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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
(Mark OneOne)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2021March 30, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-37844
BIOVENTUS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware81-0980861
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
4721 Emperor Boulevard, Suite 100
Durham, North Carolina27703
(Address of Principal Executive Offices)(Zip Code)
(919) 474-6700
(Registrant’s Telephone Number, Including Area CodeCode)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareBVSThe Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐☒
Non-accelerated filer☒☐Smaller reporting company☐☒
Emerging Growth Company☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  ☒
As of May 10, 2021,April 30, 2024, there were 41,038,58963,827,617 shares of Class A common stock outstanding and 15,786,737 shares of Class B common stock outstanding.

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BIOVENTUS INC.
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PARTPART I. FINANCIALFINANCIAL INFORMATION
Item 1.
Consolidated Condensed Statements of Operations andComprehensiveIncome Loss for the three months ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023
1
Consolidated Condensed Balance Sheets as of April 3, 2021March 30, 2024 and December 31, 20202023
2
Consolidated Condensed Statements of changes Changes in Stockholders’ and Members’Stockholders’ Equity for the three months ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023
3
Consolidated Condensed Statements of Cash Flows for thethree months ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023
4
Notes to the Unaudited Consolidated Condensed Consolidated Financial Statements
5
Item 2.
1920
Item 3.
2628
Item 4.
2628
PART II. OTHEROTHER INFORMATION
Item 1.
28
Item 1A.
2829
Item 2.
2830
Item 3.
2930
Item 4.
2930
Item 5.
2930
Item 6.
30
Signatures
3332



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
As used in this Quarterly Report on Form 10-Q, unless expressly indicated or the context otherwise requires, references to "Bioventus," "we," "us," "our," "the Company," and similar references refer to Bioventus Inc. and its consolidated subsidiaries, including Bioventus LLC (BV LLC)(“BV LLC”).
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act)(“Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (Securities Act)(“Securities Act”), concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements including, without limitation, statements regarding our business strategy, including, without limitation, expectations relating to our integration of Misonix and Bioness, potential acquisitions, and expected expansion of our pipeline and research and development investment, cost savings initiatives, new therapy launches, expected timelines for clinical trial results and other development milestones, expected contractual obligations and capital expenditures, recent dispositions of non-core assets, our domestic and international operations and expected financial performance and condition, and impacts of the COVID-19 pandemic.pandemic, inflation and ongoing conflicts in Israel. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

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Forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Important factors that may cause actual results to differ materially from current expectations include, among other things,things: the risk that previously identified material weaknesses or new material weaknesses could adversely affect our business mayability to report our results of operations and financial condition accurately and in a timely manner; we might not be able to continue to experience adverse impactsfund our operations for at least the next twelve months as a going concern; we might not meet certain of our debt covenants under our Credit Agreement and might be required to repay our indebtedness; risks associated with the disposition of our Wound Business and expected impacts on our business; restrictions on operations and other costs associated with our indebtedness; our ability to complete acquisitions or successfully integrate new businesses, products or technologies in a cost-effective and non-disruptive manner; we maintain cash at financial institutions, often in balance that exceed federally insured limits; we are subject to securities class action litigation and may be subject to similar or other litigation in the future, which will require significant management time and attention, result of the COVID-19 pandemic;in significant legal expenses and may result in unfavorable outcomes; our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel; we are highly dependent on a limited number of products; our long-term growth depends on our ability to develop, acquire and commercialize new products, line extensions or expanded indications; we may be unable to successfully commercialize newly developed or acquired products or therapies in the United States; demand for our existing portfolio of products and any new products, line extensions or expanded indications depends on the continued and future acceptance of our products by physicians, patients, third-party payers and others in the medical community; our commercial success depends on our ability to differentiate the hyaluronic acid (HA) viscosupplementation therapies that we own or distribute from alternative therapies for the treatment of osteoarthritis; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Association (FDA)Administration (“FDA”) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; if we are unablefailure to achieve and maintain adequate levels of coverage and/or reimbursement for our products or future products, the procedures using our products, such as our hyaluronic acid (“HA”) viscosupplements, or any future products we may seek to commercialize, including any potential changes by Centers for Medicarecommercialize; pricing pressure and Medicaid Services inother competitive factors; governments outside the manner in whichUnited States might not provide coverage or reimbursement of our HA viscosupplementation products are reimbursed, the commercial success of these products may be severely hindered; if we choose to acquire or invest in new businesses, products or technologies, we may be unable to complete these acquisitions or to successfully integrate them in a cost-effective and non-disruptive manner;products; we compete and may compete in the future against other companies, some of which have longer operating histories, more established products or greater resources than we do, which may prevent us from achieving increased market penetration or improved operating results; the reclassification ofdo; if our HA products are reclassified from medical devices to drugs in the United States by the FDA, it could negatively impact our ability to market these products and may require that we conduct costly additional clinical studies to support current or future indications for use of those products; our ability to maintain our competitive position depends on our ability to attract, retain and motivate our senior management team and highly qualified personnel, and our failure to do so could adversely affectproperly manage our business, resultsanticipated growth and strengthen our brands; risks related to product liability claims; fluctuations in demand for our products; issues relating to the supply of operationsour products, potential supply chain disruptions, and financial condition;the increased cost of parts and components used to manufacture our products due to inflation; our reliance on a

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limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture certain of our productsproducts; economic, political, regulatory and as a result,other risks related to international sales, manufacturing and operations; failure to maintain contractual relationships; security breaches, unauthorized disclosure of information, denial of service attacks or the perception that confidential information in our business, resultspossession is not secure; failure of operationskey information technology and financial condition may be adversely affected until we are ablecommunications systems, process or sites; risks related to secure a new facility; our productsdebt and operations are subject to extensive governmental regulation, and ourfuture capital needs; failure to comply with applicable requirements could causeextensive governmental regulation relevant to us and our business to suffer;products; we may be subject to enforcement action if we engage in improper claims submission practices and resulting audits or denials of our claims by government agencies could reduce our net sales or profits; the FDA regulatory process is expensive, time-consuming and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our products; our HCT/P products are subject to extensive government regulation and our failure to comply with these requirements could cause our business to suffer; if clinical studies of our future productsproduct candidates do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to expand the indications for or commercialize these products; welegislative or regulatory reforms; our business may be subjectcontinue to enforcement action if we engage in improper marketingexperience adverse impacts as a result of the COVID-19 pandemic or promotion of our products, that could leadsimilar epidemics; risks related to costly investigations, fines or sanctions by regulatory bodies, any of which could be costly to our business;intellectual property matters; and other important factors described in Part I,I. Item 1A. Risk Factors in our 2020 Annual Report on Form 10-K.10-K for the year ended December 31, 2023, as may be further updated from time to time in our other filings with the SEC. You are urged to consider these factors carefully in evaluating these forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.


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PartPART I. Financial InformationFINANCIAL INFORMATION
Item 1. Financial StatementsStatements.
Bioventus Inc.
Consolidated condensed statementsCondensed Statements of operationsOperations and comprehensive incomeComprehensive Loss
Three months endedMonths Ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023
(Amounts in thousands, except share and per share data)amounts)
(Unaudited)
Three Months Ended
April 3,
2021		March 28,
2020
Net sales$81,778 $78,645 
Cost of sales (including depreciation and amortization of $5,236 and $5,307, respectively)22,222 21,409 
Gross profit59,556 57,236 
Selling, general and administrative expense34,686 40,276 
Research and development expense947 2,146 
Depreciation and amortization1,925 1,825 
Operating income21,998 12,989 
Interest (income) expense(2,876)2,381 
Other expense419 83 
Other (income) expense(2,457)2,464 
Income before income taxes24,455 10,525 
Income tax (benefit) expense(73)39 
Net income24,528 10,486 
Loss attributable to noncontrolling interest408 458 
Net income attributable to Bioventus Inc.24,936 10,944 
Other comprehensive income (loss), net of tax
Change in foreign currency translation adjustments(1,156)(469)
Comprehensive income$23,780 $10,475 
Loss per share of Class A common stock, basic and diluted(1):
$(0.02)
Weighted-average shares of Class A common stock outstanding, basic and diluted(1):
41,797,882 
(1) Represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from February 16, 2021 through April 3, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 1. Organization and Note 7. Earnings per share within the Notes to the Unaudited Condensed Consolidated Financial Statements.
Three Months Ended
March 30, 2024April 1, 2023
Net sales$129,457 $119,059 
Cost of sales (including depreciation and amortization of $10,025 and $14,339, respectively)41,077 45,140 
Gross profit88,380 73,919 
Selling, general and administrative expense78,406 80,858 
Research and development expense2,597 3,771 
Restructuring costs— 317 
Change in fair value of contingent consideration295 287 
Depreciation and amortization1,755 2,129 
Impairments of assets— 78,615 
Operating income (loss)5,327 (92,058)
Interest expense, net10,339 9,694 
Other expense (income)63 (1,588)
Other expense10,402 8,106 
Loss before income taxes(5,075)(100,164)
Income tax expense (benefit), net907 (146)
Net loss from continuing operations(5,982)(100,018)
Loss from discontinued operations, net of tax— (74,429)
Net loss(5,982)(174,447)
Loss attributable to noncontrolling interest - continuing operations1,412 20,360 
Loss attributable to noncontrolling interest - discontinued operations— 14,937 
Net loss attributable to Bioventus Inc.$(4,570)$(139,150)
Net loss$(5,982)$(174,447)
Other comprehensive (loss) income, net of tax
Change in foreign currency translation adjustments(585)657 
Comprehensive loss(6,567)(173,790)
Comprehensive loss attributable to noncontrolling interest -
    continuing operations		1,528 20,226 
Comprehensive loss attributable to noncontrolling interest -
    discontinued operations		— 14,937 
Comprehensive loss attributable to Bioventus Inc.$(5,039)$(138,627)
Loss per share of Class A common stock from continuing
    operations, basic and diluted:		$(0.07)$(1.28)
Loss per share of Class A common stock from discontinued
    operations, basic and diluted:		— (0.96)
Loss per share of Class A common stock, basic and diluted$(0.07)$(2.24)
Weighted-average shares of Class A common stock
    outstanding, basic and diluted:		63,380,18762,124,752
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Consolidated condensed balance sheetsCondensed Balance Sheets as of April 3, 2021 (Unaudited)March 30, 2024 and December 31, 20202023
(Amounts in thousands, except share and per share data)amounts)
April 3,
2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents$124,247 $86,839 
Restricted cash5,207 0 
Accounts receivable, net89,472 88,283 
Inventory39,808 29,120 
Prepaid and other current assets11,987 7,552 
Total current assets270,721 211,794 
Property and equipment, net8,084 6,879 
Goodwill53,529 49,800 
Intangible assets, net271,042 191,650 
Operating lease assets18,060 14,961 
Deferred tax assets481 0 
Investment and other assets21,158 19,382 
Total assets$643,075 $494,466 
Liabilities and Stockholders’ and Members’ Equity
Current liabilities:
Accounts payable$10,283 $4,422 
Accrued liabilities89,651 88,187 
Accrued equity-based compensation10,875 11,054 
Current portion of long-term debt15,000 15,000 
Current portion of contingent consideration13,057 0 
Other current liabilities10,161 3,926 
Total current liabilities149,027 122,589 
Long-term debt, less current portion169,731 173,378 
Accrued equity-based compensation, less current portion0 29,249 
Deferred income taxes48,963 3,362 
Long-term contingent consideration, less current portion29,943 0 
Other long-term liabilities25,129 21,728 
Total liabilities422,793 350,306 
Commitments and contingencies (Note 9)00
Stockholders’ and Members’ Equity:
Members' equity— 144,160 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
Class A common stock, $0.001 par value 250,000,000 shares authorized,
    41,038,589 shares issued and outstanding
41 — 
Class B common stock, $0.001 par value, 50,000,000 shares authorized,
    15,786,737 shares issued and outstanding
16 — 
Additional paid-in capital142,923 — 
Accumulated deficit(1,041)— 
Accumulated other comprehensive income451 — 
Total stockholders’ equity attributable to Bioventus Inc. and members’ equity142,390 144,160 
Noncontrolling interest77,892 0 
Total stockholders’ and members’ equity220,282 144,160 
Total liabilities and stockholders’ and members’ equity$643,075 $494,466 
(Unaudited)
March 30, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$25,173 $36,964 
Accounts receivable, net125,541 122,789 
Inventory97,005 91,333 
Prepaid and other current assets18,184 16,913 
Total current assets265,903 267,999 
Property and equipment, net34,532 36,605 
Goodwill7,462 7,462 
Intangible assets, net470,668 482,350 
Operating lease assets12,462 13,353 
Investment and other assets3,211 3,141 
Total assets$794,238 $810,910 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$19,099 $23,038 
Accrued liabilities113,605 119,795 
Current portion of long-term debt35,811 27,848 
Other current liabilities4,806 4,816 
Total current liabilities173,321 175,497 
Long-term debt, less current portion355,430 366,998 
Deferred income taxes1,294 1,213 
Contingent consideration18,445 18,150 
Other long-term liabilities28,316 27,934 
Total liabilities576,806 589,792 
Commitments and contingencies (Note 11)
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
Class A common stock, $0.001 par value, 250,000,000 shares authorized as of March 30, 2024 and
   December 31, 2023, 63,672,170 and 63,267,436 shares issued and outstanding as of March 30, 2024
   and December 31, 2023, respectively
64 63 
Class B common stock, $0.001 par value, 50,000,000 shares authorized,
    15,786,737 shares issued and outstanding as of March 30, 2024 and December 31, 2023
16 16 
Additional paid-in capital496,977 494,254 
Accumulated deficit(326,106)(321,536)
Accumulated other comprehensive income325 794 
Total stockholders’ equity attributable to Bioventus Inc.171,276 173,591 
Noncontrolling interest46,156 47,527 
Total stockholders’ equity217,432 221,118 
Total liabilities and stockholders’ equity$794,238 $810,910 
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Consolidated condensed statementsCondensed Statements of changesChanges in stockholders’ and members’ equityStockholders’ Equity
Three months endedMonths Ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023
(Amounts in thousands, except share data)amounts)
(Unaudited)
Three Months Ended April 3, 2021
Class A Common StockClass B Common Stock
Members’
equity		SharesAmountSharesAmountAdditional Paid-In -CapitalAccumulated
other
comprehensive
(loss) income		Accumulated DeficitNon-
controlling
interest		Total Stockholders' and
members’
equity
Balance at December 31, 2020$144,160 — $— — $— $— $— $— $— $144,160 
Refund from members123 — — — — — — — — 123 
Other equity forfeiture(39)(39)
Net income prior to Organizational Transactions25,977 — — — — — — — — 25,977 
Translation adjustment prior to Organizational Transactions(1,507)— — — — — — — — (1,507)
Effect of Organizational Transactions(168,714)31,838,58932 15,786,73716 33,618 — — 79,119(55,929)
Initial public offering, net of offering costs— 9,200,0009 — — 106,441 — — — 106,450 
Distribution to Continuing LLC Owner— — — — — 1,398 — — (1,510)(112)
Equity based compensation subsequent to Organizational Transactions— — — — — 1,466 — — 517 1,983 
Net loss subsequent to Organizational Transactions— — — — — — — (1,041)(408)(1,449)
Translation adjustment subsequent to Organizational Transactions— — — — — — 451 — 174 625 
Balance at April 3, 2021$0 41,038,589$41 15,786,737$16 $142,923 $451 $(1,041)$77,892 $220,282 
Three Months Ended March 28, 2020
Members’
equity
Balance at December 31, 2019$145,617 
Profits interest forfeiture(12)
Distribution to members(681)
Debt conversion649 
Net income10,486 
Translation adjustment(469)
Balance at March 28, 2020$155,590 

The accompanying notes are an integral part of these consolidated financial statements.
Three Months Ended March 30, 2024
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive income (loss)Accumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at December 31, 202363,267,436 $63 15,786,737 $16 $494,254 $794 $(321,536)$47,527 $221,118 
Issuance of Class A common stock
for equity plans		404,734 1 — — 289 — — — 290 
Net loss— — — — — — (4,570)(1,412)(5,982)
Change in noncontrolling interest allocation— — — — 319 — — (319)— 
Equity based compensation— — — — 2,115 — — 476 2,591 
Translation adjustment— — — — — (469)— (116)(585)
Balance at March 30, 202463,672,170 $64 15,786,737 $16 $496,977 $325 $(326,106)$46,156 $217,432 
3

Three Months Ended April 1, 2023
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive (loss) incomeAccumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at December 31, 202262,063,014 $62 15,786,737 $16 $490,576 $(110)$(165,306)$86,984 $412,222 
Issuance of Class A common stock
for equity plans		444,903 1 — — 360 — — (277)84 
Net loss— — — — — — (139,150)(35,297)(174,447)
Equity based compensation— — — — 1,539 — — 307 1,846 
Translation adjustment— — — — — 523 — 134 657 
Balance at April 1, 202362,507,917 $63 15,786,737 $16 $492,475 $413 $(304,456)$51,851 $240,362 
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Bioventus Inc.
