Bioventus Inc. (BVS) Earnings

Management highlights

### Strategic Update - Following receipt of an unsolicited acquisition proposal and multiple third-party expressions of interest, the board of directors formed an independent committee to evaluate all strategic options to maximize shareholder value, including a potential sale of the company or continued execution of BioVentus' standalone growth plan. ### 2026 Strategic Priorities Execution - **Accelerate long-term revenue growth via targeted business investment**: The core HA pain business continues to outperform expectations, generating significant operating profit that funds investment in four high-growth areas: platelet-rich plasma (PRP), peripheral nerve stimulation (PNS), ultrasonics, and international operations. These investments are already generating positive traction: - PRP: Accelerating capital placements, growing reorder frequency and size, and displacing competitive offerings; synergies from leveraging the existing HA sales force are driving adoption of PRP and expanding the HA customer base simultaneously. - PNS: Differentiated technology is driving strong surgeon adoption, high conversion rates from clinical trials to permanent implants, and growing penetration at large medical institutions; management projects the PNS market will grow to $500 million from its current $200 million, and BioVentus is positioned to scale to over $100 million in PNS revenue. - Ultrasonics: Investments in marketing and training are driving rising surgeon adoption, accelerating disposable revenue growth, and new wins at large accounts and integrated delivery networks; acceleration is expected in the second half of 2026. - International: New talent and a focused strategy on high-growth markets is driving strong win rates and pipeline growth, positioning for double-digit full-year growth. - **Increase earnings despite higher investment**: Q2 2026 delivered an adjusted EBITDA margin of 23%, an expansion of 20 basis points year-over-year despite increased investment. Year-to-date adjusted EPS grew 24% year-over-year, driven by durable core revenue growth and peer-leading stable gross margins. - **Strengthen cash flow and balance sheet optionality**: Q2 2026 operating cash flow was $20 million; the company repaid $24 million of term loan debt during the quarter, bringing year-to-date total debt repayment to $46 million and reducing net leverage to below 2.0x. Management is on track to reach net leverage below 1.5x by the end of 2026, creating greater future capital deployment flexibility. ### Financial Highlights - Adjusted EBITDA hit $35 million, growing faster than total revenue; adjusted gross margin was 75%, 90 basis points lower year-over-year as expected due to higher freight costs and mix effects; adjusted diluted EPS was 22 cents, compared to 21 cents year-over-year.

Guidance

- Management reaffirms its full-year 2026 financial guidance across all metrics. - Full-year adjusted EBITDA margin is expected to be at least 20%, maintaining original guidance despite stronger-than-expected first-half margin expansion. - Full-year adjusted diluted EPS is projected to be between $0.75 and $0.79. - Full-year operating cash flow is projected to range between $84 million and $89 million, with approximately half of full-year cash flow generated in the second half (double the first half run rate). - Year-over-year revenue growth is expected to accelerate by more than 300 basis points in the second half of 2026 compared to the first half, driven by the timing shift of $2 million in Q2 revenue to the second half and core growth acceleration in PRP and PNS. - Net leverage is expected to fall below 1.5x by the end of 2026, maintaining prior guidance. - International and surgical solutions are both expected to deliver strong growth acceleration in the second half of 2026, while Exogen (restorative therapies) is projected to return to low-to-mid single-digit growth in the back half.

Segment performance

Total company Q2 2026 revenue was $153 million, a 4% increase year-over-year. 1. Global Pain Treatments: Revenue of $82 million, representing 53.6% of total Q2 revenue, with 12% year-over-year growth. Growth was driven by double-digit volume gains in the HA franchise, led by the Duralane single injection therapy. 2. Surgical Solutions: Revenue of $50 million, representing 32.7% of total Q2 revenue, with a 5% year-over-year decline (5% sequential quarter-over-quarter growth). The decline was driven by a difficult year-over-year comparison, proactive portfolio optimization actions to prioritize higher-margin growth, and a $2 million timing shift of capital placements and international orders to the second half of 2026. Ultrasonics disposable revenue is already accelerating, with growing new large account wins. 3. Restorative Therapies: Revenue of $21 million, representing 13.7% of total Q2 revenue, with a 2% year-over-year decline. The decline resulted from a difficult comparison and a shift in Medicare patient mix; Exogen volume grew in the quarter. 4. International: Total revenue of $19 million, with a 1% year-over-year decline (2% decline on a constant currency basis), driven by timing of distributor orders. Core underlying business momentum remains strong.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from expectations due to risks disclosed in the company's SEC filings, including those outlined in Item 1A of the 2025 10-K. - Revenue growth can be impacted by transitory timing shifts of large orders and distributor shipments, which created a year-over-year headwind in Q2. - Gross margins are exposed to rising input and freight costs that can impact profitability. - The outcome of the strategic alternatives review process is uncertain, with no guarantee that any transaction will be completed or that any specific outcome will deliver higher value than the company's standalone plan.

Analyst Q&A

• Q: What is the split of volume vs. price growth for Duralane, and how are both BioVentus and its main competitor gaining share in the single-injection HA market? /

  A: Duralane's first half 2026 growth has been led entirely by double-digit volume growth, which has outperformed management expectations. The market for single-injection HA therapy is growing overall, and BioVentus is gaining share driven by its clinical differentiation, broad private payer coverage, and strong commercial execution.

• Q: Can you detail the drivers of Q2 surgical solutions performance, especially the split between ultrasonics and BGS, and the timing of pushed capital placements? /

  A: Q2 surgical had a difficult year-over-year comparison and a $2 million timing shift of ultrasonics capital placements to the second half, but still grew 5% sequentially. Ultrasonics disposable growth is already accelerating with strong new account traction. BGS performance was impacted by proactive deliberate portfolio actions to exit low-margin business, but also saw strong new large account wins that will drive back half acceleration.

• Q: Can you share more color on early customer reception for PRP and PNS, and what is the outlook for contributions this year? /

  A: PRP has seen accelerating capital placements and growing reorder volume, with strong synergies from leveraging the existing HA sales force that is driving cross-adoption for both product lines. PNS is seeing strong surgeon adoption, high trial-to-implant conversion rates, and positive feedback, with the market poised for significant long-term growth. Both businesses are on track to add approximately 200 basis points of total company growth in 2026, as originally expected.

• Q: Given stronger-than-expected first half margin expansion, do you still expect full-year margins around 20% as originally guided? /

  A: Management maintains its original full-year adjusted EBITDA margin guidance of at least 20%. Strong first half margin reflects the company's strong P&L control and peer-leading gross margins. Total annual investment in growth drivers will be slightly higher than the original $13 million plan, with most additional investment directed to PNS to capitalize on its strong early traction.

• Q: How does the strong progress with PNS factor into the new strategic review process? /

  A: BioVentus as a whole has strong performance, momentum, and untapped growth potential across its entire portfolio, which has drawn outside interest. PNS's strong early progress and significant long-term potential is an exciting part of the company's overall value story, which is being evaluated as part of the strategic review.