Bioventus Inc. (Nasdaq: BVS) (“Bioventus” or “the Company”), a global leader in innovations for active healing, today reported financial results for three and nine months ended October 2, 2021.
DURHAM, N.C., Nov. 09, 2021 (GLOBE NEWSWIRE) -- BioventusInc. (Nasdaq: BVS) ("Bioventus" or "the Company"), a global leader in innovations for active healing, today reported financial results for three and nine months ended October 2, 2021.
Q3 Financial Summary & Recent Highlights:
- Net Sales of $108.9 million, up $23.0 million, or 26.8%, year-over-year, comprising:
- Net Sales from legacy Bioventus Inc. of $98.1 million, representing organic revenue growth* of 14.2% year-over-year, and
- Net Sales from the acquisition of Bioness Inc. of $10.8 million.
- Net Loss of ($2.3) million, compared to Net Income of $8.0 million in prior year.
- Adjusted EBITDA* of $21.3 million, compared to $23.1 million in prior year.
- Updates full-year 2021 Net Sales guidance to $425-$430 million, up from $405-$415 million, driven by strong Q3 results, Q4 expectations, and the inclusion of the Company's recent acquisition of Misonix Inc.
“During the third quarter, we continued building momentum across our diversified portfolio as the Bioventus team demonstrated strong execution and resiliency, driving double-digit organic growth despite some pandemic related headwinds in our Bone Graft Substitutes business,” stated Ken Reali, Bioventus’ chief executive officer. “The strong performance of our organization has enabled us to again raise our full-year revenue guidance.”
Mr. Reali continued, “We are on-track to complete the integration of Bioness in the first quarter of 2022 and deliver on our cost synergy targets over the course of the next year. Finally, we are excited to have closed our acquisition of Misonix and to welcome the Misonix employees to Bioventus. This is a significant milestone that will enable multiple growth levers within the combined business. Our new Bioventus organization will allow us to go deeper with our customers leveraging our infrastructure and driving significant shareholder value over the near and medium term.”
Third Quarter 2021 Financial Results:
The following table represents net sales by geographic region, and by vertical, for the three months ended October 2, 2021 and September 26, 2020, respectively:
| Three Months Ended | Change | |||||||||||||
| ($ thousands, except for percentage) | October 2, 2021 |
September 26, 2020 |
$ | % | ||||||||||
| By Geographic Region: | ||||||||||||||
| U.S. | $ | 99,162 | $ | 78,886 | $ | 20,276 | 25.7 | % | ||||||
| International | 9,728 | 7,022 | 2,706 | 38.5 | % | |||||||||
| Net Sales | $ | 108,890 | $ | 85,908 | $ | 22,982 | 26.8 | % | ||||||
| By Vertical: | ||||||||||||||
| Pain Treatments and Joint Preservation | $ | 60,635 | $ | 48,781 | $ | 11,854 | 24.3 | % | ||||||
| Restorative Therapies | 30,475 | 20,000 | 10,475 | 52.4 | % | |||||||||
| Bone Graft Substitutes | 17,780 | 17,127 | 653 | 3.8 | % | |||||||||
| Net Sales | $ | 108,890 | $ | 85,908 | $ | 22,982 | 26.8 | % | ||||||
Net sales of $108.9 million compared to $85.9 million for the third quarter of 2020, an increase of $23.0 million, or 26.8%, year-over-year, primarily due to acquisitions, strong commercial execution and ongoing recovery from the COVID-19 pandemic. International net sales for the third quarter of 2021 increased 38.5% year-over-year, or 34.7% on a constant currency* basis.
Gross profit was $79.1 million, or 72.6% of net sales, compared to $62.5 million, or 72.7% of net sales, for the third quarter of 2020, an increase of $16.6 million, or 26.6%, year-over-year. Non-GAAP gross profit* was $85.7 million, or 78.7% of net sales, compared to $67.9 million, or 79.1% of net sales, for the third quarter of 2020, an increase of $17.8 million, or 26.1%, year-over-year.
Operating loss was ($1.0) million, compared to operating income of $6.9 million for the third quarter of 2020, a decrease of ($8.0) million, or (115.1%), year-over-year. Operating margin was (1.0%) of net sales, compared to 8.1% of net sales for the third quarter of 2020.
Non-GAAP operating income* was $15.1 million, compared to $14.7 million for the third quarter of 2020, an increase of $0.3 million, or 2.3%, year-over-year. Non-GAAP operating margin* was 13.8% of net sales, compared to 17.1% of net sales for the third quarter of 2020.
