‘ m`

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 1, 2023~~March 30, 2024


☐			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)


Delaware						81-0980861
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

4721 Emperor Boulevard, Suite 100
Durham, North Carolina						27703
(Address of Principal Executive Offices)						(Zip Code)

(919) 474-6700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	BVS	The 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 ~~August 2, 2023,~~April 30, 2024, there were ~~62,792,850~~63,827,617 shares of Class A common stock outstanding and 15,786,737 shares of Class B common stock outstanding.


BIOVENTUS INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Condensed Statements of Operations and Comprehensive Loss for the three ~~and six~~ months ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~	1

	Consolidated Condensed Balance Sheets as of ~~July 1, 2023~~March 30, 2024 and December 31, ~~2022~~2023	2

	Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~	3

	Consolidated Condensed Statements of Cash Flows for the ~~six~~three months ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~	54

	Notes to the Unaudited Consolidated Condensed Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2820

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4128

Item 4.	Controls and Procedures	4128

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4328

Item 1A.	Risk Factors	4529

Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities	4530

Item 3.	Defaults Upon Senior Securities	4530

Item 4.	Mine Safety Disclosures	4530

Item 5.	Other Information	4630

Item 6.	Exhibits	4630

Signature		4832

Table of ~~Content~~sContents

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”).

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”), and Section 27A of the Securities Act of 1933, as amended (“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 ~~acquisitions~~integration of Misonix and Bioness, potential acquisitions, expected expansion of our pipeline and research and development investment, cost savings initiatives, new therapy launches, expected ~~costs related to,~~timelines for clinical trial results and ~~potential future options for, MOTYS,~~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, inflation and ~~inflation.~~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.

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: the risk that previously identified material weaknesses or new material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner; we might not be able to continue to fund 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 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; the proposed down classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Administration ~~(FDA)~~(“FDA”) could increase future competition for bone growth stimulators and otherwise adversely affect the Company’s sales of Exogen; failure 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)~~(“HA”) viscosupplements, or future products we may seek to commercialize; pricing pressure and other competitive factors; governments outside the United States might not provide coverage or reimbursement of our 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; ~~the reclassification of~~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 failure to properly manage our anticipated growth and strengthen our brands; risks related to product liability claims; fluctuations in demand for our products; issues relating to the supply of our products, potential supply chain disruptions, and the increased cost of parts and components used to manufacture our products due to inflation; our reliance on a

Table of Contents

limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become

~~Table of Content~~s

inoperable, we will be unable to continue to research, develop and manufacture certain of our products; economic, political, regulatory and 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 possession is not secure; failure of key information technology and communications systems, process or sites; ~~risks related to international sales and operations;~~ risks related to our debt and future capital needs; failure to comply with extensive governmental regulation relevant to us and our 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; if clinical studies of our future product 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; legislative or regulatory reforms; our business may continue to experience adverse impacts as a result of the COVID-19 pandemic or similar epidemics; risks related to intellectual property matters; and other important factors described in Part I. Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2022, as updated by our subsequent Quarterly Report on Form 10-Q for the quarter ended April 1,~~ 2023, ~~and~~ 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.

Table of ~~Content~~sContents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Bioventus Inc.

Consolidated Condensed Statements of Operations and Comprehensive Loss

Three ~~and Six~~ Months Ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~

(Amounts in thousands, except share amounts)

(Unaudited)


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
	Three Months Ended												Three Months Ended
	March 30, 2024										March 30, 2024			April 1, 2023
Net sales	Net sales	$	137,069	$	140,331	$	256,128	$	257,621
Cost of sales (including depreciation and amortization of $12,301, $9,684, $26,640 and $18,902 respectively)		47,946		43,677		93,086		85,265
Cost of sales (including depreciation and amortization of $10,025 and $14,339, respectively)
Gross profit	Gross profit	89,123		96,654		163,042		172,356
Selling, general and administrative expense	Selling, general and administrative expense	74,844		89,620		155,702		175,744
Research and development expense	Research and development expense	3,398		6,366		7,169		13,294
Restructuring costs	Restructuring costs	620		1,007		937		1,584
Change in fair value of contingent consideration	Change in fair value of contingent consideration	240		273		527		542
Depreciation and amortization	Depreciation and amortization	2,294		2,696		4,423		5,950
Impairment of assets		—		—		78,615		—
Loss on disposal of a business		977		—		977		—
Impairments of assets

Operating income (loss)

Operating income (loss)

Operating income (loss)	Operating income (loss)	6,750		(3,308)		(85,308)		(24,758)
Interest expense, net	Interest expense, net	10,587		2,578		20,281		1,028
Other expense (income)	Other expense (income)	513		604		(1,075)		241
Other expense	Other expense	11,100		3,182		19,206		1,269
Loss before income taxes	Loss before income taxes	(4,350)		(6,490)		(104,514)		(26,027)
Income tax expense (benefit), net	Income tax expense (benefit), net	381		1,244		235		(3,888)
Net loss from continuing operations	Net loss from continuing operations	(4,731)		(7,734)		(104,749)		(22,139)
Loss from discontinued operations, net of tax	Loss from discontinued operations, net of tax	—		(280)		(74,429)		(681)
Net loss	Net loss	(4,731)		(8,014)		(179,178)		(22,820)
Loss attributable to noncontrolling interest - continuing operations	Loss attributable to noncontrolling interest - continuing operations	1,050		762		21,410		4,291
Loss attributable to noncontrolling interest - discontinued operations	Loss attributable to noncontrolling interest - discontinued operations	—		—		14,937		—
Net loss attributable to Bioventus Inc.	Net loss attributable to Bioventus Inc.	$	(3,681)	$	(7,252)	$	(142,831)	$	(18,529)

Net loss from continuing operations		$	(4,731)	$	(7,734)	$	(104,749)	$	(22,139)
Other comprehensive income (loss), net of tax
Net loss
Net loss
Net loss
Other comprehensive (loss) income, net of tax
Change in foreign currency translation adjustments
Change in foreign currency translation adjustments
Change in foreign currency translation adjustments	Change in foreign currency translation adjustments	303		(507)		960		(1,189)
Comprehensive loss	Comprehensive loss	(4,428)		(8,241)		(103,789)		(23,328)
Comprehensive loss attributable to noncontrolling interest - continuing operations	Comprehensive loss attributable to noncontrolling interest - continuing operations	989		868		21,215		4,537
Comprehensive loss attributable to noncontrolling interest - discontinued operations	Comprehensive loss attributable to noncontrolling interest - discontinued operations	—		—		14,937		—
Comprehensive loss attributable to Bioventus Inc.	Comprehensive loss attributable to Bioventus Inc.	$	(3,439)	$	(7,373)	$	(67,637)	$	(18,791)

Loss per share of Class A common stock from continuing operations, basic and diluted:	Loss per share of Class A common stock from continuing operations, basic and diluted:	$	(0.06)	$	(0.11)	$	(1.34)	$	(0.29)
Loss per share of Class A common stock from continuing operations, basic and diluted:
Loss per share of Class A common stock from continuing operations, basic and diluted:
Loss per share of Class A common stock from discontinued operations, basic and diluted:	Loss per share of Class A common stock from discontinued operations, basic and diluted:	—		—		(0.95)		(0.01)
Loss per share of Class A common stock, basic and diluted	Loss per share of Class A common stock, basic and diluted	$	(0.06)	$	(0.11)	$	(2.29)	$	(0.30)

Weighted-average shares of Class A common stock outstanding, basic and diluted:	Weighted-average shares of Class A common stock outstanding, basic and diluted:	62,551,285		61,475,350		62,338,018		60,977,556
Weighted-average shares of Class A common stock outstanding, basic and diluted:
Weighted-average shares of Class A common stock outstanding, basic and diluted:										63,380,187		62,124,752

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~Content~~sContents

Bioventus Inc.

Consolidated Condensed Balance Sheets as of ~~July 1, 2023~~March 30, 2024 and December 31, ~~2022~~2023

(Amounts in thousands, except share amounts)

(Unaudited)


	March 30, 2024						March 30, 2024	December 31, 2023
Assets
Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents

		July 1, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$	29,389	$	30,186
Accounts receivable, net

Accounts receivable, net

Accounts receivable, net	Accounts receivable, net	119,636		136,295
Inventory	Inventory	96,276		84,766
Prepaid and other current assets	Prepaid and other current assets	15,337		18,551

Current assets attributable to discontinued operations		—		2,777
Total current assets

Total current assets

Total current assets	Total current assets	260,638		272,575
Property and equipment, net	Property and equipment, net	41,862		27,456
Goodwill	Goodwill	7,462		7,462
Intangible assets, net	Intangible assets, net	505,223		639,851
Operating lease assets	Operating lease assets	15,238		16,690
Investment and other assets	Investment and other assets	6,539		2,621
Long-term assets attributable to discontinued operations		—		405,994
Total assets	Total assets	$	836,962	$	1,372,649

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity
Liabilities and Stockholders' Equity
Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	41,364	$	36,697
Accrued liabilities	Accrued liabilities	121,748		111,570
Current portion of long-term debt	Current portion of long-term debt	11,320		33,056

Other current liabilities	Other current liabilities	4,672		3,607

Other current liabilities

Current liabilities attributable to discontinued operations		—		119,087
Other current liabilities

Total current liabilities

Total current liabilities

Total current liabilities	Total current liabilities	179,104		304,017
Long-term debt, less current portion	Long-term debt, less current portion	374,568		385,010
Deferred income taxes	Deferred income taxes	—		2,248

Contingent consideration	Contingent consideration	17,958		17,431

Contingent consideration

Contingent consideration
Other long-term liabilities	Other long-term liabilities	31,991		22,810
Long-term liabilities attributable to discontinued operations		—		228,911
Total liabilities	Total liabilities	603,621		960,427
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)					Commitments and contingencies (Note 11)
Stockholders’ Equity	Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued	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 July 1, 2023 and December 31, 2022, 62,804,506 and 62,063,014 shares issued and outstanding as of July 1, 2023 and December 31, 2022, respectively		63		62
Class B common stock, $0.001 par value, 50,000,000 shares authorized, 15,786,737 shares issued and outstanding as of July 1, 2023 and December 31, 2022		16		16
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
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
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
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
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
Additional paid-in capital	Additional paid-in capital	490,598		490,576
Accumulated deficit	Accumulated deficit	(308,137)		(165,306)
Accumulated other comprehensive income (loss)		655		(110)
Accumulated other comprehensive income
Total stockholders’ equity attributable to Bioventus Inc.	Total stockholders’ equity attributable to Bioventus Inc.	183,195		325,238
Noncontrolling interest	Noncontrolling interest	50,146		86,984
Total stockholders’ equity	Total stockholders’ equity	233,341		412,222
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	836,962	$	1,372,649

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~Content~~sContents

Bioventus Inc.

Consolidated Condensed Statements of Changes in Stockholders’ Equity

Three ~~and Six~~ Months Ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~

(Amounts in thousands, except share amounts)

(Unaudited)

																		Three Months Ended July 1, 2023
		Class A Common Stock			Class B Common Stock
		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated other comprehensive (loss) income		Accumulated Deficit		Non- controlling interest		Total Stockholders' equity
Balance at April 1, 2023		62,507,917	$	63	15,786,737	$	16	$	492,475	$	413	$	(304,456)	$	51,851	$	240,362
Three Months Ended March 30, 2024																		Three Months Ended March 30, 2024
	Class A Common Stock
		Shares
		Shares
		Shares																	Amount	Shares	Amount	Additional Paid-in Capital	Accumulated other comprehensive income (loss)	Accumulated Deficit	Non- controlling interest	Total Stockholders' equity
Balance at December 31, 2023
Issuance of Class A common stock for equity plans	Issuance of Class A common stock for equity plans	296,589	—		—	—		139		—		—		—		139
Net loss	Net loss	—	—		—	—		—		—		(3,681)		(1,050)		(4,731)
Change in noncontrolling interest allocation	Change in noncontrolling interest allocation	—	—		—	—		108		—		—		(108)		—
Equity based compensation	Equity based compensation	—	—		—	—		(2,124)		—		—		(608)		(2,732)
Translation adjustment	Translation adjustment	—	—		—	—		—		242		—		61		303
Balance at July 1, 2023		62,804,506	$	63	15,786,737	$	16	$	490,598	$	655	$	(308,137)	$	50,146	$	233,341
Balance at March 30, 2024

Three Months Ended July 2, 2022
Class A Common Stock Class B Common Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated other comprehensive (loss) income Accumulated Deficit Non-
controlling
interest Total Stockholders'
equity
Balance at April 2, 2022 61,357,270 $ 62 15,786,737 $ 16 $ 476,661 $ (363) $ (17,879) $ 135,311 $ 593,808
Issuance of Class A common stock
for equity plans 299,229 2 — — 2,175 — — — 2,177
Net loss — — — — — — (7,252) (762) (8,014)
Change in noncontrolling interest allocation — — — — (65) — — 65 —
Equity based compensation — — — — 3,681 — — 935 4,616
Translation adjustment — — — — — (401) — (106) (507)
Balance at July 2, 2022 61,656,499 $ 64 15,786,737 $ 16 $ 482,452 $ (764) $ (25,131) $ 135,443 $ 592,080

~~Table of Content~~s

Six Months Ended July 1, 2023
Class A Common Stock Class B Common Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated other comprehensive (loss) income Accumulated Deficit Non-
controlling
interest Total Stockholders'
equity
Balance at December 31, 2022 62,063,014 $ 62 15,786,737 $ 16 $ 490,576 $ (110) $ (165,306) $ 86,984 $ 412,222
Issuance of Class A common stock for equity plans 741,492 1 — — 222 — — — 223
Net loss — — — — — — (142,831) (36,347) (179,178)
Change in noncontrolling interest allocation — — — — 385 — — (385) —
Equity based compensation — — — — (585) — — (301) (886)
Translation adjustment — — — — — 765 — 195 960
Balance at July 1, 2023 62,804,506 $ 63 15,786,737 $ 16 $ 490,598 $ 655 $ (308,137) $ 50,146 $ 233,341

Six Months Ended July 2, 2022
Class A Common Stock Class B Common Stock
Shares Amount Shares Amount Additional Paid-in Capital Accumulated other comprehensive (loss) income Accumulated Deficit Non-
controlling
interest Total Stockholders'
equity
Balance at December 31, 2021 59,548,504 $ 59 15,786,737 $ 16 $ 473,318 $ 179 $ (6,602) $ 140,686 $ 607,656
Issuance of Class A common stock for equity plans 2,107,995 5 — — 4,252 — — 4,257
Deferred taxes on equity rebalancing — — — — (1,977) — — — (1,977)
Net loss — — — — — — (18,529) (4,291) (22,820)
Change in noncontrolling interest allocation — — — — 2,587 — — (2,587) —
Equity based compensation — — — — 7,624 — — 1,881 9,505
Tax withholdings on equity compensation awards — — — — (3,352) — — — (3,352)
Translation adjustment — — — — — (943) — (246) (1,189)
Balance at July 2, 2022 61,656,499 $ 64 15,786,737 $ 16 $ 482,452 $ (764) $ (25,131) $ 135,443 $ 592,080


Three Months Ended April 1, 2023
	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated other comprehensive (loss) income		Accumulated Deficit		Non- controlling interest		Total Stockholders' equity
Balance at December 31, 2022	62,063,014	$	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, 2023	62,507,917	$	63	15,786,737	$	16	$	492,475	$	413	$	(304,456)	$	51,851	$	240,362

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~Content~~sContents

Bioventus Inc.

Consolidated Condensed Statements of Cash Flows

~~Six~~Three Months Ended ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~

(Amounts in thousands)

(Unaudited)


		Six Months Ended
		July 1, 2023		July 2, 2022
	Three Months Ended						Three Months Ended
	March 30, 2024					March 30, 2024		April 1, 2023
Operating activities:	Operating activities:
Net loss
Net loss
Net loss	Net loss	$	(179,178)	$	(22,820)
Less: Loss from discontinued operations, net of tax	Less: Loss from discontinued operations, net of tax	(74,429)		(681)
Loss from continuing operations	Loss from continuing operations	(104,749)		(22,139)
Adjustments to reconcile net loss to net cash from operating activities:	Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	Depreciation and amortization	31,073		24,863
Provision for expected credit losses		640		2,505
Equity based compensation		(886)		9,505��
Depreciation and amortization
Depreciation and amortization
(Benefit) provision for expected credit losses
Equity-based compensation
Change in fair value of contingent consideration	Change in fair value of contingent consideration	527		542
Change in fair value of interest rate swap		—		(4,196)
Deferred income taxes	Deferred income taxes	(3,540)		(27,698)
Impairment of assets	Impairment of assets	78,615		—
Loss on disposal of a business		977		—

Unrealized loss on foreign currency fluctuations

Unrealized loss on foreign currency fluctuations

Unrealized loss on foreign currency fluctuations	Unrealized loss on foreign currency fluctuations	601		1,020
Other, net	Other, net	1,139		408
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable	11,329		(21,157)
Inventories	Inventories	(13,074)		(2,614)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	14,765		17,747
Other current and noncurrent assets and liabilities	Other current and noncurrent assets and liabilities	(1,963)		3,134
Net cash from operating activities - continuing operations	Net cash from operating activities - continuing operations	15,454		(18,080)
Net cash from operating activities - discontinued operations	Net cash from operating activities - discontinued operations	(2,169)		—
Net cash from operating activities	Net cash from operating activities	13,285		(18,080)
Investing activities:	Investing activities:
Proceeds from sale of a business		34,897		—
Investment held in trust for the acquisition of CartiHeal		—		(50,000)
Acquisitions, net of cash acquired		—		(231)

Purchase of property and equipment

Purchase of property and equipment

Purchase of property and equipment	Purchase of property and equipment	(4,957)		(4,990)
Investments and acquisition of distribution rights	Investments and acquisition of distribution rights	—		(1,478)

Net cash from investing activities - continuing operations	Net cash from investing activities - continuing operations	29,940		(56,699)

Net cash from investing activities - continuing operations

Net cash from investing activities - continuing operations
Net cash from investing activities - discontinued operations	Net cash from investing activities - discontinued operations	(11,506)		—
Net cash from investing activities	Net cash from investing activities	18,434		(56,699)
Financing activities:	Financing activities:
Proceeds from issuance of Class A and B common stock		223		4,257
Tax withholdings on equity-based compensation		—		(3,352)
Proceeds from issuance of Class A common stock
Proceeds from issuance of Class A common stock
Proceeds from issuance of Class A common stock

Borrowing on revolver

Borrowing on revolver

Borrowing on revolver	Borrowing on revolver	49,000		25,000
Payment on revolver	Payment on revolver	(42,000)		—
Debt refinancing costs	Debt refinancing costs	(3,661)		—
Payments on long-term debt	Payments on long-term debt	(38,264)		(9,019)
Other, net	Other, net	(166)		(26)
Net cash from financing activities	Net cash from financing activities	(34,868)		16,860
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	701		(293)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(2,448)		(58,212)
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	31,837		99,213
Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	29,389	$	41,001
Supplemental disclosure of noncash investing and financing activities	Supplemental disclosure of noncash investing and financing activities
Accrued liabilities for intellectual property		$	709	$	—

Accounts payable for purchase of property, plant and equipment	Accounts payable for purchase of property, plant and equipment	$	968	$	67

Accounts payable for purchase of property, plant and equipment

Accounts payable for purchase of property, plant and equipment

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~Content~~sContents

Bioventus Inc.

