UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 8, 2022
(Exact name of registrant as specified in charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (919 ) 474-6700
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
On November 8, 2022 , Bioventus Inc. (the Company) issued a press release announcing its financial results for the three and nine months ended October 1, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 2.02, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, regardless of any general incorporation language in such filings, unless expressly incorporated by specific reference in such filing.
(d)Exhibits.
The following exhibit relating to Items 2.02 shall be deemed to be furnished, and not filed:
| Exhibit No. | Description | ||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BIOVENTUS INC. | |||||||||||
| Date: | By: | /s/ Anthony D’Adamio | |||||||||
Anthony D’Adamio Senior Vice President and General Counsel | |||||||||||
Exhibit 99.1
Bioventus Reports Third Quarter Results; Updates Full-Year 2022 Financial Guidance
DURHAM, NC – November 8, 2022 – Bioventus Inc. (Nasdaq: BVS) ("Bioventus" or "the Company"), a global leader in innovations for active healing, today reported financial results for the three and nine months ended October 1, 2022.
Q3 Financial Summary & Recent Highlights:
•Net Sales of $137.1 million, up $28.2 million, or 25.9%, year-over-year as reported (26.8% constant currency*) and 7.3% organically* (8.1% constant currency*)
•Net Income of $3.2 million, compared to Net Loss of $2.3 million in prior-year period
•Adjusted EBITDA* of $22.7 million, compared to $21.3 million in prior-year period
•Basic earnings per share of Class A common stock of $0.03, compared to a loss per share of ($0.03) in prior-year period
•Non-GAAP earnings per share of Class A common stock* of $0.08, compared to $0.19 in prior-year period
“Our team continues to drive long-term growth by integrating our acquisitions, advancing our transformation and gaining market share with our innovative and proven medical devices," commented Ken Reali, Bioventus’ chief executive officer. “Though we experienced some temporary reimbursement related volatility, we drove above-market growth, demonstrating the success of our ongoing integrations and the strength of our diversified portfolio. We are excited by the recent CartiHeal acquisition which will drive significant growth for Bioventus as we enter a fast growing and large market in cartilage replacement."
*See below under “Use of Non-GAAP Financial Measures” for more details.
Third Quarter 2022 Financial Results:
The following table represents net sales by geographic region, and by vertical, for the three months ended October 1, 2022 and October 2, 2021, respectively:
| Three Months Ended | Change as Reported | Constant Currency* Change | |||||||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | $ | % | % | |||||||||||||||||||||||||
| U.S. | |||||||||||||||||||||||||||||
Pain Treatments | $ | 55,419 | $ | 55,963 | $ | (544) | (1.0 | %) | (1.0 | %) | |||||||||||||||||||
| Restorative Therapies | 38,096 | 25,634 | 12,462 | 48.6 | % | 48.6 | % | ||||||||||||||||||||||
| Surgical Solutions | 31,182 | 17,565 | 13,617 | 77.5 | % | 77.5 | % | ||||||||||||||||||||||
| Total U.S. net sales | 124,697 | 99,162 | 25,535 | 25.8 | % | 25.8 | % | ||||||||||||||||||||||
| International | |||||||||||||||||||||||||||||
Pain Treatments | 5,090 | 4,672 | 418 | 8.9 | % | 20.5 | % | ||||||||||||||||||||||
| Restorative Therapies | 4,047 | 4,841 | (794) | (16.4 | %) | (9.6 | %) | ||||||||||||||||||||||
| Surgical Solutions | 3,237 | 215 | 3,022 | NM | NM | ||||||||||||||||||||||||
| Total International net sales | 12,374 | 9,728 | 2,646 | 27.2 | % | 38.9 | % | ||||||||||||||||||||||
| Total net sales | $ | 137,071 | $ | 108,890 | $ | 28,181 | 25.9 | % | 26.8 | % | |||||||||||||||||||
Total net sales were $137.1 million compared to $108.9 million for the third quarter of 2021, an increase of $28.2 million, or 25.9%, year-over-year, primarily due to acquisitions. International net sales for the third quarter of 2022 increased 27.2% year-over-year, or 38.9% on a constant currency* basis.
Gross profit was $91.7 million, or 66.9% of net sales, compared to $79.1 million, or 72.6% of net sales, for the third quarter of 2021, an increase of $12.7 million year-over-year. Non-GAAP gross profit* was $103.1 million, or 75.2% of net sales, compared to $85.7 million, or 78.7% of net sales, for the third quarter of 2021, an increase of $17.3 million year-over-year.
Operating loss was ($10.2) million, compared to operating loss of ($1.0) million for the third quarter of 2021, a decrease of ($9.1) million, year-over-year. Operating margin was (7.4%) of net sales, compared to (1.0%) of net sales for the third quarter of 2021. Non-GAAP operating income* was $17.5 million, compared to $15.7 million for the third quarter of 2021, an increase of $1.8 million year-over-year. Non-GAAP operating margin* was 12.8% of net sales, compared to 14.4% of net sales for the third quarter of 2021.
Net income was $3.2 million, compared to net loss of ($2.3) million for the third quarter of 2021, an improvement of $5.4 million year-over-year. Non-GAAP net income* was $6.2 million, compared to $10.7 million, for the third quarter of 2021, an decrease of ($4.5) million, year-over-year.
