Bioventus Inc.
11/04/2025 | Press release | Distributed by Public on 11/04/2025 06:39
Quarterly Report for Quarter Ending September 27, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of Bioventus Inc.'s (sometimes referred to as "we," "us," "our," "Bioventus" or "the Company") financial condition and results of operations should be read in conjunction with the "Special Note Regarding Forward-Looking Statements" and our unaudited consolidated condensed financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on March 11, 2025 ("2024 10-K").
Executive Summary
We are a global medical device company focused on helping patients recover and live life to the fullest by relieving pain and addressing musculoskeletal challenges through a diverse portfolio of high-quality, innovative, and clinically proven solutions. We operate our business through two reporting segments, U.S. and International, and our portfolio of products is comprised of five patient-focused areas, grouped into three businesses based on clinical use: (i) Pain Treatments, (ii) Surgical Solutions and (iii) Restorative Therapies.
•Pain Treatments, consisting of:
◦Knee Osteoarthritis ("KOA"):Our product portfolio includes a range of intra-articular, hyaluronic acid ("HA") injections that help relieve patient discomfort and improve quality of life. In the U.S., we also distribute the XCELL Platelet-Rich Plasma ("PRP") system, a technology that is synergistic with our existing physician call points as many surgeons using HA also use PRP.
◦Peripheral Nerve Stimulation ("PNS"):We are focused on developing a full portfolio of peripheral nerve stimulation products with solutions for acute, temporary and chronic pain.
•Surgical Solutions, consisting of:
◦Ultrasonics:Our Ultrasonics business offers precision bone resection for patients with degenerative spine conditions and spinal deformities. This portfolio also enables precision ultrasonic neuro and general surgery to address brain tumors and pathologies of the liver and other organs.
◦Bone Graft Substitutes ("BGS"):Our BGS product portfolio includes a range of products that facilitate optimal bone fusion following a surgical procedure.
•Restorative Therapies, consisting of:
◦Fracture Care: We provide low-intensity pulse ultrasound to help patients who suffer from bone fractures that do not heal through traditional methods. We plan to expand our U.S. clinical fracture care indications to address the healing of fresh fractures, especially for high-risk patients.
The following table sets forth total net sales, net income (loss) and Adjusted EBITDA for the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | ||||||||||||||||||||
| Net sales | $ | 138,651 | $ | 138,964 | $ | 410,187 | $ | 419,638 | |||||||||||||||
| Net income (loss) | $ | 4,006 | $ | (5,848) | $ | 9,956 | $ | (46,446) | |||||||||||||||
|
Adjusted EBITDA(a)
|
$ | 26,604 | $ | 23,557 | $ | 79,567 | $ | 80,632 | |||||||||||||||
| Income (loss) per Class A common stock: | |||||||||||||||||||||||
| Basic | $ | 0.05 | $ | (0.08) | $ | 0.12 | $ | (0.56) | |||||||||||||||
| Diluted | $ | 0.05 | $ | (0.08) | $ | 0.12 | $ | (0.56) | |||||||||||||||
(a)See below under results of operations-Adjusted EBITDA for a reconciliation of net income (loss) to Adjusted EBITDA.
Significant developments
2025 Credit Agreement
On July 31, 2025, we entered into a new Credit Agreement (the "2025 Credit Agreement") that provides for a $300.0 million term loan facility (the "2025 Term Loan") and a $100.0 million revolving credit facility (the "2025 Revolver"). Proceeds from the 2025 Term Loan, borrowings of $30.0 million under the 2025 Revolver and $2.6 million of available cash were used to fully repay the outstanding balance under the 2019 Credit and Guaranty Agreement, as amended, which totaled $332.6 million at the time of repayment. We recorded a $0.3 million loss on extinguishment and incurred $0.8 million in third-party costs as a result of these refinancing transactions.
The 2025 Credit Agreement is expected to provide $2.0 million of annual interest expense savings, increased liquidity and extended debt maturity to July 2030. On August 1, 2025, we entered into two interest rate swaps totaling $150.0 million to hedge the interest rate risk associated with our floating-rate SOFR-based borrowings under the 2025 Credit Agreement.
XCELL PRP System
In August 2025, we fully launched the XCELL PRP System in the Orthopedic and Sports Medicine specialties across the U.S. market. The XCELL PRP System is designed to deliver customization, precision and efficiency with high platelet count in a single 10-minute process, allowing providers to select between leukocyte-rich and leukocyte-poor options with flexible dosing to meet individual patient and procedural needs.
