Bioventus Inc - Ordinary Shares - Class A Aktie

Good afternoon, and welcome to the Bioventus Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note, this event is being recorded.

I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations and Treasurer. Please go ahead.

Thanks, Drew, and good afternoon, everyone, and thanks for joining us. It is my pleasure to welcome you to the Bioventus 2026 third quarter earnings conference call. With me this afternoon are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will provide an update on our 2026 priorities and the third quarter highlights, and then Mark will review the third quarter results and discuss the update to our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com.

Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors, of the company's Form 10-K for the year ended December 31, 2025. Such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website, bioventus.com.

Now, I will turn the call over to Rob.

Thank you, Dave. Good afternoon, everyone, and thanks for joining our call today. Bioventus continued to build on its positive momentum in the third quarter, delivering a solid financial performance and encouraging leading indicators across our growth drivers. These results reinforce our conviction and our ability to create sustainable long-term value for shareholders. Before going through the details on the third quarter, I will take a moment to provide a brief update on the strategic review we disclosed on our Q2 earnings call. With the assistance of our advisers, we continue to evaluate a range of strategic options for the company. As you may recall, this review was prompted by an unsolicited acquisition proposal and multiple expressions of interest. The process is ongoing, and we will continue to take the time necessary to fully assess all options and determine the best path forward for our shareholders.

We are not able to provide further details at this time and will not be answering any questions regarding the strategic review. Turning to the third quarter, I will update you on the three priorities we outlined at the start of the year. One, accelerating long-term revenue growth with increased investment in the four growth drivers: peripheral nerve stimulation, platelet-rich plasma, Ultrasonics, and our international business. Two, increasing earnings even with a higher level of investment in these four growth drivers. And three, continuing to strengthen cash flow and enhance capital allocation optionality. Let me expand on each priority, starting with accelerating long-term revenue growth. Overall, third quarter revenue grew 3%, led by strong growth of 6% in Pain Treatments. This performance was partially offset by softness in bone graft substitutes within Surgical Solutions, which continued to face near-term headwinds.

Excluding BGS, revenue growth for the rest of the business was 6% for the quarter, reflecting strong underlying momentum within each of the growth drivers. Let me highlight a few examples of the progress we are achieving with the growth drivers, starting with platelet-rich plasma, where momentum continues to build with sequential growth in the number of capital placements. Even more encouraging is the meaningful ramp-up in disposable reorders. During the third quarter, revenue from PRP disposable kits exceeded revenue from capital placements, which is an important indicator of future growth. We are pleased to see the growing adoption of our customizable solution and its potential to displace competitive offerings. In addition, we recently secured exclusive rights from our PRP partner, APEX Biologix, to offer our solution in sports medicine accounts.

This agreement broadens the addressable market and creates an additional avenue for growth as we continue to build commercial momentum. Next, our PNS business continues to gain traction, strengthening our confidence in both the market opportunity and the vast potential for our product offering. Physician feedback is very encouraging as clinicians gain more experience with TalisMann, providing further validation of our differentiated technology and launch strategy. Key performance indicators reinforce this progress. Trial to permanent conversion rates are exceeding plan, the time from trial to permanent implant placement has shortened, and the number of physicians trained grew by more than 50% quarter-over-quarter. Collectively, these trends point to growing physician engagement and improving conversion efficiency, key drivers for continued revenue growth acceleration.

We've also strengthened PNS leadership and commercial capabilities by hiring a best-in-class marketing leader, expanding our commercial infrastructure, equipping the team with more effective competitive selling and targeting tools, and increasing our presence at key medical congresses and industry meetings. Learnings in the initial launch phase, combined with these investments, position us to accelerate market adoption and capitalize on this significant growth opportunity. Turning to Ultrasonics, we saw very strong double-digit revenue growth this quarter. Investments in marketing and surgeon training are driving increased surgeon adoption, accelerated disposables growth, and new account wins. We expect this momentum to continue into the fourth quarter, paving the way for further growth acceleration in 2027. Finally, international revenue accelerated 16% in Q3, as we begin to see the impact from talent additions and the team's successful focus on select markets.

We are encouraged by the speed of execution, the depth of the opportunity pipeline, and our customer win rates. We expect to deliver strong double-digit growth in the fourth quarter and for the full year. Turning to our second priority, increasing earnings even as we invest in future growth drivers. The third quarter again demonstrated the underlying earnings power and resilience of Bioventus' business. Despite increased investment in growth initiatives, we delivered an adjusted EBITDA margin of 20%, an improvement of 70 basis points compared to the prior year period. Looking ahead, we now expect full-year adjusted EBITDA margin to be above the prior year level, reflecting our ability to balance strategic investment with operating discipline. With strong operating performance and significant interest expense savings, we delivered adjusted EPS of $0.17 in the quarter, which advanced 13% versus the prior year.

On a year-to-date basis, adjusted EPS has increased by 18%, underscoring our continued ability to grow earnings while investing in the opportunities that will drive long-term value for shareholders. As we close out the year, we expect to see sequential acceleration in revenue growth and earnings while continuing to increase our investments to drive growth and deliver on the full-year adjusted EPS guidance we provided at the beginning of the year. This reflects the strength of our business model, supported by the earnings power generated from solid revenue growth, our stable peer-leading gross margin, and the disciplined focus on operating expense management. Turning to our third priority, accelerated cash flow, we delivered another strong quarter with cash from operations of $21 million. This strong cash generation funded the repayment of an additional $19 million of our term loan, bringing year-to-date term loan repayments to $65 million.

This enabled us to achieve an important financial milestone of lowering net debt at the end of the quarter to below $200 million. Overall, we continue to execute on our strategic priorities, driving increased conviction in our strategy and growing confidence in the strength of the portfolio and investment approach as we build Bioventus into a leading $1 billion medtech company that delivers exceptional value for customers, employees, shareholders, and all other stakeholders.

Now I'll turn the call over to Mark to walk through the quarter results in more detail.

Thank you, Rob, and good afternoon, everyone. Let me start by saying I am excited about our ability to continue to increase profitability and deliver strong cash flow as we continue to invest in our future growth drivers. Turning to headline results for the third quarter, revenue of $142 million increased 3% compared to the prior year period. Growth was driven by strength in Pain Treatments, along with strong performance in other areas of the portfolio, which was partially offset by a slowdown in BGS within Surgical Solutions. Adjusted EBITDA of $28 million increased nearly $2 million compared to the prior year period and grew faster than revenue growth. Additionally, adjusted EBITDA margin of 20% expanded 70 basis points compared to the third quarter last year.

Adjusted earnings were $0.17 per diluted share for the quarter, up 13% compared to $0.15 in the prior year period. Now let me provide some additional commentary on the quarterly revenue. In global Pain Treatments, we delivered strong growth with revenue of $71 million, representing a 6% increase compared to the prior year. Pain Treatments is up 9% year-to-date, reflecting the strength of our broad HA portfolio, the differentiation of DUROLANE, and the strong early traction we are seeing with PRP and PNS. Moving to Surgical Solutions, revenue in Q3 totaled $51 million, which was an increase of 1% compared to the prior year. In Ultrasonics, we delivered strong double-digit growth with continued progress in capital placements and continued acceleration in disposable volume as we drive new surgeon adoption.

As Rob mentioned, the momentum with our strong underlying fundamentals support very strong growth for the fourth quarter and into 2027. As it relates to BGS, revenue came in lower than expected, as strong volume from new large IDN accounts was offset by modest softness in spine procedures, temporary delays in adding new distributors, and some competitive dynamics in the synthetic market. We implemented changes late in the third quarter and are seeing positive trends to start the fourth quarter. We continue to believe that these factors are transitory, and we continue to have strong conviction in our IDN strategy, the clinical and economic value proposition, and the long-term opportunity for this business. In Restorative Therapies, revenue of $21 million declined 3%. The quarter's results were driven by an impact to volume due to higher vacancies in the EXOGEN sales force that have since been filled.

Finally, international revenue of $18 million grew 16% compared to the prior year period, or 18% on a constant currency basis, primarily due to the strong double-digit growth in the Ultrasonics and HA businesses. Our growth outlook for international continues to be very strong, and we expect to generate more than 20% growth in the fourth quarter and continued excellent growth in 2027. Moving down the income statement, adjusted gross margin of 75% was slightly lower than the prior year period, primarily due to product mix. With respect to operating expenses, we remained disciplined with our spending while appropriately investing in our growth drivers and achieved adjusted EBITDA margin of 20% in the quarter. Turning to the balance sheet and cash flow statement, we continue to generate strong cash flow.

Cash flow from operations totaled $21 million during the quarter, and we ended the period with $31 million of cash on hand and $230 million of outstanding debt. During the quarter, we reduced debt by an additional $19 million, bringing the total debt repayment for the year to $65 million. We continue to expect our net leverage ratio to be below 1.5x by the end of this year. This stronger financial position is expected to drive further interest expense savings while enhancing our ability to strategically deploy capital towards the highest value opportunities. As a result of strong earnings and outlook for the business, we are reaffirming our full-year adjusted earnings per share guidance of $0.75 to $0.79 per diluted share.

We are adjusting our previously provided cash from operations guidance of $84 million to $89 million and presenting adjusted cash from operations in the same range, which excludes the cash flow impact of the company's review of potential strategic alternatives. With lower revenue expectations, primarily in BGS, we now expect 2026 revenue of $590 million to $595 million. This guidance reflects the expectations of mid-single-digit revenue growth in Q4 and sequential acceleration. In closing, we delivered a strong performance across key strategic segments of the business. The successful investments in our growth drivers, disciplined execution, enhanced profitability, and strong cash flow position us very well to increase our momentum and build a leading medtech company that creates meaningful long-term value for our shareholders.

Operator, please open the line for questions.

[Operator Instructions] The first question comes from Caitlin Roberts with Canaccord Genuity. Please go ahead.

Maybe just to start on BGS, would love a little bit more color on the headwinds that you noted. And just with the spine market softness you called out, any concerns that, that could potentially impact Ultrasonics going forward?

Yes, thanks, Caitlin. This is Rob. There were two primary drivers behind the Q3 BGS performance, both of which we view as transitory. First was we addressed some of the competitive dynamics in the synthetic market late in Q3 and already seeing positive results there with October tracking ahead. Second is that what you mentioned and what Mark Singleton mentioned, that slowdown in spine procedural volume and the number of new distributors we added, which are now ramping back up. I think really important to note there that we are already seeing positive results with October after the actions we took and ahead of our expectations. Just long term, very excited about our IDN strategy in this space, which is gaining significant momentum. As it relates to the procedures, it does not really impact from an Ultrasonics standpoint.

Keep in mind, we have relatively small business there, large market. We are changing the standard of care in that space, and so our strong volume was able to overcome anything that may have been happening from a procedural standpoint in that space.

Understood. Just turning to EXOGEN, expectations for the recovery here with the positions filled that you noted, and how much of that potential recovery is built into the revised revenue expectations?

Yes. Well, for EXOGEN overall, we are making really good progress in refining commercial data analytics and targeting. We talked a little bit about that last time, and our messaging to help the team continue to get more efficient and effective in growing the business. Overall, this year, we expect the growth to be low single digits, which, for your comment, is towards the lower end of the range that we targeted for the year. That is factored into Q4 as well. But going forward, we expect this business to grow in the low single digit to mid-single digit range, consistent with what we have mentioned in the past.

The next question comes from Larry Solow with CJS Securities. Please go ahead.

Could you maybe just give us a little more color, just on the granularity on the guidance, revised revenue guidance, like $12.5 million at the midpoint? Is that all BGS, or are we hitting that kind of 2% bar you set for PRP and PNS? I know you didn't give numbers there, but has anything else changed across the P&L in terms of the top line?

Yes, Larry, this is Rob. I will start. We are lowering the full-year guidance by, as you mentioned, by approximately $12 million at the midpoint of the guidance range. Again, more than half of that is from Q3, and that was primarily driven by BGS, as mentioned. For Q4, the remainder of the reduction is due to BGS and the timing and contribution of new reps that we are onboarding. All that said, we expect a sequential acceleration in Q4 to mid-single-digit growth, and pleased to say that we are already seeing positive traction there with the first month of the quarter.

Okay. On the BGS, the competitive dynamics, is that pricing, I am taking it? Was that kind of the, if you had to kind of bucket those three things, is there, they kind of split evenly, or is one heavier than the other? I mean, I know you have been walking away from some business, is that discretionarily? Is that continuing still, or on at least, at some point, I mean, in some respects?

Yes. In the third quarter, really due to the two factors that we mentioned, the competitive dynamics in the synthetic space, again, already seeing positive results after taking the actions late in the quarter. Second, that slowdown in procedural volume with the number of new distributors that we added, which are now ramping back up. Those are the two primary causes for Q3, spread across the two of them. Again, just cannot emphasize enough that we are already seeing positive results in October. We do not usually talk about the current quarter in a call, but think it is important here to mention that seeing positive results with October ahead of our expectations. Longer term, again, just excited. We're gaining a lot of momentum with the IDN strategy that we've talked about before, already seeing some nice gains there, and expect that to contribute going forward.

The next question comes from Chase Knickerbocker with Craig-Hallum. Please go ahead.

Sorry for another one on BGS here, but could you maybe just, with a little bit more detail, was the weakness isolated to SIGNAFUSE specifically? Maybe just talk about how OSTEOAMP performed in the quarter, kind of relative to SIGNAFUSE. Thanks.

Yes, Chase. Primarily, we saw the impact in the quarter to the synthetic space. Again, that is because of some of the competitive dynamics, et cetera. When we mention the second reason of the slowdown in procedural volume and the number of new distributors added, obviously, that is across the portfolio, just not in the synthetic space. The good news, again, I will repeat a little bit here, but we took the actions at the end of September, and we are already seeing really positive traction there with October tracking ahead. I think that just underscores for us that we identified the right areas to focus on, took the actions early in the fourth quarter, but we are seeing an impact from the actions that we took.

If we just think about kind of what the right expectations by segment are in Q4, you kind of talked about the changes to guidance, but maybe just a little bit more specifically on how quickly you think that could bounce back from those two, specifically to surgical, from those two specific headwinds. The second piece, we have heard from some competitors that seemingly some larger customers are more willing to separate out biologics RFPs. Can you just speak to what you are seeing from a customer perspective? Are you getting more kind of inbounds on participating in those RFP processes specifically for biologics?

Chase, this is Mark. I will start with just kind of going through the revenue when you look at it from the third quarter to fourth quarter sequentially. Overall, Restorative Therapies or EXOGEN, we would expect that growth rate to improve a little bit into 4Q. Again, we have the vacancies in 3Q. We have those filled, obviously have to get them on board, but from a growth perspective, we actually expect it to improve, even though that is part of the guidance reduction. From a pain perspective, great growth in 3Q as we talked about.

We look into Q4, we will see a slightly lower growth rate, not much, but really you have to remember, when we look into last year, our growth rate was 14% and 15% overall for HA, so it was a strong quarter in Pain Treatments last year that we are comparing to, but still feel really good about the growth drivers and about our HA business within Pain Treatments. From a surgical perspective, Ultrasonics again had a really strong quarter with double-digit growth. Obviously, we talked about the struggles that we have had with BGS, and we look into fourth quarter, as we talked about, BGS will be lower than our original expectations from a guidance perspective, but we do expect the growth to accelerate into fourth quarter.

That is kind of walking through that, and as Rob also pointed out, we are seeing some early signs of traction and improvement in fourth quarter in BGS. From a biologic RFPs, I am going to let Rob take that one.

Yes. So Chase, on that, with the RFPs, the RFQs with the large accounts, particularly with the IDNs, they are putting out new requests for proposals with set formularies, and we are seeing that across the portfolio. What I think is most important there is that they are basing the decision-making on the clinical and economic value of each of the individual products. So, we like that they are getting their hands around it, and we like that they are basing it on that combination of clinical and economic value, and I think that is why we are seeing a lot of traction there, is because of our strong combination of clinical and economic value. So, really support what is happening there, and we are gaining traction and already seeing a nice contribution to our growth within that space from the activity with those large accounts.

Got it. Maybe just last from me, it is a little bit tough for us sometimes to get a sense for kind of some of the specifics around PNS, just with it being in Pain Treatments. Can you maybe just give us a sense for your expectations for kind of growth contribution from PNS next year? Thank you.

Yes, Chase. As it relates to specifics for 2027, I'm not going to obviously give any formal guidance or get too specific there, but I will give you some context on PNS. I mean, again, really excited about what we saw in Q3, which included the expansion of the team, new customers, new trials, which led to new implants, and just very positive feedback about both our trial device and the power of our permanent implant, TalisMann. As we alluded to, the leading indicators that we have are getting more and more defined, and they're tracking ahead of our launch plan, and we're just learning a lot about how to maximize our success with this business over the coming years. I'll tell you, that's what this year is all about.

We're investing in and activating our growth drivers while also very diligently analyzing our performance to shape the future decisions and investments to maximize our success. Hey, I fully expect the learnings, investments, revenue growth to keep ramping strongly, not just in Q4, but for your question, throughout 2027 and the future years. While I won't get specific on '27, we fully expect to scale this business to over $100 million in the coming years.

The next question comes from Mike Petusky with Barrington Research. Please go ahead.

I was wondering, the $13 million in incremental investment you guys sort of charted the course for at the beginning of the year, how far into that are you, and are you going to end up sort of investing that incremental $13 million, or is it going to come in less, or can you just speak to where you are on that? Thanks.

Sure, Yes. Great question, Mike. We've accelerated our investments actually beyond the $13 million to almost $15 million, so a couple million more this year, and similar to what we've conveyed in the past, more than half of that's going to PNS, given the tremendous opportunity there and our build-out of the business. But really across all of them, we're investing in an exciting range of commercial activities and gathering a lot of data-backed insights on just how to best unlock the full potential of the growth drivers. I'd say in general, the fact that we're accelerating the investments beyond the $13 million to $15 million in the back half here just demonstrates how much we're learning and the insights we're gaining, and how confident we are in increasing our investment given in certain areas because of the positive traction that we're seeing.

And again, as it relates back to our earnings, it's nice to be able to drive up our investment like this and still deliver strong earnings for the quarter, and we expect to continue those investments going here through the fourth quarter, and not at the same rate in 2027, but of course, we'll be investing in those growth drivers in 2027 as well.

Sure. Appreciate all the data points you gave around PRP and PNS. Just curious, though, Rob, are you guys affirming sort of the 2% lift that you were expecting at the beginning of the year on those two, or are you essentially saying that there may be some timing that maybe 2% incremental associated with those two initiatives may not come in?

