Good day, and welcome to the Bioventus First Quarter 2025 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, sir.

Thanks, Chuck, and good morning, everybody. And thanks for joining us. It's my pleasure to welcome you to the Bioventus 2025 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 begin his remarks with an update on our business and our 2025 priorities and then provide a brief discussion on the current macro environment. Then Mark will review our first quarter results and discuss our outlook, including our 2025 financial guidance. We'll 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, 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 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. I'm pleased to report that the first quarter of the Bioventus team continued to successfully execute our plan, maintain strong momentum and delivered yet another quarter of solid financial results as we hope patients recover so they can live life to the fullest. First quarter revenue of $124 million was in line with our internal expectation and reflected above-market organic growth of 5%. As a reminder, our Q1 revenue growth reflects a comparison to strong prior year results with above normal orders by certain distributors at the end of last year. Adjusted earnings of $0.08 per share increased 33%, reflecting the strength of our peer-leading gross margin, prudent investment in key growth initiatives and lower interest expense. Even with increased uncertainty in the macro environment, we do not see a material impact from tariffs at this time and we remain well positioned for a second half acceleration in our growth with a strong focus on disciplined execution across the entire Bioventus organization. As a result, we are reiterating our full year revenue, adjusted EBITDA and adjusted earnings per share guidance. Now let's take a closer look at our first quarter results and provide an update on our business across the 3 priorities that I introduced at the start of the year, driving above-market revenue growth, expanding our profitability and accelerating free cash flow generation. With respect to our first priority, driving above-market revenue growth and starting with Surgical Solutions, revenue advanced 7% driven by double-digit growth in Ultrasonics where we continue to see substantial growth from market expansion with new capital placements. Our value proposition of enhanced precision and control for surgeons, reduced patient blood loss, and increased operating room efficiency continues to resonate well with surgeons…

Thanks, Rob, and good morning, everyone. Let me begin by saying that I am pleased with the start of the year and the progress we are making to improve and strengthen our company and our performance. Turning to our headline results for the first quarter. Revenue of $124 million declined 4%, reflecting the impact of our advanced rehabilitation divestiture at the end of last year. Adjusting for the divestiture, organic growth was 5% with solid growth across all 3 businesses. Organic growth for the quarter was below our annual expectation given 2 fewer selling days and above normal orders by certain distributors at the end of last year. Adjusted EBITDA of over $19 million was $3 million lower than the prior year, primarily due to the divestiture and an unexpected $1.1 million foreign currency loss from the revaluation of payables on our balance sheet. The currency loss related to payables designated in Swedish krona, which appreciated 11% in the quarter. Now let me provide some additional commentary on our quarterly revenue. Surgical Solutions revenue grew by 7%, driven by strong double-digit growth in Ultrasonics with capital sales in the U.S., up by more than 50% compared to the prior year. As expected, bone graft substitutes growth slowed but is expected to accelerate in the second half of the year due to our recently added distributors. In pain treatments, revenue increased 4% compared to the prior year as certain distributors bought less this quarter following higher purchases at the end of last year. This impacted growth by approximately 3 to 4 percentage points. Shifting to restorative therapies, the divestiture of our Advanced rehabilitation business resulted in a 35% decline in revenue. Excluding the impact of the divestiture, organic growth was 4% as we maintained above-market growth in Exogen demand with demonstrated…

[Operator Instructions] And the first question will come from Chase Knickerbocker with Craig Hallum.

I just wanted to start in pain, maybe kind of a bigger picture kind of competitive question. Can you just kind of give us an update on the market and how you see it? I mean, are you seeing kind of any increased competition in the single injection space kind of give us an update on the multi shot. I know it's a little bit more of a competitive environment out there. And then can you just kind of level set us? Was there any price benefit for DUROLANE in the quarter on a year-over-year basis? And then kind of how you expect the year to kind of play out from that perspective?