Peripheral Nerve Stimulation
In July 2025, we received FDA 510(k) clearances for both TalisMann and StimTrial, expanding our innovative growth portfolio of PNS solutions for chronic pain management. These clearances mark an important step forward and represent a substantial growth opportunity as we look to expand in the PNS market. With TalisMann and StimTrial now FDA-cleared, we offer a comprehensive PNS portfolio that empowers physicians to potentially treat a broader spectrum of patients-from initial assessment to long-term therapy-with greater confidence and flexibility. This development also reinforces our commitment to delivering non-opioid, minimally invasive therapies designed to address real-world clinical needs.
TalisMann combines our patented electric field conduction technology with an integrated pulse generator to potentially reach deeper, larger nerves. This combination is designed to provide long-term relief from chronic nerve pain for patients, potentially increasing the number of patients who respond to neuromodulation therapy. From a physician's perspective, the increase in power allows for easier lead placement and potentially broadens addressable nerves. StimTrial provides physicians the ability to evaluate patient response to PNS therapy, which we expect will facilitate physician adoption and payer reimbursement where trial assessments are required. We began a limited commercial release of both TalisMann and StimTrial in select U.S. markets during the third quarter, with a broader rollout planned for early 2026.
Advanced Rehabilitation Business
On December 31, 2024, we completed the sale of certain products within our Advanced Rehabilitation Business, including the L100, L300 Go, L360, H200, Vector Gait & Safety System and Bioness Integrated Therapy System (collectively, the "Advanced Rehabilitation Business"). This divestiture reflects our strategic decision to focus on core business areas and streamline operations. The Advanced Rehabilitation Business was considered non-core and required additional research and development investment to achieve its next stage of growth. We received $24.7 million of cash proceeds at closing, net of transactional fees, which were subject to a post-closing adjustment for net working capital. We paid $0.7 million in the second quarter of 2025 to settle the adjustment for net working capital. The net proceeds were used to pay $20.0 million in long-term debt obligations on December 31, 2024. We may also receive an aggregate of $20.0 million in potential earn-out payments based on the achievement of certain revenue and financial performance thresholds related to the Advanced Rehabilitation Business during the fiscal years ending December 31, 2025 and 2026.
Results of Operations
For a description of the components of our results of operations, refer to Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsin our 2024 10-K.
The following table sets forth components of our consolidated condensed statements of operations as a percentage of net sales for the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | ||||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
|
Cost of sales (includes depreciation &
amortization)
|
32.0 | % | 32.7 | % | 31.9 | % | 31.9 | % | |||||||||||||||
| Gross profit | 68.0 | % | 67.3 | % | 68.1 | % | 68.1 | % | |||||||||||||||
| Selling, general and administrative expense | 56.7 | % | 58.6 | % | 56.4 | % | 61.3 | % | |||||||||||||||
| Research and development expense | 2.2 | % | 2.8 | % | 2.2 | % | 2.5 | % | |||||||||||||||
| Change in fair value of contingent consideration | - | % | 0.3 | % | - | % | 0.3 | % | |||||||||||||||
| Depreciation and amortization | 1.0 | % | 1.5 | % | 1.1 | % | 1.4 | % | |||||||||||||||
| Impairment of assets | - | % | 1.5 | % | - | % | 8.1 | % | |||||||||||||||
| (Gain) loss on disposals | - | % | - | % | - | % | - | % | |||||||||||||||
| Operating income (loss) | 8.1 | % | 2.6 | % | 8.4 | % | (5.5 | %) | |||||||||||||||
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| (in thousands) | September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |||||||||||||||||||
| Net income (loss) | $ | 4,006 | $ | (5,848) | $ | 9,956 | $ | (46,446) | |||||||||||||||
| Interest expense, net | 6,177 | 9,532 | 21,180 | 29,795 | |||||||||||||||||||
| Income tax expense (benefit), net | 664 | 589 | 1,610 | (5,843) | |||||||||||||||||||
|
Depreciation and amortization(a)
|
11,403 | 12,275 | 35,317 | 37,150 | |||||||||||||||||||
|
Acquisition and related costs(b)
|
- | 483 | - | 994 | |||||||||||||||||||
|
Shareholder litigation costs(c)
|
14 | 50 | 50 | 13,720 | |||||||||||||||||||
|
Restructuring and succession charges(d)
|
- | 54 | - | 67 | |||||||||||||||||||
|
Equity compensation(e)
|
3,176 | 2,491 | 9,233 | 11,258 | |||||||||||||||||||
|
Debt refinancing(f)
|
731 | 4 | 903 | 351 | |||||||||||||||||||
|
Loss on extinguishment(g)
|
326 | - | 326 | - | |||||||||||||||||||
|
(Gain) loss on disposals(h)
|
(1) | - | 81 | - | |||||||||||||||||||
|
Impairment of assets(i)
|
- | 2,031 | - | 33,901 | |||||||||||||||||||
|
Other items(j)
|
108 | 1,896 | 911 | 5,685 | |||||||||||||||||||
| Adjusted EBITDA | $ | 26,604 | $ | 23,557 | $ | 79,567 | $ | 80,632 | |||||||||||||||
(a)Includes for the three and nine months ended September 27, 2025 and September 28, 2024, respectively, depreciation and amortization of $10.0 million, $10.2 million, $30.9 million and $31.3 million in cost of sales and $1.4 million, $2.1 million, $4.4 million and $5.9 million in operating expenses presented in the consolidated condensed statements of operations and comprehensive income (loss).