Notes to the unaudited consolidated condensed financial statements

(Amounts in thousands, except unit and share amounts)

1. Organization

The Company

Bioventus Inc. (together with its subsidiaries, the “Company”) was formed as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of Bioventus LLC and its subsidiaries (“BV LLC”). Bioventus Inc. functions as a holding company with no direct operations, material assets or liabilities other than the equity interest in 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 and reports a 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. The Company is headquartered in Durham, North Carolina and has approximately ~~950~~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 2024 end on March 30, June 29 and September 28. Comparable periods for 2023 ~~end~~ended on April 1, July 1 and September 30. ~~Comparable periods for 2022 ended on April 2, July 2 and October 1.~~ 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”) 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, 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 Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. The consolidated balance sheet at December 31, ~~2022~~2023 has been derived from the audited consolidated financial statements of the Company, but does not include all the disclosures required by U.S. GAAP.

~~Correction of immaterial misstatements~~Reclassifications

~~During~~Certain prior period amounts have been reclassified to conform to current period presentation. In 2024, the ~~quarter ended April 1, 2023~~Company reclassified revenue and ~~as part~~expense of the ~~balance sheet review process,~~SonicOne Ultrasonic Cleansing and Debridement Systems (“SonicOne”) from the ~~Company identified misstatements in its calculation of the carrying amount of noncontrolling interest as it applies~~Restorative Therapies to the ~~Company’s complex UP-C tax and ownership structure as prescribed~~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 amended and restated limited liability company agreement of BV LLC. Specifically, the Company failed to adjust the carrying amount of its noncontrolling interest to reflect changes in ownership interests relating to BV LLC. As a result, the previously issuedunaudited consolidated condensed financial statements ~~reflect an understatement of noncontrolling interest and an overstatement of additional paid-in capital.~~

As a result of further research conducted, the Company discovered an additional error related to historical deferred income tax balances. The Company concluded that it had inappropriately calculated deferred income taxes by using an incorrect book basis in its investment of BV LLC duringreflects the Company’s ~~IPO, which resulted in an overstatement of deferred tax liabilities, an understatement of noncontrolling interest and an understatement of additional paid-in capital.~~results from continuing operations.

Table of ~~Content~~sContents

Use of estimates

The ~~statements affected by these errors include the consolidated balance sheets and consolidated statements~~preparation of ~~stockholders’ and members’ equity issued in the Company’s Annual Report on Form 10-K for the years ended December 31, 2022 and December 31, 2021. There was no impact to any other~~ financial statements ~~for~~in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the ~~periods presented. The Company concluded that these misstatements were not material, individually or in the aggregate, as evaluated under the Securities and Exchange Commission Staff Bulletin No. 99,~~ ~~Materiality;~~ ~~No. 108,~~ ~~Considering the Effects~~reported amounts of ~~Prior Year Misstatements in Current Year Financial Statements; and Financial Accounting Standards Board ASC 250-10,~~ ~~Accounting Changes and Error Corrections~~. However, because of the significance of these items, and to facilitate comparison among periods, the Company has decided to revise its previously issued consolidated financial statements on a prospective basis. The Company will correct its prior period presentation for this error in its future 2023 quarterly financial statements included in its Forms 10-Q and 2023 Annual Report on Form 10-K for the period ended December 31, 2023. The adjustments did not have an impact on revenues, total assets or cash flows.

~~The following are selected line items from our aforementioned impacted financial statements illustrating the effect of the error corrections thereon:~~

Consolidated Balance Sheets — December 31, 2022 As Previously Reported Adjustments As Adjusted
Deferred income taxes (b)(d) $ 74,138 $ (71,890) $ 2,248
Total liabilities 1,032,317 (71,890) 960,427
Additional paid-in capital (a)(b)(c)(d) 481,919 8,657 490,576
Noncontrolling interest (a)(c) 23,751 63,233 86,984
Total stockholders’ equity 340,332 71,890 412,222

Consolidated Balance Sheets — December 31, 2021 As Previously Reported Adjustments As Adjusted
Deferred income taxes (b) $ 133,518 $ (73,867) $ 59,651
Total liabilities 692,073 (73,867) 618,206
Additional paid-in capital (a)(b) 465,272 8,046 473,318
Noncontrolling interest (a) 74,865 65,821 140,686
Total stockholders’ equity 533,789 73,867 607,656

The Company’s consolidated statements of changes in stockholders’ and members equity as of December 31, 2022 and December 31, 2021 have been corrected to reflect the above adjustments. The Company revised the amounts originally reported for the years ended December 31, 2022 and December 31, 2021 for the following items:

~~(a)~~Recorded a $65,821 decrease to additional paid-in capital and a corresponding increase to noncontrolling interest. This action effectively rebalanced equity appropriately between the Company and its noncontrolling interests according to their respective BV LLC ownership interests.

~~(b)~~Recorded a $73,867 decrease to deferred income tax balances and an increase to additional paid in capital to reflect the correction of an error that occurred during the calculation of deferred taxes at the Company’s IPO.

~~(c)Reflects the entry as discussed in (a) above and additional rebalancing activity of $2,588 relating to the issuance of Class A common stock for equity plans during the year ended December 31, 2022.~~

~~(d)~~Reflects the entry as discussed in (b) and an additional $1,977 increase to deferred income tax balances and a reduction to additional paid in capital to reflect the deferred tax impact during the year ended December 31, 2022.

~~Going concern~~

The accompanying unaudited consolidated financial statements have been prepared under the going concern basis of accounting, which presumes that the Company’s liquidation is not imminent; however, based on the Company’s current financial position and liquidity sources, including current cash balances, and forecasted future cash flows, the Company is at risk of violating certain of its financial covenants under the Credit and Guaranty Agreement, dated December 6, 2019 (as amended on October 29, 2021, July 11, 2022 and March 31, 2023).

If mitigating steps are not taken or are not successful, the Company is at substantial risk of failing its covenants in 2024. A breach of a financial covenant under the Credit and Guaranty Agreement could accelerate repayment of our obligations under the agreement. Refer to ~~Note 4. Financial instruments~~ ~~for further discussion concerning the Company’s long-term debt obligations.~~

~~Table of Content~~s

The Company is actively pursuing plans to mitigate these conditions and events, such as considering various additional cost cutting measures, and exploring additional divestiture opportunities such as the recently completed divestiture of certain assets within the Company’s Wound Business (as defined in ~~Note 3. Acquisitions and divestitures)~~; however, there can be no assurances that it is probable these plans will be successfully implemented or that they will successfully mitigate these conditions and events. Therefore, these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

~~As part of efforts to improve its financial condition, on February 27, 2023, the Company reached an agreement to return the~~ assets and liabilities, and the disclosure of ~~CartiHeal (2009) Ltd. (“CartiHeal”), a wholly-owned subsidiary~~contingent assets and liabilities, at the date of the ~~Company, to its former securityholders. The deconsolidation~~financial statements, as well as the reported amounts of ~~CartiHeal relieved deferred consideration liabilities~~revenues and ~~milestone obligations~~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 ~~acquisition~~circumstances, the results of ~~CartiHeal. Refer to~~ ~~Note 3. Acquisitions~~which form the basis for making judgments about the carrying values of assets and ~~divestitures~~ ~~for further information regarding the acquisition~~liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

Emerging Growth Company and ~~subsequent deconsolidation of CartiHeal. In addition, the~~Smaller Reporting Company ~~announced a restructuring plan in December 2022 to align the Company’s organizational and management cost structure to improve profitability and cash flow. Refer to~~ ~~Note 9. Restructuring costs~~ ~~for further information.~~

~~Recent accounting pronouncements~~Status

The Company is an “emerging growth company,” pursuant to the provisions of the 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 as 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 JOBS Act provides that the decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

The Company is also considered a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), which was determined as of the last day of the Company’s second fiscal quarter of 2023. The Company will continue to be categorized as a smaller reporting company-accelerated filer until the Company’s public float reaches a certain threshold. The Company may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Recent accounting pronouncements

In addition to being a smaller reporting and an emerging growth company, the Company also is an accelerated ~~public company filer.~~filer under SEC rules and regulations. Therefore, required effective dates for adopting new or revised accounting standards are generally earlier than when smaller reporting companies and emerging growth companies who are not accelerated filers are required to adopt.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes, which enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate 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 the interim periods; (iii) clarifies that if the CODM uses more than one measure of profitability in assessing segment performance and deciding how to allocate resources, that one or more of those measures may be reported; (iv) requires disclosure of the title 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 fiscal years beginning after December 15, 2023, and interim 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 cash flows. The Company will adopt ASU 2023-07 for the annual reporting period ending December 31, 2024 and for interim reporting periods thereafter.

Table of Contents

2. Balance sheet information

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:

July 1, 2023 December 31, 2022
Accounts receivable(a)
$ 126,777 $ 143,317
Less: Allowance for credit losses (7,141) (7,022)
$ 119,636 $ 136,295

~~(a)Other receivables of $350 attributable to CartiHeal was reclassified to current assets attributable to discontinued operations within the December 31, 2022 consolidated balance sheets. Refer to~~ ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~


	March 30, 2024		December 31, 2023
Accounts receivable	$	128,670	$	127,008
Less: Allowance for credit losses	(3,129)		(4,219)
	$	125,541	$	122,789

Due to the short-term nature of the 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. The Company has a diverse customer base with no single customer representing ten percent or more of sales. The Company has one customer representing approximately ~~15.2%~~18.7% and 16.0% of the accounts receivable balance as of ~~July 1, 2023.~~March 30, 2024 and December 31, 2023, respectively. Historically, the Company’s reserves have been adequate to cover credit losses.

Changes in credit losses were as follows:

Three Months Ended Six Months Ended
July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Beginning balance $ (7,401) $ (4,254) $ (7,022) $ (3,402)
Benefit (provision) for expected credit losses 439 (1,353) (640) (2,505)
Write-offs 768 456 1,054 825
Recoveries (479) (141) (963) (210)
Disposition (468) — 430 —
Ending balance $ (7,141) $ (5,292) $ (7,141) $ (5,292)

~~Table of Content~~s


	Three Months Ended
	March 30, 2024		April 1, 2023
Beginning balance	$	(4,219)	$	(7,022)
Benefit (provision) for expected credit losses	976		(1,079)
Write-offs	223		286
Recoveries	(109)		(484)
Disposition	—		898
Ending balance	$	(3,129)	$	(7,401)

Inventory

Inventory consisted of the following as of:

July 1, 2023 December 31, 2022
Raw materials and supplies(a)
$ 26,438 $ 19,133
Finished goods 72,347 67,484
Gross 98,785 86,617
Excess and obsolete reserves (2,509) (1,851)
$ 96,276 $ 84,766

~~(a)~~Raw material inventory of $642 attributable to CartiHeal has been reclassified to current assets attributable to discontinued operations within the December 31, 2022 consolidated balance sheets. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

~~Prepaid and other current assets~~

~~Prepaid and other current assets consisted of the following as of:~~

July 1, 2023 December 31, 2022
Prepaid taxes $ 4,224 $ 4,442
Prepaid and other current assets(a)
11,113 14,109
$ 15,337 $ 18,551

~~(a)Prepaid and other current assets of $134 attributable to CartiHeal was reclassified to current assets attributable to discontinued operations within the December 31, 2022 balance sheet. Refer to~~ ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

~~Intangible assets, net~~

~~Intangible assets consisted of the following as of:~~

July 1, 2023 December 31, 2022
Intellectual property(a)(b)
$ 677,258 $ 790,049
Distribution rights 61,325 61,325
Customer relationships(b)
57,950 67,450
IPR&D 5,500 5,500
Developed technology and other 13,998 13,998
Total carrying amount 816,031 938,322
Less accumulated amortization:
Intellectual property(a)(b)
(198,141) (187,767)
Distribution rights (46,810) (44,319)
Customer relationships(b)
(57,950) (58,842)
Developed technology and other (6,899) (6,276)
Total accumulated amortization (309,800) (297,204)
Intangible assets, net before currency translation 506,231 641,118
Currency translation (1,008) (1,267)
$ 505,223 $ 639,851

~~(a)~~Intellectual property and accumulated depreciation attributable to CartiHeal totaling $410,200 and $11,327, respectively, were reclassified to long-term assets attributable to discontinued operations within the December 31, 2022 consolidated balance sheets. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

~~Table of Content~~s

~~(b)~~The Company recorded an impairment loss of $78,615 for the six months ended July 1, 2023 in the U.S. reporting segment of net intellectual property attributable to the TheraSkin and TheraGenesis products, which were sold in May 2023. The loss was recorded in impairment of assets within the consolidated condensed statements of operations and comprehensive loss. Refer to Refer to ~~Note 3. Acquisitions and divestitures~~ ~~for further details regarding businesses held for sale.~~

Estimated amortization expense for intangibles subsequent to reclassifications, impairment and additions for the remainder of 2023 and for the years ended December 31, 2024 through 2027 is expected to be $13,814, $26,590, $23,922, $20,461 and $20,109, respectively.

~~Goodwill~~

Goodwill is evaluated for impairment annually or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company assesses goodwill impairment by applying a quantitative impairment analysis comparing the carrying value of the Company’s reporting units to their respective fair values. A goodwill impairment exists if the carrying value of the reporting unit exceeds its fair value.

The Company has two reporting units and assesses impairment based upon qualitative factors and if necessary, quantitative factors. A reporting unit's fair value is determined using the income approach and discounted cash flow models by utilizing Level 3 inputs and assumptions such as future cash flows, discount rates, long-term growth rates, market value and income tax considerations. Specifically, the value of each reporting unit is determined on a stand-alone basis from the perspective of a market participant and represents the price estimated to be received in a sale of the reporting unit in an orderly transaction between market participants at the measurement date. The Company then reconciles the values of all reporting units to the market capitalization of the Company.

The Company’s goodwill resides within the International segment, of which $6,297 related to CartiHeal and was reclassified to long-term assets attributable to discontinued operations within the December 31, 2022 consolidated balance sheets. The amount was recorded in discontinued operations, net of tax on the consolidated condensed statements of operations for the six months ended July 1, 2023 as a result of CartiHeal’s deconsolidation. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details concerning the deconsolidation of CartiHeal.~~

On November 8, 2022, due to a significant decline in the Company’s Class A common stock price, circumstances became evident that a possible goodwill impairment existed as of the third quarter 2022 balance sheet date. The Company concluded that the carrying value of the U.S. reporting unit exceeded its fair value and recorded a non-cash goodwill impairment charge of $189,197 during the year ended December 31, 2022. There were no impairment losses or indicators of impairment during the six months ended July 1, 2023. There were also no accumulated impairment losses prior to the year ended December 31, 2022.


	March 30, 2024		December 31, 2023
Raw materials and supplies	$	25,690	$	21,062
Finished goods	71,315		70,271
	97,005		91,333

Accrued liabilities

Accrued liabilities consisted of the following as of:

July 1, 2023 December 31, 2022
Gross-to-net deductions $ 68,304 $ 71,227
Bonus and commission 13,368 9,179
Compensation and benefits 9,080 11,428
Accrued interest 6,933 217
Income and other taxes 5,175 2,572
Other liabilities(a)
18,888 16,947
$ 121,748 $ 111,570

~~(a)Other liabilities attributable to CartiHeal of $384 were reclassified into current liabilities attributable to discontinued operations within December 31, 2022 consolidated balance sheets. Refer to~~ ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details.~~


	March 30, 2024		December 31, 2023
Gross-to-net deductions	$	63,891	$	59,592
Bonus and commission	13,869		19,437
Compensation and benefits	6,341		9,709
Accrued interest	6,451		6,606
Income and other taxes	5,017		4,749
Other liabilities	18,036		19,702
	$	113,605	$	119,795

107

Table of ~~Content~~sContents

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 ~~$84,897,~~$84,675, including ~~$34,897~~$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 deconsolidation of Disposal Group resulted in the recognition of a $977 loss on disposal of a business recorded within the consolidated statements of operations and comprehensive loss for the three and six months ended July 1, 2023.

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 Earn-out Payments 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 net revenue thresholds are as follows:

•~~2024 Earn-out Payment—$5,000 due if net revenue for the period January 1, 2024 through December 31, 2024 is equal to or greater than $54,300 or zero if net revenue is less than $54,300.~~

•2025 Earn-out Payment—$20,000 due if net revenue for the period January 1, 2025 through December 31, 2025 is equal to or greater than $69,700 or $10,000 due if net revenue is greater than or equal to $55,760 but less than $69,700 or zero if net revenue is less than $55,760.

•2026 Earn-out Payment—$20,000 due if net revenue for the period January 1, 2026 through December 31, 2026 is equal to or greater than $83,700 or $10,000 due if net revenue is greater than or equal to $66,960 but less than $83,700 or zero if net revenue is less than $66,960.

~~The~~ Company evaluated the Wound Business for impairment prior to its sale and recorded a $78,615 ~~($63,337 after tax)~~ impairment within the consolidated condensed statements of operations and comprehensive loss during the ~~six~~three months ended ~~July~~April 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.

CartiHeal (2009) ~~Ltd~~Ltd.

On July 12, 2022, the Company completed the acquisition of 100% of the remaining shares in CartiHeal (2009) Ltd. (“CartiHeal”), a ~~privately held company headquartered in Israel and the~~ developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints. The Company previously held an equity interest in CartiHeal’s fully diluted shares with a carrying value of $15,768 and $16,771 as of July 12, 2022 and December 31, 2021, respectively. Net equity losses associated with CartiHeal for the three and six months ended July 2, 2022 totaled $280 and $681, respectively, which were included in discontinued operations, net on the consolidated condensed statements of operations and comprehensive loss.

The Company acquired CartiHeal (the “CartiHeal Acquisition”) for an aggregate purchase price of approximately $315,000 and an additional $135,000, payable after closing upon the achievement of a certain sales milestone (“Sales Milestone”, or “CartiHeal Contingent Consideration”). The Company paid $100,000 of the aggregate purchase price upon closing consisting of a $50,000 deposit held in trust and $50,000 from a financing arrangement (Refer to ~~Note 4. Financial instruments~~ for further information regarding financing arrangements). The Company also paid approximately $8,622 of CartiHeal’s transaction-related fees and expenses and deferred $215,000 (“Deferred Amount”) of the aggregate purchase price otherwise due at closing.