Net Loss was ($2.3) million compared to net income of $8.0 million for the third quarter of 2020, a change of ($10.2) million or (128.5%), year-over-year.
Adjusted EBITDA* was $21.3 million, compared to $23.1 million for the third quarter of 2020, a decrease of ($1.8) million, or (7.7%), year-over-year.
Non-GAAP net income* was $13.8 million, compared to $12.6 million, for the third quarter of 2020, an increase of $1.3 million, or 10.1%, year-over-year.
As of October 2, 2021, the Company had $80.9 million in cash and cash equivalents and $177.4 million in debt obligations, compared to $86.8 million in cash and cash equivalents and $188.4 million in debt obligations as of December 31, 2020.
Updated Full Year 2021 Financial Guidance:
For the twelve months ending December 31, 2021, the Company now expects:
- Net sales of $425 million to $430 million, up approximately 32% to 34% year-over-year. The full year 2021 net sales guidance range is comprised of:
- Net sales from legacy Bioventus Inc. of $378.1 million to $382.1 million, representing organic revenue growth* in the range of approximately 18% to 19% year-over-year, and,
- Net sales from the recent acquisitions of Bioness Inc and Misonix Inc of approximately $46.9 million to $47.9 million.
- Net income of $1.8 million to $3.7 million, compared to net income of $14.7 million for the twelve months ended December 31, 2020.
- Non-GAAP net income* of $72.1 million to $75.6 million, compared to $47.4 million for the twelve months ended December 31, 2020.
- Adjusted EBITDA* of $77.8 million to $82.0 million, compared to $72.4 million for the twelve months ended December 31, 2020.
The Company's guidance reflects its current expectations regarding the impact of COVID-19 on its business. The severity and duration of the COVID-19 pandemic are outside of the Company’s control and, given the uncertain nature of the pandemic, could cause the Company’s future operating results to be different from our current expectations, particularly if the impact of the pandemic worsens.
Presentation: This press release presents historical results, for the periods presented, of Bioventus Inc., including Bioventus LLC, the predecessor of Bioventus Inc. for financial reporting purposes.
Third Quarter 2021 Earnings Conference Call:
Management will host a conference call to discuss the Company’s financial results and provide a business update, with a question and answer session, at 8:30 a.m. Eastern Time on November 9, 2021. Those who would like to participate may dial 844-945-2085 (442-268-1266 for international callers) and provide access code 9652759.
A live webcast of the call and any accompanying materials will also be provided on the investor relations section of the Company's website at https://ir.bioventus.com/.
The webcast will be archived on the Company’s website at https://ir.bioventus.com/ and available for replay until November 8, 2022.
About Bioventus
Bioventus delivers clinically proven, cost-effective products that help people heal quickly and safely. Its mission is to make a difference by helping patients resume and enjoy active lives. The Innovations for Active Healing from Bioventus include offerings for pain treatments, restorative therapies and surgical solutions. Built on a commitment to high quality standards, evidence-based medicine and strong ethical behavior, Bioventus is a trusted partner for physicians worldwide. For more information, visit www.bioventus.com, and follow the Company on LinkedIn and Twitter. Bioventus and the Bioventus logo are registered trademarks of Bioventus LLC.