Yes. As you alluded to there, really exciting traction with both. Currently tracking a little shy of the 200 basis points, but we will see what we can do in Q4. I would say either way, I couldn't be more excited about progress that we are making with both of them and the potential to enhance our overall growth profile, not just with those two, but all of our key growth drivers. We will let you know where we land after the year.

Okay. One more quick one, and then I will get off. In terms of the Ultrasonics momentum, is it primarily getting deeper in with docs in terms of just driving better utilization with sort of the guys you have relationships with, or are you really expanding the footprint of docs that are utilizing your Ultrasonics? Thanks.

Yes, Mike. Really all of the above. The investments are working. They are having a clear impact. The team is doing an excellent job. Just to address a couple of points, we are ahead of schedule on new users or surgeon adoption, which is a really important leading indicator for us. We are also expanding our capital placements. Then, perhaps most importantly, we are seeing very positive continuous sequential growth trends in disposables. That is what really fueled the double-digit growth in Q3, is that combination. We look at this business, and we are in the early innings with activating the real potential of Ultrasonics, and just really looking forward to the path forward with this business.

We have a follow-up from Larry Solow with CJS Securities. Please go ahead.

Great. I appreciate the extra time. Just on the I am curious, as Mike alluded to, you said the investments expense is actually spending up a couple million or up a couple million run rate. Where have you been able to cut the costs on that SG&A line, or at least keep SG&A relatively flat, I guess, year-over-year on an adjusted basis if we take out the you had a $3.5 million strategic alternatives expense that you took out there. On an adjusted basis, if it is keeping it flat on similar revenue year-over-year, it is continuing to invest, if you could just give us a little more color on where you have been able to take some costs out of the P&L.

Yes, Larry, this is Mark. Thanks for the question. First, we talked about our largest shortfall in revenue in 3Q and for guidance from a BGS perspective. That business is our lowest variable margin business compared to other businesses that have very lucrative variable margins. So, when we miss on that, the profit that we lose isn't as material as it would be in some of the other businesses. I also think this is a testament to the powerful P&L that we do have when we're driving above-market growth, and the gross margins that we have really gives us the control over P&L. We have the commissions come out for BGS, but then there's other levers that we have from a variable spending perspective that come out as well.

I think we've done a good job as a team over the last few years of really demonstrating the discipline and management of all of our costs. Most importantly, as Rob talked about in one of the earlier questions, amongst that, prioritizing our spending and still being able to make significant investments into the business that allows us to continue the momentum and the fuel that we're putting into these growth drivers of starting out the year of investing $13 million, it's up to $15 million. So really, overall, just the power of the P&L, the fact that we missed in our least lowest variable margin business is really the dynamics that's going on in the P&L, but it really just speaks to the strength of the powerful P&L that we do have.

I appreciate that. That makes a lot of sense. If I could squeeze one more in. I know you don't want to answer any questions on this strategic process, but thoughts just from a rough timeline, approximate basis, would you like to optimally like to have something done by year end? Is that maybe a soft goal, soft target, if you will? Is there any, just any color on potential timing would be great if you can offer anything. Thanks.

Yes, Larry. As noted in the prepared remarks, the strategic review remains ongoing, and really not able to comment further at this time about any of the details. So, thanks for that.

I appreciate that. I figured I would try.

This concludes our question-and-answer session. I would like to turn the conference back over to Rob Claypoole for any closing remarks.

Yes. Thanks, everyone. We delivered another strong quarter and are excited about the underlying momentum across our growth drivers. We're confident in our ability to deliver above-market revenue growth, increase earnings, and accelerate cash flow to create significant shareholder value.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I'd like to welcome everyone to the BioVentus Inc. second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's question, we'll be right back. there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again.

I'd now like to hand today's conference over to Dave Crawford. Please go ahead.

Thanks Virginia and good morning everyone and thanks for joining us. It is my pleasure to welcome you to the BioVentus 2026 second quarter earnings conference call. With me this morning are Rob Claypool, President and CEO and Mark Singleton, Senior Vice President and CFO. Rob will provide an update on our 2026 priorities and the second quarter highlights and then Mark will review second quarter results and discuss our 2026 guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including factors and the company's form 10K from the year ended December 31st, 2025.

As such factors may be updated from time to time in the company's filings made with the SEC, you are cautioned not to place undue reliance upon any forward-looking statements which may speak only as to the date made. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about the definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor section of our website at bioventus.com. And now I'll turn the call over to Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. BioVentus continued its positive momentum in the second quarter, delivering solid financial results across our business. As we continue to strengthen our commercial, operational, and financial fundamentals, We are seeing encouraging leading indicators that reinforce our confidence in our future growth drivers. As such, we are reiterating our full-year guidance on all metrics and are confident that our long-range growth prospects will drive enhanced value for our shareholders. Before going through the details on the second quarter, I'd like to take a moment to address the strategic review we disclosed this morning. As you saw in our press release, following receipt of multiple expressions of interest and an unsolicited acquisition proposal are The Board has formed a committee of independent directors that will evaluate a range of strategic options. Importantly, these options include, but are not limited to, a sale of the company or the continued execution of our standalone plan.

We have built a strong foundation for growth and success at BioVentus, and I am confident that the committee, with the assistance of Evercore as financial advisor, will take the time it needs to carefully evaluate all options to maximize value for our shareholders. Turning to the quarter, I'll update you on the three priorities we outlined at the start of the year. One, accelerating long-term revenue growth with increased investment in our business. increasing earnings even with the higher level of investment, and three, continuing to strengthen our robust cash flow and enhance capital allocation optionality. Let me expand on each priority, starting with accelerating revenue growth and increasing investments into our business. Second quarter revenue grew 4% as we continue to capitalize on the opportunities to grow our core business led by strong double-digit growth in our pain treatments business. Within pain treatments, our HA franchise, led by Duralane, our market-leading single-injection therapy, continues to be a durable strength for BioVentus, consistently growing well above the market. Our product is a great product. performance is driven by strong commercial focus, the experience of our dedicated sales force, NeuralAid's clinical differentiation, and broad private payer coverage.

In the second quarter, this compelling combination helped us expand volume in existing accounts and win new ones. We believe our go-to-market approach and disciplined pricing strategy positions us for sustainable, above-market revenue growth in HA. Here today, the HA business has outperformed our expectations, allowing us to deploy the significant operating profit generated by this franchise to invest in our key growth drivers, including PRP, PNS, ultrasonics, and international. During the second quarter, we continued to increase investments in these businesses by expanding our commercial team, raising awareness of our differentiated solutions, and and enhancing physician training programs. I'm pleased to report that these initiatives are generating valuable data-driven insights while producing positive traction across several leading performance indicators. These insights help us determine the optimal mix of future investment and commercial actions to maximize growth and returns. Let me highlight a few examples, starting with platelet-rich plasma.

Our momentum is building in PRP, and as capital placements continue to accelerate, we are seeing both larger and more frequent disposable reorders. These leading indicators demonstrate that our PRP systems efficient, customizable solution is gaining traction and beginning to displace competitive offerings. We are also beginning to realize the benefits of leveraging our HA Salesforce to drive PRP adoption. which helps us win new PRP accounts and creates additional opportunities to expand our HA customer base. With respect to PNS, our world-class differentiated technology, combined with strong commercial execution, has created excellent momentum, including increased velocity in surgeon adoption and stem trial placements with high conversion rates to permanent talisman implants, which is a great thing to do. resulting in a growing base of new business. In addition, surgeons consistently express strong appreciation and clear recognition of our differentiation, which is translating into competitive conversions and meaningful inroads with larger institutions. The strength of these leading indicators confirms our continued focus on expanding Salesforce coverage and enhancing clinical support, and investing in clinical evidence generation to further augment our differentiation. In ultrasonics, our technology, combined with our investments in marketing and surgeon training, is driving encouraging traction with key leading indicators, particularly increased surgeon adoption, accelerating disposables growth, and new wins with larger accounts and market-leading IDMs.

We expect these early indicators to translate into revenue acceleration in the second half of this year and beyond. Finally, in our international business, momentum continues to build following the addition of new talent and the team's greater focus on select markets with the best growth opportunities. We are encouraged by the speed of execution, the depth of our opportunity pipeline, and our customer win rates. Together, these indicators give us confidence in delivering strong, double-digit growth in the second half and for the full year. Turning to our second priority, increasing earnings, even as we invest in our future growth drivers. The second quarter was a powerful demonstration of how we have enhanced the earnings power of the business. Despite accelerating investments, we delivered an adjusted EBITDA margin of 23%.

And for the full year, we expect to maintain a margin of at least 20%. Our operating profitability combined with significant interest expense savings generated adjusted EPS of 22 cents in the quarter. And year to date, we have increased our adjusted EPS by 24% compared to the prior year. Looking ahead to the second half of the year, we expect to further accelerate our investments while continuing to grow earnings and deliver on our full-year financial guidance. We are able to achieve this by leveraging the earnings power generated from our durable, above-market revenue growth and stable peer-leading gross margin. Turning to our third priority, accelerating cash flow. We delivered another strong quarter with cash from operations of $20 million.

We used our strong cash generation to repay an additional $24 million of our term loan. also achieved an important financial milestone, reducing our net leverage to below two times. And we expect our net leverage to be below 1.5 times by the end of the year, reflecting our disciplined capital allocation. We plan to continue to prioritize strengthening our balance sheet by using our strong free cash flow to further reduce debt this year. by creating significant capital deployment optionality for the future. Overall, we continue to execute with discipline and deliver strong results against our strategic priorities We are entering the back half of the year with significant momentum, increased conviction in our strategy, and growing confidence in the strength of our portfolio and investment approach. Before I turn the call over to Mark, I'd like to highlight another important milestone. Ventus was recently recognized by U.S. News and World Reports as a best company to work for.

This recognition is a testament to the talent, commitment, and culture of our world-class team. And it further strengthens our resolve as we continue our journey to build BioVentus into a leading $1 billion MedTech company that delivers exceptional value for our customers, employees, shareholders, and all other stakeholders. Now I'll turn the call over to Mark. Thank you Rob and good morning everyone. Let me start by highlighting that our performance this quarter reflects the strength of our strategy and our disciplined execution against the investment thesis we outlined. The combination of durable growth and momentum in our core business and peer leading gross margin is an enabling us to fund the investment into our four growth drivers. In the near term, each of these four areas of growth are generating encouraging evidence and increasing our confidence in future revenue acceleration.

At the same time, we continue to deliver on our commitment to improve profitability and generate strong cash flow. This powerful combination sets us apart and positions us to create meaningful long-term value for our stakeholders. Turning to our headline results from the second quarter, revenue of $153 million increased 4% compared to the prior year period. Health was driven by significant strength in our pain treatment business, which was partially offset by a few factors, including a challenging comparison to the prior year in surgical solutions and restorative therapies, and a shift in timing of some orders, which we will discuss in a moment. Adjusted EBITDA of $35 million increased over $1 million compared to the prior year and grew faster than revenue growth. Adjusted EBITDA margin of 23% expanded 20 basis points compared to the second quarter last year, even with our increased investment. adjusted earnings were 22 cents per diluted share for the quarter, compared to 21 cents in the prior year period. let me provide some additional commentary on our quarterly revenue. In global pain treatments, we delivered double-digit growth with revenue of $82 million, representing a 12% increase compared to the prior year.

As Rob highlighted, the ongoing durability of our performance continues to be driven by strong growth in HA from volume gains with our differentiated single injection Duralane therapy and favorable customer mix. This success reflects the intense focus and strategic collaboration across our customers. Salesforce, corporate accounts, and pricing teams. Additionally, we saw positive contributions from PRP and P&S, and we continue to expect both to rank in the second half of the year, as we have previously discussed. Moving to surgical solutions, revenue in Q2 totaled $50 million, which was a decline of 5% compared to the prior year. though it reflects 5% growth sequentially. In addition to the challenging prior year comparison, performance was impacted by the timing of certain ultrasonics capital placements and international orders, shifting approximately $2 million of revenue or more than 100 basis points for the company into the second half. Revenue and BGS were also impacted by challenging prior year comparisons and deliberate portfolio actions to prioritize higher margin profitable growth opportunities.

It is important to note that ultrasonics disposables performance is accelerating, and we are gaining significant traction within BGS with new large accounts and IDNs. which will propel second half and longer term profitable growth. In restorative therapies, revenue of $21 million declined 2%, resulting from a change in mix, specifically with Medicare patients, in addition to a difficult comparison to the prior year. We expect growth to resume based on current business opportunities and the execution that the Exogen team has demonstrated. over the past two years. Finally, international revenue of $19 million was lower than the prior year by 1% or 2% on a constant currency basis, primarily due to the timing of distributor orders, which is consistent with the business. fundamental growth at international continues to be strong and given our increased strategic focus, talent additions, and improved commercial execution, we expect to generate strong double-digit growth in the second half of the year and for the full year. Moving down the income statement, adjusted gross margin of 75 percent was 90 basis points lower than the prior year period as expected. primarily due to higher freight costs and product mix. Additional adjusted total operating expenses and R&D expenses increased by $4 million as we continue to strategically invest in our key growth drivers to accelerate future revenue growth and expand the long-term earning potential. At the same time, demonstrated disciplined cost management by controlling expenses and finding efficiencies across the business.

Adjusted net income of $20 million increased $1 million compared to the prior year period. improvement reflects the benefit of continued revenue growth, stable gross margins, and lower interest expense, demonstrating a leverage in our business model and impact of our ongoing focus on operational execution. Adjusted net income was also impacted by an increase in our effective tax rate compared to the prior year due to the removal of the valuation allowance, and we expect to have a higher effective tax rate for the year. Turning to the balance sheet and cash flow statement, we continue to generate strong cash flow driven by our robust profitability, disciplined working capital management, and capital life business model. Cash flow from operations totaled $20 million during the quarter, and we ended the period with $29 million of cash on hand and $248 million of outstanding debt. During the quarter, we reduced debt by an additional $24 million, bringing total debt repayment for the year to $46 million as we continue to prioritize deleveraging and repayment of our term loan. This strengthens our financial position and is expected to drive further interest expense savings while enhancing our ability to strategically deploy capital towards our highest value opportunities. Through the first six months of the year, we have achieved 5% revenue growth, 12% adjusted EBITDA growth, 24% growth. 4% adjusted EPS growth, and $22 million of growth in cash from operations. year-over-year revenue growth to increase in the second half compared to the first half by over 300 basis points, half of which comes from acceleration in our surgical solutions business with a portion related to the shift in timing from the second quarter into the second half, and the other half from revenue acceleration in both P&S and PRP.

In addition, cash from operations is expected to approximately double in the second half compared to the first half of this year. As a result of strong progress to date in our outlook for the business, we are reaffirming our full-year financial guidance. We continue to expect 2026 revenue to be in the range of $600 million to $610 million. Adjusted earnings per share to be between 75 cents to 70 cents. $1.79 per diluted share and cash from operations to range between $84 million and $89 million. In closing, we are off to a strong start to the year and remain focused on executing our strategy to invest in our four growth drivers. We believe we possess a powerful combination of growth, operational discipline, and financial strength to position us well as we build a leading medtech company and create meaningful, meaningful long-term value for our shareholders. Operator, please open the line for questions.

We will now begin the question and answer session. To ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Chase Knickerbocker with Craig Hallam. Please go ahead.

Good morning. Thanks for taking the questions. So just first on pain, it's clear that both you and kind of your leading competitor in the single injection market are growing volumes here in the first half of the year, maybe just a couple parter there, can you give us an idea of kind of volume versus price? performance in the quarter, again, focusing particularly on Duraline. And then kind of just help us with kind of a little bit of characterization around the competitive dynamics that are currently out there in the single injection market, you know, how, you know, kind of both. And again, your leading competitor could be kind of grabbing volumes and taking share at the same time. Thanks. Thanks.

Hey, Chase, this is Rob. Yes, thanks for the question, and we'll try to provide you some insights on that. You know, first, just reiterate that we've had a great first half, even better than our expectations. And to your question there, it was led by double-digit volume growth for Durlane. Again, you know this is our single injection therapy. And like I believe our first half performance shows again that HA is a very strong, durable, profitable growth driver for us. So that's, you know, we've talked about it before, but it's favorable movement in the market, but that's really due to our clinical differentiation, our broad private payer base, and our overall commercial strength. So we're looking forward to the back half of the year, not just for HA, but for pain overall.

Again, whether you're talking about the first half of this year or the second half going forward, our progress and growth in this space is really driven by volume growth.

Help Rob, thanks. Maybe just on, you know, kind of going to surgical. Can you kind of just discuss your visibility into that capital, kind of getting pushed into the second half and kind of staying there? And then just to follow up on that, even if you kind of placed that $2 million in the second quarter, you know, surgical would have still been essentially flat. Can you maybe just peel back the layers a bit around kind of breaking down growth by ultrasonics and BGS? And then if you wouldn't mind talking about kind of capital in ultrasonics versus kind of handpiece growth, I think that would be really helpful for us to just kind of think about that business.

Yes, this is Rob again. There's a lot to unpack there from the question. So maybe I'll broaden it to surgical and just kind of give you overall perspective on it and also touch on both the capital and disposable pieces that you mentioned. So, you know, first, we feel great about the long-term outlook for both. both ultrasonics and BGS and for surgical overall. I think it's important to note that despite a difficult comparison in ultrasonics and Q2 and the transitory impact of the timing that you mentioned with respect to capital placements, and that alone was nearly a 400 basis point impact for surgical, The surgical business grew 5% sequentially in the second quarter. More importantly, we saw great traction in ultrasonics with our leading indicators from our investments, including new accounts, new users, capital placements, and accelerated sequential growth with disposables. So we're really looking forward to the second half of the year. And in BGF, look, we're constantly managing our business with operating discipline to drive possible growth.

And to that end, we took some proactive actions in the channel in the second quarter that had a temporary impact on our performance. But there we also saw in Q2 very positive traction with new large account acquisitions and early penetration with the counts that we've recently won, which gives us clear line of sight to acceleration in the back half of the year. So again, a lot lighter quarter, less than our expectations for known reasons. And part of that was that shift in timing that you alluded to. And we fully expect to see a strong.

acceleration for our surgical business in the back half of the year and then just last for me Rob if I can sneak one more in appreciate all the context there I know you won't specifically comment on the strategic alternatives process, but maybe could you just help us contextualize it just a little bit as far as where we are? Is this fresh? Is this brand new? Or is this something we've been working on in the background before announcing it publicly here over the course of the quarter? Sure.

