boosting profitability.
Robert Claypoole: Turning to our second focus area, boosting profitability. With our peer-leading gross margin and our accelerated revenue growth, we generated adjusted EBITDA of $109 million for the full year, an increase of 23%. and we expanded, adjusted even the margin by 160 basis points. This included a strong finish to the year as we generated adjusted EBITDA of $28 million in the fourth quarter, up over $6 million versus prior year. And with respect to our third focus area, improving our liquidity position, I'm pleased to say that we paid down nearly $50 million in debt in the fourth quarter.
Speaker Change: With our peer leading gross margin.
Speaker Change: The accelerated revenue growth, we generated adjusted EBITDA of $109 million for the full year, an increase of 23%.
And we expanded adjusted EBITDA margin by 160 basis points.
Speaker Change: This included a strong finish to the year as we generated adjusted EBITDA of $28 million in the fourth quarter up over $6 million versus prior year.
Speaker Change: And with respect to our third focus area, improving our liquidity position I'm pleased to say that we paid down nearly $50 million in debt in the fourth quarter. This included the proceeds from the divestiture of our advanced rehabilitation business.
Robert Claypoole: This included the proceeds from the divestiture of our advanced rehabilitation business. As a result of our growth in adjusted EBITDA and our debt repayment, we further reduced our net leverage ratio to slightly above three turns at the end of 2024, representing a reduction of more than a full turn since the start of the year.
Speaker Change: And as a result of our growth in adjusted EBITDA at our debt repayments. We further reduced our net leverage ratio to slightly above three turns at the end of 2024, representing a reduction of more than a full turn since the start of the year.
Speaker Change: In summary, our team accomplished a great deal in 2024, well, we are not satisfied with our progress as we strive to capitalize on our enormous potential to create even greater value for our stakeholders.
Robert Claypoole: In summary, our team accomplished a great deal in 2024, but we are not satisfied with our progress as we strive to capitalize on our enormous potential to create even greater value for our stakeholders.
Speaker Change: Now I'll transition to our 2020 financial priorities, which are one driving above market growth.
Robert Claypoole: Now I'll transition to our 2025 financial priorities, which are, one, driving above market growth. 2. Continuing to expand our profitability, and 3. Accelerating free cash flow generation. Let me provide further context on these three areas. First, across our diverse portfolio, we participate in large growing markets with favorable demographic trends. On average, these markets are growing low to mid-single digits. However, given our strong clinical differentiation and enhanced commercial execution, we believe we have demonstrated our ability to grow at a higher rate and achieve above-market revenue growth.
Speaker Change: Two continuing to expand our profitability and three accelerating free cash flow generation.
Speaker Change: Let me provide further context on these three areas.
Speaker Change: First across our diverse portfolio, we participate in large growing markets with favorable demographic trends.
Speaker Change: On average these markets are growing low to mid single digits. However, given our strong clinical differentiation and enhanced commercial execution. We believe we have demonstrated our ability to grow at a higher rate and achieve above market revenue growth.
Speaker Change: Let me take a moment to highlight some of the opportunities in front of us starting with surgical solutions. This is our highest growth business today in.
Robert Claypoole: Let me take a moment to highlight some of the opportunities in front of us. Starting with Surgical Solutions, this is our highest growth business today. It includes both ultrasonics and bone graft substitutes. and we project long-term double-digit growth. With ultrasonics, we are in the early stages of penetrating the roughly $1 billion market opportunity across spine, neuro, and general surgery. Customers I've met with over the past year have referred to our technology as revolutionary because it provides control and precision for surgeons, reduces blood loss for patients, and decreases time in surgery, which enables hospitals to improve operating room productivity.
Speaker Change: It includes both ultrasonics and bone graft substitutes.
Speaker Change: And we project long term double digit growth.
Speaker Change: With ultrasound X. We are in the early stages of penetrating the roughly $1 billion market opportunity cross spine neuro and general surgery.
Speaker Change: Customers Ive met with over the past year I've referred to our technology is revolutionary because it provides a control and precision for surgeons reduces blood loss for patients and decrease the time in surgery, which enables hospitals to improve operating room productivity.
Robert Claypoole: is for these reasons that we believe we can make our technology the standard of care. We recently brought on new leadership over this business to capitalize on this substantial opportunity, and we are focusing our efforts in several key areas, including strategic marketing, commercial effectiveness, and medical education, to raise awareness about the benefits of ultrasonic surgery versus current practice. In addition to ultrasonics, our OsteoAM portfolio enables us to continue growing our bone graft substitutes business above the market growth rate. OsteoAMP provides similar results for a large number of spinal procedures, as compared to the leading product in the premium segment, and delivers material savings for hospitals.
Speaker Change: It's for these reasons that we believe we can make our technology the standard of care.
Speaker Change: We recently brought on new leadership over this business to capitalize on this substantial opportunity.