Legal Notice Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements concerning our business strategy, position and operations; expected sales trends, opportunities and growth; the ongoing COVID-19 pandemic; the expected benefits and impact of Bioventus’ products, including in certain regions, and biologic drug candidates; the benefits of and expected completion of integration efforts for the Bioness and Misonix acquisitions; and the Company’s financial guidance and expected financial performance. 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 inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Factors that could cause actual results to differ materially from those contemplated in this press release include, but are not limited to, statements about the adverse impacts on our business as a result of the COVID-19 pandemic; our dependence on a limited number of products; our ability to develop, acquire and commercialize new products, line extensions or expanded indications; the continued and future acceptance of our existing portfolio of products and any new products, line extensions or expanded indications by physicians, patients, third-party payers and others in the medical community; our ability to differentiate the hyaluronic acid (“HA”) viscosupplementation therapies we own or distribute from alternative therapies for the treatment of osteoarthritic; the proposed down-classification of non-invasive bone growth stimulators, including our Exogen system, by the U.S. Food and Drug Administration ("FDA"); our ability to achieve and maintain adequate levels of coverage and/or reimbursement for our products, the procedures using our products, or any future products we may seek to commercialize, including any potential changes by Centers for Medicare and Medicaid Services in the manner in which our HA viscosupplementation products are reimbursed, our ability to complete acquisitions or successfully integrate new businesses, products or technologies in a cost-effective and non-disruptive manner; including the Misonix acquisition; competition against other companies; the negative impact on our ability to market our HA products due to the reclassification of HA products from medical devices to drugs in the United States by the FDA; our ability to attract, retain and motivate our senior management and qualified personnel; our ability to continue to research, develop and manufacture our products if our facilities are damaged or become inoperable; failure to comply with the extensive government regulations related to our products and operations; enforcement actions if we engage in improper claims submission practices or in improper marketing or promotion of our products; the FDA regulatory process and our ability to obtain and maintain required regulatory clearances and approvals; failure to comply with the government regulations that apply to our human cells, tissues and cellular or tissue-based products; the clinical studies of any of our future products that do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere; and the other risks identified in the Risk Factors section of the Company’s public filings with the Securities and Exchange Commission (“SEC”), including Bioventus’ Annual Report on Form 10-K for the year ended December 31, 2020, as updated in our Quarterly Report on Form 10-Q for the three months ended October 2, 2021 and as such factors may be further updated from time to time in Bioventus’ other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov and the Investor Relations page of Bioventus’ website at ir.bioventus.com. Except to the extent required by law, the Company undertakes no obligation to update or review any estimate, projection, or forward-looking statement. Actual results may differ materially from those set forth in the forward-looking statements.
BIOVENTUS INC.
Consolidated condensed balance sheets
As of October 2, 2021 and December 31, 2020
(Amounts in thousands, except share amounts) (unaudited)
| October 2, 2021 |
December 31, 2020 |
||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 80,917 | $ | 86,839 | |||
| Accounts receivable, net | 105,442 | 88,283 | |||||
| Inventory | 36,565 | 29,120 | |||||
| Prepaid and other current assets | 23,154 | 7,552 | |||||
| Total current assets | 246,078 | 211,794 | |||||
| Restricted cash | 50,000 | — | |||||
| Property and equipment, net | 10,297 | 6,879 | |||||
| Goodwill | 52,885 | 49,800 | |||||
| Intangible assets, net | 248,794 | 191,650 | |||||
| Operating lease assets | 16,938 | 14,961 | |||||
| Deferred tax assets | 481 | — | |||||
| Investment and other assets | 29,317 | 19,382 | |||||
| Total assets | $ | 654,790 | $ | 494,466 | |||
| Liabilities and Members’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 10,897 | $ | 4,422 | |||
| Accrued liabilities | 107,554 | 88,187 | |||||
| Accrued equity-based compensation | 10,875 | 11,054 | |||||
| Current portion of long-term debt | 15,000 | 15,000 | |||||
| Current portion of contingent consideration | 13,386 | — | |||||
| Other current liabilities | 2,993 | 3,926 | |||||
| Total current liabilities | 160,705 | 122,589 | |||||
| Long-term debt, less current portion | 162,437 | 173,378 | |||||
| Accrued equity-based compensation, less current portion | — | 29,249 | |||||
| Deferred income taxes | 47,687 | 3,362 | |||||
| Contingent consideration, less current portion | 30,906 | — | |||||
| Other long-term liabilities | 22,558 | 21,728 | |||||
| Total liabilities | 424,293 | 350,306 | |||||
| Stockholders’ and Members’ Equity: | |||||||
| Members' equity | — | 144,160 | |||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued | |||||||
| Class A common stock, $0.001 par value, 250,000,000 shares authorized, 41,097,292 shares issued and outstanding | 41 | — | |||||
| Class B common stock, $0.001 par value, 50,000,000 shares authorized, 15,786,737 shares issued and outstanding | 16 | — | |||||
| Additional paid-in capital | 158,480 | — | |||||
| Accumulated deficit | (6,238 | ) | — | ||||
| Accumulated other comprehensive income | 204 | — | |||||
| Total stockholders’ equity attributable to Bioventus Inc. and members’ equity | 152,503 | 144,160 | |||||
| Noncontrolling interest | 77,994 | — | |||||
| Total stockholders’ and members’ equity | 230,497 | 144,160 | |||||
| Total liabilities and stockholders’ and members’ equity | $ | 654,790 | $ | 494,466 | |