Consolidated condensed statements of cash flows
Three months ended April 3, 2021 and March 28, 2020
(Amounts in thousands)
(Unaudited)
Three Months Ended
April 3,
2021		March 28,
2020
Operating activities:
Net income$24,528 $10,486 
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization7,184 7,265 
Provision for expected credit losses191 543 
Equity-based compensation from 2021 Stock Incentive Plan1,944 0 
Profits interest plan, liability-classified and other equity awards compensation(24,356)(7,026)
Change in fair value of interest rate swap(1,565)1,068 
Change in fair value of Equity Participation Rights unit(2,774)(788)
Deferred income taxes83 (150)
Foreign currency adjustments256 16 
Amortization of debt discount and capitalized loan fees, net136 136 
Changes in operating assets and liabilities:
Accounts receivable2,612 3,354 
Inventory(3,051)(1,398)
Accounts payable and accrued expenses(14,073)3,816 
Other assets and liabilities(9,157)369 
Net cash from operating activities(18,042)17,691 
Investing activities:
Purchase of Bioness, Inc, net of cash acquired(45,791)0 
Purchase of property and equipment(1,370)(299)
Other513 (152)
Net cash from investing activities(46,648)(451)
Financing activities:
Proceeds from issuance of Class A common stock sold in initial public offering,
     net of underwriting discounts and offering costs		110,410 0 
Proceeds from issuance of Class B common stock16 0 
Borrowing on revolver0 49,000 
Payments on long-term debt(3,750)0 
Refunds from members854 0 
Other, net(4)(218)
Net cash from financing activities107,526 48,782 
Effect of exchange rate changes on cash(221)(260)
Net change in cash, cash equivalents and restricted cash42,615 65,762 
Cash, cash equivalents and restricted cash at the beginning of the period86,839 64,520 
Cash, cash equivalents and restricted cash at the end of the period$129,454 $130,282 
Supplemental disclosure of noncash investing and financing activities
Accrued member distributions$572 $924 
Debt conversion$0 $649 
Accounts payable for the purchase of property, plant and equipment$157 $21 
The accompanying notes are an integral part of these consolidated financial statements.statements.
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Bioventus Inc.
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 30, 2024 and April 1, 2023
(Amounts in thousands)
(Unaudited)
Three Months Ended
March 30, 2024April 1, 2023
Operating activities:
Net loss$(5,982)$(174,447)
Less: Loss from discontinued operations, net of tax— (74,429)
Loss from continuing operations(5,982)(100,018)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization11,785 16,473 
(Benefit) provision for expected credit losses(976)1,079 
Equity-based compensation2,591 1,846 
Change in fair value of contingent consideration295 287 
Deferred income taxes81 (2,664)
Impairment of assets— 78,615 
Unrealized loss on foreign currency fluctuations377 747 
Other, net581 224 
Changes in operating assets and liabilities:
Accounts receivable(1,958)13,162 
Inventories(4,070)(5,294)
Accounts payable and accrued expenses(7,332)2,331 
Other current and noncurrent assets and liabilities(1,397)(2,129)
Net cash from operating activities - continuing operations(6,005)4,659 
Net cash from operating activities - discontinued operations— (2,169)
Net cash from operating activities(6,005)2,490 
Investing activities:
Purchase of property and equipment(291)(3,560)
Investments and acquisition of distribution rights(709)— 
Net cash from investing activities - continuing operations(1,000)(3,560)
Net cash from investing activities - discontinued operations— (11,506)
Net cash from investing activities(1,000)(15,066)
Financing activities:
Proceeds from issuance of Class A common stock177 84 
Borrowing on revolver— 49,000 
Payment on revolver— (20,000)
Debt refinancing costs(1,180)(1,668)
Payments on long-term debt(3,056)— 
Other, net(183)(36)
Net cash from financing activities(4,242)27,380 
Effect of exchange rate changes on cash(544)461 
Net change in cash, cash equivalents and restricted cash(11,791)15,265 
Cash, cash equivalents and restricted cash at the beginning of the period36,964 31,837 
Cash, cash equivalents and restricted cash at the end of the period$25,173 $47,102 
Supplemental disclosure of noncash investing and financing activities
Accounts payable for purchase of property, plant and equipment$218 $— 
The accompanying notes are an integral part of these consolidated financial statements.
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Bioventus Inc.
Notes to the Unaudited Condensed Consolidated Financial Statementsunaudited consolidated condensed financial statements
(Amounts in thousands, except unit and share per unit and per share data)amounts)
1. Organization
The Company
Bioventus Inc. (the Company, we, us or our)(together with its subsidiaries, the “Company”) was formed as a Delaware corporation on December 22, 2015 for the purpose of facilitating an initial public offering (IPO) and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (BV LLC)(“BV LLC”). The Company is headquarteredBioventus Inc. functions as a holding company with no direct operations, material assets or liabilities other than the equity interest in Durham, NC.BV LLC. BV LLC is a limited liability company formed under the laws of the state of Delaware on November 23, 2011 and operates as a partnership. BV LLC commenced operations in May 2012.
On February 16, 2021, the Company completed its initial public offering (“IPO”), which was conducted through what is commonly referred to as an umbrella partnership C Corporation (“UP-C”) structure. The Company has majority interest, sole voting interest and controls the management of BV LLC. As a result, the Company consolidates the financial results of BV LLC isand reports a global medical device company, conducting business in various countries, primarily in North America and Europe, with approximately 900 employees. noncontrolling interest representing the interest of BV LLC held by its continuing LLC owner.
The Company is focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing processes.
Initial Public Offering
On February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock at a public offering price of $13.00 per share, which includes 1,200,000 shares issued pursuant to the underwriters' over-allotment option. The Company received $111,228is headquartered in proceeds, net of underwriting discountsDurham, North Carolina and commissions of $8,372, which was used to purchase newly-issued membership interests from BV LLC at a price per interest equal to the IPO price of $13.00. The Company also incurred offering expenses totaling $4,778 in addition to the underwriting discounts and commissions. $1,327 of the offering expenses were paid in 2020 and $2,633 are in accrued liabilities on the consolidated balance sheet at April 3, 2021. Subsequent to the IPO and related transactions that occurred in connection with the IPO (the Transactions), the Company is the sole managing member of BV LLC and owns 72.2% of BV LLC. The Company has a majority economic interest, the sole voting interest in, and controls the management of BV LLC. As a result, the Company consolidates the financial results of BV LLC and reports a non-controlling interest representing the 27.8% interest not held by the Company.
IPO Transactions
The Company and BV LLC completed the following Transactions in connection with the IPO. BV LLC amended and restated the Bioventus LLC Agreement, to, among other things, (i) provide for a new single class of common membership interests in BV LLC (LLC Interests), (ii) exchange all of the existing membership interests in BV LLC for new LLC Interests and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC. The Company amended and restated its certificate of incorporation to, among other things, provide for the (i) authorization of 250,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) authorization of 50,000,000 shares of Class B common stock with a par value of $0.001 per share; (iii) authorization of 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company's Board of Directors (BOD) in one or more series; and (iv) establishment of a classified BOD, divided into three classes, each of whose members will serve for staggered three-year terms. Holders of Class A and Class B common stock are entitled to 1 vote per share and, except as otherwise required, will vote together as a single class on all matters on which stockholders generally are entitled to vote. Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the 1-to-one ratio between the number of LLC Interests held by the only member of BV LLC that remained a member following the Transactions (Continuing LLC Owner) and the number of shares of Class B common stock held by the Continuing LLC Owner. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a 1-for-one basis if the Company, at the election of a Continuing LLC Owner, redeem or exchange LLC Interests.
The Company’s amended and restated certificate of incorporation and the Bioventus LLC Agreement requires that the Company and BV LLC at all times maintain a 1-to-one ratio between the number of shares of Class A common stock issued by the Company and the number of LLC Interests owned by the Company, as well as a 1-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owner and the number of LLC Interests owned by the Continuing LLC Owner. The Company acquired, by merger, 10 entities that were members of BV LLC (Former LLC Owners), for which the Company issued 31,838,589 shares of Class A common stock as merger consideration (Merger). The only assets held by the Former LLC Owners were 31,838,589 LLC Interests and a corresponding number of shares of Class B common stock. Upon consummation of the Merger, the Company canceled the 31,838,589 shares of Class B common stock and recognized the 31,838,589 LLC Interests at carrying value, as the Merger is considered to be a recapitalization transaction. Following the Merger and IPO, as of May 12, 2021 the Company holds 41,038,589 LLC Interests, representing a 72.2% ownership interest in BV LLC.
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The financial statements for periods prior to the IPO and Transactions have been adjusted to combine the previously separate entities for presentation purposes. Prior to the Transactions, Bioventus Inc. had no operations.approximately 995 employees.
Interim periods
The Company reports quarterly interim periods on a 13-week basis within a standard calendar year. Each annual reporting period begins on January 1 and ends on December 31. Each quarter ends on the Saturday closest to calendar quarter-end, with the exception of the fourth quarter, which ends on December 31. The 13-week quarterly periods for fiscal year 20212024 end on April 3, July 3March 30, June 29 and October 2.September 28. Comparable periods for 20202023 ended on March 28, June 27April 1, July 1 and September 26.30. The fourth and first quarters may vary in length depending on the calendar year.
Unaudited interim financial information
The accompanying unaudited consolidated condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP)(“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, they do not include all information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments)adjustments, and the adjustments discussed in Note 1. Organization) considered necessary for a fair statement of the Company’s financial condition and results of operations have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. As such, the information included in this report should be read in conjunction with the Company’s 2020 Annual Report on Form 10-K.10-K for the year ended December 31, 2023. The consolidated balance sheet at December 31, 20202023 has been derived from the audited consolidated financial statements of the Company, but does not include all the disclosures required by U.S. GAAP.
COVID-19 pandemic impactReclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. In 2020,2024, the COVID-19 pandemic spread aroundCompany reclassified revenue and expense of the worldSonicOne Ultrasonic Cleansing and Debridement Systems (“SonicOne”) from the Restorative Therapies to the Surgical Solutions business. The reclassification of SonicOne activity effected prior presentation of disaggregated revenue by business, refer to Note 12. Revenue recognition for further details. The reclassification had no effect on previously reported total revenues, net loss, other comprehensive loss, stockholders’ equity or cash flows. Unless otherwise noted, all financial information in the United States. New variantsunaudited consolidated condensed financial statements reflects the Company’s results from continuing operations.
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Use of estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, at the date of the virus have emerged, somefinancial statements, as well as the reported amounts of revenues and expenses during the period. On an ongoing basis, management evaluates these estimates, including those related to contractual allowances and sales incentives, allowance for credit losses, inventory reserves, goodwill and intangible assets impairment, valuation of assets and liabilities assumed in acquisitions, useful lives of long lived assets, fair value measurements, litigation and contingent liabilities, income taxes, and equity-based compensation. Management bases its estimates on historical experience, future expectations and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which have shownform the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
Emerging Growth Company and Smaller Reporting Company Status
The Company is an “emerging growth company,” pursuant to be more contagious. The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. Federal and state governments have implemented measures in an effort to prevent or minimize the spreadprovisions of the virus,Jumpstart Our Business Startups Act (the “JOBS ACT”). An emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has chosen to “opt out” of such extended transition periods, and ongoing effectsas a result, the Company plans to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt such standards. Section 107 of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closureJOBS Act provides that the decision to opt out of the extended transition period for complying with new or reduced capacityrevised accounting standards is irrevocable.
The Company is also considered a “smaller reporting company,” as defined by Rule 12b-2 of businesses, work from home, supply chain logistical changes and other measures,the Securities Exchange Act of 1934 (the “Exchange Act”), which have caused global business disruptions and significant volatility in U.S. and international debt and equity markets. Our business, resultswas determined as of operations and financial condition have been and maythe last day of the Company’s second fiscal quarter of 2023. The Company will continue to be materially impacted by fluctuations in patient visits and elective procedures and any future temporary cessations of elective procedures and could be further impacted by delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closures or other reasons related to the pandemic. Furthermore, the long-term impact of COVID-19 on our business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability, adoption and effectiveness of vaccines, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on our partners, patients and communities in which we operate, all of which continue to be uncertain. As of the date of issuance of these consolidated financial statements, the extent to which COVID-19 could materially impactcategorized as a smaller reporting company-accelerated filer until the Company’s financial conditions, liquidity or results of operations is uncertain.
To the extent COVID-19 disruptions continuepublic float reaches a certain threshold. The Company may rely on exemptions from certain disclosure requirements that are available to adversely impact our business, results of operations and financial condition, it may also have the effect of heightening risks relating to our ability to successfully commercialize newly developed or acquired products or therapies, consolidation in the healthcare industry, intensified pricing pressure as a result of changes in the purchasing behavior of hospitals and maintenance of our numerous contractual relationships.smaller reporting companies.
Recent accounting pronouncements
TheIn addition to being a smaller reporting and an emerging growth company, the Company has elected to comply with non-accelerated public companyalso is an accelerated filer effective dates of adoption.under SEC rules and regulations. Therefore, the required effective dates for adopting new or revised accounting standards as described below are generally earlier than when smaller reporting companies and emerging growth companies who are not accelerated filers are required to adopt.
Accounting Pronouncements Recently Adopted
In December 2019,2023, the Financial Accounting Standards Board (FASB)(“FASB”) issued Accounting Standards Update 2019-12,2023-09 (“ASU 2023-09”), Income Taxes(ASU 2019-12), which amendedenhances the accounting fortransparency of income taxes. ASU 2019-12 eliminates certain exceptions to the guidance for income taxestax disclosures by expanding annual disclosure requirements related to the approach for intraperiod tax allocation, the methodology for calculatingrate reconciliation and income taxes paid. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.
In November 2023, the FASB issued Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting, which improves reportable segment disclosure requirements. ASU 2023-07 primarily enhances disclosures about significant segment expenses by requiring that a public entity disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss. This ASU also (i) requires that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment, and a description of its composition; (ii) requires that all annual disclosures are provided in anthe interim periodperiods; (iii) clarifies that if the CODM uses more than one measure of profitability in assessing segment performance and the recognitiondeciding how to allocate resources, that one or more of deferred tax liabilities for outside basis differences as well as simplifying aspectsthose measures may be reported; (iv) requires disclosure of the accountingtitle and position of the CODM and a description of how the reported measures are used by the CODM in assessing segment performance and in deciding how to allocate resources; (v) requires that an entity with a single segment provide all new required disclosures. ASU 2023-07 is effective for franchise taxesfiscal years beginning after December 15, 2023, and enacted changes in tax lawsinterim periods within fiscal years beginning after December 15, 2024 and requires retrospective application. Early adoption is permitted. The amendments under ASU 2023-07 relate to financial disclosures and its adoption will not have an impact on the Company’s results of operations, financial position or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.cash flows. The Company adoptedwill adopt ASU 2019-12 on January 1, 20212023-07 for the annual reporting period ending December 31, 2024 and it did not have a material impact on its consolidated financial statements.for interim reporting periods thereafter.
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2. Balance sheet information
Cash, cash equivalents and restricted cash
A summary of cash and cash equivalents and restricted cash is as follows:
April 3,
2021		December 31, 2020
Cash and cash equivalents$124,247 $86,839 
Restricted cash5,207 0 
$129,454 $86,839 
Restricted cash consists of deposits into escrow with financial institutions for the purpose of paying specific indebtedness of a company acquired as part of a business combination (refer to Note 3. Business Combinations and Investments).
Accounts receivable, net
Accounts receivable, net are amounts billed and currently due from customers. The Company records the amounts due net of allowance for credit losses. Collection of the consideration that the Company expects to receive typically occurs within 30 to 90 days of billing. The Company applies the practical expedient for contracts with payment terms of one year or less which does not consider the effects of the time value of money. Occasionally, the Company enters into payment agreements with patients that allow payment terms beyond one year. In those cases, the financing component is not deemed significant to the contract.
Accounts receivable, net of allowances, consisted of the following as of:
April 3,
2021		December 31, 2020
March 30, 2024March 30, 2024December 31, 2023
Accounts receivableAccounts receivable$93,283 $92,273 
Less: Allowance for credit lossesLess: Allowance for credit losses(3,811)(3,990)
$89,472 $88,283 
$
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. The allowance for credit losses is calculated by region and by customer type, where appropriate considering several factors including age of accounts, collection history, historical account write-offs, current economic conditions, and supportable forecasted economic expectations. Due to the short-term nature of itsthe Company’s receivables, the estimate of expected credit losses is based on aging of the account receivable balances. The allowance is adjusted on a specific identification basis for certain accounts as well as pooling of accounts with similar characteristics. An increase in the provision for credit losses may be required when the financial condition of the Company’s customers or its collection experience deteriorates. The Company has a diverse customer base with no single customer representing ten percent or more of sales orsales. The Company has one customer representing approximately 18.7% and 16.0% of the accounts receivable.receivable balance as of March 30, 2024 and December 31, 2023, respectively. Historically, the Company’s reserves have been adequate to cover credit losses. The Company’s exposure to credit losses may increase if its customers are adversely affected by changes in health care laws, coverage and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the COVID-19 pandemic, or other customer-specific factors. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted. Estimates are used to determine the allowance, which are based on an assessment of anticipated payment and all other historical, current and future information that is reasonably available.
