Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bioventus Inc. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Dave Crawford, Vice President, Investor Relations. Please go ahead.

Thanks, Carly, and good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the Bioventus 2025 Second 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. Then Mark will review our second quarter results and discuss our outlook, including our 2025 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 market 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 on 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. 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 Bioventus delivered another quarter of solid financial results, driven by our team's disciplined execution. As we move into the second half of the year, we are well positioned to accelerate revenue growth, profitability and cash flow as we help patients recover so they can live life to the fullest. Second quarter revenue of $148 million was in line with our expectations and reflected the strength of our portfolio's diversity as we drove above-market organic growth of 6% even with challenging prior year comparisons in pain treatments. Adjusted earnings of $0.21 per share increased 31% compared to the prior year, while our adjusted EBITDA margin of 23% for the quarter exemplified the stability of our peer-leading gross margin and disciplined investment in key growth strategies. As a result of a solid first half and strong outlook for the remainder of the year, we are reiterating our full year revenue, adjusted EBITDA and adjusted earnings per share guidance. Now let's take a closer look at our second quarter highlights and provide an update on our business across 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. With respect to our first priority, driving above-market revenue growth, let me share a few highlights starting with our Surgical Solutions business, where we delivered strong double-digit growth in ultrasonics. We are well positioned for sustained above-market revenue growth as we continue to broaden awareness in the market of our ultrasonics value proposition of enhanced precision and control for surgeons, reduced patient blood loss and increased operating room efficiency. Switching to our Restorative Therapies business, Exogen accelerated and achieved double-digit growth…

Thanks, Rob, and good morning, everyone. Let me begin by saying that I am pleased with our results and progress through the first half of the year as we work to constantly improve and strengthen our company and our performance. Turning to our headline results for the second quarter. Revenue of $148 million was 2% lower than 2024, reflecting the impact of our Advanced Rehabilitation divestiture at the end of last year. Adjusting for the divestiture, organic growth was 6%, highlighted by strong performance across Surgical Solutions and Restorative Therapies. Adjusted EBITDA of nearly $34 million was $1 million higher than the prior year due to the divestiture and $1 million of foreign currency expense due to the U.S. dollar weakening. Similar to last quarter, the majority of this FX loss resulted from the settlement of payables on our balance sheet. On a year-to-date basis, we've now absorbed more than $2 million in impacts from unplanned foreign currency exchange rate movements. Now let me provide some additional commentary on our quarterly revenue. Surgical Solutions revenue grew by 11%, driven by strong double-digit growth in ultrasonics. We are also encouraged by the acceleration in growth in bone graft substitutes, which we expect to continue into the second half of the year as new distributors ramp up and existing ones continue to access new customers. In Pain Treatments, revenue increased 1% as we lapped challenging comparisons to the prior year period. Excluding these items, pain treatments grew an estimated 4% to 5%. Shifting to Restorative Therapies, the divestiture of Advanced Rehabilitation business resulted in a 32% decrease in revenue. Excluding the impact of the divestiture, organic growth was 11% as we accelerated growth in Exogen, which demonstrated improvement in commercial effectiveness and sales force execution, along with the timing of international distributor…

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

Congrats on the solid quarter. I wanted to start on pain. Can you -- I might have missed this, I'm sorry, but can you remind us what growth would have been year-over-year on an organic basis, if not for that favorable rebate adjustment in 2Q '24? And then along those same lines, just can you kind of walk through the pluses and minuses in pain in the quarter? It sounds like DUROLANE volume was a plus. What was the volume growth there for DUROLANE? And then you had mentioned kind of price being a bit of a distractor. Was that for DUROLANE? Or was that the multi-shot portfolio? And then if you could just kind of give us your overall thoughts on kind of GELSYN and SUPARTZ and kind of the competitive environment for those products as well.

Thanks, Chase. That was a lot of questions. So we'll try to get through. I'll start with the first one and hand it over to Rob. I think when you look at our normalized growth, I talked about that in the script and essentially, it would be 4% to 5% versus the 1% that we reported.

Chase, for the business overall, and feel free to elaborate on your question if this doesn't touch on it. But I think it's important. Just keep in mind, last year, we grew about 4x the market. And as we shared in the beginning of this year, I didn't expect that to continue, but really confident that we can grow above the market given the factors we've talked about before with our clinical differentiation, large dedicated commercial team and our private payer contract strength. And as it relates to the competition, yes, this market has been competitive for a long time, and we've been driving above-market growth in that environment and expect to continue to do so. So in terms of across the portfolio, naturally, DUROLANE continues to be the strongest driver in that portfolio, both our focus on that and our clinical differentiation and also as the category continues to shift to single injection. Let us know which aspects of your question we didn't cover there.