~~The Deferred Amount was to be paid in five tranches commencing in 2023 and ending no later than 2027 as follows:~~

•$50,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023;

•~~$50,000 due upon the earliest to occur — the implantation of Agili-C devices in 100 patients in the United States or September 1, 2023;~~

•$25,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents any new or additional clinical data subsequent to the First Paper Milestone with respect to Agili-C (“Second Paper Milestone”) or January 1, 2025;

•$25,000 due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents any new or additional clinical data subsequent to the First and Second Paper Milestone with respect to Agili-C or January 1, 2026; and

•$65,000 due upon the earliest to occur — obtaining a U.S. Category 1 Current Procedural Terminology (“CPT”) code from Centers for Medicare and Medicaid Services (“CMS”) for Agili-C or January 1, 2027.

~~Table of Content~~s

Pursuant to the CartiHeal Amendment (as defined below), the Company owed interest on each tranche of the Deferred Amount at a rate of 8.0% annually, until such tranche is paid. The Sales Milestone was payable upon the achievement of $75,000 in trailing twelve month sales pursuant to the CartiHeal Amendment.

The Company had entered into an Option and Equity Purchase Agreement with CartiHeal (“Option Agreement”) in January 2020 and a subsequent amendment in June 2022 (“CartiHeal Amendment”). The Option Agreement provided the Company with an exclusive option to acquire 100% of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require the Company to purchase 100% of CartiHeal’s shares under certain conditions. In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for the Agili-C implant. In order to preserve the Company’s Call Option, in accordance with the Option Agreement and upon approval of the Company’s Board of Directors (“BOD”), the Company deposited $50,000 into escrow in August 2021.

~~The First Paper Milestone under the Option Agreement occurred on February 13, 2023, which obligated the Company to make the first $50,000 payment, plus applicable interest, under the Option Agreement.~~ On February 27, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron” ~~and together with the Company, the “Parties”~~), as representative of CartiHeal’s ~~selling~~former securityholders ~~under the Option Agreement (collectively, the~~(the “Former Securityholders”). Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings ~~relating~~related to non-payment of any obligations ~~arising~~including deferred purchase price and contingent consideration totaling $215,000 and $135,000, respectively, under the ~~Option~~Company’s previous agreements to purchase CartiHeal from the Former Securityholders.

Pursuant to the Settlement Agreement, during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10,000 and (ii) a one-time non-refundable payment of $150 to Elron to be used in accordance with the expense fund provisions of the Option Agreement. The Interim Period expired on March 29, 2023 and the Company did not exercise its right to extend the Interim Period. In addition, the Parties mutually released any further claims under the Option Agreement and related transaction documents, including without limitation a release by the Former Securityholders of any rights to enforce the provisions of the Option Agreement or make further monetary claims against the Company and/or its respective affiliates and representatives.

~~The Company~~also transferred 100% of its shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders ~~pursuant~~and made a one-time non-refundable payment of $10,150 to Elron to be used for purposes set forth in the Settlement Agreement. ~~The Company had no ownership interest and no voting rights during the Interim Period. Accordingly, the Company concluded~~Given that upon execution of the Settlement Agreement, the Company had no ownership interest or voting rights in CartiHeal, 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 the Company’s international reporting ~~segment. The~~segment and the Company treated the deconsolidation of CartiHeal as a discontinued operation. The loss ~~upon~~on disposal was $60,639 and was recorded within discontinued operations, net of tax within the consolidated condensed statements of operations and comprehensive ~~loss. The~~ loss on disposal is comprised of the book value of CartiHeal’s net assets at the time of disposal, goodwill attributable to CartiHeal and the previously discussed non-refundable payments made to Elron. The Company allowed the Interim Period to expire on March 29, 2023 as the Company was not able to find a financing solution to fund the payment obligations under the Option and Equity Purchase Agreement on terms the Company believed to be favorable to it and its shareholders.

~~The fair value of consideration~~ for the three months ended April 1, 2023. Refer to Note 14. Discontinued operations for further information regarding the impact of CartiHeal ~~Acquisition was comprised of the following:~~


~~Cash consideration~~	$	~~100,000~~
~~Transaction related costs~~	~~8,622~~
~~Subtotal of cash at closing~~	~~108,622~~
~~Deferred Amount~~	~~183,400~~
~~Sales Milestone~~	~~61,901~~
~~Fair value of previously held equity interest(a)~~	~~39,477~~
~~Total consideration~~	$	~~393,400~~

~~(a)~~ ~~Remeasurement of~~on the Company’s equity method investment in CartiHeal, net of equity losses as a result of the purchase. The remeasurement included a gain of $23,709 calculated as the difference between the fair value and the carrying value of the Company’s investment in CartiHeal at the acquisition date and was recognized in other income during the third quarter of 2022 on the consolidated condensed financial statements of operations and comprehensive loss. The fair value was based upon: (i) the consideration transferred to members owning 89.97% of CartiHeal’s fully diluted shares; (ii) calculating the value of CartiHeal’s fully diluted shares based upon the transferred consideration; and (iii) applying the calculated value to the Company’s 10.03% ownership in CartiHeal’s fully diluted shares at the acquisition date.

~~Table of Content~~s

~~The Company accounted~~ for the CartiHeal Acquisition using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:


~~Fair value of consideration~~three months ended April 1, 2023.	$	~~393,400~~
~~Assets acquired and liabilities assumed:~~
~~Cash and cash equivalents and restricted cash~~	~~3,781~~
~~Inventory~~	~~642~~
~~Prepaid and other current assets~~	~~552~~
~~Property and equipment~~	~~259~~
~~Intangibles~~	~~410,200~~
~~Investment and other assets~~	~~727~~
~~Accounts payable~~	~~(18)~~
~~Accrued liabilities~~	~~(459)~~
~~Other current liabilities~~	~~(171)~~
~~Deferred income taxes~~	~~(79,863)~~
~~Other liabilities~~	~~(2,544)~~
~~Net assets acquired~~	~~333,106~~
~~Resulting goodwill~~	$	~~60,294~~

Nearly 100% of the goodwill represents estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized and is attributable to expected revenue growth in new markets. The goodwill was not deductible for tax purposes and $55,295 and $4,999 was allocated to the U.S. and International reporting units, respectively.

~~CartiHeal’s intangibles consisted of the following:~~


	~~Useful Life~~	~~Fair Value~~
~~Intellectual Property - US Segment~~	~~20 years~~	$	~~351,500~~
~~Intellectual Property - International Segment~~	~~8 years~~	~~58,700~~
		$	~~410,200~~

The estimated fair value of the acquired CartiHeal intangibles was determined using an income approach, a valuation technique that estimates the fair value of an asset based on market participant expectations of the cash flows that an asset would generate over its remaining useful life. The determination of the useful lives was based upon consideration of market participant assumptions and transaction specific factors.

4. Financial instruments

Long-term debt consisted of the following as of:


		July 1, 2023		December 31, 2022
Amended Term Loan due October 2026 (9.56% at July 1, 2023)		$	382,448	$	420,712
Revolver due October 2025 (9.58% at July 1, 2023)		7,000		—
	March 30, 2024					March 30, 2024	December 31, 2023
Amended Term Loan due October 2026 (9.82% at March 30, 2024)
Revolver due October 2025 (9.82% at March 30, 2024)
Less:	Less:
Current portion of long-term debt
Current portion of long-term debt
Current portion of long-term debt	Current portion of long-term debt	(11,320)		(33,056)
Unamortized debt issuance cost	Unamortized debt issuance cost	(1,079)		(1,338)
Unamortized discount	Unamortized discount	(2,481)		(1,308)
		$	374,568	$	385,010
	$

Table of Contents

Amended Term Loan

On December 6, 2019, the Company entered into a Credit and Guaranty Agreement (the “2019 Credit Agreement”) that was comprised of a $200,000 term loan ~~(“Original~~(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 acquisition of Misonix, ~~Acquisition~~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.

~~Table of Content~~s

On July 11, 2022, the Company further amended the 2019 Credit Agreement ~~as amended on October 29, 2021 (the “First Amended 2019 Credit Agreement”),~~ in conjunction with the acquisition of CartiHeal ~~Acquisition.~~(the “CartiHeal Acquisition”). Pursuant to ~~the First Amended 2019 Credit Agreement,~~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.

~~The Company was not in compliance with certain financial covenants as of December 31, 2022. As a result, on~~On March 31, 2023, ~~(the “Closing Date”),~~ the Company entered into ~~another~~an additional amendment to the 2019 Credit Agreement ~~(collectively, with the October 2021 and July 2022 amendments, the “Amended 2019 Credit Agreement”)~~ to, among other things, modify certain financial covenants, waive ~~the~~covenant noncompliance at December 31, 2022, and to modify interest rates applicable to borrowings under the 2019 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 March 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 Company 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 and organizational documents of Bioventus LLC and its subsidiaries. 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 financial statements of the Company for the fiscal quarter ending ~~June 30, 2024,~~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 ~~Amended 2019 Credit Agreement~~January 2024 amendment had deferred financing costs of $1,180, of which $325 was recorded in selling, general and administrative expense within the consolidated condensed statements of operations and comprehensive loss and $855 was capitalized on the consolidated condensed balance sheets during the three months ended March 30, 2024. The March 2023 amendment had deferred financing costs of $3,661, of which $1,617 ~~were~~was recorded in selling, general and administrative expense within the consolidated condensed statements of operations and comprehensive loss and $2,044 ~~were~~was capitalized on the consolidated condensed balance ~~sheets.~~sheets during the three months ended April 1, 2023. There ~~was~~were no ~~loss~~losses on debt refinancing and modification as a result of either the January 2024 or March 2023 ~~amendment.~~amendments.

As of ~~July 1, 2023, $378,888~~March 30, 2024, $376,241 was outstanding on the Term Loan Facilities, net of original issue discount of ~~$2,481~~$1,535 and deferred financing costs of ~~$1,079.~~$1,616. As previously discussed in 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 on a straight-line basis over the term of the Term Loan Facilities, which approximates the effective interest method. Interest expense includes deferred cost amortization of ~~$915, $204, $1,138~~$381 and ~~$407~~$223 for the three months ended ~~July~~March 30, 2024 and April 1, 2023, and July 2, 2022 and the six months ended July 1, 2023 and July 2, 2022, respectively. The Company had $7,000 and no outstanding borrowings on its Revolver as of July 1, 2023 and December 31, 2022, respectively.

The estimated fair value of the Term Loan Facilities was ~~$377,668~~$380,341 as of ~~July 1, 2023.~~March 30, 2024. The fair value of these obligations was determined based on the midpoint of the Bloomberg Valuation. This is classified as a Level 2 instruments within the fair value hierarchy.

Table of Contents

Revolver and Letters of Credit

The ~~Company historically entered into interest rate swap agreements to limit its exposure to changes~~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 ~~variable interest rate~~2019 Credit Agreement then in effect. The Revolver credit capacity will be further reduced by $5,000 on ~~its long-term debt.~~June 30, 2024. The Company had ~~one non-designated interest rate swap agreement that was terminated~~$15,000 outstanding borrowings on ~~October 28, 2022.~~its Revolver as of March 30, 2024 and December 31, 2023. LOCs are available in an amount not to exceed $7,500. The Company ~~received $7,738 upon~~had three LOCs outstanding as of March 30, 2024, leaving approximately $5,700 available. Revolving loans are due at the ~~swap’s termination. The swap was carried~~earlier of termination or maturity. Swingline loans are available as base rate option loans only and must be outstanding for at ~~fair value on~~least five days. Swingline loans are due the ~~balance sheet with changes in fair value recorded as interest income~~fifteenth or ~~expense within the consolidated condensed statements~~last day of ~~operations and comprehensive loss. Net interest income of $272 and $4,196 was recorded related to the change in fair value of the interest rate swap for the three and six months ended July 2, 2022.~~a calendar month or maturity, whichever is earlier.

5. Fair value measurements

The process for determining fair value has not changed from that described in the Annual Report on Form 10-K for the year ended December 31, ~~2022.~~

~~Table of Content~~s

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:

July 1, 2023 December 31, 2022
Total Level 3 Total Level 3
Liabilities:
Deferred Amount - Current(a)
$ — $ — $ 117,615 $ 117,615
Deferred Amount - Long Term(a)
— — 79,269 79,269
CartiHeal contingent consideration- Sales Milestone(a)
— — 67,251 67,251
Bioness contingent consideration 17,958 17,958 17,431 17,431
Total liabilities: $ 17,958 $ 17,958 $ 281,566 $ 281,566

~~(a)~~The Deferred Amount and contingent consideration attributable to CartiHeal have been reclassified to discontinued operations within the December 31, 2022 balance sheet. CartiHeal was fully deconsolidated during the first quarter of 2023. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

~~Deferred Amount~~

The Deferred Amount that resulted from the CartiHeal Acquisition was calculated based on the total amount payable on each due date for the five payment tranches including applicable interest. As previously discussed, the Company reached a settlement Agreement with the Former Securityholders. Pursuant to the Settlement Agreement, the Company was relieved of the obligations under the Deferred Amount. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~


	March 30, 2024		December 31, 2023
	Total		Level 3		Total		Level 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 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 projected financial information, market data and the probability and timing of achieving the specific targets. After the initial valuation, the Company generally uses its best estimate to measure contingent consideration at each subsequent reporting period using unobservable Level 3 inputs. ~~As previously discussed, the Company reached a settlement agreement with the Former Securityholders and was relieved of the CartiHeal Contingent Consideration obligations. Refer to~~ ~~Note 3. Acquisitions and divestitures and Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

Unobservable inputs

A summary of unobservable Level 3 inputs utilized for the above liabilities are as follows:

Valuation Technique

Unobservable inputs

Range

Bioness contingent consideration

Discounted cash flow

Payment discount rate

6.4% - 6.8%

Payment period

2024 - 2025

Significant changes in these assumptions could result in a significantly higher or lower fair value. The contingent consideration reported in the table above resulted from the acquisition of Bioness on March 30, 2021. Contingent consideration is adjusted quarterly based upon the passage of time or the anticipated success or failure of achieving certain milestones. Changes in contingent consideration related to Bioness for the three months ended ~~July~~March 30, 2024 and April 1, 2023 totaled $295 and ~~July 2, 2022 and the six months ended July 1, 2023 and July 2, 2022 totaled $240, $273, $527 and $542,~~$287, respectively, and were recorded as the change in fair value of contingent consideration within the consolidated condensed statements of operations and comprehensive loss. Changes in contingent consideration related to the CartiHeal Acquisition totaled $1,710 for the six months ended July 1, 2023 and is reported within discontinued operations, net within the consolidated condensed statements of operations and comprehensive loss. Pursuant to the Settlement Agreement, the Company was relieved of CartiHeal related obligations. The Company deconsolidated the remaining $68,961 contingent consideration liability as a result. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

~~Table of Contents~~

6. Equity-based compensation

2021 Plan

The Company operates an equity-based compensation plan (the “2021 Plan”), which allows for the issuance of stock options (incentive and nonqualified), restricted stock, dividend equivalents, restricted stock units (“RSUs”), other stock-based awards, and cash awards ~~(the~~(collectively, the “2021 Plan Awards”). As of ~~July 1, 2023, 14,781,895~~March 30, 2024, 19,564,333 shares of Class A common stock ~~were~~have been authorized to be awarded under the 2021 Plan and ~~5,912,880~~9,119,667 shares were available for 2021 Plan Awards.

Table of Contents

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 ~~July 1, 2023,~~March 30, 2024, 600,000 shares of Class A common stock were authorized to be awarded under the 2023 Plan and ~~32,700~~80,700 shares were available for Retention Awards.

Activity under the Plans

Expense

Equity-based compensation, net for Awards granted under the Plans for the three ~~and six~~ months ended ~~July~~March 30, 2024 and April 1, 2023 totaled ~~$2,797~~$2,591 and $1,079, respectively, in expense reduction as a result of expense reversals due to executive leadership transitions. Equity compensation expense for Awards granted under the Plans for three and six months ended July 2, 2022, totaled $4,522 and $9,253,$1,718, respectively. Expenses and expense reductions are primarily included in selling, general and administrative expense with a nominal amount in research and development expense within the consolidated condensed statements of operations and comprehensive loss based upon the department of the employee. There were no income tax benefits related to equity-based compensation expense for the three ~~and six~~ months ended ~~July 1, 2023.~~March 30, 2024. Income tax benefits related to equity-based compensation expense for three ~~and six~~ months ended ~~July 2, 2022~~April 1, 2023 totaled ~~$1,065 and $2,290, respectively.~~$430.

Restricted Stock Units

During the three ~~and six~~ months ended ~~July 1, 2023,~~March 30, 2024, the Company granted time-based RSUs which vest at various dates through ~~May 8, 2027.~~March 15, 2028. RSU compensation expense is recognized over the vesting period, which is typically between 1 and 4 years. Unamortized compensation expense related to the RSUs totaled ~~$9,010~~$8,159 at ~~July 1, 2023,~~March 30, 2024, and is expected to be recognized over a weighted average period of approximately ~~2.39~~1.71 years. A summary of the RSU award activity for the ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 is as follows (number of units in thousands):

Number of units Weighted-average grant-date fair value per unit
Unvested at December 31, 2022 1,189 $ 11.96
Granted 1,750 2.04
Vested (375) 11.24
Forfeited or canceled (315) 10.46
Unvested at July 1, 2023 2,249 $ 4.57

~~Table of Content~~s


	Number of units	Weighted-average grant-date fair value per unit
Unvested at December 31, 2023	2,066	$	4.51
Granted	2,124	5.34
Vested	(196)	8.17
Forfeited or canceled	(55)	8.94
Unvested at March 30, 2024	3,939	$	4.69

Stock Options

During the three ~~and six~~ months ended ~~July 1, 2023,~~March 30, 2024, the Company granted time-based stock options which vest over 1 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 1 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 ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 is shown in the following ~~table.~~table:


Risk-free interest rate	~~3.49%~~3.93% - ~~3.9%~~4.3%
Expected dividend yield	—	%
Expected stock price volatility	~~35.2%~~36.1% - ~~36.4%~~36.3%
Expected life of stock options (years)	~~5.50 -~~ 6.25

The weighted-average grant date fair value of options granted during the ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 was ~~$0.49~~$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 peers’ 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. Unamortized compensation expense related to the options totaled ~~$8,485~~$5,211 at ~~July 1, 2023,~~March 30, 2024, and is expected to be recognized over a weighted average period of approximately ~~6.97~~2.15 years.