Changes in credit losses were as follows for the three months ended:follows:
April 3,
2021		March 28,
2020
Beginning balance$(3,990)$(4,146)
Provision for losses(191)(543)
Write-offs406 85 
Recoveries(36)(80)
Ending balance$(3,811)$(4,684)
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Three Months Ended
March 30, 2024April 1, 2023
Beginning balance$(4,219)$(7,022)
Benefit (provision) for expected credit losses976 (1,079)
Write-offs223 286 
Recoveries(109)(484)
Disposition— 898 
Ending balance$(3,129)$(7,401)
Inventory
Inventory consisted of the following as of:
April 3,
2021		December 31, 2020
March 30, 2024March 30, 2024December 31, 2023
Raw materials and suppliesRaw materials and supplies$5,797 $3,665 
Finished goodsFinished goods35,076 26,323 
Gross40,873 29,988 
Excess and obsolete reserves(1,065)(868)
$39,808 $29,120 
97,005
Accrued liabilities
Accrued liabilities consisted of the following as of:
April 3,
2021		December 31, 2020
March 30, 2024March 30, 2024December 31, 2023
Gross-to-net deductionsGross-to-net deductions$50,367 $43,656 
Bonus and commissionBonus and commission9,673 15,188 
Reserve for estimated overpayments from third-party payors2,046 2,790 
Compensation and benefitsCompensation and benefits5,949 5,875 
Accrued interest
Income and other taxesIncome and other taxes2,657 2,434 
Other liabilitiesOther liabilities18,959 18,244 
$89,651 $88,187 
$
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3. Acquisitions and divestitures
Wound Business
On May 22, 2023, the Company closed the sale of certain assets within its Wound Business, including the TheraSkin and TheraGenesis products (collectively, the “Wound Business” or the “Disposal Group”), for potential consideration of $84,675, including $34,675 at closing, $5,000 deferred for 18 months and up to $45,000 in potential earn-out payments (“Earn-out Payments”), which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for sales of the TheraSkin and TheraGenesis products during the 2024, 2025 and 2026 fiscal years.

The Company incurred $3,880 in transactional fees resulting from the sale of the Wound Business. The Company used the proceeds from the sale of its Wound Business to prepay $30,000 of long-term debt obligations. Refer to Note 4. Financial Instruments for further details regarding the Company’s outstanding long-term debt obligations.
The Company completedevaluated the Wound Business for impairment prior to its sale and recorded a restructuring plan during$78,615 impairment within the fourth quarterconsolidated condensed statements of 2020operations and the remaining $247 accrued liabilities were paidcomprehensive loss during the three months ended April 3, 2021.1, 2023 as a result of this evaluation to reduce the intangible assets of the Disposal Group to reflect their respective fair values less any costs to sell. The fair value of the Disposal Group’s intangibles was determined based on the consideration received for the Wound Business.
3. Business combinations and investments
AcquisitionsCartiHeal (2009) Ltd.
On March 30, 2021, in order to broaden its portfolio and increase its global footprint,July 12, 2022, the Company acquiredcompleted the acquisition of 100% of the capital stockremaining shares in CartiHeal (2009) Ltd. (“CartiHeal”), a developer of Bioness, Inc. (Bioness)the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints. On February 27, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron”), as representative of CartiHeal’s former securityholders (the “Former Securityholders”). Bioness isPursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings related to non-payment of any obligations including deferred purchase price and contingent consideration totaling $215,000 and $135,000, respectively, under the Company’s previous agreements to purchase CartiHeal from the Former Securityholders.
Pursuant to the Settlement Agreement, the Company also transferred 100% of its shares in CartiHeal to a global leadertrustee (the “Trustee”) for the benefit of the Former Securityholders and made a one-time non-refundable payment of $10,150 to Elron to be used for purposes set forth in neuromodulation and advanced rehabilitation medical devices through its innovative peripheral nerve stimulation therapy and premium advanced rehabilitation solutions. Thethe Settlement Agreement. Given that upon execution of the Settlement Agreement, the Company had previously made a $1,500 convertible debt investmentno ownership interest or voting rights in Bioness on January 4, 2021 asCartiHeal, the Company concluded that it had ceased to control CartiHeal for accounting purposes, and therefore, deconsolidated CartiHeal effective February 27, 2023. CartiHeal was part of an exclusive negotiationthe Company’s international reporting segment and the Company treated the deconsolidation of CartiHeal as a discontinued operation. The loss on disposal was $60,639 and was recorded within discontinued operations, net of tax within the consolidated condensed statements of operations and comprehensive loss for the three months ended April 1, 2023. Refer to purchase Bioness, which was subsequently repaid in conjunction withNote 14. Discontinued operations for further information regarding the acquisition. The consideration paidimpact of CartiHeal on the Company’s consolidated condensed financial statements for Bioness is comprisedthe three months ended April 1, 2023.
4. Financial instruments
Long-term debt consisted of the following:following as of:
Consideration
Cash consideration at closing$48,933 
Contingent consideration at fair value43,000 
        Total Bioness consideration$91,933 
Contingent consideration is comprised of future earn-out payments contingent upon the achievement of certain research and development projects as well as sales milestones related to Bioness products. Contingent earn-out payments could total up to $65,000 for the achievement of the following:
•$15,000 for obtaining FDA approval for U.S. commercial distribution of a certain product for certain indications on or before June 30, 2022;
•$20,000 for meeting net sales targets for certain implantable products over a three year period ending on June 30, 2025 at the latest;
•Up to $10,000 for meeting net sales milestones for certain implantable products over a three year period ending on June 30, 2025 at the latest; and
•$20,000 for maintaining Centers for Medicare & Medicaid Services coverage and reimbursement for certain products at specified levels as of December 31, 2024.

March 30, 2024December 31, 2023
Amended Term Loan due October 2026 (9.82% at March 30, 2024)$379,392 $382,448 
Revolver due October 2025 (9.82% at March 30, 2024)15,000 15,000 
Less:
Current portion of long-term debt(35,811)(27,848)
Unamortized debt issuance cost(1,616)(917)
Unamortized discount(1,535)(1,685)
$355,430 $366,998 
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The allocation of the purchase price is preliminary and subject to change. The primary areas of the purchase price that are not yet finalized are related to contingent consideration, working capital, intangible assets and the residual goodwill. Accordingly, adjustments may be made to the values of assets and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the acquisition date. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date and the resulting goodwill, which is expected to be deductible for tax purposes:Amended Term Loan
Fair value of consideration$91,933 
Assets acquired and liabilities assumed:
Cash, cash equivalents and restricted cash (a)
3,143 
Accounts receivable4,124 
Inventory7,318 
Prepaid and other current assets1,891 
Property and equipment673 
Intangible assets87,000 
Operating lease assets3,616 
Other assets2,329 
Accounts payable and accrued liabilities(10,733)
Other current liabilities(6,227)
Other liabilities(4,930)
Net assets acquired88,204 
Resulting goodwill(b)
$3,729 
(a)Consists of cash and cash equivalents of $2,143 and restricted cash deposited by the former majority owner of Bioness of $1,000, into escrow with financial institutions for the purpose of paying specific Bioness indebtedness. Additionally,On December 6, 2019, the Company deposited $4,207 into escrow for the same purpose. Prior to the acquisition, Bioness had entered into 2 loansa Credit and Guaranty Agreement (the “2019 Credit Agreement”) that was comprised of a $200,000 term loan (the “Original Term Loan”) and a $50,000 revolving facility (the “Revolver”). The Company amended the 2019 Credit Agreement on August 29, 2021, and then again on October 29, 2021 in connection with the Paycheck Protection Programacquisition of Misonix, Inc., in which the Company prepaid $80,000 on the Original Term Loan. The 2019 Credit Agreement, as amended, subsequent to the prepayment, was comprised of a $360,750 term loan (“Term Loan”) and the Revolver.
On July 11, 2022, the Company further amended the 2019 Credit Agreement in conjunction with the acquisition of CartiHeal (the PPP)“CartiHeal Acquisition”). Pursuant to that amendment, an $80,000 term loan facility (the “July 2022 Term Loan” and, together with the Term Loan, the “Term Loan Facilities”) was extended to the Company to be used for: (i) the financing of the CartiHeal Acquisition; (ii) the payment of related fees and expenses; (iii) repayment of the draws made on the Revolver; and (iv) working capital needs and general corporate purposes of the Company, including without limitation for permitted acquisitions.
On March 31, 2023, the Company entered into an additional amendment to the 2019 Credit Agreement to, among other things, modify certain financial covenants, waive covenant noncompliance at December 31, 2022, and to modify interest rates applicable to borrowings under the Coronavirus Aid, Relief2019 Credit Agreement.
On January 18, 2024 (the “Closing Date”), the Company further amended the 2019 Credit Agreement (collectively, with the August 2021, October 2021, July 2022 and Economic Security Act (CARES Act) administeredMarch 2023 amendments, the “Amended 2019 Credit Agreement”), to further modify certain financial covenants under the 2019 Credit Agreement. The Company was in compliance as of March 30, 2024 with the financial covenants as stated within the 2019 Credit Agreement.
SOFR loans and base rate loans had a margin of 3.25% and 2.25%, respectively, subsequent to July 11, 2022 and prior to the Closing Date. As of the March 31, 2023 amendment, SOFR loans and base rate loans had a margin of 4.25% and 3.25%, respectively. All obligations under the Amended 2019 Credit Agreement are guaranteed by the U.S. SmallCompany and certain wholly owned subsidiaries where substantially all the assets of the Company collateralize the obligations.
The Amended 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of Bioventus LLC’s equity interests, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of assets of Bioventus LLC and its subsidiaries, as well as limitations on making changes to the business Administration. Bioness received total proceedsand organizational documents of $5,207 fromBioventus LLC and its subsidiaries. Financial covenant requirements include a maximum debt leverage ratio and an interest coverage ratio. In addition, during the unsecured PPP loansperiod commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to the delivery of financial statements of the Company for the fiscal quarter ending October 29, 2025, the Company will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10,000 as of the end of each calendar month during such period. The Term Loan Facilities will mature on October 29, 2026. The Revolver will mature on October 29, 2025.
The January 2024 amendment had deferred financing costs of $1,180, of which $3,207 and $2,000 mature on April 10, 2022 and February 5, 2026, respectively. The PPP loans have an interest rate of 1%. Bioness applied for forgiveness of the PPP loans during 2021. There can be no assurance that Bioness will be granted forgiveness of the PPP Loans in whole or in part. As part of the Bioness acquisition, the balance of $5,207$325 was placed in restricted cash to cover the repayment of these PPP Loans in the event they are not forgiven. These loans are included in other current liabilities within the condensed consolidated balance sheets.
(b)The U.S. segment was allocated the resulting goodwill from the Bioness acquisition.
The following table summarizes the preliminary fair values of identifiable intangible assets and their useful lives:
Useful Life
(in years)		Fair Value
Intellectual property10 - 15 years$86,750 
Customer relationships2 years250 
$87,000 
The aggregate amortization expense related to acquired intangible assets for the following five periods is as follows: $5,406 - remainder of 2021, $7,208 - 2022, $7,115 - 2023, $7,083 - 2024 and $7,083 - 2025.
We incurred $3,196 in acquisition costs, which are includedrecorded in selling, general and administrative expense within the consolidated condensed statement of operations and other comprehensive income.
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Investments
VIE
The Company has a fully diluted 8.8% ownership of Harbor Medtech Inc.’s (Harbor) Series C Preferred Stock. The Company and Harbor entered into an exclusive Collaboration Agreement in 2019 for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor. The Company’s partial ownership and exclusive Collaboration Agreement created a variable interest in Harbor. As a result, Harbor has been consolidated in the Company’s consolidated financial statements since the third quarter of 2019. The noncontrolling interest was 91.2% as of April 3, 2021.
Harbor assets that can only be used to settle Harbor obligations and Harbor liabilities for which creditors do not have recourse to the general credit of the Company are as follows:
April 3,
2021		December 31, 2020
Cash and cash equivalents$317 $803 
Property and equipment, net161 173 
Intangible assets, net5,514 5,635 
Operating lease assets163 178 
Other assets74 74 
$6,229 $6,863 
Accounts payable and accrued liabilities$282 $366 
Other current liabilities2,005 2,004 
Other long-term liabilities643 659 
$2,930 $3,029 
Equity Method
Investments in which the Company can exercise significance influence, but do not control, are recorded under the equity method of accounting and are included in other assets on the consolidated balance sheets. The Company’s share of net earnings or losses is included in other (income) expense within the consolidated statements of operations and comprehensive income.loss and $855 was capitalized on the consolidated condensed balance sheets during the three months ended March 30, 2024. The Company evaluates investments for impairment whenever events or changes in circumstances indicate that the carrying amountsMarch 2023 amendment had deferred financing costs of such investments may be impaired. Impairment losses are$3,661, of which $1,617 was recorded in earningsselling, general and administrative expense within the current period.
The Company has an equity investment in CartiHeal Ltd. (CartiHeal), a privately held entity that does not have a readily determinable fair value, whichconsolidated condensed statements of operations and comprehensive loss and $2,044 was capitalized on the Company began recording as an equity investment during the third quarter of 2020. The CartiHeal investment carrying value totaled $18,169 as of April 3, 2021, yielding a 10.03% fully diluted equity ownership. Net losses from CartiHeal totaled $469consolidated condensed balance sheets during the three months ended April 3, 2021, which is included1, 2023. There were no losses on debt refinancing and modification as a result of either the January 2024 or March 2023 amendments.
As of March 30, 2024, $376,241 was outstanding on the Term Loan Facilities, net of original issue discount of $1,535 and deferred financing costs of $1,616. As previously discussed in other Note 3. Acquisitions and divestitures, the Company made a prepayment of $30,000 on its Term Loan Facilities with the proceeds from the Wound Business divestiture during the second quarter of 2023. Capitalized deferred fees are amortized to interest expense withinon a straight-line basis over the consolidated condensed statement of operations and other comprehensive income.
The Company will, if needed to support the completion of a certain study, purchase an additional 338,089 of CartiHeal Series G Preferred Shares for $5,000. The Company has an exclusive option to acquire the remaining equity in CartiHeal, which may be exercised at any time up to and within 45 days following noticeterm of the U.S. FoodTerm Loan Facilities, which approximates the effective interest method. Interest expense includes deferred cost amortization of $381 and Drug Administration (FDA) approval$223 for a CartiHeal product currently in development. In addition, upon the same FDA approval, CartiHeal may exercise an option within 45 days that requires the Company to complete the acquisition of the remaining equity in CartiHeal.
4. Financial instruments
Long-term debt consists of the following:
April 3,
2021		December 31, 2020
Term loan due December 2024 (2.71% at April 3, 2021)$186,250 $190,000 
Less:
Current portion of long-term debt(15,000)(15,000)
Unamortized debt issuance cost(1,029)(1,098)
Unamortized discount(490)(524)
$169,731 $173,378 
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The 2019 Credit Agreement requires the Company to comply with financialthree months ended March 30, 2024 and other covenants. The Company complied with all covenants as of April 3, 2021. The Credit Agreement contains a $50,000 revolving credit facility, from which there were 0 outstanding borrowings as of April 3, 2021 and December 31, 2020.1, 2023, respectively.
The estimated fair value of the Term Loan Facilities was $380,341 as of April 3, 2021 was $182,094.March 30, 2024. The fair value of these obligations was determined by using a discounted cash flow model based on current market interest rates available to the Company. These inputs are corroborated by observable market data for similar obligations and aremidpoint of the Bloomberg Valuation. This is classified as a Level 2 instruments within the fair value hierarchy.
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Revolver and Letters of Credit
The Revolver is a five-year revolving credit facility that includes revolving and swingline loans as well as letters of credit (“LOC”) and, inclusive of all, cannot exceed $45,000 at any one time as the Revolver capacity was reduced at December 31, 2023 in accordance with the 2019 Credit Agreement then in effect. The Revolver credit capacity will be further reduced by $5,000 on June 30, 2024. The Company enters into interest rate swap agreements to limit its exposure to changes in the variable interest ratehad $15,000 outstanding borrowings on its long-term debt.Revolver as of March 30, 2024 and December 31, 2023. LOCs are available in an amount not to exceed $7,500. The Company has 1 non-designated interest rate swap agreement and has no other active derivatives. The swap is carried at fair value on the balance sheet (Refer to Note 5. Fair value measurements). Net interest income of $1,565 and expense of $1,068 was recorded within the consolidated statements of operations and comprehensive income related to the change in fair value of the interest rate swap for thehad three months ended April 3, 2021 and March 28, 2020, respectively.
The notional amount of the swap totaled $100,000, or 53.7% of the Term LoanLOCs outstanding principal at April 3, 2021. The swap locked in the variable portion of the interest rate on the $100,000 notional at 0.64%, with a stated fixed rate of 2.25%. The effective interest rate of the swap was 2.89% as of April 3, 2021.March 30, 2024, leaving approximately $5,700 available. Revolving loans are due at the earlier of termination or maturity. Swingline loans are available as base rate option loans only and must be outstanding for at least five days. Swingline loans are due the fifteenth or last day of a calendar month or maturity, whichever is earlier.
5. Fair value measurements
OurThe process for determining fair value has not changed from thosethat described in the Company’s 2020 Annual Report on Form 10-K.10-K for the year ended December 31, 2023.