Yes, through a lot of idea, sorry. Maybe just specifically on DUROLANE volume growth, if you could elaborate what that was in the quarter. And then basically, what I'm trying to get at is, in the back half of the year here, you will have to kind of step up organic growth on a year-over-year basis even from kind of that 4% to 5% range, call it, certainly in the high single digits in pain, at least kind of in my model to get to the guidance. Can you just kind of elaborate on kind of the drivers of that acceleration?

Yes. Chase, when you think about volume, we just talk about above-market growth from our HA business and you think about the market growth from a single injection for DUROLANE, which I think is what you're asking about. So we think that market grows in the mid-single digits. We were slightly above that for our performance in second quarter. And when you look at the back half of the year, I mean, really, I guess, from a pain but overall perspective, when you normalize for the kind of the first half unfavorable compares, we're going to make up half of that -- more than half of that growth just with the kind of the onetime compares. And then we get into the growth drivers in the back half, it's going to be HA and BGS. And I know your question is just about HA specifically. But we have a clear line of sight to some new account wins that have been coming on board over the last few months and then some new IDN accounts as well that we're looking to accelerate in the back half of the year. So we feel confident about it. And just remind you in that, we -- from an EBITDA perspective, again, not just about pain, but we've absorbed $5 million of cost and headwinds between foreign exchange and our tariffs. And so that's all absorbed in the guidance and feel good about where we are.

Chase, this is Rob. I'll just elaborate on that a bit to specify a few points to your question. So first, when you look at the first half of the year, we grew about 5.5%. And to your point, when you look at our full year guidance, it implies an acceleration of about 300 basis points in the second half versus the first half. And as Mark touched on, more than half of that, at least half will come from just getting past the unfavorable comps that we've been talking about. And then also, as he touched on, we have PGS, bone graft substitute and HA acceleration happening in the second half with new business that we already have visibility to in our pipeline. So just from that combination, let alone the momentum across the rest of our business, that's why we're confident in our revenue guidance for the back half.

That was really helpful, guys. And then maybe just one more on Surgical. Can you -- what was BGS growth in the quarter? And then kind of piecing all this commentary together with ultrasonics that continuing to do very well and BGS expected to accelerate. Should we be expecting accelerating year-over-year growth from surgical franchise as a whole as we look at the Q3 and Q4 year-over-year growth number compared to Q2?

Yes. Chase, I'll just look at your BGS question that you had. I think in the first quarter, we had really low single digits. And then when we look at the second quarter, we had pretty much a high single-digit growth in the second quarter for BGS. And we look for that business to continue to accelerate as we've been talking about since the beginning of the year and still on track for that. From an overall surgical portfolio as well -- overall, we are still confident in the growth in ultrasonics, great portfolio, as you've heard us talk about before. So with BGS accelerating and overall, we feel good about the second half of the year for that business.

And Chase, I'll also touch on this one, just to make sure that you remind you that it's in line with expectations. So we're seeing that nice acceleration in bone graft substitutes that we expected that we've been talking about for a couple of quarters now and expect that to continue again in the second half as we bring new customers online. And ultrasonics, important to say it was another very strong quarter of growth. We have this world-class technology, and we believe we can change the standard of care in this space. So we're seeing excellent capital placements, again, which is a leading indicator of market development, as you know. And we expect our momentum to continue in the second half and then ramp from there in 2026 and beyond. So expect surgical to continue to be a very attractive growth driver for us.

Congrats again on the execution here, guys.

Your next question comes from Ross Osborn with Cantor Fitzgerald.

This is Matthew Park on for Ross today. I guess maybe starting with Exogen. I was hoping to get some more color on what drove strength in the quarter and I guess, your confidence in your ability to sustain growth levels here.

Thanks, Matthew. Yes. Well, in Exogen and our Restorative Therapies business, as mentioned, we generated double-digit growth for Restorative Therapies in the second quarter. So we're very excited about that. And that's from a combination of the focus that we're putting on the business, fantastic leadership and team. I can't say enough about that team. The right strategy, smart investments and really stronger commercial execution. And that stronger execution is, in turn, demonstrating a favorable ROI on the investments that we've made in the business. And that growth is coming from a combination of previous customers that we lost, existing customers driving more volume and from new customers. And looking forward to keeping this going. I think helpful for everybody online to remind them that as we look forward, this market has an extremely large TAM or available market, total available market. And -- so it's up to us to go help the unaware and the nonbelievers so that they can help their patients with what we consider to be remarkable noninvasive technology. And so we plan on continuing to drive that. We may not be counting on double-digit growth in this business by the quarter, but we do believe we can generate sustained growth in the mid-single-digit range or above while always aiming for higher. And then last, Matthew, for your perspective, as you may know, this business used to be over $100 million in size, and we believe we can get it back over $100 million in size with the momentum that we have.

Super helpful. And then maybe one more for me. I guess how should we think about OpEx spend in the back half of the year, especially as you begin to roll out TalisMann and StimTrial and build the sales force?