Adjusted EBITDA* was $22.7 million, compared to $21.3 million for the third quarter of 2021, an increase of $1.3 million year-over-year.
Earnings per share of Class A common stock was $0.03, compared to a loss per share of ($0.03) for the third quarter of 2021.
Non-GAAP earnings per share of Class A common stock* was $0.08, compared to $0.19 for the third quarter of 2021.
Balance Sheet:
As of October 1, 2022, the Company had $34.4 million in cash and cash equivalents and $424.4 million in debt obligations, compared to $43.9 million in cash and cash equivalents and $357.7 million in debt obligations as of December 31, 2021.
*See below under “Use of Non-GAAP Financial Measures” for more details.
Updated Full Year 2022 Financial Guidance:
For the twelve months ending December 31, 2022, the Company now expects:
•Net sales of $527 million to $532 million, representing year-over-year growth of approximately 22% to 23%, representing an update to the prior guidance of $547.5 million to $562.5 million.
•Adjusted EBITDA* of $75 million to $79 million, compared to $80.8 million for the year ended December 31, 2021, and representing an update from the prior guidance of $94 million to $104 million.
•Non-GAAP EPS* of $0.20 to $0.25, compared to $0.75 for the year ended December 31, 2021, and representing an update from the prior guidance of $0.47 to $0.57.
During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our recent acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We may assess further strategic options at a future date. Adjusted EBITDA and Non-GAAP EPS guidance reflect costs related to the fulfillment of remaining regulatory obligations as an adjusting item. Please see footnote (i) to the table "Reconciliation of Net (Loss) Income to Adjusted EBITDA (unaudited)" below for additional information regarding the reconciling item for MOTYS Costs (as defined below).
The Company does not provide U.S. GAAP financial measures, other than net sales, on a forward-looking basis, because the Company is unable to predict with reasonable certainty the impact and timing of acquisition related expenses, accounting fair-value adjustments, and certain other reconciling items without unreasonable efforts. These items are uncertain, depend on various factors, and could be material to the Company’s results computed in accordance with U.S. GAAP.
The Company's guidance reflects its current expectations regarding the impact of COVID-19 on its business. The severity and duration of the COVID-19 pandemic are outside of the Company’s control and, given the uncertain nature of the pandemic, could cause the Company’s future operating results to be different from our current expectations, particularly if the impact of the pandemic worsens.
Presentation: This press release presents historical results, for the periods presented, of Bioventus Inc., including Bioventus LLC, the predecessor of Bioventus Inc. for financial reporting purposes.
Third Quarter 2022 Earnings Conference Call:
Management will host a conference call to discuss the Company’s financial results and provide a business update, with a question and answer session, at 8:30 a.m. Eastern Time on November 8, 2022. Those who would like to participate may dial 833-636-0497 (412-902-4241 for international callers) and refer to the Bioventus Inc. conference call.
A live webcast of the call and any accompanying materials will also be provided on the investor relations section of the Company's website at https://ir.bioventus.com/.
The webcast will be archived on the Company’s website at https://ir.bioventus.com/ and available for replay until November 7, 2023.
About Bioventus
Bioventus delivers clinically proven, cost-effective products that help people heal quickly and safely. Its mission is to make a difference by helping patients resume and enjoy active lives. The Innovations for Active Healing from Bioventus include offerings for pain treatments, restorative therapies and surgical solutions. Built on a commitment to high quality standards, evidence-based medicine and strong ethical behavior, Bioventus is a trusted partner for physicians worldwide. For more information, visit www.bioventus.com, and follow the Company on LinkedIn and Twitter. Bioventus and the Bioventus logo are registered trademarks of Bioventus LLC.
*See below under “Use of Non-GAAP Financial Measures” for more details.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements concerning our financial guidance (including expected MOTYS Costs) and expected financial performance; our business strategy, position and operations; expected sales trends, opportunities, market position and growth (including from the acquisition of CartiHeal); our integration plans; and expected impacts of the COVID-19 pandemic. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause our actual results to differ materially from those contemplated in this press release include, but are not limited to, our ability to complete acquisitions or successfully integrate new businesses, such as CartiHeal, products or technologies in a cost-effective and non-disruptive manner; we may not be able to fund the remainder of the deferred consideration for the CartiHeal acquisition as it becomes due; our business may continue to experience adverse impacts as a result of the COVID-19 pandemic; we are highly dependent on a limited number of products; our long-term growth depends on our ability to develop, acquire and commercialize new products, line extensions or expanded indications; we may be unable to successfully commercialize newly developed or acquired products or therapies in the United States; demand for our existing portfolio of products and any new products, line extensions or expanded indications depends on the continued and future acceptance of our products by physicians, patients, third-party payers and others in the medical community; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Administration (FDA) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; failure to achieve and maintain adequate levels of coverage and/or reimbursement for our products or future products, the procedures using our products, such as our hyaluronic acid (HA) viscosupplements, or future products we may seek to commercialize, such as our recently acquired Agili-C product; pricing pressure and other competitive factors; governments outside the United States may not provide coverage or reimbursement of our products; we compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do; the reclassification of our HA products from medical devices to drugs in the United States by the FDA could negatively impact our ability to market these products and may require that we conduct costly additional clinical studies to support current or future indications for use of those products; our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel; our failure to properly manage our anticipated growth and strengthen our brands; risks related to product liability claims; fluctuations in demand for our products; issues relating to the supply of our products, potential supply chain disruptions and the increased cost of parts and components used to manufacture our products due to inflation; our reliance on a limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture our products; failure to maintain contractual relationships; security breaches, unauthorized disclosure of information, denial of service attacks or the perception that confidential information in our possession is not secure; failure of key information technology and communications systems, process or sites; risks related to international sales and operations; risks related to our debt and future capital needs; failure to comply with extensive governmental regulation relevant to us and our products; we may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits; the FDA regulatory process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products; if clinical studies of our future products do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to expand the indications for or commercialize these products; legislative or regulatory reforms; risks related to intellectual property matters; and the other risks identified in the Risk Factors section of the Company’s public filings with the Securities and Exchange Commission (SEC), including Bioventus’ Annual Report on Form 10-K for the year ended December 31, 2021 as updated by Bioventus' subsequent Quarterly Report on Form 10-Q for the quarter ended October 1, 2022 and as may be further updated from time to time in Bioventus’ other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and the Investor Relations page of Bioventus’ website at https://ir.bioventus.com. Except to the extent required by law, the Company undertakes no obligation to update or review any estimate, projection, or forward-looking statement. Actual results may differ materially from those set forth in the forward-looking statements.