Yes, thanks for that question, Chase. You know, as mentioned, we made the announcement today, given the unsolicited acquisition proposal that we received, along with multiple expressions of interest. And, you know, beyond that, we can't provide a lot of detail beyond what we've already shared. But, you know, I will say we continue to be really excited about our significant progress and about the enormous potential ahead. we have a lot of confidence that the committee that I mentioned is committed to evaluating the full range of options to maximize shareholder value. So, We'll leave it at that for now, and we'll keep you updated on anything that we can as time goes on.

Thank you, Rob. Thank you. And again, to ask a question, press star 1 on your telephone keypad. Our next question will come from the line of Larry Solo with CJS Securities. Please go ahead.

Great. Thanks and good morning everybody. I guess, give us a little more color Rob, on PRP and PNS, I know it doesn't sound like you're ready to give us any numbers, but it sounds like that 2% and 12 million number. It sounds like you're headed in the right direction there, but maybe just a little color just on customer reception, um, just early on anecdotally, you know, how things are going. And I guess particularly on PRP, I guess it sounds like you're building some. Capital placements, um, which will drive more.

for sales too in the back half of the year. Yes, thanks Larry, great question. So I'll start off with PRP and like we're really encouraged by what we saw in Q2, including velocity of new customers, accelerated capital placements. as you mentioned there, both an acceleration and an increase in the size of our reorders. all of which further validated the market opportunity in front of us with our differentiated technology. And I'll also point out that we're really starting to leverage our established HA commercial team from PRP in a very synergistic way. And that not only makes this a good profitability driver for BioVentus, but I think it's also important to highlight that HA is helping us win PRP, and PRP is now helping us win business. So it's very exciting and we're looking forward to turning this business into a strong growth driver for BioVentus in the back half of this year and beyond. I'll touch on P&S briefly too since you mentioned it. We're really excited about what we saw in P&S in Q2 as well.

It included an expansion of our P&S teams. an acceleration of new customers and new trials, and a great conversion rate to new implants. And we're receiving really positive feedback from the market. And when it comes to P&S, if it's roughly a $200 million market today, could reach $500 million over the next handful of years. And we're confident that our highly differentiated technology and our go-to-market strategy positions us very well to scale this business to over $100 million. As to the other part of your question, Yes, as expected, still tracking towards the 200 basis points for this year. So, again, really looking forward to the back half for both PRP and P&S and the years beyond.

Great. And if I could just follow up question for Mark. Sales growth, 5%. You mentioned 5% in the first half and EBITDA actually grew 12%, which shows some margin expansion. Curious. I know when we started the year with the investments, you know, enhance investments into the business. We thought EBITDA would be roughly flat-ish on the margin basis. Is that still your assumption? Because I think sales growth you mentioned was a little bit less than expected, but you still had some nice margin expansion there. Any thoughts on that as we look into the back half? Thanks.

Yes, thanks for the question. You know, feel really good about the control we have with our P&L and the peer-leading gross margins that we have. Overall, our expectations, as we mentioned in our prepared remarks, are pretty consistent with what we've communicated for the full year around the 20%. Yes. 2Q EBITDA margin was 23%. So it's just a reflection of the powerful P&L that we have and the ability to control it. But with those really strong performance numbers, we are continuing to invest in our growth drivers. As we mentioned in the beginning of the year, we had highlighted $13 million of investment actually going to be a little bit more than that as we go into the back half of the year. You know, P&S will get the majority of those drivers because of, you know, how Rob just articulated the confidence that we have in that product and our ability to be successful there.

So, we'll continue to invest in the second half. There'll be more investments into the second half than there was in the first half. very confident about the team's ability to provide the return on investment for those.

Right. Thanks. I appreciate it. Our next question will come from the line of Caitlin Roberts with Canaccord Genuity. Please go ahead.

Hi, thanks so much for taking the question. I think just starting with Exogen, maybe a little bit more color on the change in customer mix and any more color that you guys have on the CMS pricing reversal and how that shapes into your expectations. Thank you.

Sure, Caitlin, this is Rob. I'll provide you with some insights on that. First, we saw volume grow in the quarter. We saw a shift for the quarter in the customer-payer mix with with fewer Medicare orders. And so a little bit lighter quarter, but teams on top of it doing a nice job of growing volume and still see Exogen growing low to mid single digits in the back half of the year. Well, as you know, driving great profit and cash flow for the company. On the CMS part of your question, But, you know, while it was, when it was initially announced, we communicated that it was not a material change. So we're pleased to see the reversal.

We don't see that as a material change either. Great. And then just on the P&S portfolio and potential data generation, are you thinking about data generation going forward? And have surgeons in the early days been focusing on that as a point for you guys to?.

work on. Yes thanks and just to clarify I think what you're referring to is the evidence generation and yes that's been part of our plan and we continue to pursue that just to further augment our differentiation in the space. What we're seeing initially in the market is a very very strong reception to our technology given its differentiation. But it's natural for us to continue to develop evidence just to further augment that differentiation.

Wonderful. Thanks so much. Thank you, Caitlin. And once again, for any questions, press star 1 on your telephone keypad, and our next question will come from the line of Michael Petusky with Barrington Research. Please go ahead.

Hey, good morning, and I apologize in advance because I've missed part of this call, hopping EGS, did you guys walk away from some business in the quarter? And if so, did you quantify it? Thanks.

Yes, thanks. I'll touch on it. We mentioned it a little bit earlier, but for BGS, constantly managing our business with operating discipline to drive that profitable growth. And to your question, that's why we highlighted that we took some proactive actions in the channel during the second quarter. that had a temporary impact on our business. So, and I also pointed out earlier that while that was the case, we also saw a very positive traction with BGS with new account acquisitions and early penetration with accounts that we recently won. And so those give us a clear line of sight to acceleration in the back half. So sorry for the others. A little bit of repeat there, but that's what took place in BGS in the second quarter, Michael.

Rob, can I just try to press on that a little bit? You did quantify the impact of the shift in ultrasonics. I mean, would you be willing to quantify how much business maybe you decided to jettison there in BGS?.

Yes, I don't think we'll get into the details on it, Mike, but it was significant enough for us to call it out as, again, positive traction with our leading indicators, but that's why we made a point of mentioning that we took those actions in the quarter consciously and proactively, but want to really emphasize that the... The focus there was just the driving of profitable growth, the same operating discipline that you've seen us take in other businesses like HA, where we mentioned that end of last year and this year as well, transparent about our efforts to constantly play the long game and make sure that we have that operating discipline to drive really healthy, profitable growth. So that's why we highlighted it for the quarter.

Okay, and again, apologize in advance if you covered this in the first five, seven minutes of the call, but I'm just curious, on the strategic review, to the extent you can, is I'm just curious, has the PNS asset and what you guys have sort of been able to do there in terms of the regulatory approvals in very early days, has that been a significant factor, do you believe, in the current?.

strategic review. Thanks. Yes, thanks for the question. So we touched on it briefly before you were able to join. I won't go over those details again. I think to your specific question, look, we have a really strong business overall. We've made a ton of progress and we have enormous potential ahead. You know, I'd say we, you know, overall we have strength, we have momentum, and we have potential. And it's natural that that gets attention from others P&S is a really exciting part of the portfolio.

And of course, there's a high valuation of the P&S space overall in the market. But we're also getting a lot of positive feedback from the market about our overall business. When you look at year to date, you know, what Mark mentioned earlier, 5% growth overall just for this year, 12% EBITDA, 24% in EPS growth, debt pay down of $46 million, now lower than 2x leverage with line site to one and a half. And so again, just tremendous strength, momentum, and potential. And of course, what we're building in P&S is a really exciting part of the overall company.

All right, very good. Thanks, guys. Appreciate it. Thank you.

That concludes the question and answer session. I'll hand the call back over to Rob Claypool for any closing comments.

All right, thanks everyone for your interest in BioVentus. Once again, we delivered solid results in the second quarter and are confident in our ability to deliver above market revenue growth, increase earnings, and accelerate cash flow to create significant shareholder value.

This concludes today's call. Thank you all for joining. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good afternoon, everybody. My name is Jenny Rabinowitz. I cover U.S. MedTech and Healthcare here at Goldman. And today, I'm thrilled to be joined by Bioventus. To my left, we have Mark Singleton, CFO; and Dave Crawford, VP, Treasurer and IR. Starting off, it would be great to start with the company introduction. The markets you serve, your 3 key segments. What of the key products in all of them?

Great. Thank you for having us. Appreciate it. Bioventus is a $568 million revenue company as of 2025. Our guidance for 2026 is $605 million. We participate in markets of $6 billion plus. So a lot of opportunity. We've had a lot of success over the last few years, accelerating our revenue, expanding our margins and generating significant amount of cash flow. We've actually taken our margins from early 2022 to 13% EBITDA to greater than 20% in 2025. And so we've increased them by 700 basis points. At the same time, taken our revenue growth from low single digits to mid- to high single digits consistently from a performance perspective.

Overall, we've also taken our cash flow from that -- in the last few years to -- from a negative cash flow to positive free cash flow. And over the last 12 months, we produced $100 million of free cash flow. And we actually doubled our cash flow from 2025 to 2024. So we think this is a really compelling investment from a portfolio perspective. Today, we really look at our portfolio and what our core products are, what our expansion products are, and what our emerging products are. Our core products, our hyaluronic acid, HA product today. It's also our PRP product, which is a new growth driver. We're establishing 4 new growth drivers. But from the core product, there's also BGS and Exogen. So BGS and Exogen actually produce a lot of the cash and profit of our company. Those are the core products, and they feed the emerging product, which is ultrasonics, international markets from an expansion and then the emerging products are PNS and PRP. So overall, those are our -- how we think about our products, but our segments that we have is our pain segment, which is PRP, PNS and HA. And then we have our Surgical segment, which is ultrasonics business and also our bone graft substitutes business. And then our restorative therapies, which is our Exogen business.

Thinking back to the IPO in 2021, Bioventus did a few acquisitions shortly thereafter, 2 divestitures. So how are you thinking about the portfolio you have today, [ dealing ] with it?

Yes. We -- we're really excited about the portfolio that we have today. Again, we have the core products with HA, BGS and Exogen which really fund the actual future product, which is our expansion in our emerging products. And when we think about PNS, it is a product that we're really excited about in our portfolio. This is one that's got a lot of attention recently. There were some acquisitions made by Boston Scientific and Medtronic, who bought 2 of our competitors, and they paid multiples, significant multiples for that business. And if you look at where we think we can take that business, those multiples would result in a more market share than what we actually have for our overall company today. So we have that. PNS is a great product. When we compare ourselves to the competitors, we're actually -- our product is actually designed for the peripheral nerve, whereas our other competitor products were designed for spinal cord. So significantly more specificity in how we go about developing that product and how we're taking it to market. It also generates a lot more power to where -- from that device that can actually reach deeper and larger nerves, so it's much more effective. And then it's also a more smaller wearable device, so it's easier for the patient. But this market is for patients that have debilitating pain, the market itself is $250 million opportunity growing at 25%, almost 25% a year. So really a high-growth market, which we feel that we can be really successful in over time.

Can you [indiscernible] how the core products fund the growth. From a broader perspective, though, maybe including external as well. But how do you think about capital allocation beyond that?

Yes. Capital allocation is really -- one, it's great to get that question today versus a few years ago, first, second and third question were about leverage and what we're doing going to do to reduce our leverage. And we've we brought our leverage down from almost close to 6 turns. And at the end of the first quarter, it was a little bit more than 2 turns. So a significant reduction, and that comes as a reflection of the financial discipline that we put into the company, and the actual cash flow that the business is generating today. So significant turnaround. But we think about allocation right now. We're really focused on paying down debt, which we've reduced our debt at the end of the first quarter, it's close to $250 million. So significant reduction with that, as we've talked about with the leverage ratio. We look at M&A, and we just talked about our portfolio and how we like we really do like our portfolio today. We think there's a lot of potential to make a shift into these high-growth markets and really bring those products to life and ignite the growth drivers over the next few years. We're not going to put our head in the sand and ignore M&A, but it's not going to be our first priority. We really want to focus on the portfolio that we have today and bring it to life. One thing that we'll start to look at is stock buybacks potentially as we get below our 2 turns and we expect to do that in the second half of the year. But really right now focused on paying down debt, and we'll continue to do that in the short term.

Turning to recent results. Can we walk through the drivers that supported a 7% growth in Q1? And can you characterize this performance kind of ex-rate adjustments or any unusual factors?

Yes. So yes, we -- our first quarter without the rebate was in line with our expectations, so 7% growth on the top line. And again, as we expected overall in the first quarter without the rebate from a overall company perspective, we'd be in the 3% to 4% range. So good quarter overall from our expectations, and we think about our Surgical business was in the 7% growth range. Our expectation for that is higher than that for the rest of the year, but that's more of a -- as we sequence through the year, we expect that business to accelerate. But overall, a good performance. When you look at from a profitability, we actually grew our EBITDA by close to 25% year-over-year in the first quarter, and we grew our EPS 100%. And so those would be a little bit less without the rebate, but still an overall excellent performance from a profit perspective, [ gets ] into the expense management and also some of our growth investments that we're making into our growth drivers of $13 million investments that we've talked about making are going to be accelerating as we go through the year as well.

The other thing I'd hit on is cash flow. So significant $28 million increase in cash flow in Q1. As Mark talked about, that's been a big turnaround part of the story. We continue to see that momentum build as we've gone throughout the year.

On that subject, can you walk through the dynamics that led you to hold the organic growth guide, but you did raise the EPS and free cash flow guide. So maybe a bit more on the profitability [indiscernible].

Right. When we think about the first quarter performance, as we just talked about, both EPS and cash flow were ahead of our expectations, much more significantly than the revenue. Again, EPS, 100% increase year-over-year. That's a reflection of overall good P&L management, but it's also a reflection of the lower debt that we've been paying down with the excellent cash that Dave just referenced. We were able to pay down the debt that has less interest expense, flowing into the P&L. So year-over-year, a lot of improvement driven just purely on interest expense, but also good management to really further ahead on those 2 from a cash perspective and from an EPS perspective than we were on revenue. And from a revenue perspective, we still 3 quarters left over the year. So we -- our decision was to maintain that.

Since you reported earnings, there's been some news flow as it relates to CMF reimbursement for bone growth stimulators, but you guys held the guide. Can you walk through the kind of math or how you framed it that helps you get comfortable maintaining your guide in light of this change?

Yes, I think we really just focused on the impact that, that has on our business, and it really affects 50% of our business, this new news on the reimbursement. So when you look at the amount that was impacted from a full year perspective, it was really immaterial. When you also look at our competitors who are also impacted, they had some significant reductions in their revenue and profit that they adjusted with the news of this, and they're much more significantly impacted than what we are. And so again, we have -- this business is only a small part of the actual half of the business of our Exogen business is impacted by this. The other half is not.

I'd also add, when you think about last year, we had some headwinds related to currency and tariffs that we were able to offset. We see this as something similar. We'll have to make some tough decisions, but that's why we felt comfortable maintaining the guidance.

As it relates to your competitor, are you less exposed just because as a percentage of sales? Or is your product portfolio for BGS is different?

We're definitely less exposed. And they have some -- we compete head-to-head with them, but this is a bigger part of their portfolio, and they also have other -- they also treat other conditions with their products that we don't.

Okay. I guess where else in your portfolio do you see reimbursement risk or maybe benefit? Like is there anything else you know that CMF is evaluating maybe?

Yes, we always stay on top of that from a day-to-day perspective and focusing. But there are some significant changes to HA reimbursement in 2022 that impacted the company, but that has been stable since then. And we don't have any information that would lead us to believe that there would be any future or negative impacts to reimbursement at this point in time.

Turning to the segments and starting with the core. In HA, how has DUROLANE been impacted by the market-wide shift towards single injections and away from multi-injections?

Yes, DUROLANE has been positively impacted by that. We feel that this is within the HA space, as you said, it's a single injection. It's clinically differentiated versus our competitors. We're -- we have a really strong sales force with HA that is in the field, selling this all day, every day. We also come out this business with our contract position that we have with different payers as well. And so we have a payers. And if you have United Healthcare, for example, and we -- they have DUROLANE. And if you're United Healthcare, you're going to get DUROLANE through your insurance. So we really feel good about that. And even despite -- you just mentioned some of the CMF reimbursement items, from '22 all the way through 2025, there have been strong volume growth. That's really what we focus on with this space. We're going to be responsible with price. But we've seen a lot of volume growth given our great sales force out there that drives us every day and a combination of them working also with the contracts and payers that we have in place. So we really feel we have a powerful combination from an HA perspective. And as the market moves towards single injection, we're there to really benefit from that and take advantage of it.

What do you think is driving the market towards single injection? Is it mostly patient preference, physician preference, payer dynamics You kind of touched on?

I think it's a little bit of both, and it's less trips to the doctor with a single injection, but I think that there's more clinical differentiation with that product as well. And so overall, I think it's a natural shift. And just -- I think it's the physicians, it's a little bit of both in all of them, but they're still -- we have also have a broader portfolio than just DUROLANE. We still -- we sell our 3 injection product, GELSYN, sell our 5 injection, SUPARTZ. So there's still steady demand for both of those as well, but there is a shift into the single injection. And -- but overall, I think it's more preferences and then convenience for the doctors and the patients.

Staying with HA, you talked about, I mean, here and in other public appearances, targeting profitable growth, definitely a recurring theme. Can you describe to us what does it actually look like in -- out in the field, are you willing to turn down lower margin contracts? How is it playing out?

Right. It's a good question. Again, been really successful in driving a lot of volume growth over the last few years, adding new payers, adding new physicians. So really done a good job. We'll continue to do that in 2026. Our expectations for this business are not as high in 2026 as what they were and what we achieved in 2025. And it's really about being responsible from a pricing perspective, pretty much what you're asking us and that we're not going to chase volume that's not profitable from an overall just doesn't make sense from a P&L and financial management perspective. And so we're going to be rational and really pursue business that we feel is going to add profitable growth. And that's what we've been focusing on with our sales team in 2026. And as we talked about before, our first quarter results were in line with what we expected.

Turning to [indiscernible] there's obviously been some M&A activity from larger players. [indiscernible] I think what's attractive about this market and how are you uniquely positioned to compete against some of these larger players?