(b)Includes acquisition and integration costs related to completed acquisitions and changes in fair value of contingent consideration.
(c)Costs incurred as a result of certain shareholder litigation unrelated to our ongoing operations.
(d)Costs incurred were the result of contract terminations.
(e)Includes compensation expense resulting from awards granted under our equity-based compensation plans.
(f)Debt refinancing in 2025 related to certain third-party fees associated with our 2025 Credit Agreement. Activity in 2024 is attributable to advisory fees and debt amendment related costs related to our 2019 Credit and Guaranty Agreement, as amended.
(g)Losses incurred due to the refinancing of long-term debt.
(h)Represents the loss on the disposal of the Advanced Rehabilitation Business.
(i)Represents a non-cash impairment charge for intangible assets solely attributable to our Advanced Rehabilitation Business in 2024 due to our decision to divest the business.
(j)Other items include charges associated with strategic initiatives, such as potential acquisitions or divestitures, as well as costs related to a transformative project aimed at redesigning the Company's systems and information processing infrastructure.
Other items during the nine months ended September 27, 2025 primarily consisted of $0.4 million of expenses related to the divestiture of the Advanced Rehabilitation Business, which was completed on December 31, 2024.
For the three and nine months ended September 28, 2024, other items primarily consisted of strategic transaction expenses of $1.6 million and $3.9 million, respectively, primarily related to the divestiture of the Advanced Rehabilitation Business. The nine months ended September 28, 2024 also included transformative project costs of $1.3 million.
Non-GAAP Financial Measures - Adjusted EBITDA
We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator for management to measure operating performance and for planning purposes, including the preparation of our annual operating budget and financial projections. We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We define Adjusted EBITDA as net income (loss) from operations before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and divestiture related costs, certain shareholder litigation costs, impairments of assets, restructuring and succession charges, equity compensation expense, debt refinancing, loss on extinguishment of debt and other items. Adjusted EBITDA by segment consists of net sales and costs directly attributable to a segment, as well as an allocation of corporate overhead costs primarily based on a ratio of net sales by segment to total consolidated net sales.
Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures might not provide a complete understanding of the Company's performance and should be reviewed in conjunction with U.S. GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Quarterly Report on Form 10-Q, including all tables referencing Adjusted EBITDA to its most directly comparable U.S. GAAP measure.
Net Sales
|
Three Months Ended
|
Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | |||||||||||||||||||||||
| Pain Treatments | $ | 59,978 | $ | 56,306 | $ | 3,672 | 6.5 | % | |||||||||||||||
| Surgical Solutions | 44,981 | 41,155 | 3,826 | 9.3 | % | ||||||||||||||||||
| Restorative Therapies | 18,355 | 25,448 | (7,093) | (27.9 | %) | ||||||||||||||||||
| Total U.S. net sales | 123,314 | 122,909 | 405 | 0.3 | % | ||||||||||||||||||
| International | |||||||||||||||||||||||
| Pain Treatments | 7,198 | 6,821 | 377 | 5.5 | % | ||||||||||||||||||
| Surgical Solutions | 5,188 | 4,745 | 443 | 9.3 | % | ||||||||||||||||||
| Restorative Therapies | 2,951 | 4,489 | (1,538) | (34.3 | %) | ||||||||||||||||||
| Total International net sales | 15,337 | 16,055 | (718) | (4.5 | %) | ||||||||||||||||||
| Total net sales | $ | 138,651 | $ | 138,964 | $ | (313) | (0.2 | %) | |||||||||||||||
U.S.
Net sales for the period increased $0.4 million, or 0.3%, compared to the prior year period. Net sales from Pain Treatments increased $3.7 million due to volume growth. Net sales from Surgical Solutions increased $3.8 million, primarily due to volume growth in BGS and Ultrasonics. Net sales from Restorative Therapies decreased $7.1 million due to a decline of $8.7 million in net sales associated with the divestiture of Advanced Rehabilitation Business. This decline was partially offset by a $1.6 million increase in net sales for our EXOGEN Bone Stimulation System.