Consolidated balance sheets
As of October 1, 2022 and December 31, 2021
(Amounts in thousands, except share amounts) (unaudited)
| October 1, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 34,359 | $ | 43,933 | |||||||
| Restricted cash | 23 | 5,280 | |||||||||
| Accounts receivable, net | 132,185 | 124,963 | |||||||||
| Inventory | 76,952 | 61,688 | |||||||||
| Prepaid and other current assets | 27,563 | 27,239 | |||||||||
| Total current assets | 271,082 | 263,103 | |||||||||
| Restricted cash, less current portion | — | 50,000 | |||||||||
| Property and equipment, net | 26,643 | 22,985 | |||||||||
| Goodwill | 204,557 | 147,623 | |||||||||
| Intangible assets, net | 1,055,601 | 695,193 | |||||||||
| Operating lease assets | 16,304 | 17,186 | |||||||||
| Deferred tax assets | — | 481 | |||||||||
| Investment and other assets | 13,033 | 29,291 | |||||||||
| Total assets | $ | 1,587,220 | $ | 1,225,862 | |||||||
| Liabilities and Members’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 19,075 | $ | 16,915 | |||||||
| Accrued liabilities | 114,236 | 131,473 | |||||||||
| Accrued equity-based compensation | — | 10,875 | |||||||||
| Current portion of long-term debt | 31,302 | 18,038 | |||||||||
| Current portion of deferred consideration | 117,615 | — | |||||||||
| Other current liabilities | 3,491 | 3,558 | |||||||||
| Total current liabilities | 285,719 | 180,859 | |||||||||
| Long-term debt, less current portion | 393,102 | 339,644 | |||||||||
| Deferred income taxes | 202,278 | 133,518 | |||||||||
| Deferred consideration | 71,923 | — | |||||||||
| Contingent consideration | 81,914 | 16,329 | |||||||||
| Other long-term liabilities | 24,265 | 21,723 | |||||||||
| Total liabilities | 1,059,201 | 692,073 | |||||||||
| Stockholders’ Equity: | |||||||||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued | |||||||||||
Class A common stock, $0.001 par value, 250,000,000 shares authorized as of October 1, 2022 and December 31, 2021, 61,777,875 and 59,548,504 shares issued and outstanding as of October 1, 2022 and December 31, 2021, respectively | 64 | 59 | |||||||||
Class B common stock, $0.001 par value, 50,000,000 shares authorized, 15,786,737 shares issued and outstanding as of October 1, 2022 and December 31, 2021 | 16 | 16 | |||||||||
| Additional paid-in capital | 478,033 | 465,272 | |||||||||
| Accumulated deficit | (23,377) | (6,602) | |||||||||
| Accumulated other comprehensive (loss) income | (1,340) | 179 | |||||||||
| Total stockholders’ equity attributable to Bioventus Inc. | 453,396 | 458,924 | |||||||||
| Noncontrolling interest | 74,623 | 74,865 | |||||||||
| Total stockholders’ equity | 528,019 | 533,789 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,587,220 | $ | 1,225,862 | |||||||
Consolidated statements of operations and comprehensive (loss) income
(Amounts in thousands, except share and per share data, unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
| Net sales | $ | 137,071 | $ | 108,890 | $ | 394,692 | $ | 300,484 | |||||||||||||||
Cost of sales (including depreciation and amortization of $11,331 and $6,637, $30,233, $17,491 respectively) | 45,349 | 29,821 | 130,614 | 85,546 | |||||||||||||||||||
| Gross profit | 91,722 | 79,069 | 264,078 | 214,938 | |||||||||||||||||||
| Selling, general and administrative expense | 84,325 | 69,636 | 260,069 | 173,372 | |||||||||||||||||||
| Research and development expense | 6,432 | 6,153 | 19,726 | 11,936 | |||||||||||||||||||
| Restructuring costs | 575 | 1,798 | 2,159 | 1,798 | |||||||||||||||||||
| Change in fair value of contingent consideration | 3,142 | 651 | 3,684 | 1,292 | |||||||||||||||||||
| Depreciation and amortization | 7,442 | 1,878 | 13,392 | 5,655 | |||||||||||||||||||
| Impairment of variable interest entity assets | — | — | — | 5,674 | |||||||||||||||||||
| Operating (loss) income | (10,194) | (1,047) | (34,952) | 15,211 | |||||||||||||||||||
| Interest expense, net | 9,894 | 1,347 | 10,922 | 152 | |||||||||||||||||||
| Other (income) expense | (23,272) | 757 | (22,350) | 2,821 | |||||||||||||||||||
| Other (income) expense | (13,378) | 2,104 | (11,428) | 2,973 | |||||||||||||||||||
| Income (loss) before income taxes | 3,184 | (3,151) | (23,524) | 12,238 | |||||||||||||||||||
| Income tax expense (benefit), net | 9 | (882) | (3,879) | 759 | |||||||||||||||||||
| Net income (loss) | 3,175 | (2,269) | (19,645) | 11,479 | |||||||||||||||||||
| (Income) loss attributable to noncontrolling interest | (1,421) | 1,198 | 2,870 | 8,260 | |||||||||||||||||||
| Net income (loss) attributable to Bioventus Inc. | $ | 1,754 | $ | (1,071) | $ | (16,775) | $ | 19,739 | |||||||||||||||
| Net income (loss) | $ | 3,175 | $ | (2,269) | $ | (19,645) | $ | 11,479 | |||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||
| Change in foreign currency translation adjustments | (723) | (366) | (1,912) | (1,225) | |||||||||||||||||||
| Comprehensive income (loss) | 2,452 | (2,635) | (21,557) | 10,254 | |||||||||||||||||||