Yes. I think it's -- again, it's a $250 million market growing at 25%. These are patients who are really suffering from debilitating pain. I've been out in the field with our CEO, Rob and seen this live in person, seen some procedures, seen the patients really go from -- when they've got the device implanted and then come back to the doctor and really kind of highly questioning us, the Bioventus team when we were there that, that product was actually going to work for them. And we saw it live in person to where we actually -- after the implant actually saw that have an impact. We've had our general manager out in the field that were a woman really had not been able to really have been mobile for a long, long while, and she had the PNS device installed and was able to walk after that and had much higher mobility and she came to tears after seeing and experiencing that and just really moving experiences that we've seen. So it's a great market, and it's really treating people with really not just a little bit of pain in their knee, but significant pain that's really impacting their daily life. So that's why it's such a really attractive market with $250 million, growing almost 25%. We feel that we have the advantage versus our competitors, again, because our device was specifically designed for the peripheral nerves versus the other ones being designed for spinal cord stimulation. Our device, the power that our device generates is more efficient and it's more powerful, to where it goes from the lead into the deeper and thicker nerves. And so it's going to have a more effective impact on the nerves and bring the patients see the results that I just referred to. And then there's always -- it's a wearable device you have and ours is much more small -- much smaller than our competitors. And so we think really the combination of all those things is what gives us the advantage. But we really are excited about this product. We have a specific general manager we brought in to run this business and excited about what we see so far, excited about what we can do into the future. And I think it's -- it's going to be a one of our great growth drivers and help change the growth profile of the company over time.

So it sounds like there might be an advantage on the clinical side just in terms of how the device was designed. I guess, how are you guys thinking about generating clinical data so that the clinical community knows this?

Yes, that's a good question. And we're in the early stages of that and exploring the opportunities of how we go about doing that. And obviously, that's an investment that we're -- that we'll need to make to do that, but we have not generated that, but we're -- we have plans in place. We're assessing that all the time, looking at the benefits of that and how we -- in our research and our R&D team participating in that with the clinical team.

I think something else unique about the PNS portfolio is that there's multiple offerings, say, the trial. Do all of your competitors have this? Is this something unique? And does this help you address maybe a wider range of patients or indications?

I'd say it's a little bit a part of that market. Not all of our competitors have a complete portfolio like we do, like the company that SPR just bought is -- or Medtronic just bought SPR, they just had a temporary device. But it's important for -- and so we have a trial device and then we have the permanent device. And we just came out and launched those, got FDA clearance, mid-2025. And but it's important for the patient to go through a 30-day or 60-day trial to really experience the impact of that. And then once they get comfortable with it and how to use it and how -- and then we move them to a more -- to a permanent device. And so it's really more in line with how the industry does that. But there are some patients, like I said, the SPR market is more temporary devices. And so -- but overall, we think that gives us an advantage.

On the earnings call, you mentioned that half of the planned investments for the year are being dedicated to PNS. So can you walk through what some key areas of investment are for this year?

Yes. We're investing -- we grew our EBITDA above 20% last year. So we really have a unique from a P&L perspective of either expanding our margins or investing. This is an investment year in 2026 to really invest in the 4 key growth drivers that we've talked about. And so from a PNS perspective, the $13 million that we're investing in that, a big portion of that is for the PNS market or the product. And we're focused on, first, expanding our sales force there and investing in the sales resources to bring the product to market. Second, the sale also, there's -- as we talked about the clinical trial and the clinical data, really investing in clinical resources who will work alongside the sales team to help in the procedure and answer the questions and make that procedure as efficient and effective as possible. And so we're investing in those. We're also increasing the amount of medical education that we're doing. Overall, increasing our marketing that we're doing for that product. So really -- this is really like a start-up in a lot of ways for us. And so there's lots of investments that we're making and the things that we just talked about, but we really we look at those and think about like the return that we're going to have and expect from those, we're, again, really excited about the product and confident in the investments that we're making.

Is this level of investment in response to competition coming on? Or is this kind of the right time for you guys?

This is -- we believe it's the right time. These investments were planned in 2025 before any of these acquisitions were made, and we looked at our P&L and our -- through our planning processes in the fall of 2025, looked at our growth potentials in 2026 and really focused on putting those investments in place then and giving us a head start going into 2026. So really not in response to them. And we actually feel these 2 players, Boston Scientific and Medtronic coming into the space, really, we welcome it. Our CEO, Rob would say, he's ready to compete with them, which I agree with. But I think it will bring more attention to the space. It will expand the market. So we really look at this as all upside from Bioventus perspective and what that will -- the opportunities that it will actually bring to us.

Got it. Shifting to PRP. You've highlighted it's the only system that only requires 1 centrifuge spin cycle. How pivotal is this point of differentiation in terms of clinicians looking to adopt PRP?

Yes, PRP, we think, to answer that question directly, we think that it's an important part of the decision. It's not just because we walk in there and say that they're going to switch on that alone. But we think it is one of the differentiators anytime, whether it be PRP or another device that you can actually make it easier for physicians. That's going to be an advantage, no matter whether it's PRP or another product. Our thesis and thinking about getting into PRP is really taking advantage of the synergies we get with our HA sales force. So we're entering this space with a product that is going to be highly accretive to our bottom line straight away because there's not a significant amount of investments. So there are all kinds of synergies where our HA reps are going to the office today already, and now they're going to -- they're selling an HA, they're going to bring in PRP. So the infrastructure that we have and the success that we've had with our HA sales force, really in medical device, talk about having multiple things in the bag. This adds another thing the bag for our HA sales force. And so we've seen early on that this has been very beneficial both ways. One, getting conversations with our current customers about PRP and getting those customers to sign up and switch to our device. But at the same time, reaching out to some new customers who maybe weren't buying HA from us before and now they're buying. So we're seeing benefits both ways on this and really are excited about the opportunities. But we think the biggest advantage we have is the sales force that we've been so successful with in selling DUROLANE, GELSYN, and SUPARTZ and really adding this to their bag to get synergies. And also from -- you look at it from an investment, again, we'll have the gross profit through the revenue growth that we drive, and that will be going to the bottom line because there's not a lot of investment to really drive this. So we're excited about that, one for HA reps to be able to have something else to sell in their bags and also the benefits in the P&L that, that will actually bring from a financial EBITDA and also cash flow.

I'd say there's one other differentiation besides just the centrifuge spin is the benchtop processor. It allows more customization for the surgeon or a physician to choose Leukocyte-Rich, Leukocyte-Poor, depending upon what the patient is requiring to be treated. That allows them to have like just one system. A lot of these orthopedic doctors will have multiple systems because of what they want to do. They're able to customize it just using our own system. So not just a quicker process but one that's more efficient and customizable.

Great. I think for PNS and PRP together, you said, should contribute 200 basis points to growth for the year. How are you tracking against that so far? What KPIs are you monitoring? And just any comments on that goal?

Yes. So our expectations for the first half of the year were not to be at 200 basis points. The 200 basis points was a full year commitment. So we're tracking in line with our first half expectations. And so we'd expect the back half to be more than 200 while the first half is less than that. But in addition to just the pure revenue, we're looking at -- we've developed a sales pipeline. So obviously, you want to look at the opportunities that you have. What we talked about before with the temporary devices or the child devices to see how many [indiscernible] are going to get a [ perm ]. So we were tracking the number of overall from a PNS perspective, looking at the number of physicians that we've actually trained or surgeons that we've actually trained and then how many of them are adopting it. And so all of those are internal things that we're assessing and looking at. We haven't started to quote any of those externally at this point in time. That's something that we eventually want to do. But really looking at those internally from a PRP perspective, looking at the capital placements that we have, obviously, looking at the sales funnel, developing all of those things early on with these new businesses, and really looking at those metrics and monitoring them over time, and that's where we'll help us get more and more confident about the future.

Shifting to ultrasonics. You have a first first-of-kind offering. So how are you thinking about the investment required given that you're kind of being the market creators here?

Yes. So the ultrasonic product came through us a few years ago through an acquisition. And then for those that don't know about this, this is really a game-changing technology. Again, another field visit that I did with Rob early on in his tenure, we met with a surgeon, probably a gentleman about my age, he's been working and doing surgery for a significant amount of time, and unprovoked or unsolicited, he told Rob and I that he thought this technology was revolutionary. So that was direct quote from him. Literally, the devices that we're competing with today are hammer and chisel, it's night day different. We strongly believe that we have the ability to change standard of care within this space over time. It's really when we -- the surgeon has much more precision and control with this device, there's a lot less blood loss for the patient. And it also extends the life of the surgeon because they're not in there with their hands, moving things around and hammering and chisel and safe [indiscernible] technology that we're excited about to win in this space with this technology.

On international markets, any markets you guys are very interested in entering? What are you buying? And any criteria that you're evaluating whether it makes sense then to enter a country?

Yes. We're always looking at all of our investments from an ROIC lens when we think this is another growth driver for us. We think it has a significant amount of potential. I think Rob's come into the company and where he's used to the business that he used to run before Bioventus was 25% of the revenue was in the U.S. and 75% was in international. Bioventus is pretty much the direct inverse of that is that we have 10% of our business internationally and 90% in the U.S. So he understands how to go to market internationally and has had a proven track record on how to be successful. So first start with that in his experience there. He's brought new leadership into this business that has a similar track record in business and international markets and how to go about that. So we've added talent, one through adding Rob and his commercial experience. He's added talent that we've put in place there that's really looking at these markets a lot different and has had early success early on. But the areas that we're actually looking at and where we think we have the most opportunity going to be in Asia, APAC. But specifically within APAC and China and Japan, we're not really penetrating those markets much at all today. So an immaterial amount of business and both of those. So we're working through regulatory processes, looking at all of the things we have to do to enter those markets and working through that. The other area is going direct in Germany. So this is not a market that we really -- even though it's a mature market, it's not something that we penetrated very much there, but we're making investments from a sales force perspective and really taking ultrasonic itself into Germany and some of the other products.

The last market, I'd say, is the Middle East and specifically Saudi Arabia, where we really think that we have opportunity, again, some examples of success from Rob's past and the leader that we have in our international business have been very successful in those markets. Obviously, there's some turbulent times over there right now, but we believe in those areas that we have a lot of opportunity to really accelerate growth and hasn't really been, I'd say, explored before as a company.

Got it. Turning to the P&L a little bit, how would you frame the margin profile of some of the expansion emerging products that we talked about. As these scale, should these be accretive to corporate average?

Yes. Our gross margin is peer leading. Overall, we're -- compares to anybody else, we're either the best or close to the best, and it's really a strength in of our P&L. We have the ability to grow. We have a high margin, generates a lot of gross profit dollars, so we can either expand our margins drop it to the bottom line like we did last year. We can take that money and invest it in the P&L like we're doing this year. But from a margin profile of our growth drivers, we look at -- start with PNS, it's a little bit less than our average from a gross margin perspective. But that's today early on. And as we get more volume through that over time, we'll have the ability to lower our cost structure and bring that margin more in line with the corporate average of 75%.

From a PRP perspective, that margin is a little bit lower than our corporate average. But again, the thesis for that investment was fully knowing that, that margin is lower. But when you look at that from the actual variable profit to the bottom line, it will be significant because the amount of investments that we're putting into that are not -- we've really already invested in the sales force, which is the biggest thing we need to do to drive that growth. And so from an ultrasonic perspective, it's actually north of our corporate average. And so overall, that is accretive to our gross margin. Again, high-growth potential, really strong growth margin combination. And then our international markets today, that margin is less than our corporate average, but we don't feel that these growth drivers are going to -- over time, as we get success in each of these areas, we're going to have better negotiating power. We're always going to be looking at our cost structure and how to bring it down. And so we don't think that the growth drivers and where our future growth is going to come from is going to be a meaningful difference in our actual gross margin that we have today and still fully expect that we'll be in that range over time.

So we talked about how 2026 is an investment-heavy year. And you've also said that you're expecting to hold EBITDA margins of 20%. How should we think about the balance between reinvestment and margin expansion beyond 2026?

Yes, I think that that's a wait and see a little bit of that to see the success that we have this year and the new things that we discovered by taking these new products to market. The great thing is we have the flexibility, right? And we've proven that we can do that last year. I think this year, our margin will be a little bit less from an EBITDA perspective, we'll grow EPS. So that's how our guidance is set up. But when we get into 2027, we'll evaluate the milestones of how we're doing. Are we making the progress that we expected, yes or no, and really look at that. But we do believe that these growth drivers have so much potential that we're going to invest in them to realize their full potential, and that may mean another investment year, but we haven't gotten to the point where we've really fully decided on that.

With the last minute, let me turn it back to you guys. Anything we didn't discuss that you want to highlight something underappreciated or anything else that you want to share?

Yes. I think, one, thank you for having us, but we really feel our story in total is underappreciated. We've already said, Bioventus is a very different company today than it was a few years ago. We've made significant products overall on our revenue growth, on expanding our margins, on changing our cash flow from negative to positive. We think this is a really compelling investment. It's rare and really unique opportunity to get into the company. When we look into the future with these 4 growth drivers that we have, that we're investing in, we really be able to take our growth profile that we have today and really accelerate it over time at the same time, expanding our margins and driving more cash flow. But overall, we feel like we've had a good track record of what we've accomplished to get the company where it is today. We have a really strong foundation, and now it's really bringing these growth drivers, igniting them and driving that into the future. And we think it's a great opportunity to get into an exciting company that has a bright future.

Perfect. Thank you guys for coming.

Thank you, Jenny.

Good day, and welcome to the Bioventus First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to hand the call over to Dave Crawford, Vice President of Investor Relations. Please go ahead.

Thanks, Andrea, and good morning, everyone, and thanks for joining us. It is my pleasure to welcome you to the Bioventus 2026 First Quarter Earnings Conference Call.

With me this morning are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will provide an update on our 2026 priorities and first quarter highlights, and then Mark will review the first quarter results and discuss our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com. But before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A Risk Factors of the company's Form 10-K for the year ended December 31, 2025, as such factors may be updated from time to time in the company's other filings made with the SEC.

You are cautioned not to place undue reliance upon any forward-looking statements, which may -- which speak only as of the date made. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

This call will also include reference to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website at bioventus.com. And now I will turn the call over to Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. Bioventus is off to a strong start to the year across our business as we successfully executed our plan, accelerated investment in our growth drivers and delivered another quarter of solid financial results. We continue to strengthen our commercial, operational and financial fundamentals across our company, while we help patients recover so they can live life to the fullest. For my remarks this morning, I would like to provide an update on our performance regarding the 3 priorities we outlined at the start of the year and highlight our first quarter performance.

As a reminder, our 3 priorities for the year are: one, accelerate our long-term revenue growth with increased investment into our business; two, continue to increase earnings even as we significantly increase our investment into the business; and three, continue to strengthen our robust cash flow and enhance our capital allocation optionality. We are off to a good start and are progressing well across all 3 of these priorities. As a result, we are raising our full year guidance for adjusted EPS and cash from operations. Mark will provide more detail on that in a moment.

Now let me expand on each priority, starting with revenue growth and acceleration of investments into our business. First quarter revenue growth of 7% was slightly ahead of our expectations as we delivered strong revenue performance across our core portfolio. These results were achieved through a combination of factors, including strong focus on growth with disciplined resource allocation, increasing awareness of the differentiated clinical and economic value we bring to our customers and effective commercial execution across geographies and channels.

Regarding our investment into the business, our continued ability to deliver above-market growth from our core portfolio is generating significant operating profit for us to invest into our future growth drivers of PNS, PRP, Ultrasonics and our International segment to accelerate long-term growth. During the quarter, we increased investment across these 4 growth drivers, which included expansion of our commercial teams, stronger marketing to help raise awareness of our differentiated solutions and additional physician training programs.

We also gained important data-driven insights across our growth drivers that will shape and accelerate our investments throughout the rest of the year. To provide you with some further context, let me share a few examples of the increased investments we are making in PNS as it will account for more than half of our planned investments this year. As a reminder, we possess a significant opportunity with our world-class PNS technology in a rapidly expanding market. To capitalize on the opportunity, we've started to expand the sales organization and add clinical resources to assist in pre-, intra- and postoperative patient and physician support.

In addition, we're investing to support these teams with surgeon training and increased marketing to raise awareness. We also made the strategic decision to hire a dedicated general manager. I'm excited to have Megan Rosengarten join Bioventus as our General Manager for PNS. Megan brings a proven track record of launching and scaling new medical device businesses around novel technologies and has held senior leadership roles across multiple leading med tech companies. Bringing Megan on board at this early stage reflects our belief in the significant potential of our PNS business and our intention to scale the business aggressively.

Turning to our second priority, increasing our earnings even as we invest in our future growth drivers. In the first quarter, we increased adjusted EBITDA by 24% and improved our adjusted EBITDA margin by well over 200 basis points. The increase in adjusted EBITDA, combined with our significant interest expense savings enabled us to generate adjusted EPS of $0.15, nearly double compared to the first quarter last year. This is a testament to our earnings power, which is generated from our durable above-market growth and our stable peer-leading gross margin.

Our strong start to the year with our operating margin exceeding expectations provides us with greater flexibility to invest aggressively in opportunities we identify while delivering on our full year financial goal of increasing earnings. As we ramp up investment throughout the year, we may see some margin fluctuation from quarter-to-quarter, but our strong business model gives us the agility to invest significantly while holding our adjusted EBITDA margin around 20% for 2026.

And with respect to our third priority, accelerating cash flow, we had a great start to the year following our very strong performance last year. Cash from operations increased $28 million compared to the first quarter last year and marked the largest -- our largest cash flow from operations in the first quarter since becoming a public company. Our strong cash flow gives us substantial capital deployment optionality. And as mentioned previously, at this time, we plan to continue to prioritize strengthening our balance sheet by using our free cash flow to further reduce debt.

In conclusion, thanks to the solid execution of our team, we are off to a strong start, and we remain focused on building our momentum in the quarters ahead. We believe we have a powerful and differentiated combination of value drivers that sets Bioventus apart, and we are confident in our portfolio, our strategy and our investment approach as we continue our pursuit to become a $1 billion leading med tech company that delivers significant value for all of our stakeholders. Now I'll turn the call over to Mark.

Thank you, Rob, and good morning, everyone. Let me begin by saying that we had a strong first quarter, and we are well positioned to increase investment in our future growth while continuing to strengthen our balance sheet with robust cash flow. I'm confident that with continued focus and disciplined execution, we will advance our business and create significant shareholder value.

Turning to our headline results for the first quarter. Revenue of $132 million increased 7% compared to the prior year period, driven by solid performance across all 3 of our businesses. Adjusted EBITDA of $24 million was nearly $5 million higher than the prior year and represented an increase of 24%. Foreign currency exchange rates had a favorable impact for the quarter as we benefited by almost $2 million due to the impact from FX rate movements compared to the first quarter of last year. Adjusted EBITDA margin of 18% expanded 260 basis points compared to the first quarter last year. This was the result of higher revenue and improved gross margin, partially offset by the increase in investment that Rob highlighted. And adjusted earnings were $0.15 per diluted share for the quarter, nearly double compared to the $0.08 in the prior year period.