Table of Contents

A summary of stock option activity is as follows for the ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 (number of options in thousands):

Number of options Weighted-average exercise price Weighted average remaining contractual term Aggregate intrinsic value
Outstanding at December 31, 2022 8,910 $ 11.65
Granted 1,173 1.19
Forfeited or canceled (2,670) 12.36
Outstanding at July 1, 2023 7,413 9.74 7.40 years $ 1,875
Exercisable and vested at July 1, 2023 4,750 $ 10.89 6.49 years $ 13


	Number of options	Weighted-average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at December 31, 2023	4,347	$	8.68
Granted	1,752	5.18

Exercised	(209)	5.18
Forfeited or canceled	(332)	12.60
Outstanding at March 30, 2024	5,558	7.61		7.39	$	3,733
Exercisable and vested at March 30, 2024	2,149	$	10.50	4.62	$	147

The aggregate intrinsic value 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 ~~$2.89~~$5.20 per share as this was the closing price of the Company’s Class A common stock on ~~June 30, 2023.~~March 28, 2024, the last trading day of the first quarter.

Employee Stock Purchase Plan

The Company operates a non-qualified Employee Stock Purchase Plan (“ESPP”), which provides for the issuance of shares of the Company’s Class A common stock to eligible employees of the Company that elect to participate in the plan and purchase shares of Class A common stock through payroll deductions at a discounted price. As of ~~July 1, 2023,~~March 30, 2024, the aggregate number of shares reserved for issuance under the ESPP was ~~1,036,979.~~1,519,604. No shares were issued under the ESPP during the three months ended March 30, 2024. A total of ~~144,851 and 366,927~~222,076 shares were issued under the ESPP and ~~$65 and $193~~$128 of expense was recognized during the three ~~and six~~ months ended ~~July~~April 1, 2023. ~~A total of 53,826 and 102,819 shares were issued and $94 and $252 of expense was recognized during the three and six months ended July 2, 2022.~~

7. Stockholders’ equity

~~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.~~through an UP-C structure with BV LLC. In connection with the IPO, the Company ~~completed the following transactions (“Transactions”).~~

•~~Amended~~amended and restated the limited liability ~~company~~ agreement of BV LLC (“BV LLC Agreement”), to ~~among other things, (i)~~ provide for a new single class of common membership interests in BV LLC (“LLC Interests”)~~; (ii)~~ and exchange all of the existing membership interests in BV LLC ~~(“Original~~(the “Original BV LLC Owners”) for new LLC ~~Interests; and (iii) appoint Bioventus Inc. as the sole managing member of BV LLC.~~

•Amended and restated the Bioventus Inc. certificate of incorporation to, among other things, (i) provide for an increase in the authorized shares of Class A common stock; (ii) provide for Class B common stock with voting rights but no economic interest, which shares were issued to the Original BV LLC Owners on a one-for-one basis with the number of LLC Interests they owned; and (iii) provide for undesignated preferred stock.

~~Table of Content~~s

•~~Acquired, by merger, ten entities that were Original BV LLC Owners (“Former LLC Owners”), for which the~~Interests. The Company issued 31,838,589 shares of Class A common stock as merger consideration (“IPO Mergers”). 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 IPO Mergers, the 31,838,589 shares of Class B common stock were canceled, and the Company recognized the 31,838,589 LLC Interests at carrying value, as the IPO Mergers are considered to be a recapitalization transaction.

~~Amendment and restatement of certificate of incorporation~~

~~On February 16, 2021, the Company~~also amended ~~and restated~~ its certificate of incorporation to ~~among other things, provide for:~~authorize the following shares: (i) ~~the authorization of~~ 250,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) ~~the authorization of~~ 50,000,000 shares of Class B common stock with a par value of $0.001 per ~~share;~~share, which have voting rights but no economic interest, and some of which were issued to the Original BV LLC Owners; and (iii) ~~the authorization of~~ 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the ~~BOD in one or more series;~~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 ~~(iv)~~cancelled the ~~establishment of~~Class B common stock held by such Former BV LLC Owners. The IPO Mergers are deemed to be a ~~classified BOD, divided into three classes, each of whose members will serve for staggered three-year terms.~~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 ~~the~~ 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.

~~The Company must, at all times, maintain a one-to-one ratio between the number~~

Table of ~~outstanding shares of Class A common stock and the number of LLC Interests owned by the Company.~~Contents

~~BV LLC recapitalization~~

The BV LLC Agreement provides that holders of LLC Interests may, from time to time, require the Company to redeem all or a portion of their LLC Interests for newly-issued shares of Class A common stock on a one-for-one basis. The Company may elect to settle any such redemption in shares of Class A common stock or in cash.

The amendment also requires that the Company, at all times, maintain (i) a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Interests owned by the Company and (ii) a one-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.

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 ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 or during the year ended December 31, ~~2022.~~2023. The following table summarizes the ownership interest in BV LLC as of ~~July 1, 2023~~March 30, 2024 and December 31, ~~2022~~2023 (number of units in thousands):


		July 1, 2023			December 31, 2022
		LLC Interests	Ownership %		LLC Interests	Ownership %
	March 30, 2024														March 30, 2024							December 31, 2023
	LLC Interests											LLC Interests					Ownership %				LLC Interests					Ownership %
Number of LLC Interests owned	Number of LLC Interests owned
Bioventus Inc.
Bioventus Inc.
Bioventus Inc.	Bioventus Inc.	62,805	79.9	%	62,063	79.7	%	63,672		80.1			80.1	%				63,267		80.0			80.0	%
Continuing LLC Owner	Continuing LLC Owner	15,787	20.1	%	15,787	20.3	%	Continuing LLC Owner	15,787		19.9			19.9		%			15,787		20.0			20.0	%
Total	Total	78,592	100.0	%	77,850	100.0	%	Total	79,459		100.0			100.0		%			79,054		100.0			100.0	%

~~Table of Content~~s

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 periods presented (amounts in thousands, except share and per share data):

Three Months Ended Six Months Ended
July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Numerator:
Net (loss) income from continuing operations,
    net of tax $ (4,731) $ (7,734) $ (104,749) $ (22,139)
Net loss attributable to noncontrolling interests — continuing operations 1,050 762 21,410 4,291
Net loss attributable to Bioventus Inc. Class A
    common stockholders — continuing operations $ (3,681) $ (6,972) $ (83,339) $ (17,848)
Numerator:
Net (loss) income from discontinued operations,
    net of tax $ — $ (280) $ (74,429) $ (681)
Net loss attributable to noncontrolling interests —
    discontinued operations — — 14,937 —
Net loss attributable to Bioventus Inc. Class A
    common stockholders — discontinued operations $ — $ (280) $ (59,492) $ (681)
Denominator:
Weighted-average shares of Class A common
    stock outstanding - basic and diluted 62,551,285 61,475,350 62,338,018 60,977,556
Net loss per share of Class A common stock from
    continuing operations, basic and diluted $ (0.06) $ (0.11) $ (1.34) $ (0.29)
Net loss per share of Class A common stock from
    discontinued operations, basic and diluted — — (0.95) (0.01)
Net loss per share of Class A common stock,
    basic and diluted $ (0.06) $ (0.11) $ (2.29) $ (0.30)


	Three Months Ended
	March 30, 2024		April 1, 2023
Numerator:
Net loss from continuing operations, net of tax	$	(5,982)	$	(100,018)
Net loss attributable to noncontrolling interests — continuing operations	1,412		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 diluted	63,380,187		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.

The following number of weighted-average potentially dilutive shares as of ~~July~~March 30, 2024 and April 1, 2023 ~~and July 2, 2022~~ 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:


		Three Months Ended		Six Months Ended
		July 1, 2023	July 2, 2022	July 1, 2023	July 2, 2022
	Three Months Ended						Three Months Ended
	March 30, 2024					March 30, 2024		April 1, 2023
LLC Interests held by Continuing LLC Owner(a)	LLC Interests held by Continuing LLC Owner(a)	15,786,737	15,786,737	15,786,737	15,786,737
Stock options	Stock options	6,730,685	10,020,106	7,623,865	9,396,023
RSUs	RSUs	766,427	1,137,936	974,238	769,809
Total	Total	23,283,849	26,944,779	24,384,840	25,952,569

Table of Contents

(a)Class A Shares reserved for future issuance upon redemption or exchange of LLC Interests by the Continuing LLC Owner.

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.

~~Table of Content~~s

The ~~Company announced a~~Company’s prior restructuring ~~plan~~plans adopted in ~~December~~2021 and 2022 ~~(the “2022 Restructuring Plan”) that is intended to align the Company’s~~focused on aligning its organizational and management cost structure to improve profitability and cash ~~flow. The Company expects to incur $5,000 to $6,000~~flow, reduce headcount and the consolidation of ~~pre-tax costs under the 2022 Restructuring Plan primarily consisting of~~facilities. These plans have been completed. There were no expenses incurred and $840 in restructuring payments for employee severance and ~~additional expenses for third-party and other related costs. Pre-tax charges recognized~~temporary labor costs during the three ~~and six~~ months ended ~~July 1, 2023~~March 30, 2024. Expenses incurred and ~~the year ended December 31, 2022 totaled $628, $890 and $4,581, respectively.~~

The Company adopted restructuring plans for businesses acquired to reduce headcount, reorganize management structure and consolidate certain facilities during the second half of 2021 (the “2021 Acquisition Restructuring Plan”) and during the first quarter of 2022 (the “2022 Acquisition Restructuring Plan”). The Company’s planned total pre-tax charges for the 2021 Acquisition Restructuring Plan and 2022 Acquisition Restructuring Plan are $3,500 and $2,300, respectively. There was nominal activity related to the 2021 Acquisition Restructuring Plan during the six months ended July 1, 2023 and $223, $600 $719 and $2,487 recognizedpayments made during the three ~~and six~~ months ended July 2, 2022, and the years ended December 31, 2022 and 2021, respectively. The 2021 Acquisition Restructuring Plan is essentially completed. Costs incurred attributable to the 2022 Acquisition Restructuring Plan totaled $84 for the six months ended JulyApril 1, 2023 ~~respectively,~~totaled $317 and ~~$784, $984 and $1,479 during the three and six months ended July 2, 2022, and the year ended December 31, 2022,~~$1,845, respectively.

~~The Company’s restructuring charges and payments for plans related to businesses recently acquired comprised of the following:~~

Employee
severance and
temporary
labor costs
Other
charges
Total
Balance at December 31, 2022 $ 3,760 $ — $ 3,760
Expenses incurred 745 192 937
Payments made (2,893) (192) (3,085)
Balance at July 1, 2023 $ 1,612 $ — $ 1,612

10. Income taxes

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 ~~July~~March 30, 2024 and April 1, 2023, ~~and July 2, 2022 and the six months ended July 1, 2023 and July 2, 2022 ,~~ the Company's effective tax rate was ~~8.8%, 18.4%, 0.2%~~17.9% and ~~14.6%~~0.1%, respectively. The ~~changes~~change in rate for the three ~~and six~~ months ended ~~July 1, 2023~~March 30, 2024 compared to the prior year comparable ~~periods~~period was primarily due to an increase in ~~the valuation allowance applied to the Company’s net deferred tax assets.~~taxable income in 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”) 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 LLC; and (ii) certain other tax benefits related to our making payments under the TRA.

The Company maintains 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. Subsequent to the consummation of the IPO Mergers, the Continuing LLC Owner has not exchanged LLC Interests for shares of Class A common stock.

~~Table of Contents~~

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 109.1 years.

Table of Contents

The components of lease cost were as follows:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
	Three Months Ended										Three Months Ended
	March 30, 2024									March 30, 2024		April 1, 2023
Operating lease cost	Operating lease cost	$	1,010	$	1,180	$	2,079	$	2,306
Short-term lease cost(a)	Short-term lease cost(a)	229		145		435		328
Financing lease cost:	Financing lease cost:
Amortization of finance lease assets	Amortization of finance lease assets	393		9		628		18
Amortization of finance lease assets
Amortization of finance lease assets
Interest on lease liabilities	Interest on lease liabilities	229		1		366		2
Total lease cost	Total lease cost	$	1,861	$	1,335	$	3,508	$	2,654

(a)Includes variable lease cost and sublease income, which are immaterial.

Supplemental cash flow information and non-cash activity related to leases were as follows:

Six Months Ended
July 1, 2023 July 2, 2022
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases $ 2,227 $ 2,418
Operating cash flows from financing leases $ 337 $ 2
Financing cash flows from finance leases $ 175 $ 26
Right-of-use assets obtained in exchange for lease obligations:
Operating lease obligations $ 254 $ 3,590
Financing lease obligations(a)
$ 15,567 $ —

~~(a)~~Financing lease obligations entered into during the six months ended July 1, 2023 resulted from the Company’s agreement to lease a facility to expand its manufacturing operations and relocate from its current leased facilities in Memphis, Tennessee. The lease was entered into during November 2021 with occupancy starting in 2023. The lease term is 10 years and payments are as follows for the remainder of 2023—$1,551, 2024—$1,582, 2025—$1,614, 2026—$1,646, 2027—$1,679 and thereafter—$8,600. Imputed interest on the payments total $5,289.

~~Table of Content~~s


	Three Months Ended
	March 30, 2024		April 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 leases were as follows:


	March 30, 2024											March 30, 2024					December 31, 2023
Operating lease assets								Operating lease assets	$	12,462				$	13,353
		July 1, 2023			December 31, 2022
Operating lease assets(a)		$	15,238		$	16,690

Operating lease liabilities- current(b)		$	3,957		$	3,552
Operating lease liabilities- noncurrent(b)		12,489			14,355
Operating lease liabilities—current
Operating lease liabilities—current
Operating lease liabilities—current									$	4,028				$	4,057
Operating lease liabilities—noncurrent								Operating lease liabilities—noncurrent	9,671					10,573
Total operating lease liabilities	Total operating lease liabilities	$	16,446		$	17,907		Total operating lease liabilities	$	13,699				$	14,630

Property, plant and equipment - net (finance leases)		$	15,066		$	128
Property, plant and equipment, net (finance leases)
Property, plant and equipment, net (finance leases)
Property, plant and equipment, net (finance leases)									$	13,884				$	14,279

Finance lease liabilities - current		$	715		$	55
Finance lease liabilities - noncurrent		10,772			76
Finance lease liabilities—current
Finance lease liabilities—current
Finance lease liabilities—current									$	778				$	759
Finance lease liabilities—noncurrent								Finance lease liabilities—noncurrent	10,184					10,386
Total financing lease liabilities	Total financing lease liabilities	$	11,487		$	131		Total financing lease liabilities	$	10,962				$	11,145

Weighted average remaining lease term (years) for leases	Weighted average remaining lease term (years) for leases
Weighted average remaining lease term (years) for leases
Weighted average remaining lease term (years) for leases
Operating leases
Operating leases
Operating leases	Operating leases	4.4			4.8			3.6					3.8
Finance leases	Finance leases	9.8			2.4			Finance leases	9.1					9.3

Weighted average discount rate for leases	Weighted average discount rate for leases
Weighted average discount rate for leases
Weighted average discount rate for leases
Operating leases
Operating leases
Operating leases	Operating leases	4.6		%	4.8		%	4.7	%				4.7	%
Finance leases	Finance leases	8.1		%	3.3		%	Finance leases	8.1		%			8.1		%

~~(a)~~Operating lease assets totaling $618 attributable to CartiHeal was reclassified to long-term assets attributable to discontinued operations within the December 31, 2022 consolidated balance sheets. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation~~Table of ~~CartiHeal.~~Contents

~~(b)~~Operating lease liabilities-current totaling $176 and operating lease liabilities-noncurrent of $442 were reclassified into current liabilities attributable to discontinued operations and long-term liabilities attributable to discontinued operations, respectively, within the December 31, 2022 consolidated balance sheets. Refer to ~~Note 3. Acquisitions and divestitures~~ ~~and~~ ~~Note 14. Discontinued operations~~ ~~for further details regarding the deconsolidation of CartiHeal.~~

Governmental and legal 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 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 the industry, the Company is subject to extensive regulation by national, state and local governmental agencies in the 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 Company is presently unable to predict the duration, scope, or result of these 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 might 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.

~~Table of Content~~s

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 ~~lead~~ 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 ~~and~~ consolidated complaint. In response to the ~~Company’s~~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 ~~currently evaluating the allegations~~a nominal defendant) filed in the ~~amended~~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 ~~intends~~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 ~~file~~stay this case pending resolution of the Ciarciello case.

On February 9, 2024, another plaintiff filed a ~~new motion~~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 ~~dismiss, which under~~consolidate the ~~court’s scheduling order is due~~two derivative matters and stay them on ~~August 14, 2023.~~ 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 ~~litigation~~above matters lack merit and intends to defend itself vigorously. The outcome of ~~the litigation~~these matters is not presently determinable, and any loss is neither probable nor reasonably estimable.

~~Bioness patent litigation~~

On June 15, 2022, the Company, through its subsidiary Bioness, filed a lawsuit in the United States District Court for the Eastern District of Virginia against Aretech, LLC (“Aretech”) alleging infringement by Aretech of various patents related the Bioness’ Vector Gait and Safety Support System®. On August 8, 2022, Aretech filed an answer to the lawsuit denying infringement and asserting various affirmative defenses and counterclaims to the Bioness complaint. Bioness filed a motion to dismiss the defendant’s counterclaims on September 28, 2022. In response to Bioness’ motion to dismiss the counterclaims, on October 19, 2022, Aretech filed an amended answer and counterclaims. On November 16, 2022, Bioness filed a partial motion to dismiss certain of the amended counterclaims. On January 23, 2023, the court granted-in-part Bioness’ motion dismissing Aretech’s antitrust and inventorship-related counterclaims, but allowed certain of Aretech’s counterclaims to proceed. On March 23, 2023, the parties entered into a settlement and license agreement that resolved all claims in the litigation. The agreement also provides cross licenses to the parties for certain of their respective patents relevant to the claims asserted in the litigation.

~~Misonix stockholder~~

On September 15, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Stein v. Misonix, Inc., et al., Case No. 2:21-cv-05127 (E.D.N.Y.) (the “Stein Complaint”). The Stein Complaint named Misonix and members of its board of directors as defendants. The Stein Complaint was dismissed on April 6, 2022. On September 16, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Ciccotelli v. Misonix, Inc. et al., Case No. 1:21-cv-07773 (S.D.N.Y.) (the “Ciccotelli Complaint”) against Misonix, members of its board of directors, the Company, and its subsidiaries, Merger Sub I and Merger Sub II, as defendants. Plaintiff voluntarily dismissed the Ciccotelli Complaint on November 10, 2021. On October 12, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Rubin v. Misonix, Inc. et al., Case No. 1:21-cv-05672 (S.D.N.Y.) (the “Rubin Complaint”) and on October 15, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Taylor v. Misonix, Inc. et al., Case No. 1:21-cv-08513 (S.D.N.Y.) (the “Taylor Complaint”). The Rubin Complaint and the Taylor Complaint name Misonix and members of its board of directors as defendants. Plaintiffs voluntarily dismissed the Rubin and Taylor Complaints on January 21, 2022 and February 18, 2022, respectively.