There were no assets measured at fair value on a recurring basis and there were no liabilities valued at fair value using Level 1 or Level 2 inputs. The following table provides information for assets and liabilities measured at fair value on a recurring basis using Level 2 and Level 3 inputs:
April 3, 2021December 31, 2020
TotalLevel 2Level 3TotalLevel 2Level 3
Interest rate swap$37 $37 $0 $1,602 $1,602 $0 
Current portion of
    contingent
    consideration		13,057 0 13,057 0 0 0 
Long-term contingent
    consideration, less
    current portion		29,943 0 29,943 0 0 0 
Management incentive
    plan and liability-
    classified awards		0 0 0 40,303 0 40,303 
Equity Participation Right0 0 0 6,101 0 6,101 
Total liabilities$43,037 $37 $43,000 $48,006 $1,602 $46,404 
Interest rate swap
The Company values interest rate swaps using discounted cash flows. Forward curves and volatility levels are used to estimate future cash flows that are not certain. These are determined using observable market inputs when available and based on estimates when not available. The fair value of the swap was recorded in the Company’s consolidated balance sheets within accrued liabilities. Changes in fair value are recognized as interest (income) expense within the consolidated statements of operations and comprehensive income.
March 30, 2024December 31, 2023
TotalLevel 3TotalLevel 3
Liabilities:
Bioness contingent consideration$18,445 $18,445 $18,150 $18,150 
Total liabilities:$18,445 $18,445 $18,150 $18,150 
Contingent consideration
The Company initially values contingent consideration related to business combinations using a probability-weighted calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. flows for certain milestones. For other milestones, the Company used a variation of the income approach where revenue was simulated in a risk-neutral framework using Geometric Brownian Motion, a stock price behavior model.
Key assumptions used to estimate the fair value of contingent consideration include revenueprojected financial information, market data and the probability and timing of achieving the specific targets as discussed in Note 3. Business Combinations and Investments.targets. After the initial valuation, the Company will usegenerally uses its best estimate to measure contingent consideration at each subsequent reporting period. Gains and lossesperiod using unobservable Level 3 inputs.
Unobservable inputs
A summary of unobservable Level 3 inputs utilized for the above liabilities are recorded with selling, general and administrative expenses within the consolidated statements of operations and comprehensive income.as follows:
Valuation TechniqueUnobservable inputsRange
Bioness contingent considerationDiscounted cash flowPayment discount rate6.4% - 6.8%
Payment period2024 - 2025
Significant changes in these assumptions could result in a significantly higher or lower fair value. The contingent consideration reported in the table above table resulted from the acquisition of Bioness on March 30, 2021 Bioness acquisition. Refer to Note 3. Business Combinations and Investments for further details. There were no gains2021. Contingent consideration is adjusted quarterly based upon the passage of time or lossesthe anticipated success or failure of achieving certain milestones. Changes in contingent consideration related to this contingent consideration for the three months ended April 3, 2021.
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Management incentive plan (MIP) and liability-classified awards
BV LLC had operated 2 equity-based compensation plans, the management incentive plan (MIP) and the BV LLC Phantom Profits Interest Plan (Phantom Plan and, together with the MIP, the Plans), which were terminated on February 11, 2021 in connection with the Company’s IPO. Awards granted under the MIP Plan and the 2015 Phantom Units were liability-classified and the 2012 Phantom Units were equity-classified. Prior to the IPO and during the three months ended April 3, 2021, the Company settled the remaining 183,078 units with the sole MIP awardee for $10,802. No awards under the Plans were granted post-IPO and the Phantom Plan awards will be settled 12 months following the termination. Vested awardees whose BV LLC employment terminated prior to the IPO will have their awards settled for $10,875, which is included in accrued equity-based compensation on the consolidated condensed balance sheets. Awardees that were active BV LLC employees at the IPO will receive an aggregate of 798,422 shares of Class A common stock.
The following table provides a reconciliation of the beginning and ending balances for the MIP and liability-classified awards at fair value using significant unobservable inputs or Level 3:
Balance at December 31, 2020$40,303 
Change in fair value(25,185)
Initial estimate (vesting)829 
Payments(11,281)
Phantom plan conversion to Class A common stock(4,666)
Balance at April 3, 2021$0 
Equity Participation Right (EPR) Unit
Prior to the IPO, the Continuing LLC owner owned the only EPR Unit and its only entitlement was 0.55% of available distributions arising from a distribution event such as the IPO. The EPR Unit was redeemed in exchange for $3,327 in connection with the IPO in February 2021, at which time the EPR ceased to exist and all entitlements ended. The revaluation for the EPR liability is recognized in interest (income) expense on the consolidated statements of operations and comprehensive income.
The following table provides a reconciliation of the beginning and ending balances for the EPR Unit at fair value using significant unobservable inputs Level 3:
Balance at December 31, 2020$6,101 
Change in fair value(2,774)
Payment(3,327)
Balance at April 3, 2021$0 
6. Equity-based compensation
Terminated plans
Prior to the IPO, BV LLC operated 2 equity-based compensation plans, the MIP and the Phantom Plan, which were terminated on February 11, 2021 in conjunction with the IPO. During the three months ended April 3, 2021 and prior to the Plans termination, there were 0 MIP awards granted and the Company granted 90,000 Phantom Plan units. In addition, 900 Phantom Plan units were forfeited and others were redeemed for cash of $479. Compensation expense related to the Phantom Plan of $829 for the three months ended April 3, 2021, included a $25,185 decrease in fair market value of accrued equity-based compensation due to adjustments to reflect the difference between the expected pricing from the pending IPO and the actual offering price. Compensation expense of $415Bioness for the three months ended March 28, 2020, included a $7,441 decrease30, 2024 and April 1, 2023 totaled $295 and $287, respectively, and were recorded as the change in fair market value of accrued equity-based compensation due to the impact of COVID-19 on the market and economy. Compensation expense related to the Plans is primarily included in selling, general and administrative expense with $1,777 in research and development expense for the three months ended April 3, 2021 incontingent consideration within the consolidated statementcondensed statements of operations and comprehensive income based upon the classification of the employee.loss.
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6. Equity-based compensation
2021 Plan
The Company operates an equity-based compensation plan (2021 Plan). The 2021 Plan is designed to grant incentive awards to eligible employees and other service providers in order to attract, motivate and retain the talent for(the “2021 Plan”), which the Company competes. The 2021 Plan allows for the issuance of stock options (incentive and nonqualified), restricted stock, dividend equivalents, restricted stock units (RSUs)(“RSUs”), other stock-based awards, and cash awards.awards (collectively, Awards)the “2021 Plan Awards”). Generally, non-cash Awards grantedAs of March 30, 2024, 19,564,333 shares of Class A common stock have been authorized to be awarded under the 2021 Plan are equity-classified.and 9,119,667 shares were available for 2021 Plan Awards.
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2023 Plan
The Company also operates the 2023 Retention Equity Award Plan (the “2023 Plan” and, together with the 2021 Plan, the “Plans”), the purpose of which is to retain and motivate critical personnel over the short-term by providing them additional incentives in the form of RSUs (the “Retention Awards” and together with the “2021 Plan Awards,” the “Awards”). As of April 3, 2021, 7,592,476March 30, 2024, 600,000 shares of Class A common stock were authorized to be awarded under the 2023 Plan and 2,026,27380,700 shares were available for award. The number of shares availableRetention Awards.
Activity under the Plans
Expense
Equity-based compensation, net for issuance will be increased annually on January 1 of each calendar year beginning in 2022 through 2031, equal toAwards granted under the lesser of (i) 4.5% of the shares of our Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by our board of directors.
Equity based compensation expense of $1,944 was recognizedPlans for the three months ended March 30, 2024 and April 3, 2021. The1, 2023 totaled $2,591 and $1,718, respectively. Expenses and expense isreductions are primarily included in selling, general and administrative expense with a nominal amount in research and development expense onwithin the consolidated statementcondensed statements of operations and comprehensive incomeloss based upon the classificationdepartment of the employee. There waswere no income tax benefitbenefits related to thisequity-based compensation expense for the three months ended March 30, 2024. Income tax benefits related to equity-based compensation expense for three months ended April 3, 2021.1, 2023 totaled $430.
Restricted Stock Units
During the three months ended April 3, 2021,March 30, 2024, the Company granted employees and non-employee directors time-based RSUs which vest at various dates through April 1, 2025. TheMarch 15, 2028. RSU compensation expense which represents the fair value of the stock measured at the market price on the date of grant, is recognized over the vesting period, which is typically between 1 and 4 years.
No RSUs vested, settled or were cancelled during the three months ended April 3, 2021. Unamortized compensation expense related to the RSUs amounted to $13,093totaled $8,159 at April 3, 2021,March 30, 2024, and is expected to be recognized over a weighted average period of approximately 0.771.71 years. A summary of the RSU award activity for the three months ended April 3, 2021March 30, 2024 is as follows (number of units in thousands):
Number of unitsWeighted-average grant-date fair value per unit
Outstanding at December 31, 20200 $0 
Granted945 14.38 
Outstanding at April 3, 2021945 $14.38 
Number of unitsWeighted-average grant-date fair value per unit
Unvested at December 31, 20232,066 $4.51 
Granted2,124 5.34 
Vested(196)8.17 
Forfeited or canceled(55)8.94 
Unvested at March 30, 20243,939 $4.69 
Stock Options
During the three months ended April 3, 2021,March 30, 2024, the Company granted employees time-based stock options which vest over 21 to 4 years following the date of grant and expire within 10 years. The fair value of time-based stock options is determined using the Black-Scholes valuation model, with such value recognized as expense over the service period, which is typically 21 to 4 years, net of actual forfeitures. A summary of the Company’s assumptions used in determining the fair value of the stock options granted during the three months ended April 3, 2021March 30, 2024 is shown in the following table.table:
Risk-free interest rate0.51%3.93% - 1.19%4.3%
Expected dividend yield0— %
Expected stock price volatility33.1%36.1% - 33.5%36.3%
Expected life of stock options (years)5.75- 6.25
Weighted-average fair value of stock options granted$4.21 - 5.29
The weighted-average grant date fair value of options granted during the three months ended March 30, 2024 was $2.26 per share. The expected term of the options granted is estimated using the simplified method. Expected volatility is based on the historical volatility of the Company’s peerspeers’ common stock. The risk-free interest rate is determined based upon a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the option.
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No options vested, expired, forfeited or were exercisable during the three months ended April 3, 2021. Unamortized compensation expense related to the options amounted to $18,550totaled $5,211 at April 3, 2021,March 30, 2024, and is expected to be recognized over a weighted average period of approximately 1.262.15 years.
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A summary of stock option activity is as follows for the three months ended April 3, 2021March 30, 2024 (number of options in thousands):
Number of optionsWeighted-average exercise priceWeighted average remaining contractual term
Outstanding at December 31, 20200 $0 
Granted4,621 13.03 
Outstanding at April 3, 20214,621 $13.03 3.6
Number of optionsWeighted-average exercise priceWeighted average remaining contractual termAggregate intrinsic value
Outstanding at December 31, 20234,347 $8.68 
Granted1,752 5.18 
Exercised(209)5.18 
Forfeited or canceled(332)12.60 
Outstanding at March 30, 20245,558 7.61 7.39$3,733 
Exercisable and vested at March 30, 20242,149 $10.50 4.62$147 
The aggregate intrinsic value of options outstanding as of April 3, 2021 was $10,172 and is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Class A common stock for options that had exercise prices lower than $15.23,$5.20 per share as this was the closing price of the Company’s Class A common stock on April 1, 2021.March 28, 2024, the last trading day of the first quarter.
Employee Stock Purchase Plan
In February 2021, in connection with the IPO, theThe Company began operating the 2021operates a non-qualified Employee Stock Purchase Plan (ESPP). The ESPP(“ESPP”), which provides for the issuance of shares of the Company’s Class A common stock to eligible employees of the Company and its subsidiaries that elect to participate in the plan and purchase shares of Class A common stock through payroll deductions (including executive officers).
During each enrollment period, eligible employees may designate between 1% and 15% of their compensation to be deducted for the purchase of common stock under the plan (or such other percentage in order to comply with regulations applicable to employees domiciled in or resident ofat a member state of the European Union). The purchase price of the shares under the ESPP is equal to 85% of the fair market value on the first day of the offering period or, if lower, on the last day of the offering period.
discounted price. As of April 3, 2021,March 30, 2024, the aggregate number of shares reserved for issuance under the ESPP was 542,320. During1,519,604. No shares were issued under the ESPP during the three months ended March 30, 2024. A total of 222,076 shares were issued under the ESPP and $128 of expense was recognized during the three months ended April 3,1, 2023.
7. Stockholders’ equity
On February 16, 2021, 0the Company closed an IPO of 9,200,000 shares of Class A common stock through an UP-C structure with BV LLC. In connection with the IPO, the Company amended and restated the limited liability agreement of BV LLC (“BV LLC Agreement”) to provide for a new single class of common membership interests in BV LLC (“LLC Interests”) and exchange all of the existing membership interests in BV LLC (the “Original BV LLC Owners”) for new LLC Interests. The Company also amended its certificate of incorporation to authorize the following shares: (i) 250,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) 50,000,000 shares of Class B common stock with a par value of $0.001 per share, which have voting rights but no economic interest, and some of which were issued to the Original BV LLC Owners; and 0 compensation expense was recognized.(iii) 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors. In connection with the completion of the IPO, the Company acquired, by merger, certain entities that were part of the Original BV LLC Owners (“Former BV LLC Owners”), for which the Company issued 31,838,589 Class A common stock as merger consideration (“IPO Mergers”) and cancelled the Class B common stock held by such Former BV LLC Owners. The IPO Mergers are deemed to be a recapitalization transaction.
Holders of the Company’s Class A and Class B common stock are entitled to one vote per share and, except as otherwise required, will vote together as a single class on all matters on which stockholders generally are entitled to vote. Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC Interests and the number of shares of Class B common stock held by Smith & Nephew, Inc. (the “Continuing LLC Owner”). Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a one-for-one basis upon the redemption or exchange of any outstanding LLC Interests.
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Noncontrolling interest
In connection with any redemption pursuant to the BV LLC Agreement, the Company will receive a corresponding number of LLC Interests, increasing its ownership interest in BV LLC. Future redemptions of LLC Interests will result in a change in ownership and reduce the amount recorded as noncontrolling interest and increase additional paid-in capital. There were no redemptions during the three months ended March 30, 2024 or during the year ended December 31, 2023. The following table summarizes the ownership interest in BV LLC as of March 30, 2024 and December 31, 2023 (number of units in thousands):
March 30, 2024December 31, 2023
LLC InterestsOwnership %LLC InterestsOwnership %
Number of LLC Interests owned
Bioventus Inc.63,672 80.1 %63,267 80.0 %
Continuing LLC Owner15,787 19.9 %15,787 20.0 %
Total79,459 100.0 %79,054 100.0 %
7.8. Earnings per share
The following table sets forth the computation of basic and diluted loss per share of Class A common stock for the period following the Transactionsperiods presented (amounts in thousands, except share and per share data):
February 16, 2021 through April 3, 2021
Numerator:
Net loss$(1,449)
Net loss attributable to noncontrolling interests408 
Net loss attributable to Bioventus Inc. Class A common stockholders$(1,041)
Denominator:
Weighted-average shares of Class A common stock outstanding - basic and diluted41,797,882 
Net loss per share of Class A common stock, basic and diluted$(0.02)
Three Months Ended
March 30, 2024April 1, 2023
Numerator:
Net loss from continuing operations, net of tax$(5,982)$(100,018)
Net loss attributable to noncontrolling interests — continuing operations1,412 20,360 
Net loss attributable to Bioventus Inc. Class A
    common stockholders — continuing operations		$(4,570)$(79,658)
Numerator:
Net loss from discontinued operations, net of tax$— $(74,429)
Net loss attributable to noncontrolling interests — discontinued operations— 14,937 
Net loss attributable to Bioventus Inc. Class A
    common stockholders — discontinued operations		$— $(59,492)
Denominator:
Weighted-average shares of Class A common stock outstanding - basic and diluted63,380,187 62,124,752 
Net loss per share of Class A common stock from continuing operations,
    basic and diluted		$(0.07)$(1.28)
Net loss per share of Class A common stock from discontinued operations,
    basic and diluted		— (0.96)
Net loss per share of Class A common stock, basic and diluted$(0.07)$(2.24)
Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted losses per share of Class B common stock under the two-class method has not been presented.
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The following number of weighted-average potentially dilutive shares as of March 30, 2024 and April 3, 20211, 2023 were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion:
LLC Interests held by Continuing LLC Owner(a)
Three Months Ended
March 30, 2024April 1, 2023
LLC Interests held by Continuing LLC Owner(a)
15,786,737 15,786,737 
Stock options734,278 8,517,045 
RSUs1,479,188 1,070,105 
Total18,000,203 25,373,887 
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15,786,737 
Stock options4,564,091 
RSUs382,711 
Unvested shares of Class A common stock39,129 
Total20,772,668 
(a)Class A Shares reserved for future issuance upon redemption or exchange of LLC Interests by the Continuing LLC Owner.