Now let me provide some additional commentary on our quarterly revenue. In global Pain Treatments, we delivered revenue growth of 8% compared to the prior year. As Rob mentioned, our revenue growth slightly exceeded our expectations, which was driven by a favorable rebate adjustment in HA. Operationally, we experienced a slight increase in volume growth in the prior year as growth was impacted by a reduction in inventory levels as distributors, as expected.

Next, Global Surgical Solutions revenue grew by 6% as we saw solid growth across the portfolio. We plan to continue to invest in marketing across the business to raise awareness through medical education to train surgeons earlier in their careers, sales force expansion in targeted areas and highlight our distinct clinical and economic value proposition.

Shifting to Global Restorative Therapies. Revenue grew 5% compared to the prior year. Our EXOGEN team delivered another strong quarter, and we continue to expect revenue growth in the mid-single digits for the full year. Finally, as one of our four growth drivers, we expect to build on our International segment's double-digit growth rate from last year.

International revenue growth increased 17% compared to the prior year, while on a constant currency basis, growth was 11%. We saw improved growth across Ultrasonics in Europe as we began increasing awareness of our innovative technology and opened up another source of growth for Ultrasonics. We believe our positive momentum can continue given our increased strategic focus, talent additions and improved commercial execution.

Moving down the income statement. Adjusted gross margin of 76% was 110 basis points higher than the prior year period due to the favorable rebate adjustment as well as benefits from a refund of prior year tariffs. Adjusted total operating expenses and R&D expenses increased by $5 million as we increased investment to accelerate future revenue growth. Now for additional details on our bottom line financial metrics. Adjusted operating income of $20 million increased by nearly $3 million compared to the prior year. Adjusted net income of $13 million increased $7 million compared to the prior year period. This increase is the result of revenue growth, increased gross margin and lower interest expense.

Now shifting down to the balance sheet and cash flow statement. Cash flow from operations totaled $9 million, representing more than a $28 million increase compared to the first quarter last year. The stronger cash flow was driven by higher profitability, lower interest expense and favorable working capital. We ended the quarter with $36 million in cash on hand and $272 million in outstanding debt. During the quarter, debt decreased $22 million as we continue to prioritize repaying the borrowing on our term loan. We are confident our projected strong cash flow and increase in adjusted EBITDA will drive our net leverage ratio below 2 by the end of the second quarter of 2026, which is ahead of schedule. We believe this reduction in our net leverage will drive additional interest expense savings and enable greater optionality for future capital deployment.

Finally, as Rob highlighted, we are increasing our adjusted EPS and cash from operations guidance. We now expect adjusted earnings per share to range between $0.75 to $0.79. This represents a $0.02 increase compared to our prior year guidance of $0.73 to $0.77. For the year, we now expect cash from operations to range between $84 million and $89 million. This represents a $2 million increase compared to our prior year guidance.

We are pleased to reaffirm our 2026 revenue guidance we provided on March 5 of $600 million to $610 million. In addition, we expect year-over-year growth in revenue, adjusted EBITDA and adjusted earnings per share to accelerate from the first half of 2026 to the second half of 2026 as we leverage the expected increase in revenue from our investments. Our guidance does not assume additional impact of U.S. dollar fluctuation for the year. In closing, we are off to a strong start to the year and plan to continue investing in our 4 growth drivers to accelerate revenue growth, deliver increased profitability and strengthened earnings power and generate significant free cash flow. We believe this is a powerful combination that will help us build a leading med tech company and create increased value for our shareholders. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Larry Solow, CJS Securities.

I guess just first on -- just clarification on the rebate. So I assume you guys expected this, but you didn't know the timing. Is that why you haven't changed your revenue guidance? And does this just all flow to -- is this like a net that just all kind of flows to the bottom line?

Hey Larry, this is Rob. Yes. So as mentioned, we had some favorable rebate favorability and finished slightly ahead of our expectations. And we called that out as it related to a one-time process change by one of our commercial payer partners, and we don't anticipate that a similar level of variability moving forward. So we thought it'd be best to point it out. Outside of this, delivered results consistent with our planning assumptions and expect our revenue growth to accelerate in the second half of the year as we keep executing our plan.

Regarding the revenue guidance, yes, we feel really good about the first quarter and where we're headed for the year. And we're only a quarter into the year, which I mentioned because we normally wouldn't raise guidance this early. From a revenue standpoint, this is a key year for us to invest in and activate our growth drivers, which we expect to accelerate throughout the year, especially in the back half. So we're making the investments, executing our plan and analyzing our leading growth metrics very diligently, and we'll keep you updated on our progress with that over the coming quarters. But in the meantime, with cash and EPS, they're clearly ahead of schedule, and so we went ahead and raised our guidance on both of those. So overall, off to a good start, and we'll update you again next quarter on growth, cash and the profit expectations there.

No, no, absolutely. And just anecdotally, I don't know if you called out, but obviously, early days for both the PRP and the TalisMann, but any just anecdotal update there? I don't think you gave any sales numbers and they're probably modest. But just how the launches are going, how things are being received? Any thoughts there?

Yes. Thanks. Yes, we're encouraged by what we saw in the first quarter. We're, again, investing in the business and expanding, and what the first quarter entailed further validated both the market opportunity and the value of our differentiated technology. I think with the 2 of them combined, equally important is we're learning a lot about how to manage -- maximize our success with the business over the coming years. And that's exactly what this year is about, investing in and activating all 4 of our growth drivers and then diligently analyzing the performance every week, month, quarter to shape our future decisions and investments to maximize that long-term success.

So I -- with both PNS, PRP and the others, I expect our learnings and our investments and our revenue growth to continue ramping up throughout the rest of the year. And just with respect to those 2 in particular, I'll also mention that we still expect what we've mentioned in the past that combined PRP and PNS will contribute 200 basis points of growth this year. So off to a good start with those.

The next question comes from Chase Knickerbocker of Craig-Hallum.

I just maybe wanted to start on quantifying a couple of things within pain first. So maybe, Mark, if you could just quantify for us what the impact of those rebates were in pain on a year-over-year basis, if that's easiest. And then just as far as that negative impact on volumes from inventory, if you could just quantify those 2 dynamics? And then just following up on an earlier question, any sort of thoughts on what the contribution was from the new launches in Q1, just as we think about all the different moving pieces within pain?

Thanks, Chase. Appreciate that. Yes. When we look at break down the pain question and we look at it, as I said in the script, from an operational perspective, really kind of focus on volume. Our volumes were slightly positive from an overall global perspective. And so I think that's easiest to talk about with that. And when you look at revenue growth, it's slightly positive overall in pain without the rebate benefit. And so overall, it's really consistent with what we talked about in our fourth quarter remarks, I'd say, without the rebate from a Bioventus perspective as well as the Pain Treatment when we look at our 2 headwinds that we had in the first quarter being 1 less selling day and the lower distributor inventory, I think that those are both worth a couple of points of growth within the HA business. And so if you add those back and kind of normalize without those headwinds, our growth would have been in the mid-single digits from an operational perspective.

We get into the new products, the PRP and the PNS, just like Rob had talked about in the earlier question, I think Larry quantified it that way is we obviously, PNS already had some growth in our baseline in 2025. So we're continuing to grow there and then getting growth in our PRP business. But our expectations on that are really that, that starts to accelerate throughout the year as the investment comes in and we get more and more momentum with that in the field. So right now, it's playing out as we expected.

Got it. And then just on Surgical, you guys had kind of laid out your expectations by product line business segment on the previous quarterly call. That business is tracking on a year-over-year basis, a little bit below kind of what we kind of laid out expectations for '26. Can you just kind of talk us through what the kind of movements within that business were in the quarter, kind of what went better and what worse than expected? Or is that just normal kind of seasonality that you were expecting in Q1?

Yes. Chase, this is Rob. Our plan for Surgical entailed slower growth for the first quarter and then an increase in our growth rate sequentially throughout the year. And we believe we'll get to double-digit growth in the second half and even for 2026 overall as we gain additional share in BGS and see the impact from the investments we're making across Ultrasonics to train surgeons, expand our sales force and enhance awareness of our differentiated technology and clinical and economic value. So looking at a strong year for Surgical and expect that ramp up in the second half.

And just last for me, specifically on Ultrasonics. I mean, any specifics you can give us on the quarter just as far as capital growth versus disposables, just the kind of current health of that business would be helpful?

Yes. Well, overall, we remain very positive about Ultrasonics. We believe it's going to be a major growth driver for us. As you know, it's a big billion-dollar market. We believe we can make our technology standard of care given the exceptional precision and control it enables, time it saves and [ many ] patient benefits it delivers. And with respect to capital and disposables in any given quarter, both of those are key to the number with the majority of the revenue coming from the disposable side, and we expect those to accelerate throughout the year, as I mentioned, for Surgical overall and to get to double-digit growth for the full year for Ultrasonics as we ramp up our investments and execute our plan.

The next question comes from Mike Petusky of Barrington Research.

So Rob, I guess just around Ultrasonics, obviously, the lifeblood of getting that business to grow is education and training for surgeons. Can you give any detail around what you guys may be doing differently there in '26 and going forward versus previous just in terms of the effort and maybe urgency that you're trying to bring to bringing greater awareness to surgeons in terms of your technology?

Yes. Thanks, Mike. It's a great question. And like you said, it's -- when we have the technology that we have and the opportunity to become a standard of care, training surgeons is critical to that. So there's a few things. One is, as part of our strategic plan that we put in place, a much heavier focus on emphasis on and investment in the training of surgeons going forward. That includes a keen understanding of which surgeons out there we want to reach and when we want to train them in their careers in order to maximize the success of the business overall. So one, it's just a core part of our Surgical plan going forward and of our investment profile for the business.

The second is -- so we've built up our medical affairs organization over the past several months, and that includes bringing on a new leader over medical education, someone who's led medical education for a number of other leading med tech companies. And he's building the team around him in that area. So it's not just from a focus standpoint and from an investment standpoint, but it's also bringing new talent on board in order to significantly ramp up the content quality, the folks that we have helping us with that training from outside, including KOLs and just the frequency of that training throughout the rest of the year. And we expect that to continue to ramp in 2027 as well. So I appreciate the question because it is absolutely a big focus for us in terms of driving the long-term growth and success of this business.

Okay. And then if I could sort of do a follow-up, I guess, on key growth drivers over time and even including this year. I'm just curious, at what point and in what way might you guys start to disclose in terms of some kind of quantification, the PNS business, the progress you're making there, PRP. Like given that you have quantified, hey, this is going to add 200 basis points of growth in '26, to me, it feels like at some point and in some way, there'll come a time to start talking about this either in terms of incremental placements or revenue growth or percentage growth. Can you just talk about how you think about sort of ultimately disclosing as the year goes on?

Yes. Thanks. Another great question. So we're very interested in that as well. As we've mentioned before, we're investing and executing our plan with our growth drivers, and I'll keep emphasizing, really analyzing the data and learning a lot regarding commercial activity and the customer behavior about this and having dynamic real-time discussions across our team on what's working well and where we can do better and leveraging our small size and big ambition to make adjustments swiftly and decisively.

So what we've said before is that we want to get a few quarters into this year. We're only 1 quarter into it to understand both that commercial activity and the customer behavior more or better so that we can then come out and have the kind of conversation that you're referring to there, getting more specific about the numbers behind each business and even more importantly, communicating what we expect out of those over the next 3 years or so. So as I've mentioned in other forums, Mike, I expect us to be able to have that conversation with you by the end of this year.

The next question comes from Caitlin Roberts of Canaccord.

It's Michelle on for Caitlin. Congrats on a strong start to the year. First one from us is how much of the anticipated $13 million investment in growth areas that you called out on your last earnings call, have you allocated already? And maybe can you provide further breakdown or color on that spend?

Caitlin, this is Mark. So we look at our $13 million of investments, really, say, 25% through the year right now and say that we've been invested slightly less than that. So when we look at it, we're really going to be accelerating the investment over the next 3 quarters. So if you look at our operating expense in the first quarter, we expect that to accelerate into second quarter and the rest of the year. So we'll see a step-up in our expense for the remainder part of the year after first quarter. The investments for that, as we've talked about in the first -- fourth quarter call and Rob referred to it a little bit today, a significant amount of that is in PNS, which is one of our main growth drivers that we're focused on and discussed a lot today. We look at what we're investing inside of that, it's bringing on and ramping up our sales force, bringing on our clinical expertise to make sure that we have the clinical resources to help us drive the demand and help our customers and physicians in that.

And then just also continued resources that support that overall in sales reps and then also medical education is a big investment that we're making within that business similar to what we talked about in Ultrasonics. That also is an investment that we're making within the $13 million. So really, most all of those investments are targeted around the growth drivers, but a big portion of that is PNS and then put into Ultrasonics and PRP as well, but all around the same thing, sales resources, clinicians and medical education would be the 3 main areas.

Great. And then maybe if I can just sneak in another quick one on PNS. Have you moved out of the pilot launch? And how should we think about the current user mix? Are they primarily existing HA users? And then maybe can you talk about any early initiatives Megan has helped drive in PNS?

Michelle, it's Rob. Yes. So I think you may have mixed PNS and PRP there. So let me talk about both of them. So for PNS and PRP, we've moved out of the pilot stage and now we're ramping up. Different dynamics there. For PRP, we're leveraging our existing commercial team for HA, whereas for PNS, we're going to be building that team over the coming quarters for quite some time. So while they're both out of pilot launch, different dynamics in terms of the investment that we're putting into the business for both. And yes, as I mentioned, we're really encouraged by what we're seeing for both in Q1. We're learning a lot. And more than anything, it's validating the market opportunity for both and the strong value that our differentiated technology brings to the space. So very excited about both PNS and PRP going forward. Was there a follow-on question to that?

Yes. Yes. Can you maybe talk about any early initiatives that Megan plans to implement or has implemented so far in PNS?

Yes, sure. Thanks. Yes. So it's, again, really excited to have Megan on board. She has a track record of -- with promising differentiated technology of scaling it into big businesses. So really excited to have her on board. Really, the focus right now is on scaling the business. So it's -- again, we have this fantastic technology, a market that's growing very fast. We're getting high interest from the customers that we're going to. And now we're building the organization and our commercial efforts. Mark alluded to a number of those things. This is everything from building up the sales team to the clinical resources around that team to the medical education that we're putting in place, to the evidence that we're putting in place. And we had a good plan in place when Megan came on board, and she's doing a fantastic job executing on that plan, leading the team to execute on that plan to scale the business for the future. So again, while it's early, it's a very promising growth driver for us, and we're encouraged what we saw in the first quarter, and we're really looking forward to the path ahead.

This concludes our question-and-answer session. I would like to turn the call back over to Rob Claypoole for any closing remarks.

Thank you. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the first quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve earnings and accelerate our cash flow to create significant shareholder value. Thanks for joining our call.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Good day, and welcome to the Bioventus Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Dave Crawford. Please go ahead.

Thanks, Chuck, and good morning, everyone. Thanks for joining us. It's my pleasure to welcome you to the Bioventus 2025 Fourth Quarter Earnings Conference Call.

With me this morning are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our business, review our performance against our 2025 priorities and lay out our 2026 objectives. Then Mark will review the fourth quarter results and discuss our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com.

Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A Risk Factors of the company's Form 10-K for the year ended December 31, 2025, as such factors may be updated from time to time in the company's other filings made with the SEC.

You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable securities laws.

This call will also include reference to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors section of our website at bioventus.com.

Now I will turn the call over to Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. Bioventus delivered another solid quarter and concluded a successful year across our strategic priorities while helping patients recover so they can live life to the fullest. Over the past 3 years, we have established a strong track record of meeting or exceeding our financial guidance while enhancing our portfolio and significantly strengthening our commercial, operational and financial fundamentals across our company.

In short, we've transformed Bioventus. It's a different company today with a very strong foundation, and we are now entering an exciting new phase and are well positioned to build a $1 billion leading med tech company. In this next phase, we are increasing our focus on accelerating our revenue growth while further strengthening our earnings power and expanding our capital allocation optionality through strong and consistent growth in free cash flow. We believe this combination will drive significant future value creation for shareholders.

For my remarks this morning, I would like to discuss 3 areas. First, I will briefly highlight our fourth quarter performance. Second, I will summarize our 2025 full year performance with respect to our 3 priorities that we outlined at the start of last year. And finally, I will lay out our objectives for 2026.

Let's start with a review of the fourth quarter, which represented a significant year-over-year acceleration and reflects our progress with sharpening commercial execution, scaling operations and strengthening our financial foundation. The results further demonstrate that Bioventus possesses a powerful combination of value drivers of revenue growth, increased profitability and enhanced cash flow. We delivered 10% organic revenue growth with robust performance across our core businesses, and we achieved the second half revenue acceleration that we guided to throughout the past year.

We drove an increase in adjusted EBITDA of $8 million and expanded our adjusted EBITDA margin by almost 500 basis points compared to the prior year. And we set a record for quarterly cash from operations at approximately $38 million, helped in part by our improved inventory management. In addition to our strong financial performance, we received positive market feedback and valuable insights from the pilot launches for 2 of our exciting growth drivers, peripheral nerve stimulation, or PNS, and platelet-rich plasma, or PRP, which I will discuss in more detail in a moment.

Now let me shift to a review of our full year performance against the 3 priorities I introduced at the start of 2025, driving above-market revenue growth, continuing to expand our profitability and accelerating free cash flow generation. Across all 3 of our businesses, we delivered above-market organic revenue growth for 2025.

In our Pain Treatments business, we drove solid growth from our market-leading HA business and added the 2 new high potential growth drivers I already referred to, PNS and PRP. We also received a strong contribution to our 2025 growth from Surgical Solutions and equally important, solidified our plan to accelerate growth in this business in 2026 and beyond.

And in Restorative Therapies, we delivered our highest organic growth in the last 7 years, thanks to the excellent execution of our great team and the powerful impact Exogen has on patients' lives.

Turning to our second focus area, expanding profitability. We drove nearly 150 basis points of adjusted EBITDA margin expansion compared to 2024, surpassing our goal to expand our adjusted EBITDA margin by 100 basis points. This illustrates our capability to build our profitability by leveraging the combination of strong organic revenue growth, our peer-leading gross margin and consistent operational efficiencies. Expanding our adjusted EBITDA margin to a level at or above many of our peers gives us the ability to invest in our significant growth opportunities in 2026, which we believe will accelerate future revenue growth.