International
Net sales decreased compared to the prior year period, primarily due to the divestiture of the Advanced Rehabilitation Business, which contributed $2.1 million in net sales during the three months ended September 28, 2024. The decline resulting from this divestiture was partially offset by increased net sales for our EXOGEN Bone Stimulation System, Pain Treatments and Surgical Solutions products.
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | |||||||||||||||||||||||
| Pain Treatments | $ | 177,100 | $ | 172,137 | $ | 4,963 | 2.9 | % | |||||||||||||||
| Surgical Solutions | 131,572 | 121,275 | 10,297 | 8.5 | % | ||||||||||||||||||
| Restorative Therapies | 53,937 | 78,187 | (24,250) | (31.0 | %) | ||||||||||||||||||
| Total U.S. net sales | 362,609 | 371,599 | (8,990) | (2.4 | %) | ||||||||||||||||||
| International | |||||||||||||||||||||||
| Pain Treatments | 22,302 | 19,939 | 2,363 | 11.9 | % | ||||||||||||||||||
| Surgical Solutions | 16,547 | 14,256 | 2,291 | 16.1 | % | ||||||||||||||||||
| Restorative Therapies | 8,729 | 13,844 | (5,115) | (36.9 | %) | ||||||||||||||||||
| Total International net sales | 47,578 | 48,039 | (461) | (1.0 | %) | ||||||||||||||||||
| Total net sales | $ | 410,187 | $ | 419,638 | $ | (9,451) | (2.3 | %) | |||||||||||||||
U.S.
Net sales for the period decreased $9.0 million, or 2.4%, compared to the prior year period. Net sales from Pain Treatments increased $5.0 million, driven by volume growth in Durolane. This increase was partially offset with a decline in volume for certain products, in part due to inventory reductions by certain distributors following elevated purchases at the end of 2024. Net sales from Surgical Solutions increased $10.3 million due to volume growth in BGS and Ultrasonics. The $24.3 million decline in net sales from Restorative Therapies was driven by the divestiture of the Advanced Rehabilitation Business, which contributed $28.8 million in net sales during the prior year. This decrease was partially offset by a $4.5 million increase in our net sales for our EXOGEN Bone Stimulation System.
International
Net sales decreased compared to the prior year period primarily due to the divestiture of the Advanced Rehabilitation Business, which contributed $5.7 million in net sales during the prior year. This decline was partially offset by volume growth in Pain Treatments and Surgical Solutions.
Gross profit and gross margin
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | $ | 85,505 | $ | 83,781 | $ | 1,724 | 2.1 | % | |||||||||||||||
| International | 8,724 | 9,770 | (1,046) | (10.7 | %) | ||||||||||||||||||
| Total | $ | 94,229 | $ | 93,551 | $ | 678 | 0.7 | % | |||||||||||||||
| Three Months Ended | |||||||||||||||||
| September 27, 2025 | September 28, 2024 | Change | |||||||||||||||
| U.S. | 69.3 | % | 68.2 | % | 1.1 | % | |||||||||||
| International | 56.9 | % | 60.9 | % | (4.0 | %) | |||||||||||
| Total | 68.0 | % | 67.3 | % | 0.7 | % | |||||||||||
U.S.
Gross profit increased $1.7 million, or 2.1%, compared to the prior year period, primarily driven by volume growth in BGS, Durolane and our EXOGEN Bone Stimulation System. The increase was partially offset by a $5.2 million reduction resulting from the divestiture of the Advanced Rehabilitation Business. Gross margin improved 1.1% compared to the prior year period, driven by a favorable product mix. These improvements were partially offset with freight and tariff costs.
International
Gross profit decreased $1.0 million, or 10.7%, compared to the prior year period. The decline was due to a $1.4 million reduction resulting from the divestiture of the Advanced Rehabilitation Business. This was partially offset by growth in BGS and our EXOGEN Bone Stimulation System. Gross margin declined 4.0% reflecting unfavorable product and country mix.
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | $ | 251,691 | $ | 257,382 | $ | (5,691) | (2.2 | %) | |||||||||||||||
| International | 27,684 | 28,188 | (504) | (1.8 | %) | ||||||||||||||||||
| Total | $ | 279,375 | $ | 285,570 | $ | (6,195) | (2.2 | %) | |||||||||||||||
| Nine Months Ended | |||||||||||||||||
| September 27, 2025 | September 28, 2024 | Change | |||||||||||||||
| U.S. | 69.4 | % | 69.3 | % | 0.1 | % | |||||||||||
| International | 58.2 | % | 58.7 | % | (0.5 | %) | |||||||||||
| Total | 68.1 | % | 68.1 | % | - | % | |||||||||||
U.S.