| Comprehensive (income) loss attributable to noncontrolling interest | (1,274) | 1,300 | 3,263 | 8,182 | |||||||||||||||||||
| Comprehensive income (loss) attributable to Bioventus Inc. | $ | 1,178 | $ | (1,335) | $ | (18,294) | $ | 18,436 | |||||||||||||||
Loss per share of Class A common stock(1): | |||||||||||||||||||||||
| Basic & Diluted | $ | 0.03 | $ | — | $ | (0.03) | $ | (0.27) | $ | (0.15) | |||||||||||||
Weighted-average shares of Class A common stock outstanding(1): | |||||||||||||||||||||||
| Basic | 61,674,254 | 41,837,581 | 61,208,941 | 41,816,706 | |||||||||||||||||||
| Diluted | 62,164,276 | 41,837,581 | 61,208,941 | 41,816,706 | |||||||||||||||||||
(1) Per share information for the nine months ended October 2, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through October 2, 2021, the period following Bioventus Inc.'s initial public offering (IPO) and related transactions completed in connection with the IPO as described in the Company's SEC filings. | |||||||||||||||||||||||
Consolidated condensed statements of cash flows
(Amounts in thousands, unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | ||||||||||||||||||||
| Operating activities: | |||||||||||||||||||||||
| Net income (loss) | $ | 3,175 | $ | (2,269) | $ | (19,645) | $ | 11,479 | |||||||||||||||
| Adjustments to reconcile net (loss) income to net cash from operating activities: | |||||||||||||||||||||||
| Depreciation and amortization | 18,780 | 8,522 | 43,643 | 23,185 | |||||||||||||||||||
| Equity-based compensation | 4,648 | 5,938 | 14,153 | (10,621) | |||||||||||||||||||
| Change in fair value of contingent consideration | 3,142 | 651 | 3,684 | 1,292 | |||||||||||||||||||
| Change in fair value of Equity Participation Rights | — | — | — | (2,774) | |||||||||||||||||||
| Change in fair value of interest rate swap | (2,222) | (81) | (6,418) | (1,391) | |||||||||||||||||||
| Revaluation gain on previously held equity interest in CartiHeal | (23,709) | — | (23,709) | — | |||||||||||||||||||
| Impairments related to variable interest entity | — | — | — | 7,043 | |||||||||||||||||||
| Deferred income taxes | 23,523 | (722) | (4,175) | (1,703) | |||||||||||||||||||
| Unrealized loss on foreign currency fluctuations | 1,906 | 770 | 2,926 | 1,224 | |||||||||||||||||||
| Other, net | 1,127 | 356 | 4,040 | 269 | |||||||||||||||||||
| Changes in working capital | (31,071) | (2,578) | (33,280) | (18,129) | |||||||||||||||||||
| Net cash from operating activities | (701) | 10,587 | (18,781) | 9,874 | |||||||||||||||||||
| Investing activities: | |||||||||||||||||||||||
| Acquisition of CartiHeal, net of cash acquired | (54,841) | — | (104,841) | — | |||||||||||||||||||
| Acquisition of Bioness, net of cash acquired | — | (1,000) | — | (46,790) | |||||||||||||||||||
| Purchase of property and equipment | (1,649) | (1,926) | (6,639) | (4,568) | |||||||||||||||||||
| Investments and acquisition of distribution rights | — | (10,260) | (1,478) | (11,124) | |||||||||||||||||||
| Other | 156 | — | (75) | — | |||||||||||||||||||
| Net cash from investing activities | (56,334) | (13,186) | (113,033) | (62,482) | |||||||||||||||||||
| Financing activities: | |||||||||||||||||||||||
| Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discounts and offering costs | — | — | — | 107,777 | |||||||||||||||||||
| Proceeds from issuance of Class A and B common stock | 482 | 417 | 4,739 | 747 | |||||||||||||||||||
| Tax withholdings on equity-based compensation | — | — | (3,352) | — | |||||||||||||||||||
| Borrowing on revolver | — | — | 25,000 | — | |||||||||||||||||||
| Payment on revolver | (25,000) | — | (25,000) | — | |||||||||||||||||||
| Proceeds from the issuance of long-term debt, net of issuance costs | 79,659 | — | 79,659 | — | |||||||||||||||||||
| Payments on long-term debt | (4,509) | (3,750) | (13,528) | (11,250) | |||||||||||||||||||
| Refunds from members | — | (996) | — | (183) | |||||||||||||||||||
| Other, net | 22 | (17) | (4) | (28) | |||||||||||||||||||
| Net cash from financing activities | 50,654 | (4,346) | 67,514 | 97,063 | |||||||||||||||||||
| Effect of exchange rate changes on cash | (238) | (206) | (531) | (377) | |||||||||||||||||||
| Net change in cash, cash equivalents and restricted cash | (6,619) | (7,151) | (64,831) | 44,078 | |||||||||||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 41,001 | 138,068 | 99,213 | 86,839 | |||||||||||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 34,382 | $ | 130,917 | $ | 34,382 | $ | 130,917 | |||||||||||||||
Use of Non-GAAP Financial Measures
Organic Revenue Growth