And with respect to our third focus area, we ended the year by generating nearly $75 million of cash from operations, accomplishing our goal to nearly double cash flow from operations compared to the prior year. In addition, we refinanced our term loan, which enhanced our liquidity and drove interest expense savings in the second half of the year that we expect to continue throughout 2026. Overall, 2025 was a pivotal year for our company and reflected our substantial advancements with our portfolio, execution and financial performance.

Next, I would like to highlight the 3 objectives we are prioritizing in 2026. First, with a strong financial foundation established, we are very focused on accelerating our growth drivers through targeted and disciplined investment. Second, as we significantly increase investments to accelerate future growth, we aim to drive profitability at a pace exceeding revenue growth. And third, we look to continue to strengthen our already robust cash flow, which in turn will enhance our capital allocation optionality.

Let me expand on each objective, starting with revenue growth. We remain focused on driving above-market growth across our core business, led by our durable and very profitable HA franchise, which generates profit to invest in and accelerate our future growth drivers of PNS, PRP, ultrasonics and our international business. In 2026, we plan to allocate approximately $13 million of incremental investment towards these exciting growth drivers. Investment across these businesses includes expansion of commercial resources, evidence generation to highlight the clinical and economic benefits of our technology, stronger marketing to raise awareness of our clinically differentiated portfolio and continued R&D innovation.

Let me provide additional context on these 3 investments -- on these investments across our 3 businesses. First, within our Pain Treatments business, we will be investing in both PNS and PRP. Our PNS platform will receive the largest share of the incremental investment, given the rapidly expanding market, our highly differentiated technology and the enormous potential of this business. This resource allocation strategy is supported by our successful pilot launch and positive feedback from physicians and patients as they see the benefits of our innovative technology.

During the pilot launch, we gained positive traction with both our trial and permanent solutions and collected valuable insights. The learnings from the pilot launch enable us to invest aggressively in 2026 in a very targeted and measured way to maximize the growth of this business in 2026 and over the coming years.

Mark and I have spent time in the field and witnessed firsthand the positive impact that our PNS technology has on patients' lives. Our interactions with a wide variety of customers and patients have made us even more confident that our PNS business will become a major growth driver for Bioventus given the power, size and ease of use of our differentiated technology.

We're also excited about PRP following its successful pilot launch. As a reminder, we are leveraging our existing HA commercial team for PRP, so there is less incremental investment required for this growth driver. Again, the market feedback from our pilot launch has been positive about our differentiated technology and the benefits for both physicians and patients. We believe the combination of PNS and PRP will provide a minimum of 200 basis points of growth this year with further acceleration in 2027.

Shifting to our Surgical Solutions business, where ultrasonics will receive a disproportionate amount of our incremental investments considering the size of the market, the unique benefits of our technology and our increasing ability to make our solution the standard of care. In 2026, we plan to invest aggressively in marketing to raise awareness and medical education to train surgeons earlier in their careers and in sales expansion in targeted areas.

We will also continue to support the growth of our excellent bone graft substitutes technology by raising awareness of our distinct clinical and economic value proposition. And with respect to our Restorative Therapies business, we will continue to support the business with targeted investments in 2026 and maintain our renewed focus and disciplined execution following a very successful 2025.

Finally, within our International segment, we plan to make significant investments across Pain Treatment, Surgical Solutions and Restorative Therapies given the untapped growth potential in front of us. I recently attended our international sales meeting and came away even more confident that our international business is well positioned to become a key growth driver for Bioventus. We now have a targeted growth plan, new structure and capabilities and a highly energetic team that is very focused on driving excellent execution in 2026.

Before I turn the call over to Mark, let me briefly touch on our other 2 key objectives for 2026, earnings and cash flow. Mark will share more details on both during his section, so I'll just provide the headlines. We remain committed to increasing our earnings and strengthening cash flow even as we accelerate investment in our growth drivers. We expect earnings growth to outpace revenue growth, driven by our peer-leading gross margin, disciplined resource allocation and our interest expense savings.

Given our substantial progress over the past few years in raising our EBITDA margin, we believe the best way to maximize shareholder value is to prioritize greater investment in our future growth while maintaining an EBITDA margin of approximately 20% for 2026. We believe our strong business model gives us the flexibility to invest more aggressively in 2026 to accelerate our future growth and the ability to expand our margins as soon as 2027. And we believe this combination of accelerating growth and margin expansion will create significant shareholder value.

And with respect to our third objective, as our increased earnings outpaces revenue growth, we expect it to contribute to an increase in cash flow, which will create increased capital allocation optionality. In the near term, we will continue to prioritize strengthening our balance sheet by using our strong free cash flow to further reduce debt.

In conclusion, thanks to the strong execution of our team, we have transformed Bioventus and created a strong foundation. It's unusual for a company our size to consistently grow above the market while simultaneously increasing its investment in growth and expanding profitability and cash flow. We believe this combination is one of the many aspects that sets Bioventus apart. We are now entering a new stage, confident in our portfolio, growth strategy and investment power to become a $1 billion leading med tech company. Our team is focused, excited and ready for the year ahead.

Now I'll turn the call over to Mark.

Thank you, Rob, and good morning, everyone. Let me begin by saying that I am proud of our team's hard work and dedication to transform Bioventus and significantly improve our financial results over the past few years. After a strong finish to the year, our improved execution has now positioned us to increase investment in our future growth while continuing to strengthen our balance sheet. I'm confident that with continued strong focus and disciplined execution, we will advance our business and create significant shareholder value.

Turning to our headline results for the fourth quarter. Revenue of $158 million increased 3% compared to the prior year. Organic growth was 10% after adjusting for the impact of our advanced rehabilitation divestiture at the end of 2024, which was a result of strong performance across Pain Treatments and Restorative Therapies. Revenue growth also benefited from an additional selling day compared to the prior year. Adjusted EBITDA of $37 million was $8 million higher than the prior year and represented an increase of 30%.

Again, foreign exchange rates had an unfavorable impact for the quarter, and we incurred an unplanned loss of almost $1 million. For the year, we've absorbed more than $3 million in unplanned impacts from FX rate movements. Adjusted EBITDA margin of 23% expanded 490 basis points compared to the fourth quarter of last year. This was the result of higher revenue, improved gross margin and disciplined spending. And adjusted earnings were $0.24 per diluted share for the quarter.

Now let me provide some additional commentary on our quarterly revenue. In Pain Treatments, we continue to see the second half acceleration that we previously communicated as revenue advanced 15% in Q4. Growth in HA benefited from strong volume growth in DUROLANE and recent account wins from earlier in the year. Next, Surgical Solutions revenue grew by 3%. Results in Ultrasonics were impacted due to a tough comparison to the prior year for capital sales, which was an all-time high. To give you a sense of the tough comparison, generator revenue in the fourth quarter this year still represented our third highest total ever.

For the year, we exceeded our plan for capital sales, which provides the foundation to accelerate disposable growth in 2026. Growth was also impacted in our International segment due to the timing of distributor orders. Shifting to Restorative Therapies. Revenue declined 26% compared to the prior year due to the divestiture of our Advanced Rehabilitation business. Excluding the impact of the divestiture, organic growth was 10% as the Exogen team delivered another strong quarter to close a remarkable year.

Finally, revenue from our International segment was unchanged compared to the prior year, while organic growth climbed 10%. For the year, our International segment grew 11% organically as our new team delivered on its target of double-digit organic growth in 2025. We believe this positive momentum can continue given the talent additions made throughout the year, market expansion opportunities and improved commercial execution.

Moving down the income statement. Adjusted gross margin of 76% was 180 basis points higher than the prior year period due to improved product mix and favorable comparison to the prior year, which more than offset the impact of tariffs and foreign exchange rates. Adjusted total operating expenses and R&D expenses declined by $2 million as increased investment was more than offset by direct expense savings related to the divestiture of our Advanced Rehabilitation business.

Now for additional detail on our bottom line financial metrics. Adjusted operating income of $33 million increased $7 million compared to the prior year. Adjusted net income of $20 million increased $1 million compared to the prior year. This growth is the result of our increased gross margin, decreased operating expenses and lower interest expense, which was offset by higher tax expense.

Now shifting to the balance sheet and cash flow statement. Consistent with our planning assumptions, we generated significant cash flow for a third straight quarter. Cash flow from operations totaled $38 million, nearly doubled compared to the fourth quarter last year. The stronger cash flow was driven by higher profitability, lower interest expense and a reduction in inventories. As Rob mentioned, we achieved a full year objective of nearly doubling cash flow from operations, delivering a 92% increase for the year.

We ended the quarter with $51 million in cash on hand, $294 million in outstanding debt. During the quarter, debt decreased $29 million as we repaid the borrowings on our revolving credit facility. As a result of the lower debt outstanding, our net leverage ratio declined to below 2.5x at the end of the quarter. We are confident our projected strong cash flow and increase in adjusted EBITDA will drive our net leverage well below 2x by the end of 2026. We believe this reduction in our net leverage will drive additional interest expense savings and enable greater optionality for future capital deployment.

Finally, let me lay out our 2026 financial guidance and provide some additional color on our guidance for the year. Based on current business trends, we expect net sales to range from $600 million to $610 million. In terms of quarterly phasing, we expect our first quarter revenue growth to be below our implied guidance range, at which point we believe it will accelerate in Q2 and the second half of 2026 as our PRP and PNS investments result in a more meaningful contribution to growth.

First quarter growth is expected to be impacted by 1 fewer selling day than the prior year and a rebalancing of HA distributor inventory levels given the very strong fourth quarter results. For the year, we expect adjusted earnings per share of $0.73 to $0.77, which represents growth that outpaces our revenue growth. This demonstrates strong earnings expansion while making significant incremental investments in our growth drivers.

Finally, further demonstrating the strength of our business and our momentum, we project cash from operations to range between $82 million and $87 million, an increase of approximately 10% to 17%, driven by higher operating earnings and lower interest expense. In line with the cadence established in prior years, we expect revenue and adjusted EBITDA to be the lowest in the first quarter of 2026 and to be the highest in the fourth quarter.

Our guidance does not assume additional impact from the U.S. dollar fluctuation for the year. In closing, Bioventus has solidified its foundation, and we are now at an inflection point to invest in our 4 growth drivers to accelerate future revenue growth, deliver increased profitability and strengthened earnings power and generate significant free cash flow. We believe this is a powerful combination as we strive to create increased value for our shareholders.

Operator, please open the line for questions.

[Operator Instructions]

And our first question for today will come from Chase Knickerbocker with Craig-Hallum Capital Group.

Congrats on the impressive execution to finish 2025 here. I wanted to start in pain. You've kind of far exceeded kind of what we had modeled there in Q4. I wanted to get a little bit more color. I just throw out a couple kind of quick questions on pain. So just any growth contribution year-over-year from price? And then some thoughts on kind of GELSYN and SUPARTZ's contribution to growth. Was it positive? Was it negative? And clearly, it looks like double-digit during growth, but can you just give us a sense of kind of underlying volume, too?

Chase, this is Rob. Thanks for the question. Yes, maybe I'll start by saying we have a great Pain Treatments business. And of course, it starts with HA, saw that again in the fourth quarter. Knee osteoarthritis isn't going away. It has favorable underlying demographics. And as you know, HA is a very trusted therapy in this space, and we believe we set ourselves apart competitively with our clinical differentiation and broad private payer access and significant commercial strengths.

And we saw that again in the fourth quarter. I think it's another example of how this business over the long term generates durable, very profitable growth for us. So yes, in the fourth quarter, strong performance by the team. It was a great job. It's in line with what we signaled to you that we'd see a back half of the year acceleration. And of course, that's driven always by account wins and market expansion in general. It was also aided to a small extent by selling days and distributor dynamics. So even more positive than what we saw -- than what we expected.

As it relates to price volume, our business continues to be driven by volume. We're focused on both, very intentional about both. But as it relates to the performance that we saw, highly driven by volume and saw a good performance across the portfolio there. I may -- I'll just mention one more in the last part of what you said, which was on DUROLANE. Yes, with the strength of DUROLANE for us and the continued shift in the market from multi to single injection, as you would expect, DUROLANE is what led the performance for us.

Got it. And maybe just on the '26 guide, can you give us a sense for kind of assumptions by segment as far as how you kind of come out on the top line versus contribution for growth by segment?

Yes. Thanks, Chase. This is Mark. When you kind of walk through the portfolio, again, really strong fourth quarter, proud of the results that we delivered in fourth quarter and the turnaround that we've done over the last few years. When we look at our growth for 2026 -- in 2025, Exogen had a really strong year. So from that perspective, we look for the Restorative Therapies segment to be low to mid-single-digit growth in 2026.

From a pain perspective, we really look at that as our continued execution across the different pieces of our portfolio within that. And we'd expect mid- to high single-digit growth in the pain portfolio. And then from a surgical perspective with our strong ultrasonic technology that we believe is ability to really change the standard of care in that business over time that we would expect to have double-digit growth in that portfolio in 2026.

And then just one last one for me, guys, if I can sneak one in. Just as it relates to kind of pain for 2026, obviously, exiting the year on that strong quarter and guide kind of implies a step down, inorganic growth for the HA business that gets you kind of closer to market growth rates. Can you just kind of walk us through kind of why that deceleration in organic growth in the first half of the year from kind of the strong Q4 performance? And just maybe walk us through what in the market is kind of causing that expectation from you guys?

Yes, sure. I'll take that, Chase. So in 2026, we expect to grow our HA business above the market again, and we anticipate that growth to be less than 2025, partly influenced by the selling days in Q1 and normalizing inventories, but mainly because of our very intentional approach to continuously play the long game and to go after business that is accretive to our profitable growth. That's the main driver. And we've done that and shown that for years with our durable profitable growth in this business.

And it's important for us because we're leveraging that profitable growth to fund our exciting future growth drivers, 2 of which, as you know, fall into our Pain Treatments business with PRP and PNS. So that's really the key, some contribution from selling days and normalizing inventories, but really our intentional approach to go after profitable growth. So we feel good about HA and our Pain Treatments business overall for 2026.

Your next question will come from Mike Petusky with Barrington Research.

Yes, nice finish to the year. So I guess, Mark, on the -- you guys sort of alluded multiple times to the -- in terms of pain and maybe some favorable order timing, it seemed like distributor dynamics, et cetera. Is there any way to quantify how much sort of, I guess, tailwind you got just from sort of favorable order timing in the quarter?

Yes. Thanks, Mike. Appreciate your question. From an order timing perspective, really selling days was really favorable to us in Q4. So that helped us a little bit overall from the -- as Rob said, a little bit higher growth than what we had expected. Some of the distributor dynamics in Q4 probably helped us $2-ish million, maybe a little bit higher overall, and that's a little bit alluded to when we look into Q1, that will be our lowest growth from an overall year perspective. So as we see some of that move down after Q4. And so those are really the 2 main drivers of that.

Okay. And then just sort of one more, I guess, maybe a couple of questions within one more category. In terms of PNS, you guys referred to learnings during the pilot phase. And I'm just curious, what were your learnings in terms of -- is it the trial lead? Is it as important as I think you guys had believed it was? Is TalisMann getting favorable reception? Like what have you guys learned? And then second part to that, I guess, is -- I may have missed this, but are you guys reaffirming the 200 basis point bump from PNS and PRP for '26?

Thanks, Mike. Yes. First on the PNS pilot, there are a number of things that we were seeking to learn during that pilot, and it was very successful from that standpoint. First is just in terms of our differentiated technology. It's you always gain additional insights once you go into pilot launch. And what we received back was very positive feedback on the power of our technology, the size of it and the ease of use. And all of those relate back to that our peripheral nerve stimulation technology, in particular, our permanent solution is the only one on the market that was designed from the start for peripheral nerves.

And so we saw -- but we saw a positive feedback from that during the pilot launch. We expected it, but good to have that confirmed. And then also from a learning standpoint, we plan to scale this business aggressively. And so what we learned during the pilot launch was how to do that most effectively from the optimal resource allocation across that business in terms of where we invest and also the pace at which we should go with throughout 2026 and beyond in order to maximize our success.

And then just a lot of learnings around the best way to execute in the market to help patients with our fantastic technology while creating this major new growth driver for Bioventus. So we're really looking forward to that -- all of that playing out as we are shifting here into the full launch and accelerating this year and expected for the years to come as well.

Regarding the second part of your question, in terms of the 200 basis points, yes, we reaffirmed that in our remarks earlier that we expect to see a minimum of 200 basis points from the contribution of PNS and PRP combined.

The next question will come from Caitlin Roberts with Canaccord Genuity.

Congrats on the quarter. Maybe just starting with Ultrasonics. How near term are your expectations to build out the neurosurgery and the general surgery parts of the business? And does this require more rep adds from that perspective?

Caitlin, yes, our biggest focus for our Ultrasonics business is in the spine space, and that's for a few different reasons. But the most -- the biggest reason is just the significant size and opportunity of that space. It's much larger than neuro in general. And -- but we're also -- we have the technology and the interest with neuro in general because it's already -- the Ultrasonics is already an established standard of care in those spaces, and it lends itself naturally to us accelerating the growth in this business. But the biggest focus and the majority of our investment is going to be aimed at expanding within the spine space. And then was that -- did I cover both parts of your question? Or was there a second part to it there?

Yes. It was just if you required any more rep adds for adding those other indications, but it sounds like the focus is more on spine. So...

Yes. But I'll touch on that as well. I mean it is the same sales organization that calls on both the spine space and neuro for us within Ultrasonics. And as we've alluded to a number of times, our 4 growth drivers, including Ultrasonics, are getting a disproportionate amount of our investment in 2026. And with Ultrasonics, we expect that to be in a number of places, including expanding our sales presence. So that will impact, of course, both spine and beyond spine and also increasing our marketing power.

We have such great technology, but we need to raise awareness of our differentiated clinical and economic benefits with Ultrasonics. And we're really looking forward to putting more marketing power beyond this business and then doing some other things in terms of surgeon training and evidence and continued innovation. We have a fantastic R&D team behind our Ultrasonic business, and we're rejuvenating some of the investments from an innovation standpoint because we believe we can continue to drive exciting technology that will really help our surgeons and patients in this space. So we will see some of the investment go to Ultrasonics this year.

That's great. And just a quick one on PNS. Any color on the progress to building out the PNS team and cadence to hiring this year?

Yes. We're moving fast. We're scaling the business. And again, as I mentioned earlier with Mike, really driving that optimal resource allocation across PNS, and it's with the sales organization, of course, but it's also with the back support that we have, evidence that we're investing in. And as you may have seen recently, we've brought on a new dedicated General Manager for this business, just given the enormous potential that it has. So Megan Rosengarten has joined Bioventus and under her leadership, we're really looking forward to driving it aggressively throughout the year.