The complaints asserted claims under Section 14(a) and Section 20(a) of the Exchange Act and SEC Rule 14a-9, challenging the adequacy of disclosures in the proxy statement/prospectus filed with the SEC on September 8, 2021 or the Definitive Proxy Statement filed with the SEC on September 24, 2021, regarding Misonix and/or Bioventus’ projections and J.P. Morgan’s financial analysis. The complaints had sought, among other relief, (i) injunctive relief preventing the parties from proceeding with the merger; (ii) rescission in the event that the merger is consummated; and (iii) an award of costs, including attorneys’ and experts’ fees.

2316

Table of ~~Content~~sContents

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. ~~The Company believes that it has various legal and factual defenses to these claims and intends to vigorously defend~~On March 6, 2024, the ~~appeal~~Second Circuit Court of Appeals issued its ruling affirming the lower ~~court’s~~Court’s summary judgment ~~rulings in its favor.~~

~~Bioness shareholder~~

Prior to closing the Bioness Acquisition, Bioness had been named as a defendant in a lawsuit, for which the Company is indemnified under the indemnification provisions contained in the Bioness Merger Agreement. The case relates to an action brought in February 2021 in the Delaware State Court of Chancery by a former minority shareholder and director of Bioness, seeking a temporary restraining order contesting the 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 attorney fees and other expenses totaling approximately $3,000 incurred by the director and shareholder in connection with the matter.

On August 19, 2021, the court issued a ruling granting, in part, plaintiff’s motion for summary judgment, awarding plaintiff attorney’s fees and related expenses incurred in connection with performance of the plaintiff’s directorial duties, and denying fees and expenses incurred in a non-director capacity. In its ruling, the court’s order also directed the parties to agree upon a process that will govern the payment of and challenges to plaintiff’s payment requests and required Bioness to pay 50% of the demanded amount into escrow if more than 50% of the total invoiced amount was in dispute. Pursuant to the court’s order, Bioness paid approximately $1,300 into escrow. On November 1, 2022, at a hearing before Delaware State Court of Chancery, the court ruled in favor of ~~the former~~ Misonix in all respects.

Bioness ~~director awarding attorney’s fees in connection with the underlying pre-merger~~stockholder litigation and the advancement action in the amounts claimed, less approximately $50. On December 23, 2022, Bioness and the plaintiff entered into a settlement agreement resolving the matter for the aggregate sum of $2,500 payable to the plaintiff. The settlement was satisfied by releasing the $1,300 previously paid by Bioness and held in escrow and by an additional payment of $1,200. Pursuant to the indemnification obligations under the Bioness Merger Agreement, this subsequent payment was made on behalf of Bioness on December 28. 2022, by the selling majority shareholder under that agreement. The Company subsequently recovered the $1,300 paid into escrow from the selling Bioness shareholders pursuant an indemnification request under the Bioness Merger Agreement. An order dismissing the case was entered by the court on January 27, 2023.

On February 8, 2022, ~~the above referenced~~a minority shareholder of Bioness filed ~~another~~an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of ~~Bioness.~~Bioness, Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness directors, the Alfred E. Mann Trust ~~(Trust)~~(“Trust”), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection 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 under the indemnification provisions contained in the Bioness Merger Agreement for these claims. On July 20, 2022, the Company filed a motion to dismiss all claims made against it on various grounds, as did all the other named defendants in the suit. A hearing on Bioness’ and other the defendant’s motions was held before the Court of Chancery on January 19, 2023. ~~The Company believes that there are various legal and factual defenses to the claims plaintiff made against us and intend to defend ourselves vigorously.~~ On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case.

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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 Milestone Payment was reduced to $1,418, of which $709 ~~is payable~~was paid on January 31, 2024, and the remainder is due upon receipt of the Medical Device Regulation Certification for the product provided that it is obtained prior to December 31, 2024. As a result, the Company recorded an intellectual property intangible asset totaling $709 for initial payment.

On August 23, 2019, the Company was assigned a third-party license on 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.

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, but during the second quarter of 2022, the Company elected to discontinue the development of MOTYS, the initial product candidate under development. On October 21, 2022, the Company provided notice to MTF of termination of the Development Agreement and the related cGTP Commercial Supply Agreement with MTF for MOTYS, effective December 20, 2022.

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 during the three months ended ~~July~~March 30, 2024 and April 1, 2023 totaled $3,579 and ~~July 2, 2022 and six months ended July 1, 2023 and July 2, 2022 totaled $4,119, $4,083, $6,440 and $7,415,~~$2,321, respectively. These royalties are included in cost of sales within the consolidated condensed statements of operations and comprehensive 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 10 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 8 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 licensed products with a minimum annual royalty payment through 2023, the date the agreement will expire, upon the expiration

Table of ~~the patent held by the licensor. These royalties are included in cost of sales on the consolidated condensed statements of operations and comprehensive loss.~~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 ~~July 1, 2023~~March 30, 2024 and December 31, ~~2022,~~2023, the Company had ~~one LOC~~three 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.

12. Revenue recognition

Our policies for recognizing sales have not changed from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~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 the Company’s net sales disaggregated by major ~~products (Vertical)~~business within each segment as follows:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
	Three Months Ended										Three Months Ended
	March 30, 2024									March 30, 2024		April 1, 2023
U.S.	U.S.
Pain Treatments
Pain Treatments
Pain Treatments	Pain Treatments	$	55,617	$	58,055	$	96,612	$	105,929
Restorative Therapies	Restorative Therapies	31,844		35,433		64,332		64,379
Surgical Solutions	Surgical Solutions	33,386		32,822		63,881		60,083
Total U.S. net sales	Total U.S. net sales	120,847		126,310		224,825		230,391

International	International
International
International
Pain Treatments
Pain Treatments
Pain Treatments	Pain Treatments	6,024		5,859		11,355		10,038
Restorative Therapies	Restorative Therapies	4,774		4,469		10,388		9,883
Surgical Solutions	Surgical Solutions	5,424		3,693		9,560		7,309
Total International net sales	Total International net sales	16,222		14,021		31,303		27,230

Total net sales	Total net sales	$	137,069	$	140,331	$	256,128	$	257,621
Total net sales
Total net sales

13. Segments

The Company’s two 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 ~~adjusted~~Adjusted 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 ~~adjusted~~Adjusted EBITDA reconciled to loss before income taxes:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Segment adjusted EBITDA
	Three Months Ended										Three Months Ended
	March 30, 2024									March 30, 2024		April 1, 2023
Segment Adjusted EBITDA
U.S.
U.S.
U.S.	U.S.	$	24,712	$	19,489	$	39,424	$	24,328
International	International	3,446		2,840		5,685		5,173
Interest expense, net	Interest expense, net	(10,587)		(2,578)		(20,281)		(1,028)
Depreciation and amortization	Depreciation and amortization	(14,600)		(12,384)		(31,073)		(24,863)
Acquisition and related costs	Acquisition and related costs	(1,448)		(5,994)		(2,623)		(13,972)
Shareholder litigation costs
Restructuring and succession charges	Restructuring and succession charges	(620)		(1,695)		(937)		(2,272)
Equity compensation	Equity compensation	2,732		(4,616)		886		(9,505)
Financial restructuring costs	Financial restructuring costs	(1,257)		—		(6,587)		—
Impairment of assets		—		—		(78,615)		—
Loss on disposal of a business		(977)		—		(977)		—
Impairments of assets

Other items

Other items

Other items	Other items	(5,751)		(1,552)		(9,416)		(3,888)
Loss before income taxes	Loss before income taxes	$	(4,350)	$	(6,490)	$	(104,514)	$	(26,027)

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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 ~~CartiHeal~~ Settlement Agreement and ~~its~~the deconsolidation ~~from the Company’s financial statements.~~of CartiHeal. CartiHeal had no sales ~~for~~during the ~~three months ended July 1, 2023 and~~ year ended December 31, ~~2022.~~2023.

The following table summarizes CartiHeal’s major classes of assets and liabilities as reported on the consolidated condensed balance sheets as of December 31, 2022 as the balances were fully deconsolidated as of July 1, 2023:


	~~December 31, 2022~~
~~Carrying amounts of major classes of assets included as part of discontinued operations~~
~~Cash~~	$	~~1,628~~
~~Restricted cash~~	23
~~Other receivables~~	~~350~~
~~Inventory~~	~~642~~
~~Prepaid and other current assets~~	~~134~~
~~Property and equipment, net~~	~~191~~
~~Goodwill~~	~~6,297~~
~~Intangible assets, net~~	~~398,873~~
~~Operating lease assets~~	~~618~~
~~Other assets~~	15
~~Total assets~~	$	~~408,771~~

~~Carrying amounts of major liabilities included as part of discontinued operations~~
~~Accounts payable~~	$	~~852~~
~~Accrued liabilities~~	~~384~~
~~Current portion of deferred consideration~~	~~117,615~~
~~Other current liabilities~~	~~236~~
~~Deferred income taxes~~	~~79,863~~
~~Deferred consideration~~	~~79,269~~
~~Contingent consideration~~	~~67,251~~
~~Other long-term liabilities~~	~~2,528~~
~~Total liabilities~~	$	~~347,998~~

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 ~~and six~~ months ended ~~July~~April 1, ~~2023 and July 2, 2022:~~2023:

Three Months Ended Six Months Ended
July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
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 —
Operating loss from discontinued operations — — (8,098) —
Interest expense, net — — 4,889 —
Other expense(b)
— 280 61,442 681
Other expense — 280 66,331 681
Loss before income taxes — (280) (74,429) (681)
Income tax benefit, net — — — —
Net loss — (280) (74,429) (681)
Loss attributable to noncontrolling interest — — 14,937 —
Net loss attributable to Bioventus Inc. $ — $ (280) $ (59,492) $ (681)

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	Three Months Ended
	March 30, 2024		April 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.

The following discussion and analysis of Bioventus Inc.’s (sometimes referred to as “we,” “us,” “our,” “Bioventus” or “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 included in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 filed with the Securities and Exchange Commission (“SEC”) on March ~~31,~~ 12, 2024 (“2023 ~~(“2022~~ 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:~~businesses:

•Pain Treatments is comprised of non-surgical joint pain injection therapies as well as peripheral nerve stimulation (“PNS”) products to help the patient get back to their normal activities.

•Surgical Solutions is comprised of bone graft substitutes (“BGS”) that increase bone formation to ~~fuse and grow bones, improve results following~~stimulate bone healing in spinal fusions and other orthopedic surgeries, as well as ~~minimally invasive~~a portfolio of ultrasonic ~~medical devices~~products used for precise bone cutting and sculpting, ~~removing tumors~~soft tissue management (i.e., tumor and liver resections) and tissue debridement, in various ~~surgeries.~~surgeries, including minimally invasive applications.

•Restorative Therapies is comprised of a bone healing system, ~~and~~as well as devices designed to help patients regain leg or hand function due to stroke, multiple sclerosis or other central nervous system disorders.

As further discussed below, there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern. In light of this, the Company is actively pursuing plans to mitigate these conditions and events; however, there can be no assurances that it is probable these plans will be successfully implemented or that they will successfully mitigate these conditions and events.

~~For additional information, see the below~~ ~~Going Concern~~ ~~section under~~ ~~Liquidity and Capital Resources~~.

The following table sets forth total net sales, net loss and Adjusted EBITDA for the periods presented:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
	Three Months Ended										Three Months Ended
	March 30, 2024									March 30, 2024		April 1, 2023
Net sales	Net sales	$	137,069	$	140,331	$	256,128	$	257,621
Net loss from continuing operations	Net loss from continuing operations	$	(4,731)	$	(7,734)	$	(104,749)	$	(22,139)
Adjusted EBITDA(1)	Adjusted EBITDA(1)	$	28,158	$	22,329	$	45,109	$	29,501
Loss per Class A common stock, basic and diluted:	Loss per Class A common stock, basic and diluted:
Continuing operations	Continuing operations	$	(0.06)	$	(0.11)	$	(1.34)	$	(0.29)
Continuing operations
Continuing operations
Discontinued operations	Discontinued operations	—		—		(0.95)		(0.01)
Loss per Class A common stock, basic and diluted	Loss per Class A common stock, basic and diluted	$	(0.06)	$	(0.11)	$	(2.29)	$	(0.30)

(1)See below under results of operations-Adjusted EBITDA for a reconciliation of net loss to Adjusted EBITDA.

Significant transactions

Reclassification

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, was adopted with the aim of ensuring better protection of public health and patient safety. Among other things, the EU MDR imposed changes to clinical evidence for medical devices, post-market clinical follow-up evidence, annual reporting of safety information for Class III products, and bi-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 market, reclassification of medical devices, and 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 it throughout the EU. The certificate is valid for 5 years.

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Wound 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 ~~$84.9~~$84.7 million, including ~~$34.9~~$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”). We incurred $3.9 million in transactional fees resulting from the sale of the Wound Business. The deconsolidation of Disposal Group resulted in the recognition of a $1.0 million loss on disposal of a business recorded within the consolidated statements of operations and comprehensive loss for the three and six months ended July 1, 2023.

~~Table of Content~~s

~~The proceeds were used to prepay $30.0 million of long-term debt principal obligations. The 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 net revenue thresholds are as follows:~~

•~~2024 Earn-out Payment—$5.0~~We incurred $3.9 million ~~due if net revenue for~~in transactional fees resulting from the ~~period January 1, 2024 through December 31, 2024 is equal~~sale of the Wound Business and used the proceeds from the sale of the Wound Business to ~~or greater than $54.3~~prepay $30.0 million ~~or zero if net revenue is less than $54.3 million;~~

•2025 Earn-out Payment—$20.0 million due if net revenue for the period January 1, 2025 through December 31, 2025 is equal to or greater than $69.7 million or $10.0 million due if net revenue is greater than or equal to $55.8 million but less than $69.7 million or zero if net revenue is less than $55.8 million.

•2026 Earn-out Payment—$20.0 million due if net revenue for the period January 1, 2026 through December 31, 2026 is equal to or greater than $83.7 million or $10.0 million due if net revenue is greater than or equal to $67.0 million but less than $83.7 million or zero if net revenue is less than $67.0 million.of long-term debt obligations.

We evaluated the Wound Business for impairment prior to its sale and recorded a $78.6 million ~~($63.3 million after tax)~~ impairment within the consolidated statements of operations and comprehensive loss during the ~~six~~three months ended ~~July~~April 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 were determined based on the consideration received for the Wound Business.

~~CartiHeal~~

On July 12, 2022, we acquired 100% of CartiHeal (2009) Ltd. (“CartiHeal”), a privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints. We purchased CartiHeal (“CartiHeal Acquisition”) for an aggregate purchase price of approximately $315.0 million and an additional $135.0 million, becoming payable after closing upon the achievement of a certain sales milestone (“Sales Milestone Consideration”). We paid $100.0 million of the aggregate purchase price upon closing, consisting of a $50.0 million escrow deposit and $50.0 million from a financing arrangement. We also paid approximately $8.6 million of CartiHeal’s transaction-related fees and expenses and deferred $215.0 million (“Deferred Amount”) of the aggregate purchase price otherwise due at closing until the earlier of the achievement of certain milestones or the occurrence of certain installment payment dates. We recognized a gain of $23.7 million due to the change in fair value of our equity method investment in CartiHeal as a result of the purchase during the third quarter of 2022. The gain was recognized in other income within the consolidated statement of operations and comprehensive loss.

We previously entered into an Option and Equity Purchase Agreement with CartiHeal (“Option Agreement”) in July 2020. The Option Agreement provided us with an exclusive option to acquire 100% of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain conditions. In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for the Agili-C implant. In order to preserve our Call Option, in accordance with the Option Agreement and upon approval of the Board of Directors (“BOD”), we deposited $50.0 million into escrow in August 2021 for the potential acquisition of CartiHeal.

In April 2022, we exercised our Call Option to acquire all of the remaining shares of CartiHeal, excluding shares we already owned. Our decision to exercise the Call Option followed the FDA’s March 29, 2022 premarket approval of CartiHeal’s Agili-C implant. On June 17, 2022, the Company entered into an amendment to the Option Agreement with CartiHeal (“CartiHeal Amendment”) and Elron Ventures Limited, in its capacity as the shareholder representative, that provided for deferred payment of the consideration for CartiHeal to be paid in multiple tranches, one of which was $50.0 million due upon the earliest to occur — the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023.

~~Pursuant to the CartiHeal Amendment, we agreed to pay interest on each tranche of the Deferred Amount at a rate of 8.0% annually, until such tranche is paid.~~

The First Paper Milestone under the Option Agreement occurred on February 13, 2023, triggering our obligation to make the first $50.0 million payment, plus applicable interest, under the Option Agreement.

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On February 27, 2023, we entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”). Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10.0 million and (ii) a one-time non-refundable payment of $0.2 million to Elron to be used in accordance with the expense fund provisions of the Option Agreement. The Interim Period expired on March 29, 2023 and we did not exercise our right to extend the Interim Period. In addition, the Parties mutually released any further claims under the Option Agreement and related transaction documents, including without limitation a release by the Former Securityholders of any rights to enforce the provisions of the Option Agreement or make further monetary claims against us and/or our respective affiliates and representatives.

Upon execution of the Settlement Agreement, we transferred 100% of our shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders. We had no ownership interest and no voting rights during the Interim Period. We have concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, have deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023. We treated the Disposal as a discontinued operation. The loss upon disposal totaled $60.6 million and was recorded within loss from discontinued operations, net.

Amended 2019 Credit Agreement

On July 11, 2022, we amended our Credit and Guaranty Agreement, dated as of December 6, 2019 (as amended on October 29, 2021 and July 11, 2022, the “Amended 2019 Credit Agreement”) in conjunction with the CartiHeal Acquisition to, among other things, provide for an $80.0 million term loan facility (“Term Loan Facility”). On March 31, 2023,January 18, 2024, we further amended ~~our Amended~~the 2019 Credit Agreement in order to ~~among other things,~~ modify certain financial ~~covenant provisions, waive~~covenants under the ~~noncompliance at December 31, 2022 and increase the applicable interest rate.~~2019 Credit Agreement. Refer to ~~Liquidity and Capital Resources—Credit Facilities~~Part I. Item 1. Financial Information—Notes to the consolidated condensed financial statements—Note 4. Financial instruments for further ~~information.~~

~~B.O.N.E.S. Trial~~

~~We submitted a premarket approval (“PMA”) supplement to~~information regarding 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. In December 2021, we completed the follow-up of all patients in the scaphoid B.O.N.E.S. study. In October 2022, we elected to withdraw our PMA submission on metatarsal fractures. Presently, we are in the process of finalizing our PMA supplement for the scaphoid indication. In the scaphoid study analysis plan, the applicable feedback received from the FDA in the prior metatarsal submission was applied prospectively and as such we believe this second filing will address the FDA’s concerns on the study design. Assuming positive outcome with the FDA of the scaphoid review, we would consider resubmitting the metatarsal data at a later date. We can, however, give no assurance that the scaphoid review will be accepted by the FDA or, if accepted, that we will be able to resolve the deficiencies in the PMA supplements identified by the FDA in a timely manner, or at all. Consequently, the FDA’s decision on the PMA supplements might be delayed beyond the time originally anticipated. Moreover, if our responses do not satisfy the FDA’s concerns, the FDA might not approve our PMA supplements seeking to expand the indications for use of EXOGEN in scaphoid and metatarsal fractures as proposed.