Chase, it's Rob. Yes. On the first one, we continue to see a shift from multi-injection to single-injection in this space. And from our perspective, that's fine for a few different reasons. We have a really strong clinical value proposition with DUROLANE and strong contract backbone. And those 2 combined with our dedicated commercial organization we're driving good growth in that space, again, double-digit growth in the first quarter, also carries a higher profitability for us in the single-injection space. So we expect that to continue to take place. From a competitive standpoint, the competitors that we've had in the past still exists today. We feel good about competing against them, given that combination that I just mentioned with our clinical value proposition and contracts and really dedicated sales force. So regarding the pricing, I'll turn that over to Mark.

Yes. Thanks, Chase. When you look at our CMS price, as you're pointing to, it increased year-over-year. But as we've discussed before, there's a lot of differences between CMS and our financial ASP over the long-term, directionally, these are -- will come together and trend in the same way. But in the short-term, there's lots of different things that can affect it like the payments from a rebate perspective, and CMS is based on cash and the ASP from a financial perspective is based on accruals, and then you have lots of dynamics with distributor inventory that can influence this from a quarter-on-quarter basis. But overall, from a specifically DUROLANE the CMS ASP was up 10%. But from a financial ASP, it was just slightly positive.

Got it. And then just can you remind us kind of the tougher Q2 comp for pain and what was driving that? Sorry, if I missed it. And then you had mentioned some account wins. Can you just kind of discuss those in increased detail -- just what's kind of supporting that second half ramp that you expect in growth?

Yes. So just regarding Q2 for this category, again, last year at this time, a competitor had supply challenges that led to some additional volume. And we also had some of the favorable rebate accruals. So that's the -- again, some of these onetime comparables that will be out of the way as we move to the second half of the year. And then what was the second part of the question, Chase?

You had mentioned some recent account wins and kind of that's supporting the acceleration in the second half of the year for pain. Can you just kind of give us more detail there on what supports it.

Yes. Thank you. So it's so I'm not going to go into detail on those because they're fresh wins. And so what we're moving right now towards is converting those accounts and penetrating them to increase volume. But promising wins. And then in terms of what's driving them, it really keeps going back to the same combination that we've mentioned, and we see it reinforced quarter-by-quarter, which is we have this clear clinical differentiation with DUROLANE and the more doctors and patients that experience it the more well-known that clinical differentiation becomes. And in addition to that, we're leveraging the strong contract presence that we have, which still gives us an opportunity to drive significant penetration volume in the market. And then we have a really hungry team that's out there focused on this each day. So that combination is leading to those account wins. The other thing that I'd mentioned I'd mentioned -- I've mentioned that we've mentioned in the past is we're getting smarter in terms of our targeting, which accounts that we want to go after in order to drive the volume in the quarters and the years ahead. So it's a combination of those that are leading to these account wins.

Just last for me. It sounds like pharmaceutical tariffs are incoming. Can you kind of give us your assumptions around your exposure there? And kind of how you see that playing out and any sort of avenues for you to kind of adjust to any incoming tariffs there?

Yes. Well, as Mark mentioned, pharma is currently excluded. And I think this is 1 of the spaces we’re speculating on a hypothetical is probably not productive just given how much things are changing day-to-day, week-to-week. But – but I will emphasize that we’re vigilant monitoring the changing environment, and we’ve already planned for a number of different scenarios and right now, we’re focused more on what we can control, which is a lot, like growing above the market and expanding our profitability and increasing our cash flow. So if something changes in that area, we’ll be sure to talk to you about it.

The next question will come from Robbie Marcus with JPMorgan.

Just wanted to follow up there. You guided to first quarter below the low end of the 6% to 8% organic. It came in at 5%. You touched on some of it in the last few questions. But just maybe on organic growth and EBITDA, just speak to the level of confidence and visibility you have to the acceleration in 2Q through 4Q?