So we'll see throughout the year an investment in this business across multiple aspects that are required to scale it effectively, not just to drive the growth in 2026, but as we mentioned, we expect that growth to further accelerate in 2027 and beyond.

This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Rob Claypoole, our CEO, for any closing remarks. Please go ahead.

All right. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the fourth quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve earnings and accelerate our cash flow to create significant shareholder value. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, everyone. Welcome. Thank you for joining us. My name is Dawit Ghebremedhin, I'm an associate on health care team at JPMorgan. And today, I have the pleasure of introducing the Bioventus team. Joining us today is CEO, Rob Claypoole; and CFO, Mark Singleton.

Just a quick reminder on format. This will be a 20-minute presentation followed by 20 minutes of Q&A. So please save any questions until the end of the presentation.

And with that, I'll pass it off to Rob. Thank you.

All right. Thanks for the introduction, Dawit, and good morning, everyone. Appreciate you joining us today. At Bioventus, our mission is to help patients recover and live life to the fullest.

I'm entering my third year as CEO and over the next few minutes, I'd like to do 2 things. First, highlight the significant changes and the strong performance that we've driven over the past few years. And second, show you that Bioventus is now at a very exciting inflection point, where we're focused on igniting 4 powerful growth drivers while continuing to expand profitability increase cash flow and drive shareholder value.

But before we dive into it, a slide that you're all familiar with. My remarks today will include some forward-looking statements and also reference non-GAAP metrics. The forward-looking statements may differ from actual results and involve the risks that are outlined in our recent filings with the SEC, which are also available on our website.

Okay. With that behind us, let me provide you with a brief summary of who we are and why I believe Bioventus is such a compelling investment opportunity. We operate across 3 businesses: Pain Treatments, Surgical Solutions and Restorative Therapies. We're generating over $550 million in annual revenue in markets that provide us over $6 billion worth of opportunity.

And across our portfolio, we are either a category leader or a growth leader as we help patients with debilitating pain and musculoskeletal challenges with our differentiated energy and orthobiologic solutions. Now our unique portfolio provides us with multiple paths to future value creation, including accelerating revenue, continuing to expand profitability and driving significant cash flow. And I'm happy to say that we're executing on all three.

And that's because the past few years of Bioventus represent a clear transformation of the company. Bioventus has had strong assets in the past, but wasn't realizing its potential due to lack of prioritization, some inconsistent execution and constraining leverage. And we've addressed all of that by first, advancing our portfolio through development and innovation in order to create powerful new growth drivers and also by divesting non-core assets. We've also significantly sharpened our commercial execution. And we've instilled a disciplined financial mindset across our company, which has included reducing our leverage ratio by more than half.

And from all of that, we've generated revenue growth well above the market. We've sustained our peer-leading gross margin in the mid-70s. We've also expanded our EBITDA margins by roughly 700 basis points. And in the last 2 years alone, we've delivered over $100 million in operating cash flow. But that's not the end story, of course. This just sets us up for what we're about to create. With this strong foundation, we're entering this exciting new phase where we're going to ignite the poor growth drivers that I mentioned to accelerate our future growth. And our mission is clear. Our ambition is to create a leading med tech company that's over $1 billion in size with strong durable revenue growth, high margins and significant cash flow. And we are confident that the building blocks are now firmly in place to achieve these goals.

It starts with our portfolio. The portfolio that we've built across our 3 growth platforms, our core, our expansion platform and our emerging growth drivers. I'll briefly touch on all 3, and then I'll go into a little bit more detail on the next slide on both the expansion and the emerging platforms as they represent the 4 growth drivers that I mentioned, and it's also where we will invest disproportionately.

The first, our core, it's comprised of HA, bone graft substitutes and fracture care. And these legacy businesses account for the majority of our revenue today and because of their differentiated products and their leading market positions, they carry very high margins, and they generate significant cash flow for Bioventus. And while our core isn't growing as fast as our expansion and our emerging platforms, it is consistently growing above the market, and it generates significant profit for Bioventus.

Next is our expansion platform, and that includes the first of the 2 growth drivers that I mentioned, ultrasonics and international. And these are already providing strong growth to Bioventus with near-term growth acceleration expected. And overall, we expect these 2 to become a more meaningful part of our overall revenue profile in the years ahead.

And then we have our emerging growth platform, peripheral nerve stimulation or PNS, and platelet-rich plasma, PRP. These are early-stage businesses for us, and we're also confident that they're going to turn into major growth drivers for Bioventus in the years to come. The key is this. Our core funds our future, allowing us to invest in our expansion without sacrificing profitability or balance sheet discipline.

All right. Let's go into a little bit more detail on the 4 growth drivers. And let's start with peripheral nerve stimulation or PNS. This is an exciting space, getting a lot of attention, over $250 million in size, growing very fast at around 24%. We recently received FDA clearance for our TalisMann and StimTrial technology, and we're just now entering into the full launch with that new PNS platform.

And our platform has several distinct advantages. First, it is the only technology on the market that was designed from the start for peripheral nerves. It also uses a more powerful and effective form of energy and because that has the potential to reach deeper and larger nerves. And on top of all of that, it's the smallest wearable on the market. So as you can tell, we're really excited about what we can do with this business. We're excited to get going and to turn it into a major growth driver for Bioventus.

Next up, platelet-rich plasma, PRP, another exciting space. I'm guessing everybody in the room here knows somebody that has had a PRP treatment recently. It's about $400 million in size, growing over 10%. We recently entered the space towards the end of last year. And our technology has several advantages, including that it works in a single centrifuge spin versus requiring multiple spins. And that saves both the physician and the patient's valuable time.

It also allows physicians to precisely and easily customize the treatment to address a wide variety of patients and patient conditions versus requiring different systems to do that. And I should also mention that it's a highly synergistic opportunity for Bioventus as it leverages our established HA sales force. And that's because the majority of surgeons who are using HA in their practice are also using PRP.

Now if we go to the next one, which is Ultrasonics, another major growth driver. I'll touch on one thing actually back on this first. Even though those are both early stage with PNS and PRP, in 2026 alone, we expect them to contribute 200 basis points of growth to Bioventus together. And that -- I'd point that out because even though they're early-stage businesses, they're already going to contribute in a meaningful way this year.

So next, I'll go on to our third growth driver, Ultrasonics. Ultrasonics has already been our fastest growth driver over the past few years. And that's driven by our state-of-the-art technology, which is predominantly used in spinal surgery for bone cutting. And we are convinced that we have the potential to make our technology the standard of care in this space. And that's because it provides exceptional precision and control to surgeons. It also allows for tissue-sparing bone resections and it enables safer and more controlled surgical outcomes. Surgeons that I've met with personally have also said that it's so much easier and gentler on their hands that it's allowing them to extend their careers.

So while spinal surgery will remain the main focus for us with Ultrasonics, I'll also point out that we'll leverage our platform, our Ultrasonics platform for select neurosurgery and general surgery procedures, which will further enhance our future revenue profile.

And last, but certainly not least, international. This is another very compelling growth opportunity for us, a huge market, over $2 billion in size, which means that we have significant untapped potential. So historically, Bioventus has been a U.S.-focused company. And we simply didn't have the resources or the capability to go after the international segment. But that's changing this year. We're starting with much stronger strategic focus and prioritization with international. We've also established new leadership, proven leadership that knows how to drive everything from strategy down to execution. And we have a very targeted plan with substantial new investments in order to win market share internationally.

So again, very excited about our expansion and emerging platforms. And today, they make up less than 25% of our total company, which contributes to a low single-digit weighted average market growth rate, or WAMGR, for the company. Now naturally, we've been growing well above the market, but the bigger transformation takes place as we execute on these growth drivers and we start to shift towards these higher-end growth markets. In fact, we expect that in the future, half of our portfolio will be comprised of our expansion in our emerging businesses. And that will naturally increase our WAMGR, which will further sustain the long-term growth profile of Bioventus.

And that's why we're investing disproportionately starting this year in expansion and our emerging growth platforms. Our investment priorities include milestone-based expansion of our expansion of our PNS sales organization. We're very excited to scale that business, targeted increases in our international sales resources and then powerful new marketing to raise awareness of our differentiated clinical and economic benefits of our portfolio. And we'll also continue to invest in product innovation, specifically with ultrasonics and PNS.

With our outstanding R&D team, we're determined to keep building the best and most complete portfolio for those businesses. And everything that we do will be done through a strict ROIC lens to make sure that we -- everything we're investing, we're getting the highest return on that investment.

All right. So you can tell that we're very excited about our growth profile across our portfolio with our core, expansion and emerging platforms. But growth alone does not maximize shareholder value. That requires financial strength and discipline as well. And we're very proud of our peer-leading gross margin in the mid-70s. When you take a peer-leading gross margin in the mid-70s and you combine it with above-market growth, while it gives us the flexibility to continue to invest in our future growth while continuing to expand profitability.

But we're not resting on our laurels. We expect our earnings and our overall profitability momentum to continue. While we're not giving guidance here, we'll wait until our fourth quarter call to do that. I will point out that in addition to the very significant increase that we saw in our EPS in 2025, we expect our adjusted EPS for this year to grow 2 to 3x faster than revenue, and that's financial strength.

So before we wrap up, I'll touch on one other part of our value creation, and that is our strong and increasing cash flow. Over the past few years, we've significantly increased our cash flow. And we've used that cash to pay down our debt, which is now below $300 million and in turn, has reduced our leverage ratio by -- to below 2.5x.

In 2025, we've messaged that the increase in our cash flow equates to nearly double what it was from the prior year. And so as we go forward and we have this significantly increased cash flow with significantly reduced leverage ratio. What that means is that it gives us substantial optionality for our future capital deployment. And as we look at that capital allocation today, our top priority is to continue to pay down our debt with a clear line of sight to reducing it below 2x.

We'll also consider M&A, of course, and we'll always be on the offense with it, but we have a very high bar for M&A because we truly believe in the growth potential of our current portfolio. So we need to be highly synergistic tuck-in and meet our strong financial metrics. And of course, it's always responsible for us to consider returning cash to shareholders versus a share repurchase. The key to it is this is that we, with our increased cash flow and our reduced leverage, we have significant optionality for our capital deployment moving forward.

Okay. I'll wrap up by reiterating that Bioventus is a very different company today. Our transformation has strengthened our foundation and we believe we are very well positioned to ignite our expansion and emerging growth platforms to further accelerate our future growth. And to continue expanding our profitability and our earnings power overall and to also generate significant cash flow, which in turn, will further increase our future capital deployment optionality. That combination is rare and valuable. And we're confident that we have built the right portfolio and the right strategic growth plan and the right team to achieve our goals.

Thank you very much for your interest in Bioventus, and we look forward to your questions.

Thank you, Rob. I could kick it off with a couple of questions here. First, it's been great to see the turnaround of Bioventus had in the past couple of years. I think the acceleration in organic growth really highlights that. I'm curious to hear what opportunities you're most excited about that maybe investors might not fully appreciate or understand.

Thanks for the question, Dawit. It's -- what I mentioned during there is that powerful combination of being able to increase growth and expand profitability and drive cash flow simultaneously. And that's not just what we've done over the past few years, but that's what we're going to do moving forward. With our 4 drivers, we're really excited about igniting the -- investing in them, igniting them to accelerate our future growth profile with our peer-leading gross margin when we have that strong growth with the peer-leading gross margin, it allows us to invest while expanding profitability and cash flow, as I mentioned, just given the mechanics of our business, we have very strong cash flow. .

And I think as investors take a closer look at our company, they will be very impressed with the power of that combination. That's -- we're excited about that, and I think investors will be too as they take a closer look at our company.

Delving into growth drivers, and starting with PNS, there's been like a lot of M&A activity and growth, for example, the acquisition from Boston Scientific. I'd be curious to hear how you guys are going to position yourself in this market. And I'd love to hear more about the recent pilot launch.

Yes. Great. Well, I'll start with the last part. The recent pilot launch. It's gone very well. The market feedback has been extremely positive, and we're really excited now to start moving into the full launch. And really, that's because of the distinct advantages of our technology.

Mark and I have the opportunity to be in the field last month with a wide variety of patients. And it's -- it is truly remarkable what our technology does to help these patients with their debilitating pain. And so we're just really excited to get going with that business.

In terms of -- the space has gotten a lot of attention recently. We welcome Boston Scientific entering the space. I think that validates how attractive this market is. And it also implies the very high valuation of this space. And also a lot of respect for Boston Science. I think that when a leader like that comes into the space, it will further increase the awareness of it and drive adoption of PNS in this relatively young market. So -- but having said that, we're also very excited to compete against anyone and everyone with our technology. So it will be a fun path ahead.

Great to hear. Pivoting to ultrasonics. There's been -- it's another place where there's been a lot of significant growth. I'd love to hear about how you're taking the next steps to make it the standard of care for response treatment.

Yes, thanks. It's -- so it's exceptional technology. It has the potential to be the standard of care. And this is really about doing all of the fundamentals. If any of you have been around med tech businesses before, where they go from less known to becoming the standard of care. First, it starts with raising awareness through both education and through marketing of why this technology is so special. And then, of course, there's an expansion of the commercial resources and doing all of the things that raise our overall presence and profile of that business. And we're going to continue to invest in the product innovation as well to make it the broadest and most impactful technology platform for surgeons.

So I think as we do those different things, raising the training and education behind it, the marketing behind it, expanding the commercial resources and continuing to invest in product innovation, all of those, by the way, in ways that we haven't done before with this business that it will accelerate its path to becoming the standard of care.

Moving to another pilot launch, which you guys have done, PRP. I'd love to hear more about that and how you see yourselves against the competition.

Yes, it's a fun space. As I mentioned, $400 million, growing above 10%. We really like our platform because of the single centrifuge spin. Time is valuable out there today. With time and ease of use. And patients with ours, they can stay there for a short period of time and get the procedure versus needing to come back hours later in order to get it. So the overall convenience and time factor is key.

And then I touched on it briefly in the presentation, but I'll elaborate on it. So the overall orthobiologics using the patient to heal the patient with PRP, it's not just one type of PRP that works for every patient and every condition. So we need to provide physicians with the ability to precisely customize that treatment based on different conditions in different patients. And ours does that within 1 system. And we believe that's the future of PRP. So that's where we're really excited to go out and educate the market about that. and to grow this business for years to come.

I guess staying in team with growth drivers. You mentioned international expansion. I have to hear more about that and maybe any regions you'd like to specifically highlight.

Yes. That's a truly is a huge untapped opportunity for us. I would say that across my 2 decades plus in med tech, most of the companies have been with had pulled the international lever a while ago. Not that there still isn't growth there, but Bioventus hasn't done that yet. It represents a very small portion of our overall company's profile today. $2 billion market, and there's no reason why we can't go into these spaces and help patients and doctors and win market share. So we're really excited about going after that.

Big focus is in EMEA and APAC. But I'd say across international, the key for us is that we're going with a really targeted approach. What we're not going to do is go to all countries with all of our portfolio because that's not the best way to drive efficient growth. So we have select countries based on our market analysis that we're going to, and we know how to go to the market in those and we know what investment we need behind it to drive significant growth over the coming years.

And then after we establish a foundation in those markets and steady growth then we'll consider expanding to the next set of countries internationally. But I just want to emphasize that, that we have a -- we're really excited about it, and we're also very targeted and disciplined in terms of how we're going to grow that international business.

That's awesome. Shifting to capital allocation. I know you guys made it clear that you want to invest to drive growth. I'd love to hear how you're balancing that with continuing to deleverage the balance sheet in general?

Yes. It's -- so overall -- and I'll let Mark chime in here, too, just so he doesn't get too bored at the table, but it's -- we have this -- again, this combination of peer-leading gross margin and above-market growth and we're generating significant cash flow and we have the lower leverage and we have this increased capital allocation. This is a wonderful combination to have. And so we have the ability to do a lot with that.

But our first focus is on continuing to pay down debt. And that's an easy decision for us because we believe so much in our current portfolio. Of course, it's responsible for us to always consider what are high synergistic M&A opportunities and whether it ever makes sense to provide cash back to shareholders versus a repurchase. But right now, with our capital allocation, the top priority is to keep paying down the debt. Anything to add?

Agree. .

Awesome. I know you're not giving guidance, but your cash flow doubled in 2025, are you curious to hear is there room for further growth? .

Yes. The short answer is yes, and I'll let Mark take expand on that.

For cash flow, we think this is a really underappreciated part of the Bioventus story, and Rob mentioned in his presentation, but from a '24 to '25 through our guidance and what we talked about throughout the year, we expect to almost double our cash which has turned around from negative cash flow for a few years ago. So really impressive.

When we look into 2026, we continue to see further acceleration of that coming from 2 places. One from the -- talking about paying down debt. So our interest expense should be less from having lower debt. And then earlier in the year as well, we refinanced our term loan and got better interest for that. So that will definitely contribute further acceleration in 2026.

And then in addition to that, we're will continue to increase our operating profit in '26 over '25. And again, from a cash flow perspective, we'll -- just like we always focus on growing our EBITDA faster than we do our revenue, we expect cash flow to grow and accelerate more than our revenue growth in 2026 as well.

Thank you. I guess last one for me here. Taking a step back and looking forward with regard to the macroeconomic environment, what assumptions are you building into your plan in 2026 in regards to things such as FX and tariff or headwinds?

Yes. I'll take that. And I think if we -- for those of you not familiar with the story and in 2025, obviously, everybody is aware of the very fluent and dynamic headwinds that were in the macroeconomic environment, whether it be tariff or FX challenges. But we set our guidance in the beginning of the year, and we had $5 million of headwinds in 2025 between tariff exposure and as well as FX.

So that was a $5 million that we were able to overcome and manage the business, just like Rob talked about in his presentation from an overall disciplined approach from a financial perspective, and still are reiterating our guidance in the third quarter for the full year and our last earnings request of meeting that guidance despite those headwinds. So we feel that between our management system, our leadership in the company that we were able to overcome those headwinds.

When we look into 2026, we have $1 million to $2 million of tariffs that were previously announced. And obviously, things could change tomorrow. But when we look into '26, those are the tariff exposure that we are planning for and we'll manage the company that way from an overall FX perspective. Obviously, we all can't accurately predict the impacts of FX, so our planning rates from an FX impact in 2026 or that the dollar will stay where it is today. So -- but again, we've demonstrated the ability to overcome these in the past, and that's what we'll do in the future if we experience any of that in 2026.

Thank you. Let's open it up to the audience in case any questions.