Speaker Change: And we are focusing our efforts in several key areas, including strategic marketing commercial effectiveness and medical education to raise awareness about the benefits of ultrasonic surgery versus current practices.
Speaker Change: In addition to ultrasonics are off do I have a portfolio enables us to continue growing our bone graft substitutes business above the market growth rate.
Speaker Change: Australia provide similar results for a large number of spinal procedures as compared to the leading product in the premium segment and delivers material savings for hospitals.
Speaker Change: And the pain treatment business, we are an established market leader in H E for knee osteoarthritis.
Robert Claypoole: In the pain treatments business, we are an established market leader in HA for knee osteoarthritis. We are driving above market growth and we will continue to enhance our commercial execution and expand our footprint within large customer accounts. Looking ahead, we are confident in our ability to drive sustained above-market growth with our clinical differentiation, dedicated commercial teams, robust private payer coverage, and targeted opportunities for geographic expansion. and with Restored Therapies, we're focused on capitalizing on our clear momentum with exogen and driving sustained profitable growth. With a market growth rate in the low single digits, we believe we can grow oxygen annually in the low to mid single digits.
Speaker Change: We are driving above market growth and we will continue to enhance our commercial execution and expand our footprint within large customer accounts.
Speaker Change: Looking ahead, we are confident in our ability to drive sustained above market growth with our clinical differentiation dedicated commercial team robust private payer coverage and targeted opportunities for geographic expansion.
Speaker Change: And with restorative therapies, we're focused on capitalizing on our clear momentum with oxygen and driving sustained profitable growth.
Speaker Change: But the market growth rate in the low single digits. We believe we can grow oxygen annually in the low to mid single digits and the team is working hard to achieve the upper end of that range.
Robert Claypoole: And the team is working hard to achieve the upper end of that range.
Speaker Change: Our second focus area is to continue to improve our profitability.
Robert Claypoole: Our second focus area is to continue to improve our profitability. Last year we demonstrated how the powerful combination of our pure leading gross margin with above market growth can drive meaningful margin accretion. We will focus on preserving our high gross margin with supply chain improvements and we remain committed to growing our bottom line faster than our top line. Consequently, as we have already mentioned publicly, our goal is to deliver 100 basis points of incremental adjusted EBITDA margin improvement in 2025.
Speaker Change: Last year, we demonstrated how the powerful combination of our pure leading gross margin.
Speaker Change: Above market growth.
Speaker Change: Can drive meaningful margin accretion.
Speaker Change: We will focus on preserving our high gross margin with supply chain improvements and we remain committed to growing our bottom line faster than our top line.
Speaker Change: Consequently.
Speaker Change: As we've already mentioned publicly our goal is to deliver 100 basis points of incremental adjusted EBITDA margin improvement in 2025.
Speaker Change: And our third priority for 2025 is continuing to accelerate free cash flow in.
Robert Claypoole: And our third priority for 2025 is continuing to accelerate free cash flow. In 2024, our cash from operations more than doubled. And we believe that we will further accelerate cash generation and have the opportunity for it to nearly double again in 2025. We plan to achieve this by increasing EBITDA, reducing one-time cash costs, managing our working capital, especially inventory, more efficiently. and Lowering Interest Expense.
Speaker Change: In 2024, our cash from operations more than doubled and what do you believe that we have that we will further accelerate cash generation and have the opportunity for it to nearly double again in 2025.
Speaker Change: Planning to achieve this by increasing EBITDA, reducing onetime cash costs, managing our working capital, especially inventory more efficiently.
Speaker Change: And lowering interest expense.
Robert Claypoole: In conclusion, we made significant progress in transforming Bioventus in 2024, and we exceeded our financial expectations. But this is just the start of what we can achieve.
Speaker Change: In conclusion, we made significant progress in transforming violent as in 2024, and we exceeded our financial expectations.
Speaker Change: This is just the start of what we can achieve.
Robert Claypoole: I'm confident that with strong focus and disciplined execution, we will continue to advance our business and create significant shareholder value.
Speaker Change: I'll put it that with strong focus and disciplined execution, we will continue to advance our business and create significant shareholder value.
Mark Singleton: I'll turn the call over to Mark. Thank you, Rob, and good morning, everyone. Let me begin by saying I am very proud of our ability to deliver on our 2024 financial commitments and the progress our team made to continuously improve our business. Turning to our results for the fourth quarter, revenue of $154 million increased 14%, and adjusted EBITDA of over $28 million grew $6 million, reflecting a 28% increase compared to the prior year. Surgical solutions revenue accelerated by 18%. For the second consecutive quarter, our ultrasonics revenue advanced by more than 20%. With respect to bone graft substitutes, we are on track to add new customers as we onboard new distributors, while at the same time, we are increasing the productivity of our existing distributors.
Barbara: Now I'll turn the call over to Barbara.
Barbara: Thank you Rob and good morning, everyone. Let me begin by saying I am very proud of our ability to deliver on our 2024 financial commitments.