Thanks, Robbie. This is Mark. And really, when we look at the second half of the year or, I guess, the remaining 3 quarters in front of us, we talked a little bit about from a first quarter perspective that BGS was going to be slow in the first half of the year, we expect that to start accelerating in the back half of the year. HA, from a seasonality perspective, Q2 last year was our biggest quarter so Q2 and Q4 really in front of us. We talked about the recent account wins that we have. From an EBITDA perspective, you can really look at the big jump in EBITDA we had from Q1 to Q2 and 2024. We expect the same in 2025 and then to accelerate from there. And so as the sales increase throughout the year, we don't expect big spikes in expense other than kind of the correlation of commissions that would go with that. And so as the sales drives throughout the year, EBITDA will drop to the bottom line. And again, focused on increasing our margin by 100 basis points for that as well. And then also the cash flow acceleration nearly doubled from last time. So really just gets into the -- continue executing like we have over the last couple of years.

Robbie, I'll just add on. It's that growth acceleration in the back half will, as Mark alluded to, will occur naturally as we move past some of these unfavorable comparables. And -- we see that in the first quarter with double-digit growth in DUROLANE, double-digit growth in Ultrasonics, nearly double-digit growth in Exogen in the U.S., and these have been some of the key focus areas for us. So they're validating our approach. And once those unfavorable comparables in the first half of the year out of the way, I think we'll see that those growth drivers shine a little brighter.

Great. And you've made really good improvements in lowering leverage over the past few years. Maybe just speak to where you are in that journey and the plans for the rest of the year.

Yes. I think we’re right now right around 3.25 leverage ratio and expect that to get to around 2.5 by the end of the year. So really feel good about it, again, from driving revenue and expanding our margin by 100 basis points and delivering the cash flow we expect to be able to achieve that as we accelerate through the last 3 quarters of the year.

Your next question will come from Caitlin Cronin with Canaccord.

It's Michelle on for Caitlin. Kind of piggybacking off of the last question. Can you maybe talk about like what level of leverage you become more constructive on M&A opportunities?

Yes. This is Rob. I'll start by saying by saying that kind of the premise there is the portfolio. And we feel really good about the portfolio that we have right now and our ability to drive short, mid- and long-term growth. So the -- and then on top of the existing portfolio we have, we're layering additional growth drivers, which we're really excited about as well. We have in the back half of this year, going through FDA clearance right now. We have game change in technology for our peripheral nerve stimulation business. We have a significant untapped opportunity in our international business. And as mentioned today, we're now going to be in the PRP space, which opens up a large and growing market for us. So we feel really good about the portfolio that we have. And so the focus from capital deployment standpoint is really to keep reducing leverage to get it below 2 eventually. And that's the focus for us. Nonetheless, as opportunities come along that are really synergistic with our mission and synergistic with our current business footprint and the channels and call points that we have. We're going to go after those if they help us achieve our goals, which is driving growth, profitability and cash flow. And that's what you saw with the PRP announcement today. So that's our focus at this point.

Got it. That's great. And maybe just 1 more from us. Has the new OUS business manager started? And if so, maybe what are some of the initiatives they're driving in early days?

Your line broke up a little bit. I believe it was a question about the OUS business.

Yes, sorry. Has the new OUS business manager started? And if so, what are some of the initiatives that they're driving in the early days.

Yes. Thank you. So we just started this month, actually, and really excited about that. I mentioned a couple of times in the past that this – our international business is still quite small, even though many of the products that we have are eligible to drive significant growth. And with this type of business, when you have a ton of opportunity, but you’re early in the evolution. We really need a leader who can fly high and low at the same time and driving a powerful overarching growth strategy but also with really disciplined prioritization and very hands-on leadership and improving commercial execution country by country. So that’s why we brought on the new leader, and that’s what he’s going to do. So we’re going to, again, not just take a broad random approach, but very prioritized in terms of which countries, which products, refining the go-to-market approach, putting the investments in the right place to unlock more significant growth going forward for our international business.

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

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

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