Gross profit decreased $5.7 million, or 2.2%, compared to the prior year period. The decline was primarily attributable to a $15.8 million reduction resulting from the divestiture of the Advanced Rehabilitation Business. This reduction was partially offset by volume growth in Surgical Solutions, Pain Treatments and our EXOGEN Bone Stimulation System. Gross margin slightly increased by 0.1% in comparison to the prior year period. This improvement was driven by a favorable product mix within both Surgical Solutions and Pain Treatments, as well as enhanced collections associated with our EXOGEN Bone Stimulation System. These gains were partially offset with freight and tariff costs, as well as shifts in channel mix.
International
Gross profit decreased $0.5 million, or 1.8%, primarily due to a $3.2 million reduction resulting from the divestiture of the Advanced Rehabilitation Business. This reduction was partially offset with growth in the remaining businesses. Gross margin decreased 0.5% due to product and country mix.
Selling, general and administrative expense
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Selling, general and administrative expense | $ | 78,657 | $ | 81,482 | $ | (2,825) | (3.5 | %) | |||||||||||||||
Selling, general and administrative expenses decreased by $2.8 million, or 3.5%, primarily due to a $2.6 million reduction in compensation-related costs, partially attributable to the sale of the Advanced Rehabilitation Business.
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Selling, general and administrative expense | $ | 231,269 | $ | 256,925 | $ | (25,656) | (10.0 | %) | |||||||||||||||
Selling, general and administrative expenses decreased by $25.7 million, or 10.0%, primarily due to: (i) a $13.7 million reduction in shareholder litigation costs settled during 2024; (ii) a $10.6 million decrease in compensation-related costs, partially attributable to the sale of the Advanced Rehabilitation Business; and (iii) a $2.2 million decrease in stock-based compensation.
Research and development expense
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Research and development expense | $ | 2,923 | $ | 3,843 | $ | (920) | (23.9 | %) | |||||||||||||||
Research and development expense decreased $0.9 million, or 23.9% due to: (i) a $0.6 million reduction in consulting expenses resulting from the completion of certain projects; and (ii) a $0.4 million decrease in compensation-related costs.
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Research and development expense | $ | 9,106 | $ | 10,680 | $ | (1,574) | (14.7 | %) | |||||||||||||||
Research and development expense decreased by $1.6 million, or 14.7%, primarily due to: (i) a $1.1 million reduction in consulting expenses resulting from the completion of certain projects; and (ii) a $0.8 million decrease in compensation-related costs.
Change in fair value of contingent consideration
Activity from the change in fair value of contingent consideration relates to the acquisition of Bioness in 2021. Certain milestones were achieved during the fourth quarter of 2024, and as a result, we ceased revaluing the contingent consideration liability in 2025. We made contingent consideration payments of $9.0 million and $10.8 million during the first and second quarters of 2025, respectively, which fully settled the Bioness contingent consideration liability.
Depreciation and amortization
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Depreciation and amortization | $ | 1,398 | $ | 2,065 | $ | (667) | (32.3 | %) | |||||||||||||||
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Depreciation and amortization | $ | 4,430 | $ | 5,884 | $ | (1,454) | (24.7 | %) | |||||||||||||||
Depreciation and amortization decreased during the three and nine months ended September 27, 2025 compared to the prior year comparable periods primarily due to certain information technology assets being fully depreciated in 2025.
Impairment of assets
Following the decision to divest the Advanced Rehabilitation Business, we evaluated it for impairment in the second quarter of 2024. As a result, impairment losses of $2.0 million and $33.9 million were recorded for the three and nine months ended September 28, 2024, respectively, related to the net intellectual property solely attributable to the Advanced Rehabilitation Business. The losses, measured at fair value less costs to sell, were based on the purchaser's consideration.
(Gain) loss on disposals
During the nine months ended September 27, 2025, we recorded a $0.3 million loss on disposal related to the sale of the Advanced Rehabilitation Business. The cumulative loss was due to post-closing working capital adjustments.
Other expense
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Interest expense, net | $ | 6,177 | $ | 9,532 | $ | (3,355) | (35.2 | %) | |||||||||||||||
| Loss on extinguishment | 326 | - | 326 | NM | |||||||||||||||||||
|
Other expense (income), net
NM - Not Meaningful
|
79 | (626) | 705 | (112.6 | %) | ||||||||||||||||||
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Interest expense, net | $ | 21,180 | $ | 29,795 | $ | (8,615) | (28.9 | %) | |||||||||||||||
| Loss on extinguishment | 326 | - | 326 | NM | |||||||||||||||||||
| Other expense (income), net | 1,417 | (404) | 1,821 | NM | |||||||||||||||||||
Interest expense, net decreased during both the three and nine months ended September 27, 2025, compared to the prior year periods. This decrease was due to lower debt outstanding and a reduction in interest rates and applicable margins. The third quarter of 2025 was further impacted by our debt refinancing completed during the quarter, which contributed to the overall reduction in interest expense.