~~MOTYS Update~~

During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our 2021 and 2022 acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We incurred $0.3 million and $1.2 million, respectively, during the three and six months ended July 1, 2023 related to MOTYS. We expect to incur up to $0.5 million in remaining expenditures.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 it pursuant to the newly adopted reporting obligations to adjust the Medicare payment to healthcare providers using our Durolane and Gelsyn-3 products.

~~Table of Content~~s

Results of Operations

For a description of the components of our results of operations, refer to Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2022~~2023 10-K.

The following table sets forth components of our ~~condensed~~ consolidated condensed statements of operations as a percentage of net sales for the periods presented:


		Three Months Ended				Six Months Ended
		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
	Three Months Ended														Three Months Ended
	March 30, 2024												March 30, 2024			April 1, 2023
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%		100.0	%
Cost of sales (including depreciation and amortization)	Cost of sales (including depreciation and amortization)	35.0	%	31.1	%	36.3	%	33.1	%	Cost of sales (including depreciation and amortization)	31.7	%		37.9	%
Gross profit	Gross profit	65.0	%	68.9	%	63.7	%	66.9	%	Gross profit	68.3	%		62.1	%
Selling, general and administrative expense	Selling, general and administrative expense	54.6	%	64.0	%	60.8	%	68.2	%	Selling, general and administrative expense	60.6	%		67.9	%
Research and development expense	Research and development expense	2.4	%	4.5	%	2.8	%	5.2	%	Research and development expense	2.0	%		3.2	%
Restructuring costs	Restructuring costs	0.5	%	0.7	%	0.4	%	0.6	%	Restructuring costs	—	%		0.3	%
Change in fair value of contingent consideration	Change in fair value of contingent consideration	0.2	%	0.2	%	0.2	%	0.2	%	Change in fair value of contingent consideration	0.2	%		0.2	%
Depreciation and amortization	Depreciation and amortization	1.7	%	1.9	%	1.7	%	2.3	%	Depreciation and amortization	1.4	%		1.8	%
Impairment of assets	Impairment of assets	—	%	—	%	30.7	%	—	%	Impairment of assets	—	%		66.0	%
Loss on disposal of a business		0.7	%	—	%	0.4	%	—	%

Operating income (loss)	Operating income (loss)	4.9	%	(2.4	%)	(33.3	%)	(9.6	%)

Operating income (loss)

Operating income (loss)											4.1	%		(77.3	%)

Table of Contents

The following table presents a reconciliation of net loss to Adjusted EBITDA for the periods presented:


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended
(in thousands)	(in thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(in thousands)	March 30, 2024	April 1, 2023
Net loss from continuing operations	Net loss from continuing operations	$	(4,731)	$	(7,734)	$	(104,749)	$	(22,139)
Interest expense, net	Interest expense, net	10,587		2,578		20,281		1,028
Income tax expense (benefit), net	Income tax expense (benefit), net	381		1,244		235		(3,888)
Depreciation and amortization(a)	Depreciation and amortization(a)	14,600		12,384		31,073		24,863
Acquisition and related costs(b)	Acquisition and related costs(b)	1,448		5,994		2,623		13,972
Shareholder litigation costs(c)
Restructuring and succession charges~~(c)~~(d)	Restructuring and succession charges~~(c)~~(d)	620		1,695		937		2,272
Equity compensation~~(d)~~(e)	Equity compensation~~(d)~~(e)	(2,732)		4,616		(886)		9,505
Financial restructuring costs~~(e)~~(f)	Financial restructuring costs~~(e)~~(f)	1,257		—		6,587		—
Impairment of assets~~(f)~~(g)	Impairment of assets~~(f)~~(g)	—		—		78,615		—
Loss on disposal of a business(g)		977		—		977		—

Other items(h)

Other items(h)

Other items(h)	Other items(h)	5,751		1,552		9,416		3,888
Adjusted EBITDA	Adjusted EBITDA	$	28,158	$	22,329	$	45,109	$	29,501

(a)Includes for the three months ended ~~July~~March 30, 2024 and April 1, 2023, ~~and July 2, 2022 and six months ended July 1, 2023 and July 2, 2022,~~ respectively, depreciation and amortization of ~~$12,301, $9,684, $26,640~~$10,025 and ~~$18,902~~$14,339 in cost of sales and ~~$2,299, $2,700, $4,433~~$1,760 and ~~$5,961~~$2,134 in operating expenses presented in the consolidated condensed statements of operations and comprehensive loss.

(b)Includes acquisition and integration costs related to completed acquisitions ~~amortization of inventory step-up associated with acquired entities,~~ 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 result of adopting restructuring plans to reduce headcount, reorganize management structure, and to consolidate certain facilities.

~~(d)~~(e)Includes compensation expense resulting from awards granted under our equity-based compensation plans. ~~The three and six months ended July 1, 2023 includes the reversal of equity compensation expenses totaling $3.8 million related to the transition of our executive leadership.~~

~~(e)~~(f)Financial ~~Restructuring~~restructuring costs ~~which~~ include advisory fees and debt amendment related costs.

~~(f)~~(g)Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to our decision to divest the business.

~~(g)Represents the loss on the disposal of the Wound Business.~~

~~Table of Content~~s

(h)Other items primarily includes charges associated with strategic transactions, such as potential acquisitions or divestitures ~~incremental one-time consulting costs related~~and a transformative project to ~~the recertification of certain products to comply with the new~~redesign systems and extensive EU MDR requirements, and costs attributable to MOTYS. During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS, to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions. We incurred $0.3 million and $1.2 million, respectively, during the three and six months ended July 1, 2023 related to MOTYS. We expect to incur up to $0.5 million in remaining expenditures. Other items for three and six months ended July 1, 2023 also includes severance costs totaling $2.3 million related to the transition of executive leadership.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 that management uses as a measure of operating performance as well as for planning purposes, including the preparation of our annual operating budget and financial projections. We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We define Adjusted EBITDA as net 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, ~~impairments on goodwill,~~certain shareholder litigation costs, impairments of assets, restructuring and succession charges, equity compensation expense, financial restructuring costs ~~loss on disposal of a business~~ and other 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 primarily based on a ratio of net sales by segment to total consolidated net sales.

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 ~~Form10-Q,~~Form 10-Q, including ~~in the table above,~~all tables referencing Adjusted EBITDA to its most directly comparable U.S. GAAP measure.

~~Net sales~~

Three Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
U.S.
Pain Treatments $ 55,617 $ 58,055 $ (2,438) (4.2 %)
Restorative Therapies 31,844 35,433 (3,589) (10.1 %)
Surgical Solutions 33,386 32,822 564 1.7 %
Total U.S. net sales 120,847 126,310 (5,463) (4.3 %)
International
Pain Treatments 6,024 5,859 165 2.8 %
Restorative Therapies 4,774 4,469 305 6.8 %
Surgical Solutions 5,424 3,693 1,731 46.9 %
Total International net sales 16,222 14,021 2,201 15.7 %
Total net sales $ 137,069 $ 140,331 $ (3,262) (2.3 %)

~~U.S.~~

Net sales decreased $5.5 million, or 4.3%, changes by vertical were: (i) Pain Treatments—$2.4 million decrease due to the decline in our selling price, resulting from the impact of lower reported average selling price (“ASP”), leading to lower reimbursement levels, partially offset with an increase in sales volume; (ii) Restorative Therapies—$3.6 million net sales decrease primarily due to the divestiture of the Wound Business, partially offset with net volume growth; and (iii) Surgical Solutions—$0.6 million net sales increase primarily due to volume growth.

3222

Table of ~~Content~~sContents

~~International~~Net Sales

~~Net sales increased $2.2 million, or 15.7%, primarily due to an increase in sales volume within our Surgical Solutions vertical.~~


		Six Months Ended				Change
	Three Months Ended																			Three Months Ended										Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)		March 30, 2024						April 1, 2023							$						%
U.S.	U.S.
Pain Treatments
Pain Treatments
Pain Treatments	Pain Treatments	$	96,612	$	105,929	$	(9,317)	(8.8	%)	$	50,637			$		$	40,995			$			$	9,642			23.5			23.5		%
Restorative Therapies	Restorative Therapies	64,332		64,379		(47)		(0.1	%)	Restorative Therapies		25,304			30,776				30,776			(5,472)					(5,472)		(17.8					(17.8	%)
Surgical Solutions	Surgical Solutions	63,881		60,083		3,798		6.3	%	Surgical Solutions		38,340			32,207				32,207			6,133					6,133		19.0					19.0	%
Total U.S. net sales	Total U.S. net sales	224,825		230,391		(5,566)		(2.4	%)	Total U.S. net sales		114,281			103,978				103,978			10,303					10,303		9.9					9.9	%

International	International
International
International
Pain Treatments
Pain Treatments
Pain Treatments	Pain Treatments	11,355		10,038		1,317		13.1	%	6,052				5,331			5,331				721				721			13.5				13.5		%
Restorative Therapies	Restorative Therapies	10,388		9,883		505		5.1	%	Restorative Therapies		5,170			5,549				5,549			(379)					(379)		(6.8					(6.8	%)
Surgical Solutions	Surgical Solutions	9,560		7,309		2,251		30.8	%	Surgical Solutions		3,954			4,201				4,201			(247)					(247)		(5.9					(5.9	%)
Total International net sales	Total International net sales	31,303		27,230		4,073		15.0	%	Total International net sales		15,176			15,081				15,081			95					95		0.6					0.6	%

Total net sales	Total net sales	$	256,128	$	257,621	$	(1,493)	(0.6	%)
Total net sales
Total net sales												$	129,457					$	119,059						$	10,398					8.7		%

U.S.

Net sales ~~decreased $5.6~~increased $10.3 million, or ~~2.4%~~9.9%, compared to the prior year period. Changes by ~~vertical~~business were: (i) Pain Treatments—$~~9.3~~9.6 million increase due to volume; (ii) Restorative Therapies—$5.5 million decrease due to the decline in our selling price, resulting from the impact of lower reported ASP thereby generating lower reimbursement levels, partially offset with an increase in sales volume; (ii) Restorative Therapies—the nominal change is the result of net volume growth offset with the divestiture of our Wound ~~Business;~~Business, partially offset with a volume increase for our Exogen Bone Stimulation System; and (iii) Surgical Solutions—$~~3.8~~6.1 million ~~net sales~~ increase due to volume growth.

International

Net sales ~~increased $4.1 million, or 15.0%, due to sales volume growth across all verticals.~~remained consistent with the prior year comparable period.

Gross profit and gross margin


		Three Months Ended				Change
	Three Months Ended															Three Months Ended								Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023					$						%
U.S.	U.S.	$	79,549	$	87,331	$	(7,782)	(8.9	%)	U.S.	$	79,368	$	$	65,506		$		$	13,862		21.2				21.2	%
International	International	9,574		9,323		251		2.7	%	International	9,012		8,413		8,413			599			599		7.1				7.1	%
Total	Total	$	89,123	$	96,654	$	(7,531)	(7.8	%)	Total	$	88,380	$	$	73,919		$		$	14,461		19.6				19.6	%


		Three Months Ended
		July 1, 2023		July 2, 2022		Change
	Three Months Ended														Three Months Ended
	March 30, 2024										March 30, 2024			April 1, 2023				Change
U.S.	U.S.	65.8	%	69.1	%	(3.3	%)	U.S.	69.4	%		63.0	%			6.4	%
International	International	59.0	%	66.5	%	(7.5	%)	International	59.4	%		55.8	%			3.6	%
Total	Total	65.0	%	68.9	%	(3.9	%)	Total	68.3	%		62.1	%			6.2	%

U.S.

Gross profit ~~decreased $7.8~~increased $13.9 million, or 8.9%, due to lower ASP within our Pain Treatments vertical and increased amortization, partially offset with an increase in sales within Surgical Solutions. Gross margin decreased due to lower selling prices and product mix.

~~Table of Content~~s

~~International~~

~~Gross profit increased $0.3 million, or 2.7%~~21.2%, primarily due to volume growth in Pain Treatments, Surgical Solutions and our Exogen Bone Stimulation System, partially offset by the ~~increase in net sales.~~Wound Business divestiture. Gross margin ~~decreased~~increased due to product mix.

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
U.S. $ 145,055 $ 154,947 $ (9,892) (6.4 %)
International 17,987 17,409 578 3.3 %
Total $ 163,042 $ 172,356 $ (9,314) (5.4 %)

Six Months Ended
July 1, 2023 July 2, 2022 Change
U.S. 64.5 % 67.3 % (2.8 %)
International 57.5 % 63.9 % (6.5 %)
Total 63.7 % 66.9 % (3.1 %)

~~U.S.~~

Gross profit decreased $9.9 million, or 6.4%, primarily due to the decrease in selling price within the Pain Treatments vertical and an increase in amortization in cost of sales. Gross margin decreased primarily due to product mix and decrease in selling prices. This decline was partially offset with a 2.5% margin impact from the amortization of acquisition related assets in 2022 compared with 2023.

International

Gross profit increased $0.6 million, or ~~3.3%~~7.1%, primarily due to ~~the increase~~volume growth in ~~net sales.~~Pain Treatments. Gross margin ~~decreased~~increased due to product mix.

Selling, general and administrative expense


		Three Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Selling, general and administrative expense	Selling, general and administrative expense	$	74,844	$	89,620	$	(14,776)	(16.5	%)	Selling, general and administrative expense	$	78,406	$	$	80,858		$	$	(2,452)	(3.0			(3.0	%)

Table of Contents

Selling, general and administrative expenses decreased ~~$14.8~~$2.5 million, or ~~16.5%~~3.0%, primarily due to a ~~decrease~~decline in ~~equity-based compensation~~consulting expenses of $7.0 million ~~resulting from employee turnover~~ and the decline in stock price and cost saving initiatives, including: (i) a decrease of $2.6 million in other administrative and marketing-related costs; (ii) a decrease in travel related expenses of $2.0 million; (iii) a decline of $1.8 million in bad debt ~~due to increased collections and efficiencies from integration efforts; and (iv) a decrease in compensation related expenses~~ of ~~$1.0~~$2.1 million.

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Selling, general and administrative expense $ 155,702 $ 175,744 $ (20,042) (11.4 %)

Selling, general and administrative expenses decreased $20.0 million, or 11.4%, primarily due to a decrease in equity-based compensation of $9.7 million resulting from employee turnover and the decline in stock price and cost saving initiatives, including: (i) a decline in compensation related expenses of $5.6 million; (ii) a decrease of $4.4 million in other administrative and marketing related costs; (iii) a decrease in travel related expenses of $3.0 million; (iv) a decline of $1.9 million in bad debt due to increased collections and efficiencies from integration efforts; and (v) a decrease of $1.0 million in corporate and employee health insurance. These decreases were partially offset with ~~an increase in consulting expenses~~increases in: (i) compensation-related costs of ~~$4.7 million~~$4.3 million; (ii) equity-based compensation costs of $1.3 million; and ~~an increase in audit~~(iii) corporate and ~~legal fees~~employee health insurance of ~~$1.3~~$1.0 million.

Research and development ~~expenses~~expense


		Three Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Research and development expense	Research and development expense	$	3,398	$	6,366	$	(2,968)	(46.6	%)	Research and development expense	$	2,597	$	$	3,771		$	$	(1,174)	(31.1			(31.1	%)

Research and development expense decreased by ~~$3.0~~$1.2 million, or ~~46.6%~~31.1%, primarily due ~~to: (i) a $1.8 million decline in consulting costs; (ii)~~to a decrease of ~~$0.4~~$0.7 million in ~~supplies expense due to cost reduction efforts;~~consulting costs and ~~(iii) a decline of $0.4~~$0.6 million in equity-based ~~compensation resulting from employee turnover and the decline in stock price.~~

~~Table of Content~~s

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Research and development expense $ 7,169 $ 13,294 $ (6,125) (46.1 %)

Research and development expense decreased by $6.1 million, or 46.1%, primarily due to: (i) a decrease of $3.1 million in consulting costs; (ii) a decline in $1.1 million in compensation related expenses due to restructuring and cost reduction efforts; (iii) a decline of $0.8 million in supplies expense due to cost reduction efforts; and (iv) a decrease in equity-based compensation of $0.7 million due to employee turnover and our declining stock price.compensation.

Restructuring costs


		Three Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Restructuring costs	Restructuring costs	$	620	$	1,007	$	(387)	(38.4	%)	Restructuring costs	$	—	$	$	317		$	$	(317)	(100.0			(100.0	%)

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Restructuring costs $ 937 $ 1,584 $ (647) (40.8 %)

~~Restructuring costs for~~The Company’s previously announced restructuring plans were completed in 2023. Costs incurred during the ~~three and six months ended July 1,~~first quarter of 2023 ~~included costs incurred as a~~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. Restructuring costs for the three and six months ended July 2, 2022 were incurred as a result of restructuring plans for recently acquired businesses to reduce headcount and to reorganize management structure for acquired businesses.

Change in fair value of contingent consideration

Three Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Change in fair value of contingent consideration $ 240 $ 273 $ (33) (12.1 %)


		Six Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Change in fair value of contingent consideration	Change in fair value of contingent consideration	$	527	$	542	$	(15)	(2.8	%)	Change in fair value of contingent consideration	$	295	$	$	287		$	$	8	2.8			2.8	%

The fair value of contingent consideration during the three ~~and six~~ months ended ~~July 1, 2023~~March 30, 2024 remained consistent with the prior year comparable period. The activity for both periods relates to contingent consideration associated with the acquisition of Bioness in March 2021.

Depreciation and amortization
Three Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Depreciation and amortization $ 2,294 $ 2,696 $ (402) (14.9 %)


		Six Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Depreciation and amortization	Depreciation and amortization	$	4,423	$	5,950	$	(1,527)	(25.7	%)	Depreciation and amortization	$	1,755	$	$	2,129		$	$	(374)	(17.6			(17.6	%)

Depreciation and amortization decreased during the three ~~and six~~ months ended ~~July 1, 2023~~March 30, 2024 compared with the prior year ~~periods.~~comparable period. The decrease was primarily ~~due to: (i) certain customer relationship~~the result of the impairment of intellectual property intangible assets ~~which became fully amortized and lower amortization expense in 2023 as certain intangibles were impaired resulting from the evaluation of~~associated with the Wound Business, which was ~~sold~~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.