Barbara: And the progress our team made to continuously improve our business.
Barbara: Turning to our results for the fourth quarter revenue of $154 million increased 14% and adjusted EBITDA of over $28 million grew $6 million, reflecting a 28% increase compared to the prior year.
Surgical solutions revenue accelerated by 18% for the second consecutive quarter, our ultrasonics revenue advanced by more than 20%.
Barbara: With respect to bone graft substitutes, we are on track to add new customers as we onboard new distributors while at the same time, we are increasing their productivity of our existing distributors. As a result, we expect bgs to return to double digit growth in the second half of 2025.
Mark Singleton: As a result, we expect BGS to return to double-digit growth in the second half of 2025. In pain treatments, positive momentum continued as revenue increased 17% compared to the prior year. As we previously mentioned, Duralane's strong brand recognition and clinical differentiation, along with the strength of our team's commercial execution, is enabling us to gain share and grow faster than the overall market for single injection treatment. Sales for the fourth quarter also benefited by up to $2 million due to higher year-end orders by certain distributors. Consequently, our first quarter 2025 growth expectations for HA will have this headwind as these distributors lower their inventory to normal levels.
Barbara: Pain treatments positive momentum continued as revenue increased 17% compared to the prior year as we've previously mentioned Daryl and strong brand recognition.
Barbara: Clinical differentiation along with the strength of our teams commercial execution is enabling us to gain share and grow faster than the overall market for single injection treatment.
Barbara: Sales for the fourth quarter also benefited by up to $2 million due to a higher year end orders by certain distributors.
Barbara: Consequently, our first quarter 2000, and twenty-five growth expectations for AJ will have this headwind as these distributors lower their inventory to normal levels.
Mark Singleton: Shifting to restorative therapies, sales were flat compared to the prior year as growth in exogen was offset by a decline in advanced rehabilitation.
Barbara: Shifting to restorative therapies sales were flat compared to the prior year as growth in <unk> was offset by a decline in advanced rehabilitation.
Mark Singleton: while we divested in the fourth quarter. Going forward, we remain optimistic about our ability to drive consistent growth in Exigen through our demonstrated improvement in Salesforce execution and the impact of additional resources to assist our sales team. Finally, our international segment grew 11% compared to the prior year as we benefited from shipments in our ultrasonics business that were delayed earlier in the year. Moving down the income statement, adjusted gross margin of 74% expanded 230 basis points compared to last year as we experienced transitory inventory write-offs in the prior year. In line with our expectations, adjusted total operating expenses rose by nearly $10 million compared to the prior year.
Barbara: While we divested in the fourth quarter.
Barbara: Going forward, we remain optimistic about our ability to drive consistent growth and oxygen through our demonstrated improvement in sales force execution and the impact of additional resources to assist our sales team.
Barbara: Finally, our international segment grew 11% compared to the prior year as we benefited from shipments in our ultrasonics business that were delayed earlier in the year.
Barbara: Moving down the income statement adjusted gross margin of 74% expanded 230 basis points compared to last year as we experienced transitory inventory write offs in the prior year.
Barbara: In line with our expectations adjusted total operating expenses rose by nearly $10 million compared to the prior year.
Mark Singleton: as we increase investment in strategic growth initiatives and spending normalized from the reduced levels we operated with a year ago. Now turning to our bottom-line financial metrics, adjusted operating income increased 34% to $26 million from $20 million in the prior year. Adjusted net income of $13 million more than doubled compared to the prior year, and adjusted earnings per share were $0.15 for the quarter.
Barbara: As we increased investment in strategic growth initiatives and spending normalized from the reduced levels, we operated with a year ago.
Barbara: Now turning to our bottom line financial metrics adjusted operating income increased 34% to $26 million from $20 million in the prior year adjusted net.
Barbara: Net income of $13 billion more than doubled compared to the prior year and adjusted earnings per share or 15 cents for the quarter.
Mark Singleton: almost more than doubled compared to the prior year.
Barbara: Almost more than doubled compared to the prior year now.
Mark Singleton: Now shifting to the balance sheet and cash flow statement. We ended the quarter with $42 million of cash on hand and $336 million of outstanding debt. During the quarter, we repaid $48 million of debt from free cash flow and acquisition proceeds. As anticipated, we ended the year with no amount drawn on a revolving credit facility. Operating cash flow represented an inflow of $19 million, which was an 86% higher than the fourth quarter last year. We forecast further accelerating our cash generation in 2025 and expect free cash flow to nearly double compared to 2024. Through adjusted EBITDA growth and debt paydown, we continue to lower our net leverage ratio.
Barbara: Now shifting to the balance sheet and cash flow statement, we ended the quarter with $42 million of cash on hand, and $336 million of outstanding debt during the quarter, we repaid $48 million of debt from free cash flow and acquisition proceeds as anticipated. We ended the year with no amounts drawn on our river.
Barbara: <unk> credit facility.