8.9. Restructuring costs
Restructuring costs are not allocated to the Company’s reportable segments as they are not part of the segment performance measures regularly reviewed by management. These charges are included in restructuring costs in the consolidated statements of operations and comprehensive loss. Liabilities associated from restructuring costs are recorded in accrued liabilities on the consolidated balance sheets.
The Company’s prior restructuring plans adopted in 2021 and 2022 focused on aligning its organizational and management cost structure to improve profitability and cash flow, reduce headcount and the consolidation of facilities. These plans have been completed. There were no expenses incurred and $840 in restructuring payments for employee severance and temporary labor costs during the three months ended March 30, 2024. Expenses incurred and payments made during the three months ended April 1, 2023 totaled $317 and $1,845, respectively.
10. Income taxes
As a result of the Transactions, Bioventus Inc. became the sole managing member of BV LLC, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, BV LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by BV LLC is passed through to and included in the taxable income or loss of its members, including the Company following the Transactions, on a pro rata basis. Bioventus Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of BV LLCfollowing the Transactions. The Company is also subject to taxes in foreign jurisdictions.
The tax provision for interim periods is determined using an estimate of the Company's annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision, and estimate of the Company's annual effective tax rate, are subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments.
For the three months ended March 30, 2024 and April 3, 2021 and March 28, 20201, 2023, the Company's estimated effective tax rate was 0.3%17.9% and 0.4%0.1%, respectively. The increasechange in rate for the three months ended March 30, 2024 compared to the prior year comparable period was primarily driven by the change in structure resulting from the IPO and associated Up C structure as well as the impact of non-deductible stock option expense during 2021.
The Company recorded a deferred taxes with the offset to additional paid-in capital in connection with the Transaction. The deferred tax asset of $481 was due to tax credits and the deferred tax liability of $48,963 was for the difference between the book value and the tax basis of the Company’s investmentan increase in BV LLC. The Company assesses the need for an adjustment to the valuation allowance on a quarterly basis. The assessment is based on estimates of future sources of taxable income for the jurisdictions in which the Company operates and the periods over which deferred tax assets will be realizable. In the event the Company determines that it will be able to realize all or part of its net deferred tax assets in the future, all or part of the valuation allowance will be reversed in the period in which the Company makes such determination. The release of all or part of the valuation allowance against deferred tax assets may cause greater volatility in the effective tax rate in the periods in which it is reversed.certain entities.
Tax Receivable Agreement
The Company expects to obtain an increase in the share of the tax basis of the assets of BV LLC when LLC Interests are redeemed or exchanged by the Continuing LLC Owner and other qualifying transactions. This increase in tax basis may have the effect of reducing the amounts that the Company would otherwise pay in the future to various tax authorities. The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On February 16, 2021, the Company entered into a tax receivable agreement (TRA)(“TRA”) with the Continuing LLC Owner that provides for the payment by the Company to the Continuing LLC Owner of 85% of the amount of tax benefits, if any, that the Company actually realizes as a result of (i) increases in the tax basis of assets of BV LLC resulting from any redemptions or exchanges of LLC Interests or any prior sales of interests in BV LLCLLC; and (ii) certain other tax benefits related to our making payments under the TRA.
The Company will maintainmaintains a full valuation allowance against deferred tax assets related to the tax attributes generated as a result of redemptions of LLC Interests or exchanges described above until it is determined that the benefits are more-likely-than-not to be realized. AsSubsequent to the consummation of April 3, 2021,the IPO Mergers, the Continuing LLC Owner hadhas not exchanged LLC Interests for shares of Class A common stock and therefore the Company had not recorded any liabilities under the TRA.
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stock.

9.11. Commitments and contingencies
Leases
The Company leases its office facilities as well as other property, vehicles and equipment under operating leases. The Company also leases certain office equipment under nominal finance leases. The remaining lease terms range from 1 month to 7.59.1 years.
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The components of lease cost were as follows:
Three Months Ended
April 3, 2021March 28, 2020
Three Months EndedThree Months Ended
March 30, 2024March 30, 2024April 1, 2023
Operating lease costOperating lease cost$702 $646 
Short-term lease cost(a)
Short-term lease cost(a)
117 110 
Financing lease cost:
Amortization of finance lease assets
Amortization of finance lease assets
Amortization of finance lease assets
Interest on lease liabilities
Total lease costTotal lease cost$819 $756 
(a)Includes variable lease cost and sublease income, which are immaterial.
Supplemental cash flow information and non-cash activity related to operating leases were as follows:
Three Months Ended
April 3, 2021March 28, 2020
Operating cash flows from operating leases$704 $623 
Three Months Ended
March 30, 2024April 1, 2023
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases$1,178 $1,100 
Operating cash flows from financing leases$221 $90 
Financing cash flows from finance leases$183 $37 
Right-of-use assets obtained in exchange for lease obligations:
Operating lease obligations$95 $225 
Financing lease obligations$— $9,141 
Supplemental balance sheet and other information related to operating leases were as follows:
April 3,
2021		December 31, 2020
Operating lease assets$18,060$14,961
Operating lease liabilities- current$2,960$1,960
Operating lease liabilities- noncurrent16,40214,108
Total operating lease liabilities$19,362$16,068
Weighted average remaining lease term (years)6.47.2
Weighted average discount rate4.4 %5.0 %
March 30, 2024December 31, 2023
Operating lease assets$12,462$13,353
Operating lease liabilities—current$4,028$4,057
Operating lease liabilities—noncurrent9,67110,573
Total operating lease liabilities$13,699$14,630
Property, plant and equipment, net (finance leases)$13,884$14,279
Finance lease liabilities—current$778$759
Finance lease liabilities—noncurrent10,18410,386
Total financing lease liabilities$10,962$11,145
Weighted average remaining lease term (years) for leases
Operating leases3.63.8
Finance leases9.19.3
Weighted average discount rate for leases
Operating leases4.7 %4.7 %
Finance leases8.1 %8.1 %
Reserve for estimated overpayments from all third-party payors
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The Company maintains a reserve for reimbursement claims related to certain of its Restorative Therapies products that may have been processed for payment by the Company without adequate medical records support. The Company held a reserve of $2,046Governmental and $2,790 at April 3, 2021 and December 31, 2020, respectively for these amounts. The Company refunded Medicare $65 and $1,519 during the three months ended April 3, 2021 and year ended December 31, 2020, respectively, related to known and estimated overpayments for medical necessity included in this reserve for periods through December 31, 2020. The Company’s reserve was estimated using extrapolation of an error rate from a statistical sample, which represents the Company’s best estimate as of the date of the financial statements, but because of the uncertainty inherent in such estimates, the ultimate resolution may be materially different.
Product Recall
In December 2020, the Company voluntarily recalled our ultrasound gel, an accessory to one of the Restorative Therapies product. The Company has incurred, and expects to incur in the future, costs associated with this recall. Based on the information that has been received, the estimated probable loss related to this recall globally was approximately $1,819 as of April 3, 2021. Recorded reserves of $546 and $1,684 were recorded within accrued liabilities on the consolidated balance sheets at April 3, 2021 and December 31, 2020, respectively.
Legal Contingencieslegal contingencies
In the normal course of business, the Company periodically becomes involved in various claims and lawsuits, and governmental proceedings and investigations that are incidental to its business. The Company accrues a liability when a loss is considered probable and the business.amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and amount of the claim, and an estimate of the possible loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. With respect to governmental proceedings and investigations, like other companies in ourthe industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the U.S.United States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries.
The outcomesCompany is presently unable to predict the duration, scope, or result of legal actions arethese matters. As such, the Company is presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, related to these matters. While the Company intends to defend these matters vigorously, the outcome of such litigation or any other litigation is necessarily uncertain, is not within the Company’s complete control and maymight not be known for extended periods of time. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, other than the specific matters described below, if decided adversely, is not expected to have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.
Bioventus shareholder litigation
On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.
On October 4, 2023, certain of the Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case.
On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:24-cv-00180-RGA (D. Del. 2024). Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On May 1, 2024, the parties filed a stipulation to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case. On May 2, 2024, the United States District Court for the District of Delaware granted the stipulation and ordered the consolidation of the Sanderson and Grogan cases.
The Company believes the claims alleged in each of the above matters lack merit and intends to defend itself vigorously. The outcome of these matters is not presently determinable, and any loss is neither probable nor reasonably estimable.
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PriorMisonix former distributor litigation
On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York. The complaint alleged that Misonix improperly terminated its contract with the former distributor. The complaint sought various remedies, including compensatory and punitive damages, specific performance and preliminary and post judgment injunctive relief, and asserted various causes of action, including breach of contract, unfair competition, tortious interference with contract, fraudulent inducement, and conversion. On October 7, 2017, the court granted Misonix’s motion to dismiss each of the tort claims asserted against Misonix, and also granted the individual defendants’ motion to dismiss all claims asserted against them. On January 23, 2020, the court granted Cicel’s motion to amend its complaint, to include claims for alleged defamation and theft of trade secrets in addition to the closingbreach of ourcontract claim. Discovery in the matter ended on August 5, 2021. On January 20, 2022, the court granted Misonix’s summary judgment motion on Cicel’s breach of contract and defamation claims. Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the Court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal to the United States Court of Appeals for the Second Circuit. On March 6, 2024, the Second Circuit Court of Appeals issued its ruling affirming the lower Court’s summary judgment in favor of Misonix in all respects.
Bioness stockholder litigation
On February 8, 2022, a minority shareholder of Bioness filed an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness, Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness had been nameddirectors, the Alfred E. Mann Trust (“Trust”), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as a defendantdefendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in a lawsuit, for which we areconnection with their consideration and approval of the Company’s transaction. The complaint also alleges that the Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that the Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration. The Company believes that it is indemnified for under the indemnification provisions contained in the Bioness Merger Agreement. The case relatesAgreement for these claims. On July 20, 2022, the Company filed a motion to an action brought in February 2021dismiss all claims made against it on various grounds, as did all the other named defendants in the Delaware Statesuit. A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery by a former minority shareholder and director of Bioness, seeking a temporary restrainingon January 19, 2023. On April 27, 2023, the Court issued an order contesting our acquisition of Bioness. Whilewhich, among other things, dismissed Bioventus from the complaint to block the Bioness acquisition was dismissed by the court, a separate action was brought againstcase.
Other matters
On November 10, 2021, the Company entered into an asset purchase agreement for an HA product and made an upfront payment of $853. An additional payment of $853 was made in 2022 upon the transfer of certain seller customer data. If the Company is able to obtain a Medical Device Regulation Certification for the product, $1,707 (the “Milestone Payment”) will be paid to the seller within five days. The Company is also required to pay royalties if certifications are achieved before December 31, 2024. Royalties will be payable through 2026 of 5.0% on the first $569 in sales and 2.5% thereafter. On March 8, 2023, the parties amended the agreement under which the indemnification provisionsMilestone Payment was reduced to $1,418, of which $709 was paid on January 31, 2024, and the remainder is due upon receipt of the Bioness Certificate of IncorporationMedical Device Regulation Certification for the product provided that it is obtained prior to recover $1,200 in attorney fees and other expenses incurred byDecember 31, 2024. As a result, the director and shareholder in connection with the dismissed case. Bioness is vigorously defending the matter. No hearing date has been set.
Other mattersCompany recorded an intellectual property intangible asset totaling $709 for initial payment.
On August 23, 2019, the Company and Harbor entered into an exclusive collaboration agreement for purposes of developing a product for orthopedic uses to be commercialized by the Company and supplied by Harbor. As part of the agreementwas assigned a third-party license was assigned to uson a product currently in development and the Company is subject to a 3% royalty on certain commercial sales, or a nominal minimum amount per quarter, beginning in 2023. The Company is obligated to pay up to $6,000 upon achieving certain milestones. Unless earlier terminated, the agreement will remain in effect until the earlier of 8 years or until the payment of certain milestones are met.
On May 29, 2019, the Company and the Musculoskeletal Transplant Foundation, Inc. d/b/a MTF Biologics (MTF), entered into a collaboration and development agreement to develop one or more products for orthopedic application to be commercialized by the Company and supplied by MTF (the Development Agreement). The first phase has been completed. Additional fees for the subsequent phases will be determined as the development work progresses. The Development Agreement continues until the date when the parties execute a supply agreement for the commercial products.quarter.
On December 9, 2016, the Company entered into an amended and restated license agreement for the exclusive U.S. distribution and commercialization rights of a single injection osteoarthritis (OA)(“OA”) product with the supplier of the Company’s single injection OA product for the non-U.S. market. The agreement requires the Company to meet annual minimum purchase requirements and pay royalties on net sales. Royalties related to this agreement totaled $2,377 and $2,202 during the three months ended March 30, 2024 and April 3, 20211, 2023 totaled $3,579 and March 28, 2020 respectively, and$2,321, respectively. These royalties are included in cost of sales onwithin the consolidated statementcondensed statements of operations and comprehensive income.loss.
As part of a supply agreement entered on February 9, 2016 for the Company’s three injection OA product, the Company is subject to annual minimum purchase requirements for ten10 years. After the initial 10 years, the agreement will automatically renew for an additional 5 years unless terminated by the Company or the seller in accordance with the agreement.
As part of a supply agreement for the Company’s five injection OA product that was amended and restated on December 22, 2020, the Company is subject to annual minimum purchase requirements for eight8 years.
The Company has an exclusive license agreement for bioactive bone graft putty. The Company is required to pay a royalty on all commercial sales revenue from the license products with a minimum annual royalty payment through 2023, the date the agreement will expire, upon the expiration
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Table of the patent held by the licensor. These royalties are included in cost of sales on the consolidated statement of operations and comprehensive income.Contents
From time to time, the Company causes letters of credit (LOCs)LOCs to be issued to provide credit support for guarantees, contractual commitments and insurance policies. The fair values of the LOCs reflect the amount of the underlying obligation and are subject to fees payable to the issuers, competitively determined in the marketplace. As of April 3, 2021March 30, 2024 and December 31, 2020,2023, the Company had one LOCthree LOCs outstanding for a nominal amount.$1,800.
The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice. The Company is self-insured for health insurance covering most of its employees located in the United States. The Company maintains stop-loss insurance on a “claims made” basis for expenses in excess of $200$250 per member per year.

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10.12. Revenue recognition
Our policies for recognizing sales have not changed from those described in the Company’s 2020 Annual Report on Form 10-K.10-K for the year ended December 31, 2023. The Company attributes net sales to external customers to the U.S. and to all foreign countries based on the legal entity from which the sale originated.
As previously discussed in Note 1. Organization, SonicOne revenue was reclassified from Restorative Therapies to Surgical Solutions on a prospective and retrospective basis as its capabilities to remove devitalized or necrotic tissue and fiber deposits more closely aligns with Surgical Solutions’ soft tissue management. SonicOne revenue reclassified for the three months ended April 1, 2023 totaled $1,712 and $65 for the U.S. and International reporting segments, respectively. The Company had product sales to one customer totaling $13,143 in the U.S. segment during the three months ended March 30, 2024, representing 10.2% of total net sales. The following table presents ourthe Company’s net sales by segment disaggregated by geographic markets and major product linesbusiness within each segment as follows:
Three Months EndedThree Months Ended
March 30, 2024March 30, 2024April 1, 2023
U.S.
Pain Treatments
Pain Treatments
Pain Treatments
Restorative Therapies
Surgical Solutions
Total U.S. net sales
Three Months Ended
International
International
International
Pain Treatments
Pain Treatments
Pain Treatments
Restorative Therapies
Surgical Solutions
Total International net sales
April 3, 2021March 28, 2020
Primary geographic markets:
U.S.$74,538 $71,970 
International7,240 6,675 
Total net salesTotal net sales$81,778 $78,645 
Major product lines:
Pain Treatments and Joint Preservation$41,530 $41,283 
Restorative Therapies21,821 23,465 
Bone Graft Substitutes18,427 13,897 
Total net salesTotal net sales$81,778 $78,645 
Total net sales
11.13. Segments
The Company’s 2two reportable segments are U.S. and International. U.S. segment revenues totaled $114,281 and $103,978 for the three months ended March 30, 2024 and April 1, 2023, respectively. International segment revenues totaled $15,176 and $15,081 for the three months ended March 30, 2024 and April 1, 2023, respectively. The Company’s products are primarily sold to orthopedists, musculoskeletal and sports medicine physicians, podiatrists, neurosurgeons and orthopedic spine surgeons, as well as to their patients. The Company does not disclose segment information by asset as the Chief Operating Decision Maker does not review or use it to allocate resources or to assess the operating results and financial performance. Segment adjustedAdjusted EBITDA is the segment profitability metric reported to the Company’s Chief Operating Decision Maker for purposes of decisions about allocation of resources to, and assessing performance of, each reportable segment.