Loss on extinguishment of debt recognized during the three and nine months ended September 27, 2025 was directly related to the refinancing of our debt obligations. The increase in other expense, net during both the three and nine months ended September 27, 2025 was due to fluctuations in foreign currency exchange rates compared to the prior year periods.
Income tax expense (benefit), net
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Income tax (benefit) expense, net | $ | 664 | $ | 589 | $ | 75 | 12.7 | % | |||||||||||||||
| Effective tax rate | 14.2 | % | 11.2 | % | 3.0 | % | |||||||||||||||||
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Income tax (benefit) expense, net | $ | 1,610 | $ | (5,843) | $ | 7,453 | (127.6 | %) | |||||||||||||||
| Effective tax rate | 13.9 | % | 11.2 | % | 2.7 | % | |||||||||||||||||
Our effective tax rate was 14.2% for the three months ended September 27, 2025, primarily driven by income earned in foreign jurisdictions. The effective tax rate was 13.9% for the nine months ended September 27, 2025, driven by foreign income tax, partially offset with the release of certain reserves for uncertain tax positions. The effective tax rate for both the three and nine months ended September 28, 2024 was 11.2%, primarily due to the impairment of intangibles related to the Advanced Rehabilitation Business and taxable income in certain entities.
Noncontrolling interest
Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC in which we owned 80.9% and 80.6% at September 27, 2025 and December 31, 2024, respectively. We have a majority economic interest and the sole voting interest in and control the management of BV LLC. As a result, we consolidate the financial results of BV LLC and report a noncontrolling interest representing the 19.1% that is owned by the Continuing LLC Owner. Noncontrolling interest changes during the periods presented resulted from recorded income and loss activity.
Segment Adjusted EBITDA
| Three Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | $ | 23,439 | $ | 19,662 | $ | 3,777 | 19.2 | % | |||||||||||||||
| International | $ | 3,165 | $ | 3,895 | $ | (730) | (18.7 | %) | |||||||||||||||
U.S.
Adjusted EBITDA increased $3.8 million, or 19.2%, compared to the prior year period. This increase was primarily attributable to higher gross margin and lower operating expenses. These improvements were partially offset by the impact of the Advanced Rehabilitation Business divestiture and unfavorable movements in foreign currency.
International
Adjusted EBITDA decreased $0.7 million, or 18.7%, compared to the prior year period. The decline was primarily attributable to the decrease in gross profit resulting from the divestiture of the Advanced Rehabilitation Business.
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| U.S. | $ | 68,969 | $ | 71,008 | $ | (2,039) | (2.9 | %) | |||||||||||||||
| International | $ | 10,598 | $ | 9,624 | $ | 974 | 10.1 | % | |||||||||||||||
U.S.
Adjusted EBITDA decreased $2.0 million, or 2.9%, compared to the prior year period. The decline was primarily due to lower gross profit resulting from the divestiture of the Advanced Rehabilitation Business and unfavorable movements in foreign currency. This impact was mostly offset with volume growth in the remaining businesses.
International
Adjusted EBITDA increased $1.0 million, or 10.1%, compared to the prior year period. The increase was primarily driven by lower selling, general and administrative expenses, partially offset by lower gross profit resulting from the divestiture of our Advanced Rehabilitation Business.
Liquidity and Capital Resources
Sources of liquidity
Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures. We expect these needs to continue as we develop and market new products and further expand into international markets.
On December 31, 2024, we closed the sale of the Advanced Rehabilitation Business, which was considered non-core and required additional research and development expenditures to achieve its next stage of growth. We received cash proceeds of $24.7 million at closing, net of transactional fees, which were subject to a post-closing adjustment for net working capital. We paid $0.7 million in the second quarter of 2025 to settle the adjustment for net working capital. Net proceeds from the transaction were used to pay $20.0 million in long-term debt obligations on December 31, 2024. We may also receive up to an additional $20.0 million in contingent earn-out payments, based on the achievement of certain revenue and financial performance thresholds related to the Advanced Rehabilitation Business during the fiscal years ending December 31, 2025 and 2026.
On July 31, 2025, we entered into the 2025 Credit Agreement that provides for a $300.0 million term loan (the "2025 Term Loan") and a $100.0 million revolving credit facility (the "2025 Revolver"). Proceeds from the 2025 Credit Agreement, including $30.0 million in borrowings under its revolver and $2.6 million in available cash, were used to fully repay the outstanding balance under the 2019 Credit and Guaranty Agreement, as amended, which totaled $332.6 million as of July 31, 2025.