~~Table of Content~~s

~~Loss on disposal of a business~~

~~The loss on disposal of a business during the three and six months ended July 1, 2023 resulted from working capital adjustments relating to the sale of our Wound Business.~~

Other expense (income)


		Three Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
Interest expense, net	Interest expense, net	$	10,587	$	2,578	$	8,009	NM		Interest expense, net	$	10,339	$	$	9,694		$	$	645	6.7			6.7		%
Other expense (income) (NM = Not Meaningful)		$	513	$	604	$	(91)	(15.1	%)
Other expense (income)										Other expense (income)	$	63		$	(1,588)			$	1,651			(104.0		%)

Interest expense, net increased ~~$8.0 million due to: (i) an increase in interest of $4.6~~$0.6 million due to slightly higher interest ~~rates; (ii) an increase of $2.3~~rates partially offset with a decrease in outstanding debt. Other expense (income) decreased $1.7 million due to ~~higher margin rates; and (iii) an increase of $0.7 million on~~ the additional debt used to partially fund the CartiHeal Acquisition. These changes were partially offset by $0.3 million of interest income from the change in the fair value of our interest rate swap. Other expense remained consistent with the prior year comparable period.

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Interest expense, net $ 20,281 $ 1,028 $ 19,253 NM
Other expense (income) $ (1,075) $ 241 $ (1,316) NM

Interest expense, net increased $19.3 million due to: (i) an increase in interest of $9.5 million from higher interest rates; (ii) the $4.2 million in interest income resulting from the change in the fair value of our interest rate swap in 2022, which was discontinued during the fourth quarter of 2022; (iii) an increase of $3.6 million due to higher margin rates associated with a high leverage ratio; (iv) an increase of $1.2 million on additional debt used to partially fund the acquisition of CartiHeal and (v) an increase of $0.6 million for interest on our revolving credit borrowings. Other expense (income) increased $1.3 million due to the2023 receipt of $1.5 million from the settlement of a legal claim.

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Income tax expense (benefit), net

Three Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Income tax expense, net $ 381 $ 1,244 $ (863) (69.4 %)
Effective tax rate 8.8 % 18.4 % (9.6) %


	Three Months Ended						Change
(in thousands, except for percentage)	March 30, 2024			April 1, 2023			$		%
Income tax expense (benefit), net	$	907		$	(146)		$	1,053	NM
Effective tax rate (NM = Not Meaningful)	17.9		%	0.1		%			17.7	%

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Income tax expense (benefit), net $ 235 $ (3,888) $ 4,123 (106.0 %)
Effective tax rate 0.2 % 14.6 % (14.4) %

~~Changes~~Income tax expense was incurred for the three ~~and six~~ months ended ~~July 1, 2023~~March 30, 2024 compared to a benefit in the prior year comparable ~~periods were~~period primarily due to an increase in ~~the valuation allowance applied to our net deferred tax assets.~~

~~Table of Content~~s

taxable income in certain entities.

Noncontrolling interest

Three Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Continuing LLC Owner $ 1,050 $ 545 $ 505 92.7 %
Other noncontrolling interest — 217 (217) (100.0 %)
Total $ 1,050 $ 762 $ 288

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
Continuing LLC Owner $ 36,347 $ 3,956 $ 32,391 NM
Other noncontrolling interest — 335 (335) (100.0 %)
Total $ 36,347 $ 4,291 $ 32,056

Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC in which we ~~own~~owned 80.1% and 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 noncontrolling interest representing the ~~20.1%~~19.9% that is owned by the Continuing LLC Owner. Noncontrolling interest activity during the ~~six~~three months ended ~~July 1, 2023~~March 30, 2024 was the result of ~~the large~~ losses recorded.

Segment Adjusted EBITDA

~~Adjusted EBITDA for each of our reportable segments is as follows:~~


		Three Months Ended				Change
	Three Months Ended															Three Months Ended					Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)	March 30, 2024			April 1, 2023				$				%
U.S.	U.S.	$	24,712	$	19,489	$	5,223	26.8	%	U.S.	$	19,756	$	$	14,712		$	$	5,044	34.3			34.3	%
International	International	$	3,446	$	2,840	$	606	21.3	%	International	$	2,867	$	$	2,239		$	$	628	28.0			28.0	%

U.S.

Adjusted EBITDA increased ~~$5.2~~$5.0 million, or ~~26.8%~~34.3%, primarily due ~~to cost saving initiatives, including a decrease in administrative, compensation and travel related expenses,~~higher gross profit, partially offset with ~~a decline~~an increase in ~~gross profit.~~compensation costs and other administrative expenses.

International

Adjusted EBITDA increased $0.6 million, or ~~21.3%~~28.0%, primarily due to ~~cost saving initiatives and the increase in gross profit.~~

Six Months Ended Change
(in thousands, except for percentage) July 1, 2023 July 2, 2022 $ %
U.S. $ 39,424 $ 24,328 $ 15,096 62.1 %
International $ 5,685 $ 5,173 $ 512 9.9 %

~~U.S.~~

Adjusted EBITDA increased $15.1 million, or 62.1%, primarily due cost saving initiatives, including a decrease in compensation related charges and declines in administrative and travel expenses as previously discussed partially offset with lower gross profit.

~~International~~

~~Adjusted EBITDA increased $0.5 million, or 9.9%, primarily due to cost saving initiatives and~~ the increase in gross 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.

~~Table of Content~~s

We have implemented previously announced restructuring initiatives to enhance our current financial position and sources of liquidity. These restructuring efforts are expected to result in $9.0 million to $10.0 million in cost savings on an annualized basis upon completion. Refer to ~~Item 1. Financial Information—Notes to the unaudited consolidated condensed financial statements—Note 9. Restructuring costs~~ ~~for further details regarding these cost cutting efforts.~~

As previously discussed, on May 22, 2023, we closed the sale of our Wound Business for consideration of ~~$84.9~~$84.7 million, including ~~$34.9~~$34.7 million at closing, $5.0 million deferred for 18 months and up to $45.0 million in potential earn-out payments. The proceeds were used to prepay $30.0 million of long-term debt principal ~~obligations.~~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 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 ~~recently~~ 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 payment obligations and might 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, it might be necessary to relinquish valuable rights to our products, future revenue streams or product candidates, or to grant licenses on terms that might not be favorable to us. 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 might have a negative impact on our financial condition and our ability to pursue our business strategies.

~~Going Concern~~

~~The accompanying unaudited consolidated financial statements~~ Considering recent market conditions and our business assumptions, we have ~~been prepared under the going concern basis of accounting, which presumes~~reevaluated our operating cash flows and cash requirements and believe that ~~the Company’s liquidation is not imminent; however, based on the Company’s current financial position and liquidity sources, including~~ current cash, ~~balances, and forecasted~~cash equivalents, future cash flows ~~the Company is at risk of violating certain of its financial covenants~~from operating activities and cash available under ~~the Amended~~our 2019 Credit ~~Agreement.~~

The Company is actively pursuing plans to mitigate these conditions and events, such as considering various additional cost cutting measures, and exploring additional divestiture opportunities such as the recently completed divestiture of its Wound Business; however, there can be no assurances that it is probable these plansFacility will be ~~successfully implemented or that they will successfully mitigate these conditions~~sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and ~~events. Therefore, these plans do not alleviate~~contractual obligations for at least 12 months from the ~~substantial doubt about the Company’s ability to continue as a going concern.~~

~~For example, as a part~~issuance date of efforts to improve our financial condition, on February 27, 2023, we reached an agreement to return the assets and liabilities of CartiHeal (2009) Ltd. (“CartiHeal”), a wholly-owned subsidiary of the Company, to its former securityholders. The deconsolidation of CartiHeal relieved deferred consideration liabilities and milestone obligations related to the acquisition of CartiHeal. See Strategic Transactions – CartiHeal above as well as ~~Item 1. Financial Information—Notes to~~ the unaudited consolidated condensed financial ~~statements—Note 3. Acquisitions and divestitures~~ for further information regarding the acquisition and subsequent deconsolidation of CartiHeal. In addition, we announced a restructuring plan in December 2022 to align our organizational and management cost structure to improve profitability and cash flow. Refer to ~~Item 1. Financial Information—Notes to the unaudited consolidated condensed financial statements—Note 9. Restructuring costs~~ ~~for further information.~~

If mitigating steps are not taken or are not successful, we are at substantial risk of failing to comply with the financial covenants in the Amended 2019 Credit Agreement in 2024. A breach of a financial covenant under the Amended 2019 Credit Agreement could accelerate repayment of our obligations under the agreement. Refer to ~~Item 1. Financial Information—Notes to the unaudited consolidated condensed financial statements—Note 4. Financial instruments~~ ~~for further discussion concerning the Company’s long-term debt obligations.~~statements included herein.

Cash ~~requirements~~Requirements

There have been no material changes to our future cash requirements as disclosed in Part II. Item 7 of our ~~2022~~2023 10-K.

We enter into contracts in the normal course of business with various ~~third-parties~~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 date of cancellation. Certain agreements include contingent events that upon occurrence would require payment. 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.

~~Table of Content~~s

Tax Receivable Agreement

The BV LLC Agreement provides for the payment of certain distributions to the Continuing LLC Owner in amounts sufficient to cover the income taxes imposed with respect to the allocation of taxable income from BV LLC as well as obligations within the tax receivable agreement (“TRA”) with the Continuing LLC Owner. 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

~~We were not in compliance with certain financial covenants in~~On January 18, 2024 (the “Closing Date”), the Company entered into the Amended 2019 Credit Agreement as of December 31, 2022. As a result, on March 31, 2023 (the “Closing Date”), we entered into another amendment to the Amended 2019 Credit Agreement to, among other things, modify certain financial covenants, waive the noncompliance at December 31, 2022, and to modify interest rates applicable to borrowings under the 2019 Credit Agreement.

The Amended 2019 Credit Agreement, ~~as most recently amended,~~ 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 ~~June 30, 2024,~~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 ~~$10,000~~$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.

~~During January and February 2023,~~ We were in compliance with the ~~Company borrowed $49.0 million on its Revolver for working capital needs. However, on the Closing Date of the March 2023 amendment to~~financial covenants as stated with the Amended 2019 Credit Agreement as ~~part~~ of ~~the closing conditions, the Company repaid $20.0~~March 30, 2024.

We have an outstanding Revolver balance of $15.0 million as of ~~these borrowings~~March 30, 2024, which was borrowed and used for working capital needs during the ~~first~~third quarter of 2023. An additional $22.0 million was repaid during the second quarter of 2023. Additionally, the Company paid $1.3 million in closing fees, and will be required to pay an additional $0.6 million by December 31, 2023 unless the Total Net Leverage Ratio as at September 30, 2023 is below 5.25 to 1.00.

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—Note~~contingencies and —Note 3. Acquisitions and divestitures of this Quarterly Report on Form 10-Q.

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Information regarding cash flows

Cash, cash equivalents and restricted cash as of ~~July 1, 2023~~March 30, 2024 totaled ~~$29.4~~$25.2 million, compared to ~~$30.2~~$37.0 million as of December 31, ~~2022.~~2023. The decrease in cash was primarily due to the following:


		Six Months Ended				Change
	Three Months Ended																			Three Months Ended										Change
(in thousands, except for percentage)	(in thousands, except for percentage)	July 1, 2023		July 2, 2022		$		%		(in thousands, except for percentage)		March 30, 2024						April 1, 2023							$						%
Cash flows from continuing operations:	Cash flows from continuing operations:
Net cash from operating activities
Net cash from operating activities
Net cash from operating activities	Net cash from operating activities	$	15,454	$	(18,080)	$	33,534	(185.5	%)	$	(6,005)			$		$	4,659			$			$	(10,664)			(228.9			(228.9		%)
Net cash from investing activities	Net cash from investing activities	29,940		(56,699)		86,639		(152.8	%)	Net cash from investing activities		(1,000)			(3,560)				(3,560)			2,560					2,560		(71.9				(71.9	%)
Net cash from financing activities	Net cash from financing activities	(34,868)		16,860		(51,728)		NM		Net cash from financing activities		(4,242)			27,380				27,380			(31,622)					(31,622)		(115.5				(115.5	%)
Net cash from discontinued operations	Net cash from discontinued operations	(13,675)		—		(13,675)		NM		Net cash from discontinued operations		—			(13,675)				(13,675)			13,675					13,675		(100.0				(100.0	%)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	701		(293)		994		NM		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 cash	Net change in cash, cash equivalents and restricted cash	$	(2,448)	$	(58,212)	$	55,764	(95.8	%)	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 infrom operating activities from continuing operations ~~increased $33.5~~decreased $10.7 million, ~~primarily~~due 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 ~~lower employee compensation~~higher interest rates; and ~~a net~~(iii) an increase in ~~collections.~~inventory purchases. These ~~inflows~~operating cash outflows were partially offset with an increase in ~~inventory purchases~~cash collections from the growth in sales and ~~higher interest payments.~~timing of payments on accounts payable.

Investing Activities

Net cash ~~resulting~~ from investing activities from continuing operations increased ~~$86.6~~$2.6 million, ~~primarily~~ due to ~~(i) the $34.9~~a decrease of $3.3 million ~~receipt~~in capital expenditures, primarily within information technology. This was partially offset with $0.7 million purchase of ~~cash resulting from the sale of the Wound Business; (ii) an investing cash outflow of $50.0 million for the investment in CartiHeal during 2022; and (iii) $1.5 million less in other investments and~~ distribution rights ~~in 2023.~~for one of our HA products.

Financing Activities

Cash flows from financing activities decreased ~~$51.7~~$31.6 million, primarily due to ~~(i)~~no new borrowings in 2024 on our revolving credit facility compared to $29.0 million in net borrowings during 2023 and an increase of ~~$29.2~~$3.1 million in debt principal payments; (ii) net revolver credit borrowings of $7.0 million compared to $25.0 million in 2022; (iii) deferred financing payments of $3.7 million attributable to debt refinancing in 2023; and (iv) $4.0 million less proceeds from the issuance of stock. Financing cash outflows in 2023 were partially offset with no tax withholdings on equity based compensation compared to $3.4 million of payments in 2022.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 CartiHeal disposition and $1.4 million in cash held by the CartiHeal entity at the time of disposal.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

There have been no material changes to our contractual obligations as disclosed in our ~~2022 10-K except for financing leases.~~ ~~Finance lease obligations entered into during the six months ended July 1,~~ 2023 resulted from an agreement to lease a facility to expand our manufacturing operations and relocate from our current leased facilities in Memphis, Tennessee. The lease was entered into during November 2021 with occupancy staring in 2023. The lease term is 10 years and payments are as follows for the remainder of 2023—$1.6 million, 2024—$1.6 million, 2025—$1.6 million, 2026—$1.6 million, 2027—$1.7 million and thereafter—$8.6 million.

~~Table of Content~~s

10-K.

Critical Accounting Estimates

Our discussion of operating results is based upon the unaudited consolidated condensed financial statements and accompanying 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 ~~2022~~2023 10-K and we have no material changes ~~from~~to such disclosures.

Recently Issued Accounting Pronouncements

There were no recently issued accounting pronouncements that are expected to materially impact our financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes to our market risks as disclosed in our ~~2022~~2023 10-K.

Item 4. Controls and Procedures.

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 supervision~~including our President and ~~participation of our~~ 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 ~~the~~March 30, 2024 (the end of the period covered by this Quarterly Report on Form ~~10-Q.~~10-Q). Based ~~on this~~upon that evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that, ~~because~~as of ~~ongoing material weaknesses in the Company’s internal control over financial reporting that are not fully remediated as described below, the Company’s~~March 30, 2024, our disclosure controls and procedures ~~were not effective as of July 1, 2023.~~

~~Material Weaknesses in Internal Control over Financial Reporting~~

~~A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is~~are designed at a reasonable ~~possibility~~assurance level and are effective to provide reasonable assurance that ~~a material misstatement of the Company’s annual or interim financial statements will not~~information required to be ~~prevented or detected and corrected on a timely basis.~~

~~Changes in Control Environment~~

In 2022, the Company did not conduct an effective risk assessment to identify and assess changes in its business processes and internal control environment related to newly acquired companies and multiple information technology (“IT”) system implementations that occurred in 2022. Further, there was a lack of adequate personnel resources in accounting, IT and other support functions to support simultaneous system implementations and business process integrations for acquired companies, implement appropriate controls for acquired companies and to maintain focus on compliance with internal controls for legacy Bioventus processes.

In addition, during 2022, the Company saw an unprecedented level of turnover in roles that drive execution of internal control activities. This turnover, paired with business changes, including those related to acquisitions, resulted in a disruption to the effective completion of control activities across a number of business processes. Further, management identified a gap in control design related to sufficient tracking of control performance to ensure controls operated effectively.

~~In considering these breakdowns~~disclosed in the ~~control environment, Bioventus determined~~reports that we file or submit under the ~~associated Committee of Sponsoring Organizations of~~Exchange Act is recorded, processed, summarized and reported within the ~~Treadway Commission (“COSO”) principles requiring further control and action by management to be:~~

~~(a)Control environment - Establishes structure, authority, and responsibility (COSO Principle 3);~~

~~(b)Risk assessment – Identifies and analyzes significant change (COSO Principle 9); and~~

~~(c)Monitoring – Conducts ongoing and /or separate evaluations (COSO Principle 16).~~

~~Table of Content~~s

~~These ongoing control deficiencies have resulted in certain immaterial restatements of the Company’s financial statements as discussed in our Quarterly Reports on Form 10-Q for the~~time periods ~~ended April 1, 2023 and July 1, 2023. When considered~~specified in the aggregate, they continue to create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis. Therefore, management concluded that the deficiencies continue to represent a material weakness in our internal control over financial reporting,SEC’s rules and forms, and that ~~disclosure controls~~such information is accumulated and ~~procedures were not effective as July 1, 2023.~~

~~Remediation Measures~~

~~(a)~~We identified staffing gaps based on employee turnover and integration challenges. Throughout 2022, we hired personnel and temporary resources to backfill positions vacated due to employee turnover and added additional headcount in accounting, finance and IT to expand capacity.

~~(b)~~In the fourth quarter of 2022, we engaged third-party consultants to perform an Accounting Transformation & Integration Assessment (“Project Action”). The Project Action team identified priority initiatives to enhance processes and systems to address inadequate processes, including order to cash, procure to pay and related master data processes. Further, Project Action benchmarked resources for the accounting function.

~~(c)~~As part of Project Action, we are developing mid- to long-term plans to further scale accounting, finance and IT for growth and public company requirements and continue to assess the level of resources that we need. We have implemented certain retention programs to retain key resources.