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The following table presents segment adjustedAdjusted EBITDA reconciled to incomeloss before income taxes:
Three Months Ended
April 3, 2021March 28, 2020
Segment adjusted EBITDA
U.S.$9,998 $13,712 
International1,072 534 
Depreciation and amortization(7,184)(7,265)
Interest income (expense)2,876 (2,381)
Equity compensation22,412 7,026 
Succession and transition charges(157)(773)
Foreign currency impact52 (86)
Acquisition costs(3,196)0 
Equity loss in unconsolidated investments(469)0 
Other non-recurring costs(949)(242)
Income before income taxes$24,455 $10,525 
Three Months Ended
March 30, 2024April 1, 2023
Segment Adjusted EBITDA
U.S.$19,756 $14,712 
International2,867 2,239 
Interest expense, net(10,339)(9,694)
Depreciation and amortization(11,785)(16,473)
Acquisition and related costs(211)(1,175)
Shareholder litigation costs(1,168)— 
Restructuring and succession charges(53)(317)
Equity compensation(2,591)(1,846)
Financial restructuring costs(352)(5,330)
Impairments of assets— (78,615)
Other items(1,199)(3,665)
Loss before income taxes$(5,075)$(100,164)
14. Discontinued operations
On February 27, 2023 the Company reached a Settlement Agreement with the Former Securityholders of CartiHeal that resulted in the transfer of 100% of Company’s shares in CartiHeal to a Trustee. Refer to Note 3. Acquisitions and divestitures for further details concerning the Settlement Agreement and the deconsolidation of CartiHeal. CartiHeal had no sales during the year ended December 31, 2023.
The following table summarizes the major income and expense line items of these discontinued operations, as reported in the consolidated statements of operations for the three months ended April 1, 2023:
Three Months Ended
March 30, 2024April 1, 2023
Selling, general and administrative expense$— $1,728 
Research and development expense— 396 
Change in fair value of contingent consideration(a)
— 1,710 
Depreciation and amortization(a)
— 4,264 
Impairments of assets— — 
Operating loss from discontinued operations— 8,098 
Interest expense, net— 4,889 
Other (income) expense(b)
— 61,442 
Other (income) expense— 66,331 
Loss before income taxes— (74,429)
Income tax benefit, net— — 
Net loss from discontinued operations— (74,429)
Loss attributable to noncontrolling interest -
    discontinued operations		— 14,937 
Net loss attributable to Bioventus Inc. -
    discontinued operations		$— $(59,492)
(a)Depreciation and amortization and the change in fair value of contingent consideration represents the significant operating non-cash items of discontinued operations.
(b)Other expense includes the $60,639 loss on deconsolidation, of which $10,150 was attributable to non-refundable payments. Total investing cash outflows included these non-refundable payments and $1,356 cash on hand at disposal.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Operations.
The following discussion and analysis of Bioventus Inc.’s (sometimes referred to as “we,” “us,” “our”“our,” “Bioventus” or “Bioventus”“the Company”) financial condition and results of operations should be read in conjunction with the “Special Note Regarding Forward-Looking Statements” and our unaudited consolidated condensed financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosedincluded in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (SEC)(“SEC”) on March 26, 2021 (2020 10-K)12, 2024 (“2023 10-K”).
Executive Summary
We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing process. We operate our business through two reportable segments, U.S. and International, and our portfolio of products is grouped into three verticals, which we updated during the three months ended April 3, 2021 as a result of our acquisition of Bioness Inc. (Bioness).businesses:
•Pain Treatments and Joint Preservation includes the legacy osteoarthritis (OA)is comprised of non-surgical joint pain treatment and joint preservationinjection therapies as well as peripheral nerve stimulation (“PNS”) products plusto help the Peripheral Nerve Stimulation products sold previously by Bioness.patient get back to their normal activities.
•Bone Graft Substitutes (BGS) remains unchanged. This verticalSurgical Solutions is comprised of human tissue allograftbone graft substitutes (“BGS”) that increase bone formation to stimulate bone healing in spinal fusions and syntheticother orthopedic surgeries, as well as a portfolio of ultrasonic products used primarilyfor precise bone cutting and sculpting, soft tissue management (i.e., tumor and liver resections) and tissue debridement, in spine surgery which have either (i) received 510(k) clearance, which is a premarket submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent, to a legally marketed device, or (ii) are regulated solely as Section 361 HCT/Ps, which means they are human cells, tissues and cellular and tissue-based products that do not require a PMA in the United States; andvarious surgeries, including minimally invasive applications.
•Restorative Therapies includes the legacy Minimally invasive fracture treatments, plus the rehabilitation products sold previously by Bioness. Restorative Therapies encompass our FDA-approved Exogenis comprised of a bone healing system, prescribed for long bone stimulation for fracture healing.as well as devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders.
The following table sets forth total net sales, net incomeloss and Adjusted EBITDA:EBITDA for the periods presented:
Three Months Ended
April 3, 2021March 28, 2020
Three Months EndedThree Months Ended
March 30, 2024March 30, 2024April 1, 2023
Net salesNet sales$81,778 $78,645 
Net income$24,528 $10,486 
Net loss from continuing operations
Adjusted EBITDA(1)
Adjusted EBITDA(1)
$11,070 $14,246 
Loss per Class A common stock, basic and diluted:
Continuing operations
Continuing operations
Continuing operations
Discontinued operations
Loss per Class A common stock, basic and diluted
(1)See below under results of operations-Adjusted EBITDA for a reconciliation of net incomeloss to Adjusted EBITDA.
Recent DevelopmentsSignificant transactions
Bioness AcquisitionReclassification
On March 30,We reclassified revenue and expense of the SonicOne Ultrasonic Cleansing and Debridement Systems (“SonicOne”) from the Restorative Therapies to the Surgical Solutions business in 2024. SonicOne’s capabilities to remove devitalized or necrotic tissue and fiber deposits more closely aligns with Surgical Solutions’ soft tissue management. SonicOne revenue reclassified for the three months ended April 1, 2023 totaled $1,712 and $65 for the U.S. and International reporting segments, respectively.
EU MDR
The European Union (“EU”) Medical Devices Regulation (“MDR”), which became effective in May 2021, we completedwas adopted with the acquisitionaim of Bioness, a global leader in neuromodulationensuring better protection of public health and advanced rehabilitationpatient safety. Among other things, the EU MDR imposed changes to clinical evidence for medical devices, through its innovative peripheral nerve stimulation (PNS) therapypost-market clinical follow-up evidence, annual reporting of safety information for Class III products, and premium advanced rehabilitation solutions.
The Bioness acquisition gives Bioventus access into two large and growing markets: PNS andbi-annual reporting for Class II products, Unique Device Identification (“UDI”) for all products, submission of core data elements to a European UDI database prior to placement of a device on the advanced rehabilitation market, and we estimate theirreclassification of medical devices, address total globaland multiple labeling changes. We were able to continue marketing our currently certified products in the EU after the effective date of EU MDR until the associated certifications expire. In April 2024, we received EU Certification for our Exogen Bone Stimulation System, which will allow us to market opportunities approaching $8 billion per year.
We believe both of these markets offer attractive growth opportunities driven by demographic trends andit throughout the needEU. The certificate is valid for safe, effective, treatment options for the many patients suffering from post-surgical pain, stroke, multiple sclerosis, traumatic brain injury, spinal cord injury and cerebral palsy.
Bioness advanced rehabilitation solutions have a broad portfolio of offerings, including proprietary electrical stimulation exoskeletal devices for both the upper and lower extremities, robotic gait and fall safety systems, and high-tech, interactive software learning and recovery assessment platforms.
Bioness PNS Systems help patients suffering from pain after surgery on an extremity, which affects over 16 million patients each year globally, and addresses the growing need to reduce opioid usage.
Under the merger agreement, we paid $48.9 million at the closing of the transaction and agreed to pay up to an additional $43.0 million of discounted contingent consideration related to the achievement of certain key milestones (the Bioness Merger Agreement). The acquisition includes the entire portfolio of Bioness products as well as its research and development pipeline. The up-front consideration was funded exclusively through the use of cash on hand.5 years.
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BONES TrialWound Business
On May 22, 2023, we closed the sale of certain assets within our Wound Business, including the TheraSkin and TheraGenesis products (collectively, the “Wound Business” or the “Disposal Group”), for potential consideration of $84.7 million, including $34.7 million at closing, $5.0 million deferred for 18 months and up to $45.0 million in potential earn-out payments (“Earn-out Payments”), which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for sales of the TheraSkin and TheraGenesis products during the 2024, 2025, and 2026 fiscal years. We incurred $3.9 million in transactional fees resulting from the sale of the Wound Business and used the proceeds from the sale of the Wound Business to prepay $30.0 million of long-term debt obligations.
We submittedevaluated the Wound Business for impairment prior to its sale and recorded a supplemental PMA to$78.6 million impairment within the FDA in December 2020 seeking approval of an expanded indication for EXOGEN, specifically, for the adjunctive treatment of acute and delayed metatarsal fractures to reduce the risk of non-union. This PMA supplement was based on and supported by clinical data in metatarsal fractures from the ongoing B.O.N.E.S. study. In April 2021, we received a letter from the FDA identifying certain deficiencies in the PMA supplement that must be addressed before the FDA can complete its review of the PMA supplement. The deficiencies include concerns about the data and endpoints from the B.O.N.E.S. study, and requests for re-analyses of certain data and provision of other information to support the findings. We are currently evaluating the FDA’s comments and preparing our response to the FDA letter. We can give no assurance that we will be able to resolve the deficiencies identified by the FDA in a timely manner, or at all. Consequently, the FDA’s decision on the PMA supplement may be delayed beyond the time originally anticipated. Moreover, if our responses do not satisfy the FDA’s concerns, the FDA may not approve our PMA supplement seeking to expand the indications for use of EXOGEN as proposed.
COVID-19 pandemic impact
In 2020, the COVID-19 pandemic spread around the world and in the United States. New variants of the virus have emerged, some of which have shown to be more contagious. The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. Federal and state governments have implemented measures in an effort to prevent or minimize the spread of the virus, and ongoing effects of the pandemic, including social distancing, travel restrictions, border closures, limitations on public gatherings, mandatory closure or reduced capacity of business, work from home, supply chain logistical changes and other measures, which have caused global business disruptions and significant volatility in U.S. and international debt and equity markets. Our business, resultsconsolidated statements of operations and financial condition have been and may continue to be, materially impacted by fluctuations in patient visits and elective procedures and could be further impacted by any future temporary cessations of elective procedures, delays in payments from customers, supply chain interruptions, extended “shelter-in-place” orders or advisories, facility closures or other reasons related tocomprehensive loss during the pandemic. Furthermore, the long-term impact of COVID-19 on our business will depend on many factors, including, but not limited to, the duration and severity of the pandemic, new and ongoing measures taken in response to the pandemic, the availability and effectiveness of vaccines, the impact on economic activity from the pandemic and actions taken in response and the resulting impact it has on our partners, patients and communities in which we operate, all of which continue to be uncertain. As of the date of this Quarterly Report on Form 10-Q, the extent to which COVID-19 could materially impact the Company’s financial conditions, liquidity or results of operations is uncertain.
To the extent COVID-19 disruptions continue to adversely impact our business, results of operations and financial condition, it may also have the effect of heightening risks relating to our ability to successfully commercialize new developed or acquired products or therapies, consolidation in the healthcare industry, intensified pricing pressurethree months ended April 1, 2023 as a result of changes inthis evaluation to reduce the purchasing behaviorintangible assets of hospitals and maintenancethe Disposal Group to reflect their respective fair values, less any costs to sell. The fair value of our numerous contractual relationships. For additional informationthe Disposal Group’s intangibles were determined based on the risksconsideration received for the Wound Business.
Amended 2019 Credit Agreement
On January 18, 2024, we may face as a result of COVID-19, referfurther amended the 2019 Credit Agreement in order to modify certain financial covenants under the 2019 Credit Agreement. Refer to Part I. Item 1. Financial Information—Notes to the consolidated condensed financial statements—Note 4. Financial instruments Part I, Item 1A. Risk Factors – Our business may continuefor further information regarding the January 2024 amendment.
Consolidated Appropriations Act
In July 2022, in connection with the Consolidated Appropriations Act, 2021 (“CAA”), the Centers for Medicare and Medicaid Services (“CMS”) began utilizing new pricing information the Company reported to experience adverse impacts as a result ofit pursuant to the COVID-19 pandemic innewly adopted reporting obligations to adjust the Medicare payment to healthcare providers using our 2020 10-K.Durolane and Gelsyn-3 products.
Results of Operations
For a description of the components of our results of operations, refer to Part II,II. Item 7,7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 20202023 10-K.
The following table sets forth components of our consolidated condensed consolidated statements of operations as a percentage of net sales for the periods presented:
Three Months Ended
April 3, 2021March 28, 2020
Three Months EndedThree Months Ended
March 30, 2024March 30, 2024April 1, 2023
Net salesNet sales100.0 %100.0 %Net sales100.0 %100.0 %
Cost of sales (including depreciation and amortization)Cost of sales (including depreciation and amortization)27.2 %27.2 %Cost of sales (including depreciation and amortization)31.7 %37.9 %
Gross profitGross profit72.8 %72.8 %Gross profit68.3 %62.1 %
Selling, general and administrative expenseSelling, general and administrative expense42.3 %51.3 %Selling, general and administrative expense60.6 %67.9 %
Research and development expenseResearch and development expense1.2 %2.7 %Research and development expense2.0 %3.2 %
Restructuring costsRestructuring costs— %0.3 %
Change in fair value of contingent considerationChange in fair value of contingent consideration0.2 %0.2 %
Depreciation and amortizationDepreciation and amortization2.4 %2.3 %Depreciation and amortization1.4 %1.8 %
Operating income26.9 %16.5 %
Impairment of assetsImpairment of assets— %66.0 %
Operating income (loss)
Operating income (loss)
Operating income (loss)4.1 %(77.3 %)
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The following table presents a reconciliation of net incomeloss to Adjusted EBITDA for the periods presented:
Three Months Ended
(in thousands)April 3, 2021March 28, 2020
Net income$24,528 $10,486 
Depreciation and amortization (a)
7,184 7,265 
Income tax (benefit) expense(73)39 
Interest (income) expense(2,876)2,381 
Equity compensation (b)
(22,412)(7,026)
Succession and transition charges (c)
157 773 
Foreign currency impact (d)
(52)86 
Acquisition costs(e)
3,196 — 
Equity loss in unconsolidated investments(f)
469 — 
Other non-recurring costs (g)
949 242 
Adjusted EBITDA$11,070 $14,246 
Three Months Ended
(in thousands)March 30, 2024April 1, 2023
Net loss from continuing operations$(5,982)$(100,018)
Interest expense, net10,339 9,694 
Income tax expense (benefit), net907 (146)
Depreciation and amortization(a)
11,785 16,473 
Acquisition and related costs(b)
211 1,175 
Shareholder litigation costs(c)
1,168 — 
Restructuring and succession charges(d)
53 317 
Equity compensation(e)
2,591 1,846 
Financial restructuring costs(f)
352 5,330 
Impairment of assets(g)
— 78,615 
Other items(h)
1,199 3,665 
Adjusted EBITDA$22,623 $16,951 
(a)Includes for three months ended April 3, 2021 and March 28, 2020, respectively, depreciation and amortization of $5,236 and $5,307, in cost of sales and $1,925 and 1,825, presented in the consolidated statements of operations and comprehensive income with the balance in research and development.
(b)Equity-based compensation (income) expense for the three months ended April 3, 2021 resulted from awards granted under the Company’s current equity based compensation plan (2021 Plan) and compensation costs as well as the change in fair market value of accrued equity-based compensation related to the BV LLC Phantom Profits Interest Plan (Phantom Plan) due to expected pricing with our IPO. Equity compensation expenses for the three months ended March 28, 2020 represents compensation from the Company’s management incentive plan30, 2024 and Phantom Plan as well as the changeApril 1, 2023, respectively, depreciation and amortization of $10,025 and $14,339 in fair market valuecost of accrued equity-based compensation related to the plans due to the impact of the COVID-19 pandemic on our business.
(c)Primarily represents costs related to the CEO transition.
(d)Foreign currency impact represents realizedsales and unrealized gains$1,760 and losses from fluctuations$2,134 in foreign currency and is included within other (income) lossoperating expenses presented in the consolidated condensed statements of operations and comprehensive income.loss.
(e)(b)Primarily representsIncludes acquisition and integration costs related to completed acquisitions and changes in fair value of contingent consideration.
(c)Costs incurred as a result of certain shareholder litigation unrelated to our ongoing operations.
(d)Costs incurred were the Bioness Acquisition.result of adopting restructuring plans to reduce headcount, reorganize management structure, and consolidate certain facilities.
(e)Includes compensation expense resulting from awards granted under our equity-based compensation plans.
(f)Represents CartiHeal equity investment losses.Financial restructuring costs include advisory fees and debt amendment related costs.
(g)Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to our decision to divest the business.
(h)Other non-recurring costsitems primarily includes charges associated with potential strategic transactions, such as potential acquisitions or divestitures and preparinga transformative project to become a public company, primarily accountingredesign systems and legal fees.information processing.