The 2025 Credit Agreement is expected to provide $2.0 million of annual interest expense savings, increased liquidity and extended debt maturity to July 2030. On August 1, 2025, we entered into two interest rate swaps to mitigate the interest rate risk associated with our floating-rate SOFR-based borrowings under the 2025 Credit Agreement. Under the terms of swaps, we pay a fixed interest rate in exchange for SOFR-based variable interest throughout the life of the instruments. The interest rate swaps have a weighted average fixed interest rate of 3.60% and an aggregate notional value of $150.0 million, or 50.0% of the 2025 Term Loan.
The five-year 2025 Revolver includes an initial annual commitment fee of 0.30%, calculated based on the average daily amount of the available revolving commitment, which includes revolving and swingline loans as well as letters of credit ("LOC"). The commitment fee is payable quarterly in arrears on the last day of each calendar quarter and at maturity. The commitment rate is subject to adjustment based on our leverage ratio. Swingline loans are available as base rate option loans and LOCs are limited to $7.5 million under the 2025 Credit Agreement.
As of September 27, 2025, we had $72.8 million available on the 2025 Revolver, net of $2.2 million in outstanding LOCs. This availability, combined with our existing cash balances and expected cash flows from operations, provides us with sufficient liquidity to meet our near-term obligations and support ongoing operations.
We anticipate that, to the extent additional capital is required, we will seek funding through a combination of equity financings, the incurrence of additional indebtedness, or other strategic sources of capital. Our ability to access these sources will depend on market conditions, our financial performance, and other factors.
We may explore divestiture opportunities for non-core assets to improve our liquidity position. In addition, we may raise additional funds to finance future cash needs through receivables or royalty financings or corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. If we raise additional funds through collaboration and licensing arrangements with third parties, it might be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that might not be favorable to us. We cannot be certain that additional funding will be available on acceptable terms, or at all. Any failure to raise capital in the future might have a negative impact on our financial condition and our ability to pursue our business strategies.
Cash Requirements
The following table summarizes material changes to our estimated future cash requirements associated with debt and related obligations:
| Remainder of 2025 | Thereafter | Total | |||||||||||||||
|
Long-term debt(a)
|
$ | 3,750 | $ | 296,250 | $ | 300,000 | |||||||||||
|
Interest payments on long-term debt obligations(a)
|
5,333 | 85,572 | 90,905 | ||||||||||||||
| $ | 9,083 | $ | 381,822 | $ | 390,905 | ||||||||||||
(a)Refer to Item 1. Financial Information-Notes to the unaudited consolidated condensed financial statements-Note 4. Financial instruments in this report for further information regarding our long-term debt obligations.
Other than the above changes to debt and related obligations, there have been no material changes to our estimated future cash requirements as disclosed in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsin our 2024 Form 10-K.
We enter into contracts in the ordinary course of business with various third parties for development, collaboration and other services. These agreements generally include provisions allowing for termination upon notice. In the event of cancellation, payments typically consist of amounts due for services rendered or expenses incurred through the termination date, including non-cancellable obligations of our service providers. Certain agreements also contain contingent provisions that may require payment upon the occurrence of specified events. For additional information regarding commitments and contingencies, refer to Item 1. Financial Information-Notes to the unaudited consolidated condensed financial statements-Note 10. Commitments and contingencies.
Tax Receivable Agreement
The BV LLC Agreement provides for the payment of certain distributions to the Continuing LLC Owner in amounts sufficient to cover the income taxes imposed with respect to the allocation of taxable income from BV LLC as well as obligations within the TRA. Under the TRA, we are required to make cash payments to the Continuing LLC Owner equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (1) increases in the tax basis of assets of BV LLC resulting from (a) any future redemptions or exchanges of LLC Interests, and (b) certain distributions (or deemed distributions) by BV LLC and (2) certain other tax benefits arising from payments under the TRA. We expect the amount of the cash payments required to be made under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing LLC Owner, the amount of gain recognized by the Continuing LLC Owner, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing LLC Owner under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA.
Indebtedness
The 2025 Credit Agreement contains affirmative and negative covenants applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict our ability to, subject to negotiated exceptions, incur additional indebtedness, liens on our assets, engage in acquisitions or dispositions, pay dividends or make other distributions, enter into transactions with affiliated persons, make investments, change the nature of our business or organizational documents, or prepay or make modifications to other indebtedness that would adversely affect the Lenders.