~~(d)We prioritized key projects and ensured organizational capacity, with only essential IT projects occurring during the year.~~

~~(e)~~We are reinforcing execution rigor and have established recurring metrics regarding internal controls in processes, and are tracking current performance compared with target performance to provide additional visibility to management and the Audit Committee. We have begun further utilizing our systems to automate the tracking of internal control completion.

~~(f)We implemented regular internal control certifications by control owners for all key controls.~~

~~(g)We are driving additional accountability for control owners by tying a portion of their performance objectives to successful completion of internal controls.~~

~~(h)~~We will increase training on internal controls, public company requirements and rigor through additional training requirements for new and existing control owners and tracking compliance to those training requirements.

~~(i)We will update and/or develop standard operating procedures to further document process and control performance for use in day-to-day execution and when training new employees.~~

~~(j)~~Further, we plan to implement a new internal control policy that further defines expectations for internal control performance and communication of changes to financially relevant processes. This policy will require management and internal audit approval before process changes or system implementations go-live.

~~Rebates Accrual Material Weakness~~

As previously reported, we identified a material weakness related to the Company’s internal controls over financial reporting that were not performed at a sufficient level of precision to ensure that the third quarter 2022 rebates accrual was complete and accurate. The process undertaken to estimate the expected reduction in revenue from rebates was consistent with the Company’s historical practice. However, subsequent to the initial calculation of the third quarter 2022 rebates accrual, an unexpectedly large invoice was received and there were not processes in place to ensure it was reviewed timely in order to update the accrual.

The Company reassessed open rebates accruals and the approach for calculating the rebate accruals based on this invoice. The Company revised its estimation methodology resulting in a decrease of revenue of $8.4 million. This adjustment was recorded subsequent to the earnings release but prior to the filing of the Company’s Quarterly Report on Form 10-Q for the third quarter of 2022. Further, this change in revenue projection related to the rebates accrual adjustment for 2022 and cascading effect on future revenue projections materially impacted the Company’s evaluation of its ability to meet debt covenants in its Amended 2019 Credit Agreement, resulting in liquidity and going concern disclosures in the Company’s Quarterly Report on Form 10-Q for the third quarter of 2022.

~~Remediation Measures~~

~~We have designed and implemented new processes and enhanced controls to address the underlying causes of the material weakness related to the rebates accrual, including:~~

•~~Reassessing open rebates accruals and changing the estimation method for calculating the rebates accruals, including enhancing the precision of the controls;~~

~~Table of Content~~s

•~~Implementing enhanced controls and status tracking to ensure that rebates invoices from third-party payers are received and reviewed timely; and~~

•~~Increasing rigor of documenting key conversations with payers.~~

The Company implemented enhanced procedures to ensure the completeness and accuracy of key reports and information used in the rebates accrual and further enhanced the precision of supporting documentation for control performance.

~~We believe the actions described with respect~~communicated to our ~~control environment~~management, including our President and rebates accrual processes will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting. However, the new and enhanced controls have not all been fully implemented and/or have not operated for a sufficient amount of time to conclude that our material weaknesses have been fully remediated. We are continuing to implement and monitor the effectiveness of our controls and will make any further changes management determines appropriate.

~~Notwithstanding the identified material weaknesses above, the~~ Chief Executive Officer and our Chief Financial Officer believe that the financial statements and related financial information included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our balance sheets, statements of operations and comprehensive (loss) income, statement of changes in stockholders’ equity and statements of cash flows as ~~of and for the periods presented.~~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 ~~second~~first quarter of ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting except for changes to controls resulting from the material weaknesses described above.~~reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Bioventus stockholder litigation

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On June 15, 2022, the Company, through its subsidiary Bioness, filed a lawsuit in the United States District Court for the Eastern District of Virginia against Aretech, LLC (“Aretech”) alleging infringement by Aretech of various patents related to our Vector Gait and Safety Support System®. On August 8, 2022, Aretech filed an answer to the lawsuit denying infringement and asserting various affirmative defenses and counterclaims to the Bioness complaint. Bioness filed a motion to dismiss the defendant’s counterclaims on September 28, 2022. In response to Bioness’ motion to dismiss the counterclaims, on October 19, 2022, Aretech filed an amended answer and counterclaims. On November 16, 2022, Bioness filed a partial motion to dismiss certain of the amended counterclaims. On January 23, 2023, the court granted-in-part Bioness’s motion dismissing Aretech’s antitrust and inventorship-related counterclaims, but allowed certain of Aretech’s counterclaims to proceed. On March 23, 2023, the parties entered into a settlement and license agreement that resolved all claims in the litigation. The agreement also provides cross licenses to the parties for certain of their respective patents relevant to the claims asserted in the litigation.

~~Table of Content~~s

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~~Court on April 29, 2022. On July 18, 2022, Cicel voluntarily dismissed the remaining claim for trade secret theft and later filed an appeal into the United States Court of Appeals for the Second Circuit. ~~We believe that we have various legal and factual defenses to these claims and intend to vigorously defend~~On March 6, 2024, the ~~appeal~~Second Circuit Court of Appeals issued its ruling affirming the lower ~~court’s~~Court’s summary ~~judgement rulings in our favor.~~

Prior to the closing of our acquisition of Bioness, Bioness had been named as a defendant in a lawsuit, for which we are indemnified under the indemnification provisions contained in the Bioness Merger Agreement. The case relates to an action brought in February 2021 in the Delaware State Court of Chancery by a former minority shareholder and director 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 approximately $3.0 million in attorney fees and other expenses incurred by the director and shareholder in connection with the matter.

~~On August 19, 2021, the court issued a ruling granting, in part, plaintiff’s motion for summary~~ judgment awarding plaintiff attorney’s fees and related expenses incurred in connection with performance of the plaintiff’s directorial duties, and denying fees and expenses incurred in a non-director capacity. In its ruling, the court’s order also directed the parties to agree upon a process that will govern the payment of and challenges to plaintiff’s payment requests and required Bioness to pay 50% of the demanded amount into escrow if more than 50% of the total invoiced amount was in dispute. Pursuant to the court’s order, Bioness paid approximately $1.3 million into escrow. On November 1, 2022, at a hearing before Delaware State Court of Chancery, the court ruled in favor of ~~the former~~ Misonix in all respects.

Bioness ~~director awarding attorney’s fees in connection with the underlying pre-merger~~stockholder litigation and the advancement action in the amounts claimed, less approximately $0.1 million. On December 23, 2022, Bioness and the plaintiff entered into a settlement agreement resolving the matter for the aggregate sum of $2.5 million payable to the plaintiff. The settlement was satisfied by releasing the $1.3 million previously paid by Bioness and held in escrow and by an additional payment of $1.2 million. Pursuant to the indemnification obligations under the Bioness Merger Agreement, this subsequent payment was made on behalf of Bioness on December 28. 2022, by the selling majority shareholder under that agreement. The Company subsequently recovered the $1.3 million paid into escrow from the selling Bioness shareholders pursuant an indemnification request under the Bioness Merger Agreement. An order dismissing the case was entered by the court on January 27, 2023.

On February 8, 2022, ~~the above referenced~~a minority shareholder of Bioness filed ~~another~~an action in the Delaware State Court of Chancery in connection with ~~our~~the Company’s acquisition of ~~Bioness.~~Bioness, Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness directors, the Alfred E. Mann Trust ~~(Trust)~~(“Trust”), which was the former majority shareholder of Bioness, the trustees of the Trust and Bioventus as defendants. The complaint alleges, among other things, that the individual directors, the Trust, and the trustees breached their fiduciary duty to the plaintiff in connection with their consideration and approval of ~~our~~the Company’s transaction. The complaint also alleges that wethe Company aided and abetted the other defendants in breaching their fiduciary duties to the plaintiff and that wethe Company breached the Merger Agreement by failing to pay the plaintiff its pro rata share of the merger consideration. ~~We believe~~The Company believes that ~~we are~~it is indemnified under the indemnification provisions contained in the Bioness Merger Agreement for these claims. On July 20, 2022, wethe Company filed a motion to dismiss all claims made against usit on various grounds, as did all the other named defendants in the suit. A hearing on ~~the Bioness~~Bioness’ and other the defendant’s motions was held before the Court of Chancery on January 19, 2023. ~~We believe that there are various legal and factual defenses to the claims plaintiff made against us and intend to defend ourselves vigorously.~~ On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case.

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On September 15, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Stein v. Misonix, Inc., et al., Case No. 2:21-cv-05127 (E.D.N.Y.) (the Stein Complaint). The Stein Complaint named Misonix and members of its board of directors as defendants. The Stein Complaint was dismissed on April 6, 2022. On September 16, 2021, a purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Ciccotelli v. Misonix, Inc. et al., Case No. 1:21-cv-07773 (S.D.N.Y.) (the Ciccotelli Complaint) against Misonix, members of its board of directors, the Company, and its subsidiaries, Merger Sub I and Merger Sub II, as defendants. Plaintiff voluntarily dismissed the Ciccotelli Complaint on November 10, 2021. On October 12, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Eastern District of New York, captioned Rubin v. Misonix, Inc. et al., Case No. 1:21-cv-05672 (S.D.N.Y.) (the Rubin Complaint) and on October 15, 2021, another purported stockholder of Misonix filed an action in the United States District Court for the Southern District of New York, captioned Taylor v. Misonix, Inc. et al., Case No. 1:21-cv-08513 (S.D.N.Y.) (the Taylor Complaint). The Rubin Complaint and the Taylor Complaint name Misonix and members of its board of directors as defendants. Plaintiffs voluntarily dismissed the Rubin and Taylor Complaints on January 21, 2022 and February 18, 2022, respectively.

Each of the complaints relating to the Misonix Acquisition asserted claims under Section 14(a) and Section 20(a) of the Exchange Act and SEC Rule 14a-9, challenging the adequacy of disclosures in the proxy statement/prospectus filed with the SEC on September 8, 2021 or the Definitive Proxy Statement filed with the SEC on September 24, 2021, regarding Misonix and/or Bioventus’ projections and J.P. Morgan’s financial analysis. The complaints sought, among other relief, (i) injunctive relief preventing the parties from proceeding with the merger; (ii) rescission in the event that the merger is consummated; and (iii) an award of costs, including attorneys’ and experts’ fees.

On April 28, 2023, Bioventus LLC was named as a defendant in a lawsuit filed in the Durham, North Carolina, Superior Court, Donald Auman v. Bioventus LLC. The complaint alleges that the plaintiff suffered a m~~ethicillin-resistant staphylococcus aureus (MRSA)~~ infection in his left leg after using the coupling gel supplied by the Company for use with its Exogen bone healing device. The complaint also alleges that the Exogen gel used by the plaintiff was the subject of the Company’s recall in December 2020, at which time the Company initiated a voluntary recall of certain lots of the gel supplied by a third-party manufacturer due to concerns that they may have had microbial contamination. The Company is evaluating the allegations in the complaint and intends to defend itself vigorously.

Please refer to ~~Part I.~~ Item 1—1. Financial ~~Information—~~ Statements—Notes to the ~~unaudited consolidated condensed financial statements—~~Consolidated Condensed Financial Statements—Note 11. Commitments and ~~Contingencies~~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 material adverse effect on our consolidated ~~condensed~~ 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 results of operations.

Item 1A. Risk Factors.

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 ~~2022~~2023 10-K, ~~as updated by our subsequent Quarterly Report on Form 10-Q for the quarter ended April 1, 2023,~~ 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 ~~2022 10-K and Quarterly Report on~~2023 Form ~~10-Q for the period ended Apri1 1, 2023.~~10-K.

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Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds, and Issuer Purchases of Equity Securities.

~~Recent Sales of Unregistered Securities~~(a)None.

~~There were no sales of unregistered securities during the three months ended July 1, 2023.~~(b)None.

(c)None.

Item 3. Defaults Upon Senior Securities.

Not Applicable.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

Insider Trading Arrangements

On ~~June 20, 2023,~~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 ~~Retention Awards~~RSUs granted to such officers effective that same day. ~~The~~Each of the aforementioned elections are designed to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

Item 6. Exhibits.

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

Filed / Furnished Herewith

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

Filed / Furnished Herewith

2.1

Asset Purchase Agreement, dated May 10, 2023, by and among Misonix, LLC, Solsys Medical, LLC, Bioventus LLC and LifeNet Health

8-K

001-37844

2.1

5/16/2023

10.1^

Separation Agreement and Release between Kenneth Reali and Bioventus Inc., dated April 4, 2023

8-K

001-37844

10.1

4/5/2023

10.2^

Employment Agreement between Anthony P. Bihl III and Bioventus Inc., dated as of April 5, 2023

8-K/A

001-37844

10.1

4/11/2023

10.3^

Bioventus Inc. 2023 Retention Equity Award Plan

8-K

001-37844

10.1

6/9/2023

10.4^

Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Agreement

8-K

001-37844

10.2

6/9/2023

10.1

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

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

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

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

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.INS

Inline 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

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101.INS

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101.SCH

Inline XBRL Taxonomy Extension Schema Document

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101.SCH

Inline XBRL Taxonomy Extension Schema Document

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101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

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101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

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101.DEF

Inline XBRL Extension Definition Linkbase Document

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101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

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Table of ~~Content~~sContents

Exhibit No.

Description

Form

File No.

Exhibit

Filing Date

Filed / Furnished Herewith

101.DEF

Inline XBRL Extension Definition Linkbase Document

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101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

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101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

** Furnished herewith

*** Submitted electronically herewith

~~^ Indicates management contract or compensatory plan~~

4731

Table of ~~Content~~sContents

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.

~~August 8, 2023~~May 7, 2024						/s/ Mark L. Singleton
Date						Mark L. Singleton
						Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

4832


Three Months Ended July 2, 2022
	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated other comprehensive (loss) income		Accumulated Deficit		Non- controlling interest		Total Stockholders' equity
Balance at April 2, 2022	61,357,270	$	62	15,786,737	$	16	$	476,661	$	(363)	$	(17,879)	$	135,311	$	593,808
Issuance of Class A common stock for equity plans	299,229	2		—	—		2,175		—		—		—		2,177


Net loss	—	—		—	—		—		—		(7,252)		(762)		(8,014)
Change in noncontrolling interest allocation	—	—		—	—		(65)		—		—		65		—
Equity based compensation	—	—		—	—		3,681		—		—		935		4,616
Translation adjustment	—	—		—	—		—		(401)		—		(106)		(507)
Balance at July 2, 2022	61,656,499	$	64	15,786,737	$	16	$	482,452	$	(764)	$	(25,131)	$	135,443	$	592,080


Six Months Ended July 1, 2023
	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated other comprehensive (loss) income		Accumulated Deficit		Non- controlling interest		Total Stockholders' equity
Balance at December 31, 2022	62,063,014	$	62	15,786,737	$	16	$	490,576	$	(110)	$	(165,306)	$	86,984	$	412,222
Issuance of Class A common stock for equity plans	741,492	1		—	—		222		—		—		—		223
Net loss	—	—		—	—		—		—		(142,831)		(36,347)		(179,178)
Change in noncontrolling interest allocation	—	—		—	—		385		—		—		(385)		—
Equity based compensation	—	—		—	—		(585)		—		—		(301)		(886)
Translation adjustment	—	—		—	—		—		765		—		195		960
Balance at July 1, 2023	62,804,506	$	63	15,786,737	$	16	$	490,598	$	655	$	(308,137)	$	50,146	$	233,341


Six Months Ended July 2, 2022
	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated other comprehensive (loss) income		Accumulated Deficit		Non- controlling interest		Total Stockholders' equity
Balance at December 31, 2021	59,548,504	$	59	15,786,737	$	16	$	473,318	$	179	$	(6,602)	$	140,686	$	607,656
Issuance of Class A common stock for equity plans	2,107,995	5		—	—		4,252		—		—				4,257
Deferred taxes on equity rebalancing	—	—		—	—		(1,977)		—		—		—		(1,977)
Net loss	—	—		—	—		—		—		(18,529)		(4,291)		(22,820)
Change in noncontrolling interest allocation	—	—		—	—		2,587		—		—		(2,587)		—
Equity based compensation	—	—		—	—		7,624		—		—		1,881		9,505
Tax withholdings on equity compensation awards	—	—		—	—		(3,352)		—		—		—		(3,352)
Translation adjustment	—	—		—	—		—		(943)		—		(246)		(1,189)
Balance at July 2, 2022	61,656,499	$	64	15,786,737	$	16	$	482,452	$	(764)	$	(25,131)	$	135,443	$	592,080


Consolidated Balance Sheets — December 31, 2022	As Previously Reported		Adjustments		As Adjusted
Deferred income taxes (b)(d)	$	74,138	$	(71,890)	$	2,248
Total liabilities	1,032,317		(71,890)		960,427
Additional paid-in capital (a)(b)(c)(d)	481,919		8,657		490,576
Noncontrolling interest (a)(c)	23,751		63,233		86,984
Total stockholders’ equity	340,332		71,890		412,222


	July 1, 2023		December 31, 2022
Accounts receivable(a)	$	126,777	$	143,317
Less: Allowance for credit losses	(7,141)		(7,022)
	$	119,636	$	136,295


	July 1, 2023		December 31, 2022
Raw materials and supplies(a)	$	26,438	$	19,133
Finished goods	72,347		67,484
Gross	98,785		86,617
Excess and obsolete reserves	(2,509)		(1,851)
	$	96,276	$	84,766


	July 1, 2023		December 31, 2022
Prepaid taxes	$	4,224	$	4,442
Prepaid and other current assets(a)	11,113		14,109
	$	15,337	$	18,551


	July 1, 2023		December 31, 2022
Intellectual property(a)(b)	$	677,258	$	790,049
Distribution rights	61,325		61,325
Customer relationships(b)	57,950		67,450
IPR&D	5,500		5,500
Developed technology and other	13,998		13,998
Total carrying amount	816,031		938,322
Less accumulated amortization:
Intellectual property(a)(b)	(198,141)		(187,767)
Distribution rights	(46,810)		(44,319)
Customer relationships(b)	(57,950)		(58,842)
Developed technology and other	(6,899)		(6,276)
Total accumulated amortization	(309,800)		(297,204)
Intangible assets, net before currency translation	506,231		641,118
Currency translation	(1,008)		(1,267)
	$	505,223	$	639,851


	Number of units	Weighted-average grant-date fair value per unit
Unvested at December 31, 2022	1,189	$	11.96
Granted	1,750	2.04
Vested	(375)	11.24
Forfeited or canceled	(315)	10.46
Unvested at July 1, 2023	2,249	$	4.57


	Employee severance and temporary labor costs		Other charges		Total
Balance at December 31, 2022	$	3,760	$	—	$	3,760
Expenses incurred	745		192		937
Payments made	(2,893)		(192)		(3,085)
Balance at July 1, 2023	$	1,612	$	—	$	1,612