The Company defines the term “organic revenue” as revenue in the stated period excluding the impact from business acquisitions and divestitures. The Company uses the related term “organic revenue growth” to refer to the financial performance metric of comparing the stated period's organic revenue with the reported revenue of the corresponding period in the prior year. The Company believes that these non-GAAP financial measures, when taken together with our GAAP financial measures, allow the Company and its investors to better measure the Company’s performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Company’s performance with prior and future periods and relative comparisons to its peers. The Company excludes the effect of acquisitions and divestitures because these activities can have a significant impact on the Company's reported results, which the Company believes makes comparisons of long-term performance trends difficult for management and investors.
Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income, and Non-GAAP Earnings per share of Class A Common Stock
We present Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income, and Non-GAAP Earnings per share of Class A common stock, all non-GAAP financial measures, to supplement our GAAP financial reporting, because we believe these measures are useful indicators of our operating performance. We revised our prior year presentation of our Non-GAAP measures to condense the adjustments in order to simplify the presentation. Prior periods have been recast to conform to the current periods.
We define Adjusted EBITDA as net income (loss) from continuing operations before depreciation and amortization, provision of income taxes and interest expense (income), adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and related costs, restructuring and succession charges, equity compensation expense, equity loss in unconsolidated investments, foreign currency impact, and other items. See the table below for a reconciliation of net (loss) income to Adjusted EBITDA. Our management uses Adjusted EBITDA principally as a measure of our operating performance and believes that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections.
Our management uses Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin and Non-GAAP Net Income principally as measures of our operating performance and believes that these non-GAAP financial measures are useful to better understand the long term performance of our core business and to facilitate comparison of our results to those of peer companies. Our management also uses these non-GAAP financial measures for planning purposes, including the preparation of our annual operating budget and financial projections.
We define Non-GAAP Gross Profit as gross profit, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization included in the cost of goods sold and acquisition and related costs in the cost of goods sold. We define Non-GAAP Gross Margin as Non-GAAP Gross Profit divided by net sales. See the table below for a reconciliation of gross profit and gross margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin.
We define Non-GAAP Operating Income as operating income, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, and other items. Non-GAAP Operating Margin is defined as Non-GAAP Operating Income divided by net sales. See the table below for a reconciliation of operating (loss) income and operating margin to Non-GAAP Operating Income and Non-GAAP Operating Margin.
We define Non-GAAP Operating Expense as operating expenses, adjusted to exclude certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, and other items. See the table below for a reconciliation of operating expenses to Non-GAAP Operating Expenses.
We define Non-GAAP Net Income as Net Income, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, other items, and the tax effect of adjusting items. Starting in the fourth quarter of 2021, we revised our presentation of Non-GAAP Net Income to include the income tax effect of adjusting items. The income tax effect was calculated by applying management's expectation of a long-term normalized effective tax rate to the adjusting items. Prior period presentation has been recast to conform to current period presentation. See the table below for a reconciliation of Net Income (Loss) to Non-GAAP Net Income.
We define Non-GAAP Earnings per Class A share as Earnings per Class A share, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include depreciation and amortization, acquisition and related costs, restructuring and succession charges, other items, and the tax effect of adjusting items divided by weighted average number of shares of Class A common stock outstanding during the period. Starting in the fourth quarter of 2021, we revised our presentation of Non-GAAP Earnings per Class A share to include the income tax effect of adjusting items. The income tax effect was calculated by applying management's expectation of a long-term normalized effective tax rate to the adjusting items. Prior period presentation has been recast to conform to current period presentation. See the table below for a reconciliation of loss per Class A share to Non-GAAP Earnings per Class A share.