The 2025 Credit Agreement also contains financial covenants including a maximum consolidated total net leverage ratio of 4.00 to 1.00 for the quarter ending September 30, 2025 through the quarter ending December 31, 2025, and starting with the fiscal quarter ending March 31, 2026 and for each fiscal quarter thereafter, a maximum consolidated total net leverage ratio of 3.50 to 1.00. We may elect to increase such ratio level by 0.50 to 1.00 following certain permitted acquisitions. A minimum interest coverage ratio of 2.50 to 1.00 must also be maintained. The 2025 Revolver also includes standard provisions related to conditions of borrowing and customary events of default. We were in compliance with the financial covenants under the 2025 Credit Agreement as of September 27, 2025. We do not expect any of these covenants or restrictions to affect or limit our ability to conduct business in the ordinary course.
As of September 27, 2025, we had an outstanding balance of $25.0 million under the 2025 Revolver and $297.6 million outstanding under the 2025 Term Loan, net of original issue discount and deferred financing costs. Subsequent to September 27, 2025, we made additional repayments totaling $17,000 on the 2025 Revolver.
Refer to Item 1. Financial Information-Notes unaudited consolidated condensed financial statements-Note 4. Financial instrumentsfor further details on the Company's indebtedness.
Other
For information regarding Commitments and Contingencies, refer to Item 1. Financial Information-Notes to the unaudited consolidated condensed financial statements-Note 10. Commitments and contingencies and-Note 3. Divestitures of this Quarterly Report on Form 10-Q.
Information regarding cash flows
Cash and cash equivalents as of September 27, 2025 totaled $42.2 million, compared to $41.6 million as of December 31, 2024. The change in cash was primarily due to the following:
| Nine Months Ended | Change | ||||||||||||||||||||||
| (in thousands, except for percentage) | September 27, 2025 | September 28, 2024 | $ | % | |||||||||||||||||||
| Net cash from operating activities | $ | 36,705 | $ | 19,473 | $ | 17,232 | 88.5 | % | |||||||||||||||
| Net cash from investing activities | (2,668) | (1,141) | (1,527) | 133.8 | % | ||||||||||||||||||
| Net cash from financing activities | (33,693) | (11,725) | (21,968) | 187.4 | % | ||||||||||||||||||
| Effect of exchange rate changes on cash | 238 | (497) | 735 | (147.9 | %) | ||||||||||||||||||
| Net change in cash, cash equivalents | $ | 582 | $ | 6,110 | $ | (5,528) | (90.5 | %) | |||||||||||||||
Operating Activities
Net cash from operating activities increased $17.2 million for the nine months ended September 27, 2025, compared to the prior year period. The increase was primarily driven by a decrease in interest payments resulting from favorable interest rates and less debt outstanding, increased collections, and less strategic transaction costs and expenses associated with transformative projects. These inflows were partially offset with larger compensation-related payments and other changes in working capital.
Investing Activities
Net cash from investing activities decreased by $1.5 million for the nine months ended September 27, 2025, compared to the prior year period. The decrease was driven by a $1.6 million increase in capital expenditures, primarily related to information technology assets and a $0.7 million working capital settlement associated with the sale of the Advanced Rehabilitation Business. These outflows were partially offset by the absence of a $0.7 million outflow in 2024 for the purchase of an HA distribution right.
Financing Activities
Net cash flows from financing activities decreased $22.0 million for the nine months ended September 27, 2025, compared to the prior year period. The decrease was driven by: (i) net cash outflows of $27.4 million related to the refinancing of our long-term debt obligations, including proceeds from the 2025 Credit Agreement, principal payments and associated financing costs; and (ii) a $19.8 million contingent consideration payment related to a previous acquisition. These outflows were partially offset by $25.0 million in net borrowings under our revolving credit facilities during the period.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
There have been no material changes to our contractual obligations as disclosed in our 2024 10-K.
Critical Accounting Estimates
Our discussion of operating results is based upon the unaudited consolidated condensed financial statements and accompanying notes, which have been prepared in accordance with U.S. GAAP. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our estimates are based on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from these estimates. In the event we dispose of assets before the end of their previously stated useful life, we may incur an impairment charge. Our critical accounting estimates are detailed inPart II. Item 7. Management's Discussion and Analysis of Financial condition and Results of Operationsof our 2024 10-K and we have no material changes to such disclosures.
Emerging Growth Company and Smaller Reporting Company Status
The Company is an "emerging growth company" pursuant to the provisions of the Jumpstart Our Business Startups Act (the "JOBS ACT"). An emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has chosen to "opt out" of such extended transition periods, and as a result, the Company plans to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. Section 107 of the JOBS Act provides that the decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
The Company is also considered a "smaller reporting company," as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the "Exchange Act"), which was determined as of the last day of the Company's second fiscal quarter of 2024. The Company will continue to be categorized as a smaller reporting company-accelerated filer until the Company's public float reaches a certain threshold as of the determination date. The Company may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
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