Non-GAAP Financial Measures - Adjusted EBITDA
We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator of our operating performance. Ourthat management uses Adjusted EBITDA principally as a measure of our operating performance as well as for planning purposes, including the preparation of our annual operating budget and believesfinancial projections. We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties frequently use it in their evaluation of the operating performance of companies in industries similar to ours. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. We define Adjusted EBITDA as net income (loss)loss from continuing operations before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include acquisition and related costs, certain shareholder litigation costs, impairments of assets, restructuring and succession charges, equity compensation change in fair value of contingent consideration, Bioness acquisitionexpense, financial restructuring costs succession and transition charges, loss on impairment of intangible assets, losses associated with debt refinancing, foreign currency impact and other non-recurring costs.items. We included certain shareholder litigation costs as a new item within our Adjusted EBITDA calculation during the first quarter of 2024 as it was the first period in which costs related to this type of litigation were material to our business. Costs related to this shareholder litigation are unrelated to our ongoing operations and were nominal in prior periods. Adjusted EBITDA by segment is comprised of net sales and costs directly attributable to a segment, as well as an allocation of corporate overhead costs. The allocation of corporate overhead costs is determined based on various methods but is primarily based on a ratio of net sales by segment to total consolidated net sales.
Net sales
Three Months EndedChange
(in thousands, except for percentage)April 3, 2021March 28, 2020$%
U.S.$74,538 $71,970 $2,568 3.6 %
International7,240 6,675 565 8.5 %
Net Sales$81,778 $78,645 $3,133 4.0 %
Non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. These measures might exclude certain normal recurring expenses. Therefore, these measures might not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the U.S. GAAP financial measures. Additionally, other companies might define their non-GAAP financial measures differently than we do. Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Quarterly Report on Form 10-Q, including all tables referencing Adjusted EBITDA to its most directly comparable U.S. GAAP measure.
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Net Sales
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
U.S.
Pain Treatments$50,637 $40,995 $9,642 23.5 %
Restorative Therapies25,304 30,776 (5,472)(17.8 %)
Surgical Solutions38,340 32,207 6,133 19.0 %
Total U.S. net sales114,281 103,978 10,303 9.9 %
International
Pain Treatments6,052 5,331 721 13.5 %
Restorative Therapies5,170 5,549 (379)(6.8 %)
Surgical Solutions3,954 4,201 (247)(5.9 %)
Total International net sales15,176 15,081 95 0.6 %
Total net sales$129,457 $119,059 $10,398 8.7 %
U.S.
Net sales increased $2.6$10.3 million, or 3.6%. The changes in net sales9.9%, compared to the prior year period. Changes by vertical are as follows:
•Bone Graft Substitutes
$4.5  million
•Pain Treatments and Joint Preservation
$(0.3) million
•Restorative Therapies
$(1.6) million
Bone Graft Substitutes increased primarilybusiness were: (i) Pain Treatments—$9.6 million increase due to salesvolume; (ii) Restorative Therapies—$5.5 million decrease due to the divestiture of our Wound Business, partially offset with a volume growth. Pain Treatmentsincrease for our Exogen Bone Stimulation System; and Joint Preservation decreased(iii) Surgical Solutions—$6.1 million increase due to volume offset by more treatments being sold under contracts with major insurers at lower prices. Restorative Therapies decreased due to lower sales volume.growth.
International
Net sales increased $0.6 million, or 8.5%, primarily due to sales volume within our Pain Treatments and Joint Preservation vertical.
Gross profit and gross margin
Gross profitThree Months EndedChange
(in thousands, except for percentage)April 3,
2021		March 28,
2020		$%
U.S.$54,615 $52,686 $1,929 3.7 %
International4,941 4,550 391 8.6 %
$59,556 $57,236 $2,320 
Gross marginThree Months Ended
April 3,
2021		March 28,
2020		Change
U.S.73.3 %73.2 %0.1 %
International68.2 %68.2 %— %
Total72.8 %72.8 %— %
U.S.
Gross profit increased $1.9 million, or 3.7%, primarily due to the increase in net sales. Gross margin remained consistent with the prior year comparable period.
Gross profit and gross margin
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
U.S.$79,368 $65,506 $13,862 21.2 %
International9,012 8,413 599 7.1 %
Total$88,380 $73,919 $14,461 19.6 %
Three Months Ended
March 30, 2024April 1, 2023Change
U.S.69.4 %63.0 %6.4 %
International59.4 %55.8 %3.6 %
Total68.3 %62.1 %6.2 %
U.S.
Gross profit increased $13.9 million, or 21.2%, primarily due to volume growth in Pain Treatments, Surgical Solutions and our Exogen Bone Stimulation System, partially offset by the Wound Business divestiture. Gross margin increased due to product mix.
International
Gross profit increased $0.4$0.6 million, or 8.6%7.1%, primarily due to the increasevolume growth in net sales.Pain Treatments. Gross margin remained consistent with the prior year comparable period.increased due to product mix.
Selling, general and administrative expense
Three Months EndedChange
Three Months EndedThree Months EndedChange
(in thousands, except for percentage)(in thousands, except for percentage)April 3, 2021March 28, 2020$%(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Selling, general and administrative expenseSelling, general and administrative expense$34,686 $40,276 $(5,590)(13.9)%Selling, general and administrative expense$78,406 $$80,858 $$(2,452)(3.0 (3.0 %)
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Selling, general and administrative expenses decreased $5.6$2.5 million, or 13.9%3.0%, primarily due to a higher changedecline in fair valueconsulting expenses of our accrued$7.0 million and bad debt of $2.1 million. These decreases were partially offset with increases in: (i) compensation-related costs of $4.3 million; (ii) equity-based compensation resulting in an increased net recoverycosts of expense compared to the prior year$1.3 million; and (iii) corporate and employee health insurance of $16.0$1.0 million. The change in fair value during the three months ended April 3, 2021 was due to adjustments to reflect the difference between the expected pricing from the pending IPO and the actual offering price. The change in fair value during the three months ended March 28, 2020 was due to the impact of the COVID-19 pandemic on our business.
This decrease was partially offset by increases in the following areas:
•Compensation related expenses    
$5.5 million
•Legal and accounting expenses primarily as a result of our acquisition of Bioness
$3.2 million
•Equity compensation excluding change in the fair value
$1.1 million
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Research and development expensesexpense
Three Months EndedChange
Three Months EndedThree Months EndedChange
(in thousands, except for percentage)(in thousands, except for percentage)April 3, 2021March 28, 2020$%(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Research and development expenseResearch and development expense$947 $2,146 $(1,199)(55.9)%Research and development expense$2,597 $$3,771 $$(1,174)(31.1 (31.1 %)
Research and development expense decreased by $1.2 million, or 55.9%31.1%, primarily due to a higher changedecrease of $0.7 million in consulting costs and $0.6 million in equity-based compensation.
Restructuring costs
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Restructuring costs$— $317 $(317)(100.0 %)
The Company’s previously announced restructuring plans were completed in 2023. Costs incurred during the first quarter of 2023 is primarily the result of an initiative to align the Company’s organizational and management cost structure to improve profitability and cash flow through headcount reduction and cutting third-party related costs.
Change in fair value of our accrued equity-based compensation resulting in an increased net recovery of expense totaling $1.3 million. contingent consideration
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Change in fair value of contingent consideration$295 $287 $8 2.8 %
The change in fair value during three months ended April 3, 2021 was due to adjustments to reflect the difference between the expected pricing from the pending IPO and the actual offering price. The change in fair valueof contingent consideration during the three months ended March 28, 2020 was due30, 2024 remained consistent with the prior year comparable period. The activity for both periods relates to contingent consideration associated with the impactacquisition of the COVID-19 pandemic on our business.Bioness in March 2021.
Depreciation and amortization
Three Months EndedChange
Three Months EndedThree Months EndedChange
(in thousands, except for percentage)(in thousands, except for percentage)April 3, 2021March 28, 2020$%(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Depreciation and amortizationDepreciation and amortization$1,925 $1,825 $100 5.5 %Depreciation and amortization$1,755 $$2,129 $$(374)(17.6 (17.6 %)
Depreciation and amortization remained consistent with the three months ended March 28, 2020.
Other (income) expense
Three Months EndedChange
(in thousands, except for percentage)April 3, 2021March 28, 2020$%
Interest (income) expense$(2,876)$2,381 $(5,257)NM
Other expense$419 $83 $336 NM
NM = Not meaningful
Interest (income) expense changed $5.3 million compared to the three months ended March 28, 2020. During the three months ended April 3, 2021, in conjunction with our IPO, we settled our equity participation right (EPR) liability resulting in interest income of $2.8 million. In addition, the change in the fair value of our interest rate swap resulted in interest income of $1.6 million during the three months ended April 3, 2021 compared to interest expense of $1.1 milliondecreased during the three months ended March 28, 2020.30, 2024 compared with the prior year comparable period. The decrease was primarily the result of the impairment of intellectual property intangible assets associated with the Wound Business, which was divested during the second quarter of 2023.
Impairment of assets
Our decision to divest the Wound Business required us to evaluate whether certain of its assets were impaired. We recorded a $78.6 million non-cash impairment charge as a result of this evaluation to reduce the intangible assets to their fair values less costs to sell. The fair value of intangibles of the Wound Business was determined based on the consideration offered for the Wound Business.
Other expense (income)
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Interest expense, net$10,339 $9,694 $645 6.7 %
Other expense (income)$63 $(1,588)$1,651 (104.0 %)
Interest expense, net increased $0.3$0.6 million primarily due to $0.5slightly higher interest rates partially offset with a decrease in outstanding debt. Other expense (income) decreased $1.7 million in net losses relateddue to our equity investment in CartiHeal.the 2023 receipt of $1.5 million from the settlement of a legal claim.
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Income tax expense (benefit), net
Three Months EndedChange
(in thousands, except for percentage)April 3, 2021March 28, 2020$%
Income tax (benefit) expense$(73)$39 $(112)NM
Effective tax rate0.3 %0.4 %(0.1)%
Three Months EndedChange
(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Income tax expense (benefit), net$907 $(146)$1,053 NM
Effective tax rate
(NM = Not Meaningful)
17.9 %0.1 %17.7 %
Income tax impactexpense was nominal duringincurred for the first quarter of 2020 and 2021. Our effective tax rate is expectedthree months ended March 30, 2024 compared to increase during 2021a benefit in the prior year comparable period primarily due to the changean increase in structure resulting from our IPO and associated Up C partnership structure as well as the impact of non-deductible stock option expense during 2021.taxable income in certain entities.
Noncontrolling interest
Three Months EndedChange
April 3, 2021March 28, 2020$%
Continuing LLC Owner$(81)$— $(81)NM
Harbor489 458 31 6.7 %
Total$408 $458 $(51)
Subsequent to the IPO and Transactions,related transactions, we are the sole managing member of BV LLC in which we owned 80.1% and own 72.2%.79.9% at March 30, 2024 and December 31 2023, respectively. We have a majority economic interest, the sole voting interest in, and control the management of BV LLC. As a result, we consolidate the financial results of BV LLC and report a non-controllingnoncontrolling interest representing the 27.8% which19.9% that is owned by the Continuing LLC Owner. For the period subsequent to the IPO, there was a nominal impact as a result of this noncontrolling interest.
Our partial ownership and exclusive Collaboration Agreement continues to result in a variableNoncontrolling interest in Harbor and consolidation into our financial statements. The noncontrolling interest was 91.2% as of April 3, 2021 and there was a nominal increase in the loss attributable to the Harbor noncontrolling interest as compared toactivity during the three months ended March 28, 2020.
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losses recorded.
Segment Adjusted EBITDA
Adjusted EBITDA for each of our reportable segments is as follows:
Three Months EndedChange
Three Months EndedThree Months EndedChange
(in thousands, except for percentage)(in thousands, except for percentage)April 3, 2021March 28, 2020$%(in thousands, except for percentage)March 30, 2024April 1, 2023$%
U.S.U.S.$9,998 $13,712 $(3,714)(27.1)%U.S.$19,756 $$14,712 $$5,044 34.3 34.3 %
InternationalInternational$1,072 $534 $538 100.7 %International$2,867 $$2,239 $$628 28.0 28.0 %
U.S.
Adjusted EBITDA decreased $3.7increased $5.0 million, or 27.1%34.3%, primarily due higher public company costs of $1.3 million and the previously discussedgross profit, partially offset with an increase in compensation related charges. These decreases were partially offset by a $1.9 million increase in gross profit resulting from the increase in sales.costs and other administrative expenses.
International
Adjusted EBITDA increased $0.5$0.6 million, or 100.7%28.0%, primarily due to a $0.4 millionthe increase in gross profit resulting from the increase in sales.profit.
Liquidity and Capital Resources
Sources of liquidity
Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures. We expect these needs to continue as we carry out our operations, develop and commercialize our existing product candidates and any new products candidates and possibly further our expansion into international markets. We believe that our existing cash and cash equivalents, borrowing capacity under our revolving credit facility, cash flow from operations, and net proceeds from our IPO will be enough to meet our anticipated cash requirements for at least
As previously discussed, on May 22, 2023, we closed the next twelve months. We may require additional liquidity as we continue to execute our business strategy. Negative impacts to our liquidity would include a decline in salessale of our products,Wound Business for consideration of $84.7 million, including declines due$34.7 million at closing, $5.0 million deferred for 18 months and up to changes$45.0 million in our customers’ abilitypotential earn-out payments. The proceeds were used to obtain third-party coverage and reimbursement for procedures that utilize our products, increased pricing pressures resulting from intensifying competition and cost increases, as well as general economic and industry factors. prepay $30.0 million of long-term debt principal obligations during the second quarter of 2023.
We anticipate that to the extent that we require additional liquidity, we will obtain funding through additional equity financings or the incurrence of other indebtedness additional equity financings or a combination of these potential sources of liquidity. We may explore additional divestiture opportunities for non-core assets to improve our liquidity position, as we did with the Wound Business. In addition, we may raise additional funds to finance future cash needs through receivables or royalty financings or corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. The covenants under the Amended 2019 Credit Agreement limit our ability to obtain additional debt financing. Debt financing, if allowed under the Amended 2019 Credit Agreement and if available, would result in increased fixed payment obligations and maymight involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, or making capital expenditures. If we raise additional funds through collaboration and licensing arrangements with third parties,third-parties, it maymight be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that maymight not be favorable to us. The covenants under our credit agreement limit our ability to obtain additional debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all.
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Any failure to raise capital in the future couldmight have a negative impact on our financial condition and our ability to pursue our business strategies. Considering recent market conditions and our business assumptions, we have reevaluated our operating cash flows and cash requirements and believe that current cash, cash equivalents, future cash flows from operating activities and cash available under our 2019 Credit Facility will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the unaudited consolidated condensed financial statements included herein.
Initial Public OfferingCash Requirements
On February 16, 2021,There have been no material changes to our future cash requirements as disclosed in connection with our IPO, we issued and sold 9,200,000 sharesPart II. Item 7 of our Class A common stock at a price2023 10-K.
We enter into contracts in the normal course of business with various third parties for development, collaboration and other services for operating purposes. These contracts generally provide for termination upon notice. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the publicdate of $13.00 per share, resulting in gross proceedscancellation. Certain agreements include contingent events that upon occurrence would require payment. For information regarding commitments and contingencies, refer to us of approximately $119.6 million, before deductingItem 1. Financial Information—Notes to the underwriting discount, commissionsunaudited consolidated condensed financial statements—Note 11. Commitments and estimated offering expenses payable by us.contingencies.
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Tax Receivable Agreement
We are a holding company and have no material assets other than our ownership of LLC Interests and no independent means of generating revenue. The limited liability company agreement of BV LLC Agreement provides for the payment of certain distributions to the Continuing LLC Owner and us in amounts sufficient to cover the income taxes imposed on such members with respect to the allocation of taxable income from BV LLC as well as to cover our obligations underwithin the Tax Receivable Agreement (the TRA). Additionally, intax receivable agreement (“TRA”) with the event we declare any cash dividend, we intend to cause BVContinuing LLC to make distributions to us, in an amount sufficient to cover such cash dividends declared by us. Deterioration in the financial condition, earnings, or cash flow of BV LLC and its subsidiaries for any reason could limit or impair their ability to pay such distributions. In addition, the terms of our financing arrangements, including the 2019 Credit Agreement, contain covenants that may restrict BV LLC and its subsidiaries from paying such distributions, subject to certain exceptions. Further, BV LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of BV LLC (with certain exceptions), as applicable, exceed the fair value of its assets. Subsidiaries of BV LLC are generally subject to similar legal limitations on their ability to make distributions to BV LLC. If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA.
In addition, underOwner. Under the TRA, we are required to make cash payments to the Continuing LLC Owner equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (1) increases in the tax basis of assets of BV LLC resulting from (a) any future redemptions or exchanges of LLC Interests, and (b) certain distributions (or deemed distributions) by BV LLC and (2) certain other tax benefits arising from payments under the TRA. We expect the amount of the cash payments required to be made under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing LLC Owner, the amount of gain recognized by the Continuing LLC Owner, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing LLC Owner under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA.
Indebtedness
On January 18, 2024 (the “Closing Date”), the Company entered into the Amended 2019 Credit Agreement. The Amended 2019 Credit Agreement, contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of our equity interests, restrictions on acquisitions, investments and certain other payments, limitations on the incurrence of new indebtedness, limitations on transfers, sales and other dispositions of our assets, as well as limitations on making changes to the business and organizational documents. Financial covenant requirements include a maximum debt leverage ratio and an interest coverage ratio. In addition, during the period commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to the delivery of our financial statements for the fiscal quarter ending October 29, 2025, we will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10.0 million as of the end of each calendar month during such period. The Term Loan Facilities will mature on October 29, 2026. The Revolver will mature on October 29, 2025. We were in compliance with the financial covenants as stated with the Amended 2019 Credit Agreement as of March 30, 2024.