Net Sales, International Net Sales Growth and Organic Revenue Growth on a Constant Currency Basis
Net Sales, International Net Sales Growth and Organic Revenue Growth on a Constant Currency Basis are non-GAAP measures, which are calculated by translating current and prior year results at the same foreign currency exchange rate. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to facilitate the comparison sales in foreign currencies to prior periods and analyze net sales performance without the impact of changes in foreign currency exchange rates.
Limitations of the Usefulness of Non-GAAP Measures
Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or as superior to, the financial information prepared and presented in accordance with GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of the non-GAAP measures provided in this press release, including in the tables below, to their most directly comparable GAAP measures.
Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited)
| Three Months Ended | Nine Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
| ($, thousands) | October 1, 2022 | October 2, 2021 | October 1, 2022 | October 2, 2021 | December 31, 2021 | ||||||||||||||||||||||||
| Net income (loss) | $ | 3,175 | $ | (2,269) | $ | (19,645) | $ | 11,479 | $ | 9,586 | |||||||||||||||||||
| Interest expense, net | 9,894 | 1,347 | 10,922 | 152 | 1,112 | ||||||||||||||||||||||||
| Income tax expense (benefit), net | 9 | (882) | (3,879) | 759 | (1,966) | ||||||||||||||||||||||||
Depreciation and amortization(a) | 18,780 | 8,522 | 43,643 | 23,185 | 34,875 | ||||||||||||||||||||||||
Acquisition and related costs(b) | 6,477 | 5,914 | 20,450 | 14,044 | 21,978 | ||||||||||||||||||||||||
Gain on remeasurement of CartiHeal Investment(c) | (23,709) | — | (23,709) | — | — | ||||||||||||||||||||||||
Restructuring and succession charges(d) | 575 | 1,798 | 2,847 | 2,142 | 3,717 | ||||||||||||||||||||||||
Equity compensation(e) | 4,648 | 5,938 | 14,153 | (10,621) | (4,512) | ||||||||||||||||||||||||
Equity loss in unconsolidated investments(f) | 322 | 419 | 1,003 | 1,320 | 1,868 | ||||||||||||||||||||||||
Foreign currency impact(g) | 581 | 17 | 1,122 | (47) | 132 | ||||||||||||||||||||||||
Impairments related to variable interest entity(h) | — | — | — | 7,043 | 7,043 | ||||||||||||||||||||||||
Other items(i) | 1,909 | 511 | 5,796 | 2,816 | 6,926 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 22,661 | $ | 21,315 | $ | 52,703 | $ | 52,272 | $ | 80,759 | |||||||||||||||||||
(a)Includes for the three months ended October 1, 2022 and October 2, 2021 and the nine months ended October 1, 2022 and October 2, 2021, respectively, depreciation and amortization of $11,331, $6,637, $30,233 and $17,491 in cost of sales and $7,449, $1,885, $13,410 and $5,694 in operating expenses presented in the consolidated statements of operations and comprehensive (loss) income.
Includes for the year ended December 31, 2021, depreciation and amortization of $26,471 in cost of sales and $8,363 in operating expenses, with the balance in research and development, presented in the consolidated statements of operations and comprehensive income.
(b)Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, and changes in fair value of contingent consideration.
(c)Represents the gain on remeasurement of the Company’s equity method investment in CartiHeal based upon the fair value of consideration transferred for the CartiHeal acquisition.
(d)Costs incurred were the result of adopting acquisition related restructuring plans to reduce headcount, reorganize management structure, and to consolidate certain facilities, and costs related to executive transitions.
(e)The three and nine months ended October 1, 2022 and the three months ended October 2, 2021 include compensation expense resulting from awards granted under the Company’s equity-based compensation plans in effect after its IPO. The nine months ended October 2, 2021 and the twelve months ended December 31, 2021 also include the expense and the change in fair value of the liability-classified awards granted under the compensation plans in effect prior to the Company's IPO.
(f)Represents CartiHeal equity investment losses.
(g)Includes realized and unrealized gains and losses from fluctuations in foreign currency.
(h)Represents the loss on impairment of Harbor Medtech Inc.’s (Harbor) long-lived assets and the Company’s investment in Harbor.
(i)Other items primarily includes charges associated with strategic transactions, such as potential acquisitions; public company preparation costs, which primarily includes accounting and legal fees; and MOTYS Costs. During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our recent acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We incurred $1.8 million and $2.5 million during the three and nine months ended October 1, 2022, respectively, and we expect to incur approximately $4.0 million to $6.0 million exclusively to fulfill our remaining regulatory obligations related to our Phase 2 trial (MOTYS Costs).