It looks like no questions. Thank you, guys. Thank you, Rob and team. Have a wonderful rest of your day.

Thank you, Dawit. Thanks, everybody, for joining.

Good day, and welcome to the Bioventus Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dave Crawford, Vice President, Investor Relations. Please go ahead.

Thanks, Megan, and good morning, everyone, and thanks for joining us. It is my pleasure to welcome you to the Bioventus 2025 Third Quarter Earnings Conference Call. With me this morning are Rob Claypoole, President and CEO; and Mark Singleton, Senior Vice President and CFO. Rob will begin his remarks with an update on our business and our 2025 priorities, and then Mark will review the third quarter results and discuss our 2025 financial guidance. We'll finish the call with Q&A.

The presentation for today's call is available on the Investors section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A Risk Factors of the company's Form 10-K for the year ended December 31, 2024. As such factors may be updated from time to time in the company's other filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release on the Investors section of our website, bioventus.com.

Now I will turn the call over to Rob.

Thank you, Dave. Good morning, everyone, and thanks for joining our call today. Bioventus delivered another solid quarter as we continue to make significant progress with our strategic priorities while helping patients recover so they can live life to the fullest. With strong third quarter results and solid growth expected for the fourth quarter, we are reiterating our full year guidance on all metrics while continuing to offset $5 million of tariffs and foreign exchange impacts. Let's take a closer look at our third quarter and the 3 priorities I introduced at the start of the year, driving above-market revenue growth, continuing to expand our profitability and accelerating free cash flow generation.

First, third quarter revenue of $139 million advanced 8% on an organic basis, which represents an acceleration of more than 200 basis points compared to our organic growth for the first half of the year. Our team generated above-market growth across each business, achieving mid-single-digit to low double-digit organic growth, which reflects the strength and the breadth of our portfolio. I'll briefly share a few highlights with respect to our progress and momentum. You may recall that we projected that growth in our pain treatments and surgical solutions businesses would accelerate in the third quarter, which is clearly reflected by our results. With pain treatments, our leading HA therapies continued to outpace market growth as recent account wins gained traction powered by DUROLANE's clinical differentiation, the effectiveness of our dedicated commercial team, robust private payer coverage and significant opportunities for geographic expansion.

And our surgical solutions business delivered another solid quarter with growing momentum in bone graft substitutes as we increase awareness with both existing and prospective customers of our strong clinical and health economic value proposition. We expect this positive trend to continue into 2026 as we continue to execute our growth strategy. In addition, restorative therapies organic revenue growth -- excuse me, restorative therapies organic revenue grew double digits again, thanks to the focus and commercial execution by our great Exogen team. It's important to note that our performance across HA, DGS and Exogen, our 3 largest products, demonstrates the strength of our portfolio, which helps fuel investment for our mid- and long-term growth drivers.

Let me provide a little more detail on the exciting developments for 2 of these growth drivers within our pain treatments business, peripheral nerve stimulation, or PNS, and platelet-rich plasma, or PRP. I'll start with PNS. As a quick reminder, peripheral nerve stimulation helps patients who suffer from chronic peripheral pain, and we believe it represents a very attractive growth opportunity for Bioventus. U.S. market of approximately $200 million is expected to exceed $500 million by 2029 and grow above 20% annually. And we believe that the recent acquisition of Nalu by Boston Scientific clearly validates the potential value of the PNS market and could accelerate awareness and adoption.

As you know, at the end of the third quarter, we began our limited launch of StimTrial and TalisMann following the successful FDA 510(k) clearance, and we look to expand aggressively. Although it's early, we're tracking ahead of our expectations on the projected number of StimTrial procedures and the conversion rate to our permanent TalisMann solution. This confirms our hypothesis about the strategic importance of adding a trial lead to our PNS portfolio. Equally important, we are receiving very encouraging feedback from physicians and patients regarding our differentiated technological design, including the power, size and ease of use. It's an exciting time for Bioventus to be launching this game-changing technology, and we're just getting started with expanding our commercial organization, educating physicians and increasing our overall presence in this rapidly growing segment. So, while it's early, we're looking forward to the significant growth opportunity ahead of us.

And with respect to our new PRP system, Excel, we have also received positive customer feedback about this addition to our portfolio. As you may recall, the Excel system reduces procedural time and provide a customizable treatment solution for different patient applications. We recently progressed from our limited launch to training our entire HA sales team. And consequently, we expect sales to steadily increase over the remainder of this year and throughout 2026. We believe the combination of P&S and PRP is a significant expansion for Bioventus and will provide at least 200 basis points of profitable growth in 2026 and shifts our overall portfolio towards markets with higher growth potential. Longer-term, we believe both of these innovative technologies will deliver sustainable growth and become meaningful drivers of significant value for Bioventus.

Turning to our second focus area, expanding profitability. Our third quarter adjusted EBITDA increased by 13%, with our adjusted EBITDA margin expanding by over 200 basis points. This performance further demonstrates the powerful combination of our above-market organic revenue growth peer-leading gross margins and operational efficiencies, a combination that enables us to not only drive operating leverage, but also simultaneously invest in our future growth. We remain on target to achieve our previously communicated 100 basis points of adjusted EBITDA margin expansion for the year and the increased profitability in Q3, combined with our reduced interest expense, generated a 200% increase in adjusted earnings per diluted share as we delivered $0.15 per diluted share in Q3.

And with respect to our third focus area, we continue to significantly accelerate cash flow as cash from operations in the third quarter nearly tripled versus the same period last year. And we drove a cash conversion ratio of over 100% in the quarter. Year-to-date, cash from operations is up 88%, and we are on pace for our full year cash from operations to nearly double compared to last year.

In conclusion, thanks to our highly engaged team members across the globe, we made significant progress this quarter to deliver on our 3 priorities, and we're primed to close out a strong 2025. Bioventus has entered a new phase of our transformation, and we are well positioned to drive above-market profitable revenue growth, along with strong consistent cash flow on an annual basis as we aim to become a $1 billion high-growth, high-margin, high cash flow company that creates significant value for our shareholders.

I'll turn the call over to Mark.

Thank you, Rob, and good morning, everyone. Let me begin by saying that I am proud of our team's hard work and dedication to transform Bioventus. Over the last 8 quarters, we have generated at least mid-single-digit organic revenue growth, significantly improved profitability and strengthened our balance sheet. But this is just the start of what we can achieve. I'm confident that with strong focus and disciplined execution, we will continue to advance our business and create significant shareholder value.

Turning to our headline results for the third quarter. Revenue of $139 million was unchanged compared to the prior year due to the impact of our advanced rehabilitation divestiture at the end of last year. 8% organic revenue growth was a result of strong performance across all areas of our portfolio. Adjusted EBITDA of $27 million was $3 million higher than the prior year and represented an increase of 13%. Again, foreign currency exchange rates had an unfavorable impact for the quarter as we incurred an unplanned loss of nearly $0.5 million. For the year, we've now absorbed more than $2.5 million in unplanned impacts from FX rate movements. Adjusted EBITDA margin of 19% expanded 220 basis points compared to the third quarter last year. This was the result of higher gross margin and disciplined spending.

Now let me provide some additional commentary on our quarterly revenue. In pain treatments, revenue accelerated from the first half and advanced 6% in Q3. As growth in HA benefited from strong volume growth of DUROLANE and recent account wins, which we previously highlighted. Surgical solutions revenue grew 9%, driven by growth in ultrasonics as we broaden awareness of our value proposition of enhanced precision and control for surgeons, reduced patient blood loss and increased operating room efficiency. In addition, as Rob mentioned, we saw improved growth this quarter in BGS and expect further acceleration in the fourth quarter. Shifting to restorative therapies. Revenue declined 29% due to the divestiture of our advanced rehabilitation business. Excluding the impact of the divestiture, organic growth was 11% as the Exogen team delivered another strong quarter.

Finally, revenue from our international segment decreased 4% compared to the prior year, while organic growth climbed 10%. Our international segment is on target to deliver double-digit organic growth in 2025. We believe this positive trend can continue given our new leadership, market expansion opportunities and enhanced commercial execution.

Moving down the income statement. Adjusted gross margin of 75% was 50 basis points higher than the prior year period as favorable product mix offset the impact of tariffs. Adjusted total operating expenses and R&D expenses declined by $3 million as increased investment in our growth initiatives was more than offset by direct expense savings related to the divestiture of our advanced rehabilitation business. Now for the detail on our bottom-line financial metrics. Adjusted operating income increased $3 million compared to the prior year to $24 million. Adjusted net income of $13 million nearly tripled compared to the prior year period. This growth is a result of our increased gross margin, decreased operating expenses and lower interest expense. And finally, adjusted earnings of $0.15 per share for the quarter, an increase of $0.10 compared to the prior year.

Now shifting to the balance sheet and cash flow statement. Consistent with our planning assumptions, we generated significant cash flow for the second quarter, second straight quarter. Cash flow from operations totaled $30 million, representing an increase of $20 million compared to the prior year. The stronger cash flow was driven by higher profitability, lower interest expense and a significant reduction in onetime cash costs. We ended the quarter with $42 million in cash on hand and $323 million in outstanding debt, which included $25 million drawn on our revolving credit facility. During the quarter, debt decreased $19 million, and we expect to repay the remaining $25 million outstanding under the revolving credit facility by the end of this year. As a result of the lower debt outstanding, our net leverage ratio declined to below 3x at the end of the quarter. We are confident our projected strong cash flow and increase in adjusted EBITDA will drive our year-end net leverage below 2.5x and our debt outstanding to under $300 million. We believe this reduction in our net leverage and debt will drive additional interest expense savings and enable greater optionality for capital deployment moving forward.

Finally, as Rob mentioned, we are pleased to reaffirm our 2025 financial guidance, which we initially provided on March 11. This includes organic revenue growth of 6% to 8%, adjusted EBITDA of $112 million to $116 million and EPS of $0.64 to $0.68. Our guidance does incorporate the full year impact of $5 million of the current expectation of tariffs in 2025 and the year-to-date impact related to foreign exchange rates. Our guidance does not assume additional impact from the U.S. dollar fluctuation in the final quarter of the year.

In closing, we continue to execute our business plan and believe we are well-positioned to create shareholder value through strengthening our growth, profitability and cash flow this year and over the long-term. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Chase Knickerbocker with Craig-Hallum.

Rob, maybe just to start on pain growth. Can you just give us an update on kind of market performance in Q3? And then if you could share DUROLANE growth specifically, I think that would be helpful. Question there is just is DUROLANE kind of driving all of the growth. What are you seeing out of the more legacy 3 and 5 shot businesses, just kind of the puts and takes within Pain.

Thanks, Chase. I'll start off and turn it over to Mark for some of the numbers there. Yes, I think what you saw in the third quarter here is our pain business overall accelerating backed by our HA therapies and DUROLANE in particular and feel really good about executing on our growth plan for the back half of the year as we continue to gain additional volume, particularly in large accounts. As for the market, the market is going to fluctuate on a quarterly and yearly basis within the HA space and -- but it remains a key part of the OA treatment continuum. And our focus, as you know, is always going to be to grow our volume above that market growth regardless of where it's at, while maintaining a lot of price discipline. So, excuse my voice today, but we believe that we're very well-positioned to do that, to keep growing above the market, given our clinical differentiation and private payer contracts and large dedicated sales team. So, we feel good about growing the business in that market even if there's some fluctuation. And then like I said, I'll turn it over to Mark to get into some of the details on DUROLANE and the rest of the portfolio.

Yes. Thanks, Chase, for the question, and thanks, Rob. Overall, our growth in third quarter, DUROLANE did lead the growth of our portfolio, but that's with the differentiated product that we have there and the strong sales force and contract positioning we have, that's what we expect and also as the market moves towards a single injection overall. GELSYN did have some volume growth, but there's a little bit more price pressure there as we all know about for a while in the market. But overall, I feel like it was a good quarter and delivered on what we had committed to in our second quarter call.

And then maybe just on surgical. Guide implies some acceleration into Q4, I think, in that surgical business. Can you just speak to kind of what you're seeing so far in October and if those distributors that have ramped that are going to kind of support that Q4 result. Can you just kind of speak to how productive they've been as they've gotten up to speed?

Yes, Chase, I won't get too specific about October but let me reply and let me know if you have any follow-up questions on it. So again, sorry about my voice this morning. But first, what you're referring to there is bone graft substitutes. And we mentioned in our previous calls that our back half acceleration for Bioventus overall will be driven in part by BGS and you see that clearly reflected in our Q3 results. And that's thanks to our distributor partners and also because we bring a really strong clinical and economic value proposition to that -- to the $1 billion market that we're targeting. And I think what you see in the numbers is that we're getting better every day with raising awareness of the total value that we bring to our customers. And that's gaining traction with clinicians and with supply chain leaders. So, for your question there, we're going to keep stepping up our commercial efforts, and we're looking forward to building on our momentum with BGS in the quarters and the years ahead. And we remain very confident about the other part of surgical business with ultrasonics.

We're well into the double-digit growth stage this year-to-date, and we expect that to continue next year and beyond. And again, for that one, that's because of our game-changing technology, where we continue to believe we have the opportunity to change the standard of care in this space. So, for surgical overall, we remain very positive, and that includes for both PGS and for ultrasonics.

And just last for me. If we think about what's needed with Talismann to make that offering competitive in the market, I guess, what does it take to make that business kind of take off? Do you need to generate some data sets? Is it just kind of commercial execution? I mean maybe just speak to kind of what you're going to do on the clinical data side to kind of prove out that platform.

Yes. Thanks. Well, first, just for everybody's perspective, launch, as I mentioned, is going very well, the pilot launch, and we're receiving a lot of positive feedback from customers about first having a trial in our portfolio and also about the power and the size and the ease of use of our perm technology. So, in terms of moving forward, the real key to success is scaling this business commercially. Keep in mind that the business is extremely -- and team has been extremely small for us. We were holding back for the launch of both StimTrial and TalisMann. And now that we have those exciting -- that exciting technology in our portfolio, we're building up that commercial organization. So, that is really the key, along with increasing awareness of our technology across the market. And that's what you're going to see us doing much more aggressively in the months ahead. And of course, we'll keep you updated on it. But overall, we're really looking forward to the path forward with this big growth driver for Bioventus.

The next question comes from Ross Osborn with Cantor Fitzgerald.

Congrats on the progress here. So, starting off with ultrasonics, what levers do you have there to drive penetration within the spine opportunity? And how are your medical affairs efforts progressing?

Yes. Thanks, Ross. For ultrasonics, I touched on it before there, but it's -- I'll reiterate, we really have phenomenal technology in this space. And it's because our technology, it provides control to the physician, and it saves time, and it delivers many patient benefits. And so, our greatest lever with this high-growth business for us is raising awareness about the value that our technology provides. And we can do that through a number of different ways through our commercial organization and also, as you alluded to, through medical affairs. And what we're doing is stepping up in a significant way our medical education efforts, and that includes bringing on new talent into our organization over the last quarter and significantly improving the targeting and the content and the frequency of that medical education, again, so that we can help customers understand the value that our technology brings. So that's the biggest key to continuing to penetrate that spine space and beyond.

And then when you think about profitability for the company, is this a good base level to start thinking about your model? Just curious how you're pairing growth with savings as you try to penetrate and develop new markets such as PRP.

Could you just repeat the questions on we're comparing growth I didn't hear.

How you're balancing growth with profitability, especially as you're developing new markets?

Yes. Yes. Thanks for clarifying, Ross. Yes. Overall, I mean, we've, in our guidance, committed to expanding our margin by 100 basis points, and that's what we're still committed to do for full year 2025. And over the medium and long-term, I mean that's something that with our peer-leading gross margin of 75%, we get the really good growth that we're capable of. And then really, it's up to the opportunity we have to invest in products and also delivering expansion back to investors. And so that's been part of what we've done over the last few years. That's part of what we look to do over the medium and long-term. We look into 2026, that's our intention to do that as well, but we're also going to balance that commitment to expand margin with investments and the great opportunities to invest like ultrasonics that we just talked about, like P&S that we talked about and also our international business. So those are exciting investment opportunities for us, but we're also still committed to balance that margin expansion with being smart about investing while we have a great opportunity in the market to do so.

The next question comes from Caitlin Cronin with Canaccord Genuity.

I guess just to start off on the guidance philosophy, just some color on why you decided to maintain the guidance into Q4? And then any color into dynamics and expectations going into 2026?

Thanks, Caitlin. Overall, we set our guidance in March early on, and we've been consistent with that throughout the year. And when you look at the midpoint of our guidance, it implies a slight acceleration in the fourth quarter from what we've delivered to date, and we feel good about that commitment. And so that was the decision behind keeping the guidance the same and feel like that's a good -- the range that we set at the beginning of the year was a little tighter than we normally would. So overall, we still feel good about our guidance for 2025. When we look into 2026, at this point in time, we're really excited about the 2026. We talked about our growth opportunities in P&S and ultrasonics and international, but we're not going to give guidance for 2026 right now. But we do have some exciting opportunities as we've talked about throughout the call and look forward to sharing our thoughts on 2026 in the March earnings call.

And I'll just add on to that, Caitlin. I think what you're seeing in the third quarter here is just the power of our business. We achieved what we said we'd do, grew the business by 8%. We increased the margin by 200 basis points, generated $30 million in cash, and we're carrying that momentum into the fourth quarter and into 2026. So, like Mark said, we're not giving guidance, but it's -- our growth strategy is in full action. We really feel like we've entered a new phase here. And we're leveraging our core businesses, which are driving that above-market profitable growth to invest in and drive our faster future growth businesses with Ultrasonics, B&S, PRP and international. So, we'll give you a lot more detail on that when we provide our guidance for next year, but we feel good about the path ahead.

And then just with Exogen continues to be strong. Were the same dynamics going on with commercial execution that really drove the strength this quarter as in prior quarters? Or was it something else?

Yes, it's consistent with what we've shared in the past. This is now -- we've generated double-digit growth in restorative therapies for 2 quarters in a row, and it validates the positive combination of focus, fantastic leadership and team, the right strategy, smart investments and stronger execution and which in turn is demonstrating a favorable ROI on our investments. So, I can't say enough about the great team and what they're doing with that business. What you're seeing is sustainable growth for Exogen after 5 years of decline. And we believe that we can grow this business to over $100 million with that combination that I mentioned, thanks to the dedicated team and our proven technology, which truly helps patients recover so they can live life to the fullest.

This concludes our question-and-answer session. I would like to turn the conference back over to Rob Claypoole for any closing remarks.

All right. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the third quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve profitability and accelerate our cash flow to create significant shareholder value. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.