Barbara: Operating cash flow represented an inflow of $19 million, which was an 86% higher than the fourth quarter of last year, we forecast further accelerating our cash generation in 2025 and <unk>.
Barbara: Free cash flow to nearly double compared to 2024.
Barbara: Through adjusted EBITDA growth and debt pay down we continue to lower our net leverage ratio and as Rob mentioned, our leverage ratio at the end of the year as defined in our credit agreement.
Mark Singleton: And as Rob mentioned, our leverage ratio at the end of the year as defined in our credit agreement. was just above three times net debt to adjusted EBITDA, and we have increased our liquidity meaningfully. We are confident in our ability to continue to reduce our net leverage and now project our leverage to be below two and a half times by the end of 2025.
Barbara: Was just above three times net debt to adjusted EBITDA, and we have increased our liquidity liquidity meaningfully.
Barbara: We are confident in our ability to continue to reduce our net leverage and now project our leverage to be below two and a half times by the end of 2025.
Mark Singleton: Finally, let me lay out our 2025 financial guidance and provide some additional color on our guidance for the year. Based on current trends in our business, we expect net sales to be in the range of $560 million to $570 million, reflecting above market organic growth of approximately 6% to 8%. Organic growth adjusts for the divestiture of the advanced rehabilitation business that generated approximately $45.4 million of revenue in 2024. For the year, we expect Adjusted EBITDA to be between $112 million and $116 million. This represents growth in the range of 8% to 12% when adjusting for the impact of advanced rehabilitation business, which generated approximately $5 million of Adjusted EBITDA in 2024.
Barbara: Finally, let me lay out our 2025 financial guidance and provide some additional color on our guidance for the year.
Barbara: Based on current trends in our business, we expect net sales to begin a range of $560 million to $570 million, reflecting above market organic growth of approximately 6% to 8% organic growth just for the divestiture of the advanced <unk> rehabilitation business that generated.
Barbara: Approximately $45 $4 billion of revenue in 2024 for.
Barbara: For the year, we expect adjusted EBITDA to be between $112 million and $116 million. This represents growth in the range of 8% to 12% when adjusting for the impact of advanced rehabilitation business, which generated approximately $5 million of adjusted EBITDA in 2024.
Barbara: Finally, we expect adjusted earnings per share of 64 cents to 68 cents, an increase of 31% to 39% in.
Mark Singleton: Finally, we expect adjusted earnings per share of $0.64 to $0.68, an increase of 31% to 39%. In line with the cadence established in prior years, we expect revenue and adjusted EBITDA to be the lowest in the first quarter of 2025 and to be the highest in the fourth quarter. To elaborate further, we expect first quarter organic revenue growth to be below our implied guidance range of 6% to 8%, given the strong finish in Q4, primarily in the HA business, as we mentioned earlier, and a difficult comparison to prior year, including two fewer selling days. And given the strong adjusted EBITDA performance in the first half of 2024, the timing of our growth investments and the return to normalized spending levels across our projected adjusted EBITDA is expected to be lower in the prior year during the first half of 2025 and significantly higher in the second half of 2025.
Barbara: In line with the cadence established in prior years, we expect revenue and adjusted EBITDA to be the lowest in the first border of 2025 and to be the highest in the fourth quarter.
Barbara: To elaborate further we expect first quarter organic revenue growth to be below our implied guidance range of 6% to 8% given the strong finish in Q4, primarily in the AG business as we mentioned earlier and a difficult comparison to prior year, including two fewer selling days and.
Barbara: And given the strong adjusted EBITDA performance in the first half of 2020 for the timing of our growth investments and the return to normalized spending levels across our business. Our projected adjusted EBITDA is expected to be lower than the prior year. During the first half of 2025 and significantly higher in the second half of 2025.
Mark Singleton: Lastly, as we accelerate investments during the year and as revenue increases, we expect to see a slight increase in quarterly operating expenses throughout the year.
Barbara: Lastly, as we accelerated investments during the year and as revenue increases we expect to see a slight increase in quarterly operating expenses throughout the year.
Mark Singleton: In closing, the execution of our business plan over the past year has significantly strengthened our growth, profitability, and liquidity position. Looking forward, we are excited about the long-term potential as we strive to become a $1 billion high-growth, high-margin, high-cash-flow medical device company.
Barbara: In closing the execution of our business plan over the past year has significantly strengthened our growth profitability and liquidity position looking forward. We are excited about the long term potential as we strive to become a $1 billion high growth high margin high cash flow medical device.
Barbara: Company <unk>.
Operator: Operator, please open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then one. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star 3.
Barbara: <unk>. Please open the line for questions.
Barbara: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press <unk>.
Barbara: Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Barbara: At this time, we will pause momentarily to assemble our roster.
Chase Knickerbocker: The first question comes from Chase Knickerbocker with Craig Hallam. Please go ahead. Good morning, guys. Thanks for taking the questions and congrats on the great results and guidance here.