Reconciliation of Other Reported GAAP Measures to Non-GAAP Measures
| Three Months Ended October 1, 2022 | Gross Profit | SG&A | R&D | Operating (Loss)/Income | Net Income | EPS(h) | |||||||||||||||||||||||||||||
| Reported GAAP measure | $ | 91,722 | $ | 95,484 | $ | 6,432 | $ | (10,194) | $ | 3,175 | $ | 0.03 | |||||||||||||||||||||||
| Reported GAAP margin | 66.9 | % | (7.4) | % | |||||||||||||||||||||||||||||||
Depreciation and amortization(a) | 11,331 | 7,442 | 7 | 18,780 | 18,780 | 0.25 | |||||||||||||||||||||||||||||
Acquisition and related costs(b) | — | 6,477 | — | 6,477 | 6,477 | 0.09 | |||||||||||||||||||||||||||||
Gain on remeasurement of CartiHeal Investment(c) | — | — | — | — | (23,709) | (0.31) | |||||||||||||||||||||||||||||
Restructuring and succession charges(d) | — | 575 | — | 575 | 575 | 0.01 | |||||||||||||||||||||||||||||
Other items(f) | — | 151 | 1,758 | 1,909 | 1,909 | 0.02 | |||||||||||||||||||||||||||||
Tax effect of adjusting items(g) | — | — | — | — | (1,000) | (0.01) | |||||||||||||||||||||||||||||
| Non-GAAP measure | $ | 103,053 | $ | 80,839 | $ | 4,667 | $ | 17,547 | $ | 6,207 | $ | 0.08 | |||||||||||||||||||||||
| Non-GAAP margin | 75.2 | % | 12.8 | % | |||||||||||||||||||||||||||||||
| Non-GAAP Gross Margin | Non-GAAP SG&A | Non-GAAP R&D | Non-GAAP Operating Income | Non-GAAP Net Income | Adjusted EPS | ||||||||||||||||||||||||||||||
| Three Months Ended October 2, 2021 | Gross Profit | SG&A | R&D | Operating (Loss)/Income | Net (Loss)/Income | EPS(h) | |||||||||||||||||||||||||||||
| Reported GAAP measure | $ | 79,069 | $ | 73,963 | $ | 6,153 | $ | (1,047) | $ | (2,269) | $ | (0.03) | |||||||||||||||||||||||
| Reported GAAP margin | 72.6 | % | (1.0) | % | |||||||||||||||||||||||||||||||
Depreciation and amortization(a) | 6,637 | 1,878 | 7 | 8,522 | 8,522 | 0.15 | |||||||||||||||||||||||||||||
Acquisition and related costs(b) | — | 5,914 | — | 5,914 | 5,914 | 0.10 | |||||||||||||||||||||||||||||
Restructuring and succession charges(d) | — | 1,798 | — | 1,798 | 1,798 | 0.03 | |||||||||||||||||||||||||||||
Impairments related to variable interest entity(e) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Other items(f) | — | 511 | — | 511 | 511 | 0.01 | |||||||||||||||||||||||||||||
Tax effect of adjusting items(g) | — | — | — | — | (3,823) | (0.07) | |||||||||||||||||||||||||||||
| Non-GAAP measure | $ | 85,706 | $ | 63,862 | $ | 6,146 | $ | 15,698 | $ | 10,653 | $ | 0.19 | |||||||||||||||||||||||
| Non-GAAP margin | 78.7 | % | 14.4 | % | |||||||||||||||||||||||||||||||
| Non-GAAP Gross Margin | Non-GAAP SG&A | Non-GAAP R&D | Non-GAAP Operating Income | Non-GAAP Net Income | Adjusted EPS | ||||||||||||||||||||||||||||||
| Nine Months Ended October 1, 2022 | Gross Profit | SG&A | R&D | Operating (Loss)/Income | Net (Loss)/Income | EPS(h) | |||||||||||||||||||||||||||||
| Reported GAAP measure | $ | 264,078 | $ | 279,304 | $ | 19,726 | $ | (34,952) | $ | (19,645) | $ | (0.27) | |||||||||||||||||||||||
| Reported GAAP margin | 66.9 | % | (8.9) | % | |||||||||||||||||||||||||||||||
Depreciation and amortization(a) | 30,233 | 13,392 | 18 | 43,643 | 43,643 | 0.57 | |||||||||||||||||||||||||||||
Acquisition and related costs(b) | 5,607 | 14,843 | — | 20,450 | 20,450 | 0.27 | |||||||||||||||||||||||||||||
Gain on remeasurement of CartiHeal Investment(c) | — | — | — | — | (23,709) | (0.31) | |||||||||||||||||||||||||||||
Restructuring and succession charges(d) | — | 2,847 | — | 2,847 | 2,847 | 0.04 | |||||||||||||||||||||||||||||
Other items(f) | — | 3,254 | 2,542 | 5,796 | 5,796 | 0.08 | |||||||||||||||||||||||||||||
Tax effect of adjusting items(g) | — | — | — | — | (12,173) | (0.16) | |||||||||||||||||||||||||||||
| Non-GAAP measure | $ | 299,918 | $ | 244,968 | $ | 17,166 | $ | 37,784 | $ | 17,209 | $ | 0.22 | |||||||||||||||||||||||
| Non-GAAP margin | 76.0 | % | 9.6 | % | |||||||||||||||||||||||||||||||
| Non-GAAP Gross Margin | Non-GAAP SG&A | Non-GAAP R&D | Non-GAAP Operating Income | Non-GAAP Net Income | Adjusted EPS | ||||||||||||||||||||||||||||||
| Nine Months Ended October 2, 2021 | Gross Profit | SG&A | R&D | Operating Income | Net Income | EPS(h) | |||||||||||||||||||||||||||||
| Reported GAAP measure | $ | 214,938 | $ | 187,791 | $ | 11,936 | $ | 15,211 | $ | 11,479 | $ | (0.15) | |||||||||||||||||||||||
| Reported GAAP margin | 71.5 | % | 5.1 | % | |||||||||||||||||||||||||||||||
Depreciation and amortization(a) | 17,491 | 5,655 | 39 | 23,185 | 23,185 | 0.40 | |||||||||||||||||||||||||||||