We have an outstanding Revolver balance of $15.0 million as of March 30, 2024, which was borrowed and used for working capital needs during the third quarter of 2023.
Refer to Item 1. Financial Information—Notes unaudited consolidated condensed financial statements—Note 1. Organization for further details on the Company’s covenant compliance and Note 4. Financial instruments for further details on the Company’s indebtedness.
Other
For information regarding Commitments and Contingencies, refer to Item 1. Financial Information—Notes to the unaudited consolidated condensed financial statements—Note 11. Commitments and contingencies and —Note 3. Acquisitions and divestitures of this Quarterly Report on Form 10-Q.
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Information regarding cash flows
Cash, and cash equivalents and restricted cash as of April 3, 2021March 30, 2024 totaled $124.2$25.2 million, compared to $86.8$37.0 million as of December 31, 2020.2023. The increasedecrease in cash was primarily due to the following:
Three Months EndedChange
(in thousands)April 3, 2021March 28, 2020$%
Three Months EndedThree Months EndedChange
(in thousands, except for percentage)(in thousands, except for percentage)March 30, 2024April 1, 2023$%
Cash flows from continuing operations:
Net cash from operating activities
Net cash from operating activities
Net cash from operating activitiesNet cash from operating activities$(18,042)$17,691 $(35,733)NM$(6,005)$$4,659 $$(10,664)(228.9 (228.9 %)
Net cash from investing activitiesNet cash from investing activities(46,648)(451)(46,197)NMNet cash from investing activities(1,000)(3,560)(3,560)2,560 2,560 (71.9 (71.9 %)
Net cash from financing activitiesNet cash from financing activities107,526 48,782 58,744 120.4 %Net cash from financing activities(4,242)27,380 27,380 (31,622)(31,622)(115.5 (115.5 %)
Net cash from discontinued operationsNet cash from discontinued operations— (13,675)13,675 (100.0 %)
Effect of exchange rate changes on cashEffect of exchange rate changes on cash(221)(260)39 (15.0)%Effect of exchange rate changes on cash(544)461 461 (1,005)(1,005)(218.0 (218.0 %)
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash$42,615 $65,762 $(23,147)(35.2)%Net change in cash, cash equivalents and restricted cash$(11,791)$$15,265 $$(27,056)(177.2 (177.2 %)
NM = Not Meaningful
Operating Activities
Net cash from operating activities from continuing operations decreased $35.7$10.7 million, primarilydue to: (i) increases in employee compensation as we annually pay bonuses and raise wages during the first quarter and no bonuses were paid during the first quarter of 2023; (ii) a rise in interest payments due to higher interest rates; and (iii) an increase in inventory purchases. These operating cash outflows were partially offset with an increase in cash collections from the following:
•Settlementgrowth in sales and timing of the remaining 183,078 units with the sole MIP awardee for $10.8 million and a final bonus of $1.5 million;
•Compensation and annual incentive plan payments increased $7.7 million;
•Payment of directors and officers annual insurance premiums for $4.6 million;
•Completed and potential acquisition expenses as well as other nonrecurring costs of $3.6 million;
•Settlement of our EPR liability for $3.3 million and;
•Higher inventory purchases of $2.7 million.on accounts payable.
Investing Activities
Cash flows used inNet cash from investing activities from continuing operations increased $46.2$2.6 million, primarily due to the $45.8a decrease of $3.3 million paidin capital expenditures, primarily within information technology. This was partially offset with $0.7 million purchase of distribution rights for the Bioness acquisition.
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our HA products.
Financing Activities
Cash flows provided byfrom financing activities increased $58.7decreased $31.6 million, primarily due to the $110.4 millionno new borrowings in net proceeds from the issuance of Class A common stock sold during our IPO, partially offset with no draws2024 on our revolving credit facility compared to prior year. There was also a $3.8$29.0 million in net borrowings during 2023 and an increase of $3.1 million in debt payments dueprincipal payments.
Discontinued Operations
Net cash flows from discontinued operations in 2023 were primarily the result of $10.2 million in fees used to settle the timingCartiHeal disposition and $1.4 million in cash held by the CartiHeal entity at the time of our quarter ends.disposal.
Credit Facilities
There have been no material changes to our outstanding indebtedness or the terms of and available borrowing capacity under our credit facilities as disclosed in our 2020 10-K. We were in compliance with all required financial covenants as of April 3, 2021.
Other
For information regarding Commitments and Contingencies, refer to Note 9. Commitments and contingencies to the Notes to the Unaudited Condensed Consolidated Financial Statements contained herein.
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual Obligations
We acquired leasesThere have been no material changes to our contractual obligations as part of the Bioness Acquisition, which resulted in increases to contractual lease commitments previously disclosed in our 2020 10-K of $824, $808, $775, $776 and $638 for the years ended December 31, 2021, 2022, 2023 2024 and 2025, respectively.10-K.
Critical Accounting Estimates
Our discussion of operating results is based upon the unaudited consolidated condensed consolidated financial statements and accompanying notes.notes, which have been prepared in accordance with U.S. GAAP. The preparation of these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our estimates are based on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from these estimates. In the event we dispose of assets before the end of their previously stated useful life, we may incur an impairment charge. Our critical accounting estimates are detailed in Item 7 of our 20202023 10-K except for the following:
Contingent Consideration
The Company initially values contingent consideration relatedand we have no material changes to business combinations using a probability-weighted calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. Key assumptions used to estimate the fair value of contingent consideration include revenue and the probability of achieving the specific targets. After the initial valuation, the Company will use its best estimate to measure contingent consideration at each subsequent reporting period. Gains and losses are recorded with selling, general and administrative expenses within the consolidated statements of operations and comprehensive income.such disclosures.
Recently Issued Accounting Pronouncements
Refer to Note 1. Organization, in the Notes to the Unaudited Condensed Consolidated Financial Statements for detailed information regarding the status ofThere were no recently issued accounting pronouncements.pronouncements that are expected to materially impact our financial statements.
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Item 3. Quantitative and Qualitative Disclosures about Market RiskRisk.
There have been no material changes to our market risks as disclosed in our 20202023 10-K.
Item 4. Controls and ProceduresProcedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation ofincluding our President and Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of theMarch 30, 2024 (the end of the period covered by this Quarterly Report on Form 10-Q.10-Q). Based on thisupon that evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that, as of March 30, 2024, our disclosure controls and procedures were effectiveare designed at thea reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer as of April 3, 2021.
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appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarterly period covered by this reportfirst quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
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Part II. Other Information
Item 1. Legal ProceedingsProceedings.
PriorBioventus stockholder litigation
On January 12, 2023, the Company and certain of its current and former directors and officers were named as defendants in a putative class action lawsuit filed in the Middle District of North Carolina, Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the closingdefendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.
On October 4, 2023, certain of ourthe Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case.
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On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:24-cv-00180-RGA (D. Del. 2024). Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On May 1, 2024, the parties filed a stipulation to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case. On May 2, 2024, the United States District Court for the District of Delaware granted the stipulation and ordered the consolidation of the Sanderson and Grogan cases.
The Company believes the claims alleged in each of the above matters lack merit and intends to defend itself vigorously. The outcome of these matters is not presently determinable, and any loss is neither probable nor reasonably estimable.
Misonix former distributor litigation
On March 23, 2017, Misonix’s former distributor in China, Cicel (Beijing) Science & Technology Co., Ltd., filed a lawsuit against Misonix and certain of its officers and directors in the United States District Court for the Eastern District of New York. The complaint alleged that Misonix improperly terminated its contract with the former distributor. The complaint sought various remedies, including compensatory and punitive damages, specific performance and preliminary and post judgment injunctive relief, and asserted various causes of action, including breach of contract, unfair competition, tortious interference with contract, fraudulent inducement, and conversion. On October 7, 2017, the court granted Misonix’s motion to dismiss each of the tort claims asserted against Misonix, and also granted the individual defendants’ motion to dismiss all claims asserted against them. On January 23, 2020, the court granted Cicel’s motion to amend its complaint, to include claims for alleged defamation and theft of trade secrets in addition to the breach of contract claim. Discovery in the matter ended on August 5, 2021. On January 20, 2022, the court granted Misonix’s summary judgment motion on Cicel’s breach of contract and defamation claims. Cicel’s motion for reconsideration of the court’s summary judgment ruling in Misonix’s favor was dismissed by the Court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal to the United States Court of Appeals for the Second Circuit. On March 6, 2024, the Second Circuit Court of Appeals issued its ruling affirming the lower Court’s summary judgment in favor of Misonix in all respects.
Bioness stockholder litigation
On February 8, 2022, a minority shareholder of Bioness filed an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness, Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness had been nameddirectors, the Alfred E. Mann Trust (“Trust”), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as a defendantdefendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in a lawsuit, for which we areconnection with their consideration and approval of the Company’s transaction. The complaint also alleges that the Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that the Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration. The Company believes that it is indemnified for under the indemnification provisions contained in the Bioness Merger Agreement. The case relatesAgreement for these claims. On July 20, 2022, the Company filed a motion to an action brought in February 2021dismiss all claims made against it on various grounds, as did all the other named defendants in the Delaware Statesuit. A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery byon January 19, 2023. On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case.
Please refer to Item 1. Financial Statements—Notes to the Consolidated Condensed Financial Statements—Note 11. Commitments and contingencies of this Quarterly Report on Form 10-Q for additional information pertaining to legal proceedings. In addition, we are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a former minority shareholdermaterial adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and directorresults of Bioness, seeking a temporary restraining order contesting our acquisition of Bioness. While the complaint to block the Bioness acquisition was dismissed by the court, a separate action was brought against the Company under the indemnification provisions of the Bioness Certificate of Incorporation to recover $1.2 million in attorney fees and other expenses incurred by the director and shareholder in connection with the dismissed case. Bioness is vigorously defending the matter. No hearing date has been set.operations.
Item 1A. Risk FactorsFactors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading Risk Factors included in our 20202023 10-K, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results. There have been no material changes in our risk factors from those described in our 20202023 Form 10-K.
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Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Equity Securities.
Recent Sales of Unregistered Securities(a)None.
In connection with the IPO and related transactions that occurred in conjunction with the IPO (the Transactions), Bioventus Inc. issued 15,786,737 shares of Class B common stock to the only member of BV LLC that remained a member (Continuing LLC Owner). In addition, merger consideration of 31,838,589 shares of Class A common stock were issued to the owners of ten entities that were members of BV LLC (the Former LLC Owners) that merged into Bioventus Inc. (the Merger). The Merger resulted in Bioventus Inc. owning the Former LLC Owners’ BV LLC common units (LLC Interests). None of the foregoing transactions involved any underwriters. The issuances of shares of Class A and Class B common stock described in this paragraph were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (Securities Act) and the rules and regulations promulgated thereunder.(b)None.
The Continuing LLC Owner, from time to time following the IPO, may require Bioventus Inc. to redeem or exchange all or a portion of their LLC Interests for newly-issued shares of Class A common stock of Bioventus Inc. on a one-for-one basis (and their shares of Class B common stock will be canceled on a one-for-one basis upon any such issuance). Our Board of Directors, which includes directors who hold LLC Interests or are affiliated with holders of LLC Interests, may, at its option, instead direct us to make a cash payment equal to the volume weighted average market price of one share of our Class A common stock for each LLC Interest redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the limited liability company agreement of BV LLC (BV LLC Agreement).
In conjunction with the IPO, the BV LLC Phantom Profits Interest Plan (Phantom Plan) terminated and we assumed the obligations of settling the vested awards. The awards will be settled 12 months following the Phantom Plan termination. Vested awardees that were active BV LLC employees at the IPO will receive 798,422 shares of Class A common stock. In addition, we issued 945,103 RSUs to employees under the Bioventus Inc. 2021 Incentive Award Plan (2021 Plan). The issuance of the foregoing securities did not involve any underwriters or underwriting discounts or commissions and the securities were deemed to be exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under Section 3(b) of the Securities Act.
On July 15, 2016, the Company agreed to issue ten shares of common stock, par value $0.001 per share, to a former officer of the Company in exchange for $0.01, which were transferred to an officer of the Company on September 22, 2020 and were redeemed for Class A common stock upon closing of our IPO. The issuance of Class A common stock was exempt from registration under Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving any public offering.
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Use of Proceeds
On February 10, 2021, our Registration Statement on Form S-1 (File No. 333-252238) was declared effective by the SEC for our IPO pursuant to which we registered and sold an aggregate of 9,200,000 shares of our Class A common stock (including 1,200,000 shares sold pursuant to the underwriters' over-allotment option) at a price of $13.00 per share. Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC acted as joint book-running managers in the offering. Canaccord Genuity Securities LLC acted as lead manager in the offering. The offering commenced on February 11, 2021 and did not terminate before all of the securities registered in the registration statement were sold. The offering closed on February 16, 2021, resulting in net proceeds of $111.2 million after deducting underwriters' discounts and commissions of $8.4 million. No payments were made by us to directors, officers, general partners or persons owning 10% or more of our common stock or to their associates, or to our affiliates.
We used the net proceeds to us from the IPO to purchase 9,200,000 newly-issued LLC Interests from BV LLC at a purchase price per interest equal to the IPO price per share of Class A common stock. As sole managing member of BV LLC, we caused BV LLC to use the proceeds it received as follows: (i) to pay fees and expenses of approximately $3.8 million in connection with the IPO and the Transactions (ii) to satisfy the $3.3 million cash entitlement of the Continuing LLC Owner in respect of the EPR Unit held by the Continuing LLC Owner, (iii) to pursue future potential acquisition opportunities and (iv) for general corporate purposes.
There has been no material change in the use of proceeds as described in our final prospectus filed on February 12, 2021.None.
Item 3. Defaults Upon Senior SecuritiesSecurities.
Not ApplicableApplicable.
Item 4. Mine Safety DisclosuresDisclosures.
Not ApplicableApplicable.
Item 5. Other InformationInformation.
Not ApplicableInsider Trading Arrangements
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On January 11, 2024, our President and Chief Executive Officer, Robert E. Claypoole made an election to sell shares of Company Class A common stock to cover withholding taxes that may become due pursuant to the vesting of RSUs granted to Mr. Claypoole effective that same day. On March 15, 2024, our Chief Financial Officer (Mark L. Singleton), Senior Vice President and General Counsel (Anthony D’Adamio) and Senior Vice President and Chief Compliance Officer (Katrina Church) each made an election to sell shares of Company Class A common stock to cover withholding taxes that may become due pursuant to the vesting of RSUs granted to such officers effective that same day. Each of the aforementioned elections are designed to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
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Item 6. ExhibitsExhibits.
Exhibit No.DescriptionFormFile No.ExhibitFiling Date`Filed / Furnished Herewithin
3.1 8-K001-378443.12/17/2021
3.28-K001-378443.22/17/2021
4.1S-1333-2522384.11/20/2021
10.18-K001-3784410.22/17/2021
10.28-K001-3784410.32/17/2021
10.38-K001-3784410.12/17/2021
10.48-K001-3784410.42/17/2021
10.5S-1/A333-25223810.442/4/2021
10.6S-1/A333-25223810.452/10/2021
10.7S-1/A333-25223810.472/10/2021
10.8S-1/A333-25223810.482/10/2021
10.9S-1/A333-25223810.502/10/2021
10.10S-1/A333-25223810.512/10/2021
10.11S-1/A333-25223810.522/10/2021
10.12S-1/A333-25223810.532/10/2021
10.13S-1/A333-25223810.542/10/2021
10.14S-1/A333-25223810.552/10/2021
Exhibit No.DescriptionFormFile No.ExhibitFiling Date`Filed / Furnished Herewith
10.1
8-K001-3784410.11/19/2024
31.1
Certification of President and Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
*
31.2
Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended
*
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Certification of President and Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**
101.INSInline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document***
101.SCHInline XBRL Taxonomy Extension Schema Document***
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document***
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Exhibit No.DescriptionFormFile No.ExhibitFiling Date`Filed / Furnished Herewithin
10.15S-1/A333-25223810.562/10/2021
10.16S-1/A333-25223810.572/10/2021
10.17S-1/A333-25223810.462/4/2021
10.1810-K001-3784410.493/26/2021
10.198-K001-4784410.13/31/2021
31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
*
31.2
Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended.
*
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**
101.INSInline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document***
101.SCHInline XBRL Taxonomy Extension Schema Document***
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document***
101.DEFInline XBRL Extension Definition Linkbase Document***
101.LABInline XBRL Taxonomy Extension Label Linkbase Document***
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document***
104The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2021 has been formatted in Inline XBRL***
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Exhibit No.DescriptionFormFile No.ExhibitFiling Date`Filed / Furnished Herewith
101.DEFInline XBRL Extension Definition Linkbase Document***
101.LABInline XBRL Taxonomy Extension Label Linkbase Document***
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document***
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*
*     Filed herewith
**     Furnished herewith
***     Submitted electronically herewith
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.
BIOVENTUS INC.
May 13, 20217, 2024/s/ Gregory O. AnglumMark L. Singleton
DateGregory O. AnglumMark L. Singleton
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
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