Speaker Change: First question comes from Chase Knickerbocker with Craig Hallum. Please go ahead.
Chase Knickerbocker: Good morning, guys. Thanks for taking the questions and congrats on the great results and guidance here.
Chase Knickerbocker: Maybe just first for me, can we just maybe for Mark, maybe just walk through the guidance assumptions by segment in 25. Sorry if I missed that, but should we be thinking about it kind of consistent with kind of prior messaging? Call it mid to high single digits in pain, which was kind of like longer term. How we're thinking about the business, you know, low double digits in surgical and then call it low single digits in restorative.
Chase Knickerbocker: Maybe just first for me can we just maybe for Mark maybe just walk through the guidance assumptions by segment and 25, sorry, if I missed that but should we be thinking about it kind of consistent with prior messaging call. It mid to high single digits in pain, which was kind of like longer term, how we're thinking about the business low double digits in surgical and then call it low single digits.
Chase Knickerbocker: And restorative, maybe just give us a.
Chase Knickerbocker: Could maybe just give us a specific update there with the assumptions. And Rob, if we look at pain, you know, the performance in that business is far away better than than peers. And you've got competitors kind of shifting strategy, pricing and such things. So I guess just how should we think about HA and enduring performance in 2025? I mean, are you seeing any impact from some of these market shifts? So far in the year, or are you pretty insulated at this point with your contract and access position?
Chase Knickerbocker: Specific update there with what the assumptions there.
Chase Knickerbocker: Yes, James Thanks, I. Appreciate your comments early you know we focus on 2025, but you know the full year guidance, we feel really good about the midpoint of our guidance of 7%, which is which was clearly above market and obviously, we had a great year in 2024, where it was significantly above market as well.
Chase Knickerbocker: I think when we when we think about it and break it down by segment, it's pretty consistent.
Chase Knickerbocker: With what you said, we're looking at from a pain treatments above market growth. When we look at our restorative therapies segment, that's a low low single digits and then when you look at our strong surgical portfolio with both ultrasonics at Bgs.
Chase Knickerbocker: I expect it to be double digit growth as well. So we really feel good about the short term growth drivers at the longer term growth drivers that we have in that business.
Chase Knickerbocker: Our very position and a position very well that drive the above market growth in 2025.
Rob: And Rob.
Chase Knickerbocker: If we look at pain.
Rob: The performance in that business is far away better than than peers.
Rob: And he gave you got competitors kind of shifting strategy pricing and such things. So I guess, just how should we think about H a N and enduro Lane performance in 2025, I mean are you seeing any impact from some of these market shifts.
Rob: So far in the year or are you pretty insulated at this point with your contract and access position with drilling.
Chase Knickerbocker: Thanks, Chase. We feel great about the HA business. What our guidance implies is growing above the market roughly 2x again in 2025. Keep in mind, that's very volume-based. As it relates to price, we're very focused on price. We're analytical, we're strategic, and we're very disciplined with our pricing. We closely monitor what our competitors are as well. At this point for 2025, we expect that our growth is going to be driven by volume again and that price will be fairly stable when you consider the entire year. Feel good about the business. As you alluded to there, the reason why we're in that position is because of this strong combination of clinical differentiation and the awareness of that just continues to spread along with our large dedicated commercial team that every day is focused on this business.
Rob: Yes, Thanks, Jay So we feel we felt great about DHA business, you know what our guidance implies has.
Rob: Growing above the market roughly two X again in 2025 and <unk>.
Rob: You know keep in mind, that's very volume based as it relates to price. Yeah. We're we're very focused on price. We are analytical were strategic and were just very.
Rob: Very disciplined with our pricing.
Rob: And and we and we closely monitor what our competitors are doing it as well at this point for 2025, we expect that our growth is going to be driven by volume again and that price will be fairly stable. When you consider the entire year. So feel good about the business and as you alluded to there you know the reason.
Rob: We're in that position is because of this strong combination of clinical differentiation and awareness of that just continues to spread along with our large dedicated commercial.
Rob: Team that.
Rob: Every day focused on this business.
Chase Knickerbocker: Then last, that strong private-payer contract base that we have. Again, feeling good about generating that above-market growth driven by volume.
Rob: And then last that strong private payer contract base that we have so.
Rob: I got the feeling are feeling good about generating that above market growth driven by volume.
Chase Knickerbocker: And just last for me, you know, 3x leverage now, you know, two and a half by the end of the year. I mean, when should investors be thinking about kind of capital allocation priority shifting? And how do you see that kind of developing over the next call at 18 months?
Rob: And just last for me you know three X leverage now two and a half by the end of the year I mean, when should investors be thinking about kind of capital allocation priority shifting.
Rob: And how do you see that kind of developing over the next call. It 18 months.
Rob: Yeah, well first let me talk broadly about that.
Chase Knickerbocker: Yeah, well, first, let me talk broadly about that. You know, we're really pleased with continuing to deliver on the commitment that we mentioned to you in the beginning of last year, which is to lower our debt. And. Now that gives us this vote. flexibility both strategically and financially. We like the potential of our current diverse portfolio to drive really exciting growth in the short, mid, and long term so that we have this combination of increasing financial flexibility and at the same time that we can be very selective with any portfolio expansion opportunities we have, which is a great combination.
Rob: We're really pleased with continuing to deliver on the commitment that we've mentioned to you in the beginning of last year.
Rob: Which is to lower our debt and.
Rob: That gives us this boats.
Rob: Flexibility, both strategically and financially.
Rob: Yeah.
Rob: And we like to.
Rob: Before too we like the potential of our current diverse portfolio to drive a really exciting both in the short mid and long term. So we have this combination of increasing financial flexibility and at the same time that we we can be fairly selective with any portfolio expansion opportunities, we have which is a great combination.
Mark Singleton: So that means that as it relates to the portfolio, we'll pursue something only if it fits within our portfolio strategy perfectly.
Rob: So that means that you know as it relates to the portfolio.
Rob: Oh pursue something only if it.
Rob: Fits within our portfolio strategy perfectly.
Mark Singleton: Mark, anything to add to that? No, I think that's perfectly said. Right now, it just demonstrates the progress that we have made in the business with the strengthening and acceleration of cash flow. It gives us lots of options, but we're still remaining very focused on executing the business and delivering on the goals we have, and we'll continue to evaluate opportunities that come forward with a very critical eye and understanding that leverages the footprint that we already have with our sales forces and those call points.
Mark: Mark anything to add to that no I think that's perfectly set in.
Mark: Right now we just demonstrates the progress we have made in the business.
Mark: Strengthening of acceleration of cash flow and it gives us lots of options, but we are still remaining very focused on executing the business and delivering on the goals. We have and we'll continue to evaluate opportunities that come forward with a very critical eye and understanding that leverages the footprint that we already have.
Mark: And.
Mark: With our sales forces in those couple of points.
Mark: Thanks, guys Congrats again.
Chase Knickerbocker: Thanks, guys. Gracias. Thanks for your time.
Mark: So next.
Robbie Marcus: The next question comes from Robbie Marcus with J.P. Morgan. Please go ahead.
Speaker Change: The next question comes from Robbie Marcus with Jpmorgan. Please go ahead.
Speaker Change: Hi, this is actually literally on for Robbie Thanks for taking the question you.
Lilian Barabi: Hi, this is actually Lilian Barabi. Thanks for taking the question. You talked a bit about some of those transitory supply challenges impacting the bone graft substitute business. So how are you thinking about that trending this year? What's assumed in guidance? And how much confidence and visibility do you have to getting to that double digit growth in the backup?
Speaker Change: You talked a bit about some of those transitory supply challenges impacting the bone graft substitute business. So how are you thinking about that trending this year, what's assumed in guidance and how much confidence and visibility do you have you're getting to that double digit growth in the back half.
Speaker Change: Hi, Lily this is Rob thanks for the question Yeah, we feel really good about the bone graft substitutes business a bit.
Rob: Hi, Lily. This is Rob. Thanks for the question. I feel really good about the Bone Graph Substitutes business. It faced challenges, as we mentioned, in the middle of last year because of the supply challenge, which then, because of that, we slowed our onboarding of new customers through distributor agents. And as we mentioned in the last call, we overcame those supply challenges and have been driving new customers since that time. So still ramping up with that. We feel really good about that. At the same time, what we saw in the fourth quarter was increased productivity from our existing distributor agents.
Speaker Change: The challenge is as we mentioned in the middle of last year because of the supply challenge, which then.
Speaker Change: Because of that we slowed our onboarding of new customers through distributor agents and.
Speaker Change: As we mentioned in the last call, we overcame those supply challenges and.
Speaker Change: Have been driving new customers since that time, so I'll still ramping up with that we felt really good about that at the same time, what we saw in the fourth quarter was increased productivity from our existing distributor agents. So we have the combination of both productivity from existing and ramping up with new ones.
Rob: So we have the combination of both productivity from existing and ramping up with new ones. So and then, you know, from a guidance standpoint, as Mark alluded to, for overall, for the surgical business, we expect a good double-digit growth, both in the short and the long term for that business.
Speaker Change: So and then from a guidance standpoint, as Mark alluded to for overall for the surgical business, we expect a good double digit growth.
Speaker Change: Both in the short and the long term for that business.
Speaker Change: Got it and then it seems like <unk> could really be at a turning point now on so could you talk about some of the trends that you've been seeing there now that the business has sort of stabilized and the confidence that you have in that business staying in 'twenty.
Rob: Got it.
Rob: And then it seems like Exogen could really be at a turning point now. So could you talk about some of the trends that you've been seeing there now that the business has sort of stabilized and the confidence that you have in that business staying in growth mode in 2025? Thanks. Yeah, thank you. Yeah, we're really excited about the Exogen business. You know, this is a great technology. Clinical benefits are very proven, and it's been declining for five years. And as we mentioned before, it's, you know, that was not because of the market. It was because Bioventus had deprioritized the business.
Speaker Change: 2025, thanks, so much.
Speaker Change: Yeah. Thank you yeah, we're really excited about the X gene business. I mean, you know this is a great technology, our clinical benefits are very proven and.
Speaker Change: And look it's been declining for five years and as we mentioned before it's a yes.
Speaker Change: That was not because of the market. It was because by Aventis had deep prioritize to the business and last year. What we did was bring our focus back to the business and.
Rob: And last year, what we did was bring our focus back to the business and also made some strategic investments. And we saw the impact from that. You know, and the investments were rather small, and the team has just done a fantastic job with that business. So we feel like we're in control of this business. We turned it around, as I mentioned, to the 7% growth last year. And now with the market growing in the low single digits, we, as we mentioned, we expected to grow in the low to mid single digits. And of course, we're going to work hard to achieve the upper end of that range.
Speaker Change: And also made some strategic investments and we saw the impact from that.
Speaker Change: The investments were rather small and and the team has just done a fantastic job with that business. So we feel like we're in control of this business. We turned it around as I mentioned to the 7% growth last year and now with the market growing in the low single digits.
Speaker Change: As we mentioned we expect it to grow in the low to mid single digits and of course, we're going to work hard to achieve the upper end of that range. So.
Rob: So really, this one is just about maintaining the focus that we've restored to the business and doing the fundamentals really well. And with that, we feel like we're in control of continuing to drive profitable growth with that business. Great, thank you.
Speaker Change: Really this one is just about maintaining the focus that we've restored to the business and doing the fundamentals really well and with that we feel like we're in control.
Speaker Change: Continuing to drive our profitable growth with that business.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Caitlin Cronin: The next question comes from Caitlin Cronin with Kennecord Genuity. Please go ahead. Hi, congrats on your third quarter and thanks for taking my questions.
Speaker Change: The next question comes from Caitlin crowded with Canaccord Genuity. Please go ahead.
Speaker Change: Well I can go out from a great. Thanks for taking my questions.
Caitlin Cronin: If you could just maybe break down within pain treatments the expectations within your, you know, three products, so, you know, how the growth is expected to trend there. Yeah, Caitlin, this is Mark. Thank you for the question. Within pain treatments, obviously our portfolio and significant percentage of our revenue is Enduralane, which we continue to be really successful with. One, the market moves that way, is moving towards a single injection. We're clinically differentiated with that product. You know, the sales force that we have that drives and sells around the private payer contracts, which we really feel we have a strength of and a little bit different than some of the, you know, competitors out there.
Caitlin Crowded: So could you just maybe break down with <unk> treatment.
Speaker Change: Locations with them.
Speaker Change: Yeah, no problem so hum.
Speaker Change: That's helpful.
Speaker Change: Oh, Yeah. Caitlin this is mark Thank you for the question within the within pain treatments.
Speaker Change: Obviously our portfolio.
Speaker Change: A significant percentage of our revenue was enduro lane, which we continue to be really successful with one the market moves that way is moving towards a single injection homeward clinically differentiated with that product.
Speaker Change: The sales force that we have that drives in cells around the private payer contracts, which we really feel we have a strength, though but a little bit different than some of the.
Speaker Change: Competitors out there we look at Johnson.
Mark Singleton: We look at Gelson, you know, that's a lot more price sensitive product than what Duralane is. And we've, you know, continued to be very disciplined and measured in the opportunities that we engage in with that. So it's, you know, it's more declining from the overall revenue growth year over year. But, you know, part of that is moving into Gelson as well. And so that's where, you know, some of the, over this isn't the new news for 2025 or 2024, but it is a little more price sensitive. But we continue to, you know, participate in that market and, you know, have some headwinds there.
Speaker Change: That's a lot more price sensitive product and then what <unk> and we've continued to be very disciplined and measured in the opportunities that we engage in with that so it's a.
Speaker Change: It's more a declining from our overall revenue growth year over year, but part of that is moving into Charleston as well.
Speaker Change: And so that's where some of the over this isn't new news for 2020, five or 'twenty 'twenty four but it isn't a little more price sensitive, but we continue to you know.
Speaker Change: Dissipate in that market.
Speaker Change: Perhaps some headwinds there, but overall, we feel strong about the portfolio at schuh parts continues to be a steadfast product up year over year. It continues to be a strong.
Mark Singleton: But overall, we still feel strong about the portfolio and Suparts, you know, continues to be a steadfast product year over year and continues to be a strong part of the portfolio.
Speaker Change: <unk>.
Rob: This is Caitlin, this is Rob. Just to clarify there, Mark meant Chelsen transitioning into Duralink, just for clarity. Oh, sorry. Yes, you're saying the the revenue from that over time kind of just transitioning more into Duralane. Yeah, just, you know, in line with the overall category of shifting to single injection, but also our efforts internally are to continue to shift to Duralane, just given, again, the very strong combination that we have with that business. Got it, got it. Thank you.
Rob: Caitlin This is Rob just to clarify there markman jetson.
Speaker Change: Transitioning into Darling just for clarity.
Speaker Change: Oh, sorry, yes, there were some Uh huh.
Speaker Change: Revenue from that overtime.
Speaker Change: This one one call.
Speaker Change: Carolyn.
Speaker Change: Yeah, just you know and in line with the overall category of shifting to single injection, but also our efforts internally are too to continue to shift too.
Speaker Change: To Darling mm just given again, the very strong combination that we have for that business.
Speaker Change: Got it.
Speaker Change: I'm gonna have to sit there and that's the case.
Rob: And then Rob, just with your expertise, you've really highlighted OUS as an opportunity going forward. Any more color on how you will drive OUS expansion in 2025 and beyond? Yeah, thanks for the question. Yeah, we continue to be really optimistic about the international business. We're bringing in a new person to lead our international business. We'll join shortly to leverage the big opportunity that's in front of us. But at the same time, what I recognized last year is that it's going to take more work and more time than just 2024 alone. So very optimistic about it.
Speaker Change: O U S as an opportunity going forward any more color on how much I owe you referenced.
Speaker Change: Pumps in 'twenty and beyond.
Speaker Change: Yeah. Thanks for the question Yeah, we continue to be really optimistic about the international business, we're bringing in a new person to lead our international business Oh, joining shortly to leverage the big opportunity that's in front of us but at the same time when I recognized last year is that it's going to take a more work and more time.
Speaker Change: And.
Speaker Change: And then just a 2024 alone so a.
Speaker Change: Very very optimistic about it but we're going to do is be quite targeted in our geographic expansion internationally I mentioned, a number of times that we want to make high ROI investments and with international Yeah. That's critical to make sure we understand the markets, which businesses are more most eligible for those markets and what our specific go to market strategy has been.
Rob: What we're going to do is be quite targeted in our geographic expansion internationally. I mentioned a number of times that we want to make high ROI investments. And with international, yeah, that's critical to make sure we understand the markets, which businesses are most eligible for those markets, and what our specific go-to-market strategy is before we start to put the investments in place to drive that accelerated growth. So overall, optimistic about it and excited for the new leader to start as well.
Speaker Change: Before we start to put the investments in place to drive that accelerated growth. So overall I'm optimistic about it and are excited for the new leader to start as well.
Rob: Awesome, and then just one more for me, on ultrasonics, you know, you talked about expanding to general and neurosurgery, what's the timeline for this opportunity? Well, we already have the portfolio for both neuro and for general surgery, and we have a presence in those segments right now. But what we've been primarily focused on is the spine segment, given both its size and our bone cutting technology. So just to make sure that we don't dilute our resources, we've been mostly focused on that segment. We started to introduce to the team this year the opportunities that exist within neuro and general surgery.
Speaker Change: Awesome.
Speaker Change: Hum on Ultrasonics, you know you talked about general surgery, what's the timeline for those opportunities.
Yeah, well, we already have the portfolio for both neuro and for general surgery, and we have a presence in those segments right now.
Speaker Change: But what we've been primarily focused on and this is the spine segment given both the size and in our bone cutting technology. So just to make sure that we don't dilute our resources, we've been mostly focused on that segment and we started to introduce her to the team this year the opportunities that exist within neuro.
Speaker Change: And in general surgery.
Rob: And so we'll start penetrating those segments. But again, this will be the number one priority for us by far will remain in the spine segment.
Speaker Change: And so we'll start penetrating those segments, but again this will be.
Speaker Change: Are the number one priority for us by far will remain in the spine segment.
Rob: What I would expect is that in the outer years in 2026 and beyond, that we ramp up more seriously in those segments. Thanks so much. Thank you.
Speaker Change: Would expect is that in the outer years, 'twenty 'twenty six and beyond that we ramp up more seriously in those segments.
Speaker Change: Thanks, so much.
Speaker Change: Thank you.
Robert Claypoole: This concludes our question and answer session. I would like to turn the conference back over to Rob Claypoole for any closing remarks. Okay, thanks everyone for your interest in Bioventus. Once again, we delivered a strong performance throughout our business in the fourth quarter, and we are confident in our ability to build on our momentum to deliver above market revenue growth, improve profitability, and accelerate our cash flow to create significant shareholder value. Thanks for joining today.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Rob Clay Poole for any closing remarks.
Speaker Change: Okay. Thanks, everyone for your interest in bio Ventas. Once again, we delivered a strong performance throughout our business in the fourth quarter and we are confident in our ability to build on our momentum to deliver above market revenue growth improve profitability and accelerate our cash flow to create significant shareholder value. Thanks for joining today.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect. Title Microsoft Office Word Document MSWordDoc Word.Document.8
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