Acquisition and related costs(b) | 2,106 | 11,938 | — | 14,044 | 14,044 | 0.24 | |||||||||||||||||||||||||||||
Restructuring and succession charges(d) | — | 2,142 | — | 2,142 | 2,142 | 0.04 | |||||||||||||||||||||||||||||
Impairments related to variable interest entity(e) | — | 5,674 | — | 5,674 | 7,043 | 0.03 | |||||||||||||||||||||||||||||
Other items(f) | — | 2,816 | — | 2,816 | 2,816 | 0.05 | |||||||||||||||||||||||||||||
Tax effect of adjusting items(g) | — | — | — | — | (11,240) | (0.18) | |||||||||||||||||||||||||||||
| Non-GAAP measure | $ | 234,535 | $ | 159,566 | $ | 11,897 | $ | 63,072 | $ | 49,469 | $ | 0.43 | |||||||||||||||||||||||
| Non-GAAP margin | 78.1 | % | 21.0 | % | |||||||||||||||||||||||||||||||
| Non-GAAP Gross Margin | Non-GAAP SG&A | Non-GAAP R&D | Non-GAAP Operating Income | Non-GAAP Net Income | Adjusted EPS | ||||||||||||||||||||||||||||||
(a)Includes for the three months ended October 1, 2022 and October 2, 2021, respectively, depreciation and amortization of $11,331 and $6,637 in cost of sales and $7,449 and $1,885 in operating expenses presented in the consolidated statements of operations and comprehensive income; and for the nine months ended October 1, 2022 and October 2, 2021, respectively, depreciation and amortization of $30,233 and $17,491 in cost of sales and $13,410 and $5,694 in operating expenses presented in the consolidated statements of operations and comprehensive income.
(b)Consists of acquisition related items such as integration costs, amortization of inventory step-up and changes in fair value of contingent consideration.
(c)Represents the gain on remeasurement of the Company’s equity method investment in CartiHeal based upon the fair value of consideration transferred for the CartiHeal acquisition.
(d)Consists of restructuring plans to reduce headcount, reorganize management structure and consolidate certain facilities, as well as executive leadership transition costs.
(e)Represents loss on impairment of Harbor’s long-lived assets and the Company’s investment in Harbor.
(f)Other items primarily includes charges associated with strategic transactions, such as potential acquisitions; public company preparation costs, which primarily includes accounting and legal fees; and MOTYS Costs.
(g)Calculated by applying a normalized statutory rate of 24.83% and 22.83%, respectively, to the adjustments to Non-GAAP Net Income for the three and nine months ended October 1, 2022 and October 2, 2021. The tax effect on adjustments to EPS is normalized to exclude the effect of the non-controlling ownership interest.
(h)Adjustments are pro-rated to exclude the weighted average non-controlling interest ownership of 20.4% and 27.8%, respectively, for the three and nine months ended October 1, 2022 and October 2, 2021.
| Year Ended December 31, 2021 | EPS(g) | ||||
| Reported GAAP measure | $ | (0.15) | |||
Depreciation and amortization(a) | 0.59 | ||||
Acquisition and related costs(b) | 0.37 | ||||
Restructuring and succession charges(c) | 0.06 | ||||
Impairments related to variable interest entity(d) | 0.02 | ||||
Other items(e) | 0.12 | ||||
Tax effect of adjusting items(f) | (0.26) | ||||
| Non-GAAP measure | $ | 0.75 | |||
(a)Includes for the year ended December 31, 2021, depreciation and amortization of $26,471 in cost of sales and $8,363 in operating expenses, with the balance in research and development, presented in the consolidated statements of operations and comprehensive income.
(b)Consists of acquisition related items such as integration costs, amortization of inventory step-up, and changes in fair value of contingent consideration.
(c)Consists of restructuring plans to reduce headcount, reorganize management structure and consolidate certain facilities, as well as executive leadership transition costs.
(d)Represents loss on impairment of Harbor’s long-lived assets and the Company’s investment in Harbor.
(e)Other items primarily consists of charges associated with strategic transactions, such as potential acquisitions, and debt retirement and modification costs.
(f)Calculated by applying a normalized statutory rate of 22.8% to the adjustments to Non-GAAP Net Income. The tax effect on adjustments to EPS is normalized to exclude the effect of the non-controlling ownership interest.
(g)Adjustments are pro-rated to exclude the weighted average non-controlling interest ownership of 23.5% for the year ended December 31, 2021.
Investor Inquiries and Media:
Dave Crawford
Bioventus
investor.relations@bioventus.com