Yes. Thanks for the question. When you look at the back half of the year, we'll see a slight increase in spend on commissions as our BGS revenue ramps, and then we're going to start to do some additional investing in PNS and PRP in the second half of the year. So it will slightly increase. But I think if you look at our P&L going from 1Q to 2Q, it's really about delivering on the revenue as Rob and myself walked you through that and our confidence in that. When the revenue grows, the EBITDA will come. And we've historically done a good job of being disciplined in managing our spending, and we'll continue to do so.

Your next question comes from Robbie Marcus with JPMorgan.

First for me, I wanted to ask on R&D, both the absolute dollar spend in percentage of sales and how you're thinking about that over the future as you start adding more innovative products?

Robbie, it's Rob. Yes, we have moderate investment, I'd say, from an R&D standpoint that's ramping up with what we've been doing both within our ultrasonics platform and with PNS. For those 2 businesses, we have what we believe are the best world-class R&D teams internally. And that's why while we're excited about the existing platforms for both of those, we have strong capabilities to continue to expand those platforms organically. And that's where the majority of our R&D dollars are going right now. And we expect in both of those businesses for that to increase because even though we've now launched this very exciting technology with StimTrial and TalisMann in PNS, we still have the opportunity to significantly expand that portfolio. We're very committed to that business. And in ultrasonics, we've made a number of changes, both in terms of our growth aspirations, what our strategy is to get there and how our portfolio plays into that. And that's included putting stronger resources from an upstream marketing standpoint that are developing our long-term portfolio strategy coming from our overall growth strategy, and that leads to an increase in the R&D spend that we're putting against that business. So moderate so far, but it has been ramping and expect it to go up from here as we continue to drive those high-growth businesses.

And I'd just add, I agree with Rob's comments. And if you really -- but if you break it down and you look at R&D in total, it might seem on the lower end or to the moderate. But when you break down PNS and ultrasonics portfolio and the amount we're investing in those as a percentage of revenue in the individual portfolios, it's much more material amount of what you would expect from a med device investment.

Great. Just another question on OpEx. It's a little difficult to tease out what's underlying given the sale of the business. You grew about 6% organic. How should we think about what second quarter and 2025 OpEx growth looks like on an underlying organic basis?

Yes. I think our revenue is growing faster than our OpEx overall. When you think about the OpEx that we had with our rehabilitation business is about $6 million overall from a quarter perspective. So that comes down and then other expenses ramp up. But overall, we're continuing to bring OpEx down overall from an operational perspective and driving back to our commitment on the 100 basis points margin expansion. It's obviously both the revenue growth with a peer-leading gross margin that we're driving and then scaling our OpEx and making sure that the revenue is growing faster than the expense.

Your next question comes from Caitlin Cronin with Canaccord.

Just on TalisMann, StimTrial, any more color on the launch and early commercialization strategy? And then when do you expect kind of this PNS portfolio to become a more significant contributor to revenue?

Caitlin, thanks for the question. Yes, we're really excited about this business. And a reminder that it's a very fast-growing market. And a new platform that you referred to there, it's going to help patients who are coping with this unbearable chronic peripheral pain. I think it's important to keep in mind. And why? Because we have a patented electric field conduction technology with the integrated pulse generator that potentially reaches those deeper, larger nerves, which could be easier for the doctor and beneficial for the patient. So to your question, in the back half of this year, we'll do a limited launch, and then we'll rapidly ramp in 2026. And while we're not giving guidance on next year, I'll broaden it a little bit, our initial thoughts are that this business, combined with our new PRP platform that those 2 alone have the potential to generate 200 basis points of growth next year for the company overall and ramp from there. So that gives you a feel for when we believe this will start being a more meaningful contributor to our growth profile. And of course, we'll update you and set expectations as we learn more in the early stages of both of those launches.

That's great. And then updates to the tariff expectations, I mean, what drove the increase? Any updates to any potential impact to HA.

Yes. Thanks, Caitlin. I think when we talked about this in the first quarter, it was roughly like $1 million of tariff impacts. And today, as we said in the prepared remarks, we see about $3 million of an impact and that with all of the news that we know through yesterday, obviously, this is a very volatile situation and changes day-to-day. And so overall, between tariffs and FX, we've absorbed $5 million of those headwinds and maintained our guidance. And so we'll continue to monitor this and be responsible with engaging and managing the P&L accordingly. But again, $3 million what we expect, and that's really going to be coming in the back half of the year. We've had a little bit in the first half, but most of the tariff headwinds will be in the back half of the year and the FX headwind is already behind us year-to-date of about $2 million that we've all contained within the guidance that we've provided.

And Caitlin, I'll just add that I think this speaks to the power of our P&L of the strength and agility that we have. As Mark mentioned, FX and tariffs combined have created that $5 million headwind, but we believe we can manage through that and deliver on our goals, which again speaks to the power of our P&L.

That concludes our Q&A session. I'll now turn the conference back over to Rob Claypoole for closing remarks.

All right. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the second 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.

This concludes today's conference call. You may now disconnect.