Q1 2025 Bioventus Inc Earnings Call
Good day and welcome to the bio Ventas first quarter 2025 conference call all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone and Swift draw. Your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Dave Crawford. Please go ahead Sir.
Speaker Change: Thanks, Chuck and good morning, everybody and thanks for joining us it's my pleasure to welcome you to the bottom of that 2025 first quarter earnings conference call.
Rob <unk>: With me. This morning are Rob <unk>, President and CEO, and Mark <unk> Senior Vice President and CFO.
Rob <unk>: Bob will begin his remarks with an update on our business at our 2025 priorities and then provide a brief discussion on the current macro environment and.
Rob <unk>: Then Mark will review, our first quarter results and discuss our outlook, including our 2025 financial guidance.
Rob <unk>: Finish the call with Q&A.
Rob <unk>: <unk> for today's call is available on the investors section of our website <unk> Dot com.
Rob <unk>: 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 Securities and Exchange Commission, including <unk>.
Rob <unk>: Item, one a risk factors of the Companys Form 10-K for the year ended December 31, 2024, as such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission.
Rob <unk>: You are cautioned not to place undue reliance upon any forward looking statements, which speak only as the date made although the company may voluntarily do so from time to time. It 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.
Rob <unk>: 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 generally refer to these as non-GAAP or adjusted financial measures.
Rob <unk>: Closures about.
Rob <unk>: 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 <unk> Dot Com and now I will turn the call over to Rob.
Rob <unk>: Thank you Dave Good morning, everyone and thanks for joining our call today I'm pleased to report that in the first quarter. The violent the team continued to successfully execute our plan maintained strong momentum and delivered yet another quarter of solid financial results as we help patients recover so they can live life to the fullest.
Rob <unk>: First quarter revenue of $124 million was in line with our internal expectations and reflected above market organic growth of 5% as a reminder, our Q1 revenue growth reflects a comparison to strong prior year results with above normal orders by certain distributors at the end of last year.
Rob <unk>: Adjusted earnings of eight <unk> per share increased 33%, reflecting the strength of our peer leading gross margin prudent investment in key growth initiatives and lower interest expense.
Rob <unk>: Even with increased uncertainty in the macro environment, we do not see a material impact from tariffs at this time and we remain well positioned for a second half acceleration in our growth with a strong focus on disciplined execution across the entire buyback. This organization as a result, we are reiterating our full year revenue.
Speaker Change: Adjusted EBITDA and adjusted earnings per share guidance.
Speaker Change: Now, let's take a closer look at our first quarter results.
Speaker Change: And provide an update on our business across the three priorities that I introduced at the start of the year.
Speaker Change: Driving above market revenue growth, expanding our profitability and accelerating free cash flow generation.
Speaker Change: With respect to our first priority driving above market revenue growth starting with surgical solutions.
Speaker Change: Revenue advanced 7% driven by double digit growth in ultrasonics, where we continued to see substantial growth from market expansion with new capital placements.
Speaker Change: Our value proposition of enhanced precision and control for surgeons reduced patient blood loss and increased operating room efficiency continues to resonate well with surgeons and hospital administrators.
Speaker Change: And restorative therapies estrogen maintained its momentum highlighted by high single digit growth in the U S.
Speaker Change: Excited about this performance as it validates our approach to drive the business with higher focus increased investment and improved commercial fundamentals.
Speaker Change: As we look to the rest of the year, we believe that X gene has the ability to sustain this level of growth.
Speaker Change: And in pain treatment growth continues to be driven by double digit growth in neuro Lane. We previously as we've previously discussed we expect pain treatments growth to accelerate in the second half of the year as we move past challenging comparisons to the prior year and realize the benefit from recent account wins.
Speaker Change: Before transitioning to our second focus area I am excited to share that we are expanding our pain treatments portfolio with the recent addition of a platelet rich plasma or PRP systems.
Speaker Change: As we've mentioned in the past, we will only add to our portfolio with World class technology that is synergistic with our patient base mission and our existing channels and call points.
Speaker Change: These criteria in mind during the first quarter, we signed an agreement with apex biologics to be the exclusive distributor of their excel PRP system in the U S for orthopedics and sports Medicine.
Speaker Change: CRP is a large and fast growing market and our research indicates that the majority of surgeons using our HMA treatment also use <unk> in their practice. So clearly we believe the opportunity in PRP is synergistic with our sales force.
Speaker Change: The <unk> system is designed for increased physician efficiency and precision.
Speaker Change: As it reduces the procedural time and provides a customizable treatment solution for different patient applications.
Speaker Change: We believe these factors offer a significant competitive advantage.
Speaker Change: On the <unk> revenue impact for 2025 is expected to be immaterial. We are excited about this portfolio expansion and adding another potential growth driver that leverages, our existing commercial leadership and footprint.
Speaker Change: Turning to our second focus area expanding profitability, we continue to strongly believe that our peer leading gross margin combined with the expected acceleration of revenue growth in the second half of the year will enable us to achieve at least 100 basis points of adjusted EBITDA margin expansion for the year.
Speaker Change: Even when considering the macro environment as we are prepared to swiftly adapt and prioritize spending if needed to help ensure we achieve this goal.
Speaker Change: And with respect to our third focus area consistent with what we've shared in the past we expect to nearly double cash from operations. This year compared to last year. It is customary to see a significant acceleration in cash flow starting in the second quarter and we are already seeing the drivers supporting this improvement with a reduction in interest expense and onetime cash costs.
Speaker Change: Let me conclude by reiterating that although the macroeconomic environment has become more dynamic since our last earnings call. Just two months ago. At this time, we do not see a material impact based on the current schedule of expected tariffs.
Speaker Change: Lastly, we're being vigilant and continuously monitoring and planning for any potential changes.
Speaker Change: And to note that <unk> has established a solid foundation, which we believe provides flexibility in navigating and uncertain macro environment and allows us to sustain the momentum that we've generated over the past two years.
Speaker Change: We have significantly enhanced our financial liquidity and cash flow generation.
Speaker Change: We've assembled a diverse portfolio of short mid and long term growth drivers in each business is well positioned as the market or growth leader in large growing markets with favorable demographic trends.
Speaker Change: Almost all of our revenue is comprised of the consumable products or therapies, many of which helped to delay more expensive procedures and finally, our dedicated team has displayed agility and resiliency and responding to change while driving strategic improvements challenges are not new to pilot to buy ventas and given our substantial and ongoing progress in <unk>.
Speaker Change: Elevating our team our processes and our performance we view the current climate at another opportunity to distinguish ourselves from our competition and how we serve our customers and patients globally. As we continue marching towards becoming a $1 billion high growth high margin high cash flow company that generates significant value for all of our stakeholders.
Mark: Now I'll turn the call over to Mark.
Mark: Thanks, Rob and good morning, everyone. Let me begin by saying that I am pleased with the start of the year and the progress we are making to improve and strengthen our company at our performance turning to our headline results for the first quarter revenue of $124 million declined 4%, reflecting the impact of our advanced <unk>.
Mark: Rehabilitation divestiture at the end of last year adjusting for the divestiture organic growth was 5% with solid growth across all three businesses organic growth for the quarter was below our annual expectation given two fewer selling days and above normal orders by certain distributors.
Mark: At the end of last years.
Mark: Adjusted EBITDA of over $19 million was $3 million lower than the prior year, primarily due to the divestiture and an unexpected $1 $1 million foreign currency loss from the revaluation of payables on our balance sheet the currency loss related to payables designated in Swedish krona.
Mark: Appreciated 11% in the quarter.
Mark: Let me provide some additional commentary on our quarterly revenue.
Mark: Surgical solutions revenue grew by 7% driven by strong double digit growth in ultrasonics with capital sales in the U S up by more than 50% compared to the prior year as expected bone graft substitutes growth slows, but is expected to accelerate in the second half of the year due to our recently added distributors.
Mark: <unk>.
Mark: And pain treatments revenue increased 4% compared to the prior year as certain distributors bought less this quarter following higher purchases at the end of last year. This impacted growth by approximately three to four percentage points.
Mark: Shifting to restorative therapies, the divestiture of our advanced rehabilitation business resulted in a 35% decline in revenue.
Mark: Excluding the impact of the divestiture organic growth was 4% as we maintained above market growth in oxygen demand with demonstrated improvement in commercial effectiveness and sales force execution.
Mark: Finally revenue from our international segment declined 12% compared to the prior year, while organic growth was 1% double digit growth across surgical solutions was offset by lower sales of estrogen due to the timing of certain distributor orders shifting to the second quarter.
Mark: Moving down the income statement adjusted gross margin of 75% was 70 basis points lower than last year due to channel mix and higher freight costs.
Mark: Adjusted total operating expenses declined $3 billion of increased investment in our growth initiatives was more than offset by direct expense savings related to the advanced rehabilitation divestiture.
Mark: Now for further detail on our bottom line financial metrics adjusted operating income decreased to $18 million from $20 million in the prior year.
Mark: Adjusted net income of $6 million increased 32% compared to $5 billion in the prior year. This growth is a result of the reduction in interest expense, which was $3 million lower than last year.
Mark: And finally adjusted earnings were <unk> <unk> per share for the quarter, an increase of two cents compared to the prior year.
Mark: Shifting to the balance sheet and cash flow statement, we ended the quarter with $23 million in cash on hand, and $346 million in outstanding debt, which included $10 million drawn on our revolving credit facility.
Mark: As expected operating cash flow was an outflow totaling $19 million given the timing of employee annual bonus payments and other annual costs like our insurance premiums absent.
Mark: Absent these outflows of approximately $27 million operating cash flow for the first quarter would have been positive.
Mark: Consequently, we are confident that cash from operations will accelerate in the second quarter and throughout the remainder of the year and we continue to expect 2025 cash from operations nearly doubled compared to 2024.
Mark: In addition, given the projected strong cash flow and increase in adjusted EBITDA, We expect our net leverage to decrease below two five times by the end of 2025.
Mark: Finally, we are pleased to be reaffirming our 2025 financial guidance, which was provided on March 11th. This includes organic revenue growth of 6% to 8% adjusted EBITDA of $112 million, just $116 million and EPS of <unk> 64 to 68.
Mark: This full year financial guidance reflects expected strong acceleration in the second half of the year.
Mark: While we continue to closely monitor the macro environment for any signs of deviations of medical procedural volume and changing tariff landscape. At this time, we believe the anticipated impact is minimal and manageable.
Mark: Full year 2025 guidance incorporates the impact of recent tariffs, which is slightly less than $1 million as many of our products, including raw materials of sub components are made in the U S and our <unk> therapies currently fall under that exemption from pharmaceutical products.
Mark: In closing, we continue to execute our business plan and believe we are well positioned to create shareholder value through strengthening our growth.
Mark: <unk> ability and cash flow over the coming quarters and the long term.
Speaker Change: Operator, please open the line for questions.
Mark: We will now begin the question and answer session.
Mark: To ask a question you May Press Star then one on your Touchtone phone.
Mark: If youre using a speakerphone please pick up your handset before pressing the keys.
Mark: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Mark: And the first question will come from Keith Knickerbocker with Craig Hallum. Please go ahead.
Mark: Good morning, Thanks for taking the questions I just wanted to started pain, maybe kind of a bigger picture kind of competitive question can you just kind of give us an update on the market and how you see it I mean are you seeing kind of any increased competition in the single injection space.
Mark: Kind of give us an update on the multi shot I know, it's a little bit more of a competitive environment out there there.
Mark: And then can you just kind of level set us was there any you know price benefit for <unk> in the quarter on a year over year basis, and then kind of how you expect the year to kind of play out from that perspective.
Speaker Change: Hey, Jay since Rob Yeah on the first one we continued to see.
Speaker Change: A shift from multi injection to single injection.
Speaker Change: In this space.
Speaker Change: From our perspective that that's fine Bermuda for reasons, we have a really strong clinical value proposition with Darlene and strong contract backbone and those two combined with our dedicated commercial organization.
Speaker Change: We're driving good growth in that space again double digit growth in the first quarter.
Speaker Change: Also carries higher profitability for us at the single injection space. So we expect that to continue to take place.
Speaker Change: From a competitive standpoint.
Speaker Change: <unk> is that we've had in the past still exist today, we feel good about competing against them given that combination that I, just mentioned with our clinical value proposition and contracts and.
Speaker Change: And really a dedicated sales force so.
Mark: Regarding the pricing I'll turn that over to Mark.
Mark: Yes, Thanks, Jason when you look at our CFS price youre pointing to increased year over year, but as we've discussed before there's a lot of differences between CMS and our financial ASB over the long term Directionally. These are.
Mark: We'll come together trend in the same way, but in the short term there's lots of different things that can affect it like the payments from a rebate perspective with CMS is based on cash.
Mark: And the ASP from a financial perspective is based on accruals, but when you have lots of dynamic dynamics with the <unk>.
Mark: Distributor inventory that can that can influence such from a quarter on quarter basis, but overall from a specifically thorough in the CMS ASP was up 10%, but from a financial ASB. It was just slightly positive.
Speaker Change: Got it thanks, and then just could you remind us kind of acute tougher Q2 comp for pain, and what was driving that sorry, if I missed it.
Speaker Change: And then you had mentioned some account wins can you just kind of discuss those and the increased detail just to whats kind of supporting that second half ramp that you're expecting growth.
Speaker Change: Yes, so just regarding Q2 four for.
Speaker Change: This category again last year at this time, a competitor had supply challenges that led to some additional volume and we also had some of the favorable.
Speaker Change: The rebate accrual and so that's the again some of these onetime comparable as that will be out of the way as we move to the to the second half of the year and then what was the second part of the question Chase.
Speaker Change: You had mentioned some recent account wins and kind of that supporting the acceleration in the second half of the year for pain.
Chase: Can you just kind of give us more detail there on what supports it.
Speaker Change: Yes. Thank you.
Chase: So I.
Chase: I'm not going to go into detail on those because they are fresh wins and so what we're moving right now towards us.
Chase: Converting those accounts and penetrating them to increased volume, but promising promising wins and then in terms of what's driving that and it really keeps going back to the same combination that we've mentioned and we see it reinforced quarter by quarter, which is where there's clear clinical differentiation with Darrow Lane and yes, the more doctors and patients that experience at the mall.
Chase: Well known that clinical differentiation becomes and in addition to that we're leveraging the strong contract presence that we have which still gives us an opportunity to drive significant penetration and volume in the market and.
Chase: We haven't really hungry team that's out there focused on this each day. So that combination is leading to those account wins the other thing that I'd mentioned.
Chase: And that we've mentioned in the past is we're getting.
Chase: Smarter in terms of our targeting which accounts that we want to go after in order to drive.
Chase: Volume in the quarters and the years ahead. So it's a combination of those that are leading to these account wins.
Chase: Just last for me.
Chase: It sounds like pharmaceutical tariffs or incoming.
Chase: Can you.
Chase: Give us your assumptions around your exposure, there and kind of how you see that playing out in any any sort of avenues for you to kind of adjust to any coming tariffs there.
Chase: Yes.
Chase: As Mark mentioned farmers currently excluded.
Chase: I think this is one of those spaces, where again I'm speculating on a hypothetical is probably not productive just given how much things are changing day to day week to week, but yes.
Chase: But I will emphasize that we are vigilant monitoring the changing environment and we've already planned for a number of different scenarios.
Chase: Right now we're focused more on what we can control, which is a lot like growing above the market and expanding our profitability and increasing our cash flows.
Chase: If something changes in that area, what we're starting to talk to you about it.
Rob <unk>: Thanks, Rob.
Chase: Thank you.
Robbie Marcus: The next question will come from Robbie Marcus with JP Morgan. Please go ahead.
Robbie Marcus: Oh, great good morning, and thanks for taking my questions.
Robbie Marcus: Just wanted to follow up there.
Robbie Marcus: You guided to first quarter below the low end at six to eight organic came in at five.
Robbie Marcus: You touched on some of it in the last few questions, but just maybe on organic growth and.
Robbie Marcus: EBITDA just speak to the level of confidence and visibility you have to the acceleration in Q3 <unk>.
Speaker Change: Yes. Thanks Ravi. This is this is market really when we look at the second half of the year or I guess all of the remaining three quarters in front of us and we've talked a little bit about from a first quarter perspective that bgs was going to be slow in the first half of the year, we expect that to start accelerating in the back half of the year.
Speaker Change: From a seasonality perspective Q2 last year was our biggest quarter, So Q2, and Q4 really in front of us.
Speaker Change: Talked about the recent account wins that we have.
Speaker Change: From an EBITDA perspective, you can really look at the big jump in EBITDA. We had from Q1 to Q2 in 2024, we expect the same in 2025, and then accelerate from there and so as the sales increase throughout the year.
Speaker Change: Don't expect big spikes in an expense other than kind of a correlation of commissions that would go with that and so as the sales drive throughout the year EBITDA will drop to the bottom line.
Speaker Change: <unk> focused on increasing our margin by 100 basis points for that as well.
Speaker Change: And then also the cash flow acceleration nearly doubled from last time, so really just gets into the continue executing like like we have over the last couple of years.
Speaker Change: Hi, Rob I'll just add on.
Speaker Change: That growth acceleration in the back half will as mark alluded to will occur naturally as we move past some of these unfavorable comparables.
Speaker Change: We see that in the first quarter with double digit growth underlying double digit growth in ultrasonics, nearly double digit growth in <unk> in the U S. And these have been some of the key focus areas for us.
Speaker Change: Validating our approach and once those those unfavorable comparables in the first half of the year out of the way I think we will see that those growth drivers shine a little brighter.
Speaker Change: Great and <unk>.
Speaker Change: You've made really.
Speaker Change: Good improvements in lowering leverage over the past few years, maybe just speak to where you are in that journey and the plans for the rest of the year. Thanks a lot.
Speaker Change: Yes, I think we're.
Speaker Change: Right now right around three in the quarter.
Speaker Change: Leverage ratio and expect that to get to around two and a half by the by the end of the year.
Speaker Change: So really feel good about it again from driving revenue and expanding our margin.
Speaker Change: 100 basis points and delivering the cash flow, we expect to be able to achieve that as we accelerate through the last three quarters of the year.
Speaker Change: Appreciate it thanks a lot.
Caitlin Cronin: The next question will come from Caitlin Cronin with Canaccord. Please go ahead.
Caitlin Cronin: Hey, guys, it's Mikael on for Caitlin and thanks for taking my question.
Caitlin Cronin: Kind of piggybacking off the last question can you maybe talk about like what level of leverage you become more constructive on M&A opportunity.
Caitlin Cronin: Yes. This is Rob I'll start by saying that.
Caitlin Cronin: That's kind of the premise there is a portfolio and we felt really good about the portfolio that we have right now and at our ability to drive.
Caitlin Cronin: Sure mid and long term growth.
Caitlin Cronin: And then on top of the existing portfolio have for <unk>.
Caitlin Cronin: Layering additional growth drivers, which are which we're really excited about as well we are in the.
Caitlin Cronin: In the back half of this year going through FDA clearance right now we have game changing technology for our peripheral nerve stimulation business.
Caitlin Cronin: Significant untapped opportunity in our international business.
Caitlin Cronin: As a as mentioned today.
Sure.
Caitlin Cronin: Now going to be in the PRP space, which opens up a large and growing market for us. So feel really good about the portfolio that we have and so the focus from <unk>.
Caitlin Cronin: Capital deployment standpoint is really to keep reducing leverage two to get it below two.
Caitlin Cronin: <unk> eventually and that's the that's the focus for us on.
Caitlin Cronin: Nonetheless as opportunities come along.
Caitlin Cronin: <unk> are really synergistic with our mission and synergistic with our current business footprint and the channels and call points that we have we're going to go after those if they help us achieve our goals, which is driving growth and profitability and cash flow and that's what you saw with the PRP announcement today. So that's our focus.
Caitlin Cronin: At this point.
Speaker Change: Got it thanks, that's great.
Caitlin Cronin: One more for me.
Caitlin Cronin: Hum.
Caitlin Cronin: And interest prior to then.
Caitlin Cronin: Maybe one or something.
Caitlin Cronin: Thank you.
Caitlin Cronin: Yes.
Speaker Change: Your line broke up a little bit I believe it was a question about the <unk> business.
Caitlin Cronin: Oh, yes, sorry.
Caitlin Cronin: Business manager started and it's now what are some of the initiatives that they are driving and early in the early days.
Caitlin Cronin: Yes. Thank you. So you just started this month actually and really excited about that I've mentioned, a couple of times in the past that.
Caitlin Cronin: Our international business is still quite small even though many of the products that we have are eligible to drive significant growth in.
At this type of business when when you have.
Caitlin Cronin: A ton of opportunity but.
Caitlin Cronin: But you are early in the evolution and we really need a leader who can fly high and low and at the same time driving.
Caitlin Cronin: Powerful overarching growth strategy, but also what's really disciplined prioritization and very hands on leadership and improving commercial execution country by country. So that's what that's why we brought on a new leader and Thats. What he is going to do so we're going to again not just take abroad.
Caitlin Cronin: Random approach, but Barry prioritize in terms of which countries, which products refining the go to market approach, putting the investments in the right place to unlock more significant growth going forward for our international business.
Caitlin Cronin: Okay. Thank you.
Caitlin Cronin: Yes.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Rob Clay Poole for any closing remarks. Please go ahead Sir.
Speaker Change: Okay. Thanks, everyone for your interest in Ventas and once again, we delivered a solid performance throughout our business in the first quarter and we are confident in our ability to build on our momentum to deliver above market revenue growth improved profitability and accelerate our cash flow to create significant shareholder value.
Speaker Change: Thanks for joining the call.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Good day and welcome to the bio Ventas first quarter 2025 conference call all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press Star then one on your Touchtone phone and flip to all your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Dave Crawford. Please go ahead Sir.
Speaker Change: Thanks, Chuck and good morning, everybody and thanks for joining us it's my pleasure to welcome you to the <unk> 2025 first quarter earnings Conference call with me. This morning are Rob <unk>, President and CEO, and Mark Singleton Senior Vice President and CFO.
Speaker Change: Bob will begin his remarks with an update on our business and our 2025 priorities and then provide a brief discussion on the current macro environment.
Mark Singleton: Then Mark will review, our first quarter results and discuss our outlook, including our 2025 financial guidance.
Finish the call with Q&A.
Mark Singleton: <unk> for today's call is available on the investors section of our website <unk> Dot com.
Mark Singleton: 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 Securities and Exchange Commission, including.
Mark Singleton: Item, one a risk factors of the Companys Form 10-K for the year ended December 31, 2024, as such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission.
Mark Singleton: You are cautioned not to place undue reliance upon any forward looking statements, which speak only as the date made.
Mark Singleton: Although the company may voluntarily do so from time to time and it 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 Singleton: Call will also include reference to certain financial measures that are not calculated in accordance with U S. Generally accepted accounting principles or GAAP, we generally refer to these as non-GAAP or adjusted financial measures important disclosures about.
Mark Singleton: 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 <unk> Dot Com and now I will turn the call over to Rob.
Rob <unk>: Thank you Dave Good morning, everyone and thanks for joining our call today I'm pleased to report that in the first quarter. The <unk> team continued to successfully execute our plan and maintained strong momentum and delivered yet another quarter of solid financial results as we help patients recover so they can live life to the fullest.
Rob <unk>: First quarter revenue of $124 million was in line with our internal expectations and reflected above market organic growth of 5% as a reminder, our Q1 revenue growth reflects a comparison to strong prior year results with above normal orders by certain distributors at the end of last year.
Rob <unk>: Adjusted earnings of eight <unk> per share increased 33%, reflecting the strength of our peer leading gross margin prudent investment in key growth initiatives and lower interest expense.
Rob <unk>: Even with increased uncertainty in the macro environment, we do not see a material impact from tariffs at this time and we remain well positioned for our second half acceleration in our growth with a strong focus on disciplined execution across the entire buy Ventas organization. As a result, we are reiterating our full year revenue.
Rob <unk>: Adjusted EBITDA and adjusted earnings per share guidance.
Rob <unk>: Now, let's take a closer look at our first quarter results.
Rob <unk>: And provide an update on our business across the three priorities that I introduced at the start of the year.
Rob <unk>: Driving above market revenue growth, expanding our profitability and accelerating free cash flow generation.
Rob <unk>: With respect to our first priority driving above market revenue growth and starting with surgical solutions.
Rob <unk>: Revenue advanced 7% driven by double digit growth in ultrasonics, where we continued to see substantial growth from market expansion with new capital placements.
Rob <unk>: Our value proposition of enhanced precision and control for surgeons reduced patient blood loss and increased operating room efficiency continues to resonate well with surgeons and hospital administrators.
Rob <unk>: In restorative therapies estrogen maintained its momentum highlighted by high single digit growth in the U S. We're excited about this performance as it validates our approach to drive the business with higher focus increased investment and improved commercial fundamentals.
Rob <unk>: As we look to the rest of the year, we believe that Nextgen has the ability to sustain this level of growth.
Rob <unk>: And in pain treatment growth continues to be driven by double digit growth in neuro Lane. We previously as we've previously discussed we expect pain treatments growth to accelerate in the second half of the year as we move past challenging comparisons to the prior year and realize the benefit from recent account wins.
Rob <unk>: Before transitioning to our second focus area I'm excited to share that we are expanding our pain treatments portfolio with the recent addition of a platelet rich plasma or PRP system. As we have mentioned in the past, we will only add to our portfolio with world class technology that is synergistic with our patient base mission and our exist.
Rob <unk>: <unk> channels and call points.
Rob <unk>: These criteria in mind during the first quarter, we signed an agreement with apex biologics to be the exclusive distributor of their excel PRP system in the U S for orthopedics and sports Medicine.
Rob <unk>: <unk> is a large and fast growing market and our research indicates that the majority of surgeons using our HAE treatments also use <unk> in their practice. So clearly we believe the opportunity in PRP is synergistic with our sales force.
Rob <unk>: Further the <unk> system is designed for increased physician efficiency and precision.
Rob <unk>: Is it reduces the procedural time and provides a customizable treatment solution for different patient applications.
Rob <unk>: We believe these factors offer a significant competitive advantage.
Rob <unk>: While the PRP revenue impact for 2025 is expected to be immaterial. We are excited about this portfolio expansion and adding another potential growth driver that leverages, our existing commercial leadership and footprint.
Rob <unk>: Turning to our second focus area expanding profitability, we continue to strongly believe that our peer leading gross margin combined with the expected acceleration of revenue growth in the second half of the year will enable us to achieve at least 100 basis points of adjusted EBITDA margin expansion for the year.
Rob <unk>: Even when considering the macro environment as we are prepared to swiftly adapt and prioritize spending if needed to help ensure we achieve this goal.
Rob <unk>: And with respect to our third focus area consistent with what we've shared in the past we expect to nearly double cash from operations. This year compared to last year. It is customary to see a significant acceleration in cash flow starting in the second quarter and we are already seeing the drivers supporting this improvement with a reduction in interest expense and one time cash cost.
Rob <unk>: Yeah.
Rob <unk>: Let me conclude by reiterating that although the macroeconomic environment has become more dynamic since our last earnings call. Just two months ago. At this time, we do not see a material impact based on the current schedule of expected tariffs. Nevertheless, we're being vigilant and continuously monitoring and planning for any potential changes.
Rob <unk>: It's important to note that <unk> has established a solid foundation, which we believe provides flexibility in navigating and uncertain macro environment and allows us to sustain the momentum that we've generated over the past two years.
Rob <unk>: We have significantly enhanced our financial liquidity and cash flow generation.
Rob <unk>: Had assembled a diverse portfolio of short mid and long term growth drivers in each business is well positioned as the market or growth leader in large growing markets with favorable demographic trends.
Almost all of our revenue is comprised of the consumable products or therapies, many of which helped to delay more expensive procedures and finally, our dedicated team has displayed agility and resiliency and responding to change while driving strategic improvements challenges are not new to pilot to ventas and given our substantial and ongoing progress in <unk>.
Rob <unk>: <unk> our team our processes and our performance we view the current climate at another opportunity to distinguish ourselves from our competition and how we serve our customers and patients globally. As we continue marching towards becoming a $1 billion high growth high margin high cash flow company that generates significant value for all of our stakeholders.
Mark Singleton: Now I'll turn the call over to Mark.
Mark Singleton: Thanks, Rob and good morning, everyone. Let me begin by saying that I am pleased with the start of the year and the progress we are making to improve and strengthen our company and our performance turning to our headline results for the first quarter revenue of $124 million declined 4%, reflecting the impact of our advanced <unk>.
Mark Singleton: Rehabilitation.
Mark Singleton: Stitcher at the end of last year adjust.
Mark Singleton: Adjusting for the divestiture organic growth was 5% with solid growth across all three businesses organic growth for the quarter was below our annual expectation given two fewer selling days and above normal orders by certain distributors at the end of last year's adjusted EBITDA of over 19 million.
Mark Singleton: <unk> was $3 million lower than the prior year, primarily due to the divestiture and an unexpected $1 $1 million foreign currency loss from the revaluation of payables on our balance sheet.
Mark Singleton: Currency loss related to payables designated in Swedish krona, which appreciated 11% in the quarter.
Mark Singleton: Now let me provide some additional commentary on our quarterly revenue.
Mark Singleton: Surgical solutions revenue grew by 7% driven by strong double digit growth in ultrasonics with capital sales in the U S up by more than 50% compared to the prior year unexpected bone graft substitutes growth slowed but is expected to accelerate in the second half of the year due to our recently added distributors.
Mark Singleton: <unk>.
Mark Singleton: And pain treatments revenue increased 4% compared to the prior year as certain distributors bought less this quarter following higher purchases at the end of last year. This impacted growth by approximately three to four percentage points.
Mark Singleton: Shifting to restorative therapies, the divestiture of our advanced rehabilitation business resulted in a 35% decline in revenue excluding.
Mark Singleton: Excluding the impact of the divestiture organic growth was 4% as we maintained above market growth in exigent demand with demonstrated improvement in commercial effectiveness and sales force execution.
Mark Singleton: Finally revenue from our international segment declined 12% compared to the prior year, while organic growth was 1% double digit growth across surgical solutions was offset by lower sales of estrogen due to the timing of certain distributor orders shifting to the second quarter.
Mark Singleton: Moving down the income statement adjusted gross margin of 75% was 70 basis points lower than last year due to channel mix and higher freight costs.
Mark Singleton: Adjusted total operating expenses declined $3 billion of increased investment in our growth initiatives was more than offset by direct expense savings related to the advanced rehabilitation divestiture.
Mark Singleton: Now for further detail on our bottom line financial metrics adjusted operating income decreased to $18 million from $20 million in the prior year.
Mark Singleton: Adjusted net income of $6 million increased 32% compared to $5 billion in the prior year. This growth is a result of the reduction in interest expense, which was $3 million lower than last year.
Mark Singleton: Finally, adjusted earnings were <unk> <unk> per share for the quarter, an increase of two cents compared to the prior year.
Mark Singleton: Now shifting to the balance sheet and cash flow statement, we ended the quarter with $23 million in cash on hand, and $346 million in outstanding debt, which included $10 million drawn on our revolving credit facility.
Mark Singleton: As expected operating cash flow was an outflow totaling $19 million given the timing of employee annual bonus payments and other annual costs like our insurance premiums.
Mark Singleton: These outflows of approximately $27 million operating cash flow for the first quarter would have been positive.
Mark Singleton: Consequently, we are confident that cash from operations will accelerate in the second quarter and throughout the remainder of the year and we continue to expect 2025 cash from operations nearly doubled compared to 2024. In addition, given the projected strong cash flow and increase in adjusted EBITDA, We expect our.
Net leverage to decrease below two five times by the end of 2025.
Mark Singleton: Finally, we are pleased to be reaffirming our 2025 financial guidance, which was provided on March 11th.
Mark Singleton: This includes organic revenue growth of 6% to 8% adjusted EBITDA of $112 million.
Mark Singleton: $116 million and EPS of <unk> 64 to 68 cents. This full year financial guidance reflects expected strong acceleration in the second half of the year.
Mark Singleton: While we continue to closely monitor the macro environment for any signs of deviations medical procedural volume and changing tariff landscape. At this time, we believe the anticipated impact is minimal and manageable.
Mark Singleton: Current full year 2025 guidance incorporates the impact of recent tariffs, which is slightly less than $1 million as many of our products, including raw materials of sub components are made in the U S and our <unk> therapies currently fall under that exemption from pharmaceutical products.
Mark Singleton: In closing, we continue to execute our business plan and believe we are well positioned to create shareholder value through strengthening our growth.
Mark Singleton: <unk> ability and cash flow over the coming quarters and the long term.
Mark Singleton: Operator, please open the line for questions.
Mark Singleton: We will now begin the question and answer session.
Mark Singleton: To ask a question you May Press Star then one on your Touchtone phone.
Mark Singleton: If youre using a speakerphone please pick up your handset before pressing the keys.
Mark Singleton: If any time your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Keith Knickerbocker with Craig Hallum. Please go ahead.
Keith Knickerbocker: Good morning, Thanks for taking the questions I just wanted to started paying maybe kind of a bigger picture kind of competitive question can you just kind of give us an update on the market and how you see it I mean are you seeing kind of any increased competition in the single injection space.
Keith Knickerbocker: Kind of give us an update on the multi shot I know, it's a little bit more of a competitive environment out there there.
And then can you just kind of level set us was there any price benefit for <unk> in the quarter on a year over year basis, and then kind of how you expect the year to kind of play out from that perspective.
Keith Knickerbocker: Yeah.
Jay: Hey, Jay since Rob Yeah on the first one we continued to see.
Jay: The shift from multi injection to single injection.
Jay: In this space.
Jay: From our perspective that that's fine for a few different reasons, we have a really strong clinical value proposition with darlene and strong contract backbone and those two combined with our dedicated commercial organization.
Jay: We're driving good growth in that space again double digit growth in the first order.
Jay: Also carries higher profitability for us in the single injection space. So we expect that to continue to take place.
Speaker Change: From a competitive standpoint.
Jay: <unk> is that we've had in the past still exist today, we feel good about competing against them given that combination that I, just mentioned with our clinical value proposition and contracts and <unk>.
Speaker Change: And really a dedicated sales force so.
Jay: Regarding the pricing I'll turn that over to Mark.
Mark Singleton: Yes, Thanks, Jason Yeah. When you look at our CFS price as you are pointing to increased year over year, but as we've discussed before there's a lot of differences between CMS and our financial ASP over the long term Directionally. These are will come together.
Mark Singleton: The other trend in the same way, but in the short term there's lots of different things that can affect it like the payments from a rebate perspective CMS based on cash.
Mark Singleton: And the Asps from a financial perspective is based on accruals and then do you have lots of dynamic dynamics with the distributor inventory that can that can influence those from a quarter on quarter basis, but overall from a specifically thoroughly in the CMS ASP was up 10%, but from a financial ASB. It was just.
Mark Singleton: Slightly positive.
Speaker Change: Got it thanks, and then just could you remind us kind of acute tougher Q2 comp for pain, and what was driving that sorry, if I missed it and then you had mentioned some account wins can you just kind of discuss those and the increased detail just to what's kind of supporting that second half ramp that you're expecting growth.
Speaker Change: Yes, so just regarding Q2 four.
Speaker Change: This category again last year at this time that competitor supply challenges that led to some additional volume and we also had some of the favorable.
Speaker Change: The rebate accrual and so that's the again some of these onetime comparable as that will be out of the way as we move to the to the second half of the year and then what was the second part of the question Chase.
Speaker Change: You had mentioned some of the recent account wins and kind of that supporting the acceleration in the second half of the year for pain.
Speaker Change: Can you just kind of give us more detail there on what supports it.
Speaker Change: Yes. Thank you so it's.
Speaker Change: So I.
Speaker Change: I'm not going to go into detail on those because they are fresh wins and so what we're moving right now towards us is converting those accounts and penetrating them to increase volume, but promising promising wins and then in terms of what's driving that and it really keeps going back to the same combination that we've mentioned and we see it reinforced quarter by quarter, which is where there is clear.
Speaker Change: Clinical differentiation with airline and yes, the more doctors and patients that experience that the more well known that clinical differentiation becomes and in addition to that we're leveraging the strong contract presence that we have which still gives us an opportunity to drive significant penetration volume in the market.
Speaker Change: And then we have a really hungry team that's out there focused on this each day. So that combination is leading to those account wins. The other thing that I've mentioned and I've mentioned that we've mentioned in the past is we're getting.
Speaker Change: Smarter in terms of our targeting which accounts that we want to go after in order to drive.
Speaker Change: Volume in the quarters and the years ahead. So it's a combination of those that are leading to these account wins.
Speaker Change: Just last for me.
Speaker Change: It sounds like pharmaceutical tariffs or incoming can you.
Speaker Change: Give us your assumptions around your exposure, there and kind of how you see that playing out in any any sort of avenues for you to kind of adjust to any incoming tariffs there.
Speaker Change: Yes.
Speaker Change: As Mark mentioned farmers currently excluded.
Speaker Change: I think this is one of those spaces, where again I'm speculating on a hypothetical is probably not productive just given how much things are changing day to day week to week, but.
Speaker Change: But I will emphasize that we are vigilant monitoring the changing environment and we've already planned for a number of different scenarios.
Speaker Change: Now we're focused more on what we can control, which is a lot like growing above market and expanding our profitability and increasing our cash flows.
Speaker Change: If something changes in that area, what we're starting to talk to you about it.
Speaker Change: Thanks, Rob.
Speaker Change: Thank you.
Speaker Change: Next question will come from Robbie Marcus with Jpmorgan. Please go ahead.
Robbie Marcus: Oh, great good morning, and thanks for taking the questions.
Speaker Change:
Speaker Change: Just wanted to follow up there.
Speaker Change: You guided to first quarter below the low end at six to eight organic came in at 5%.
Speaker Change:
Speaker Change: You touched on some of it in the last few questions, but just maybe on organic growth and.
Speaker Change: EBITDA just speak to the level of confidence and visibility you have to the acceleration in <unk>. Thanks.
Speaker Change: Yes. Thanks Ravi. This is this is market really when we look at the second half of the year or I guess the remaining three.
Speaker Change: Three quarters in front of us and we've talked a little bit about from a first quarter perspective that bgs was going to be slow in the first half of the year, we expect that to start accelerating in the back half of the year.
Speaker Change: From a seasonality perspective Q2 last year was our biggest quarter, So Q2, and Q4 really in front of us.
Speaker Change: <unk> talked about the recent account wins that we have.
Speaker Change: From an EBITDA perspective.
Speaker Change: Look at the big jump in EBITDA, we had from Q1 to Q2 in 2024, we expect the same in 2025, and then accelerate from there and so as the sales increase throughout the year, we don't expect big spikes in an expense other than kind of a correlation of commissions that would go with that and so as the sales drive.
Speaker Change: Throughout the year EBITDA will drop to the bottom line and again focused on increasing our margin by 100 basis points for that as well and then also the cash flow acceleration narrow doubled from last time. So really just gets into the continue executing like like we have over the last couple of years.
Rob <unk>: And Rob I'll just add on it.
Rob <unk>: That growth acceleration in the back half will as mark alluded to will occur naturally as we move past some of these unfavorable comparables.
Rob <unk>: See that in the first quarter with double digit growth in Berlin, and double digit growth in ultrasonics, nearly double digit growth in oxygen in the U S. And these have been some of the key focus areas for us. So they are validating our approach and once those those unfavorable comparables in the first half of the year out of the way I think we will see that those growth drivers shine a little brighter.
Speaker Change: Great and you've made really.
Speaker Change: Good improvements in lowering leverage over the past few years, maybe just speak to where you are in that journey and the plans for the rest of the year. Thanks a lot.
Speaker Change: Yes, I think we're.
Speaker Change: Right now right around three in the quarter.
Speaker Change: Leverage ratio and expect that to get to.
Speaker Change: Two and a half by the by the end of the year.
Speaker Change: So really feel good about it again from driving revenue and expanding our margin.
Speaker Change: By 100 basis points and delivering the cash flow, we expect to be able to achieve that as we accelerate through the last three quarters of the year.
Speaker Change: I appreciate it thanks a lot.
Speaker Change: Okay.
Speaker Change: Next question will come from Kevin Cronin with Canaccord. Please go ahead.
Speaker Change: Hey, guys, it's Mikael on for Caitlin and thanks for taking my question.
Speaker Change: Kind of piggybacking off the last question can you maybe talk about like what level of leverage you become more constructive on M&A opportunity.
Speaker Change: Yes. This is Rob I'll start by saying that.
Speaker Change: That's kind of the premise there is portfolio and we felt really good about the portfolio that we have right now and our ability to drive.
Speaker Change: Yes, sure mid and long term growth.
Speaker Change: And then I'm done.
Speaker Change: Of the existing portfolio have four.
Speaker Change: Layering additional growth drivers, which are which we're really excited about as well we haven't been.
Speaker Change: In the back half of this year going through FDA clearance right now we have game changing technology for our peripheral nerve stimulation business.
Speaker Change: Significant untapped opportunity in our international business.
Speaker Change: As mentioned today.
Speaker Change: Sure.
Speaker Change: Now going to be in the PRP space, which opens up a large and growing market for us. So feel really good about the portfolio that we have and so the focus from <unk>.
Speaker Change: Capital deployment standpoint is really to keep reducing leverage two to get it below two.
Speaker Change: <unk> eventually and that's the that's the focus for us.
Speaker Change: Unless you know as opportunities come along that are really centered just stick with our mission.
Speaker Change: <unk> with our current business footprint and the channels and call points that we have.
Speaker Change: We're going to go after those if they help us achieve our goals, which is driving growth and profitability and cash flow and that's what you saw with the <unk> announcement today. So that's our focus at this point.
Speaker Change: Got it thanks, that's great.
Speaker Change: One more from us.
Speaker Change: It has been.
Speaker Change: And interest rather than maybe one or so.
Speaker Change: Ladies.
Speaker Change: Your line broke up a little bit I believe it was a question about the <unk> business.
Speaker Change: Oh, yes, sorry.
Speaker Change: Business manager started and it's now what are some of the initiatives that they're driving in early in the early days.
Speaker Change: Yes. Thank you. So you just started this month actually.
Speaker Change: Really excited about that I've mentioned, a couple of times in the past that.
Speaker Change: Our international business is still quite small even though many of the products that we have are eligible to drive significant growth in.
Speaker Change: At this type of business win when you have.
Speaker Change: You know a ton of opportunity but.
Speaker Change: But your early in the evolution and we really need a leader who can fly high and low at the same time driving.
Speaker Change: Powerful overarching growth strategy, but also what's really disciplined prioritization and very hands on leadership and improving commercial execution country by country. So that's what that's why we brought on a new leader and Thats. What he is going to do so we're going to again not just take a abroad.
Speaker Change: Random approach, but very prioritized in terms of which countries, which products refining the go to market approach, putting the investments in the right place to unlock more significant growth going forward for our international business.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Rob Clay Poole for any closing remarks. Please go ahead Sir.
Speaker Change: Okay. Thanks, everyone for your interest in Ventas and once again, we delivered a solid performance throughout our business in the first quarter and we are confident in our ability to build on our momentum to deliver above market revenue growth improved profitability and accelerate our cash flow to create significant shareholder value.
Speaker Change: Thanks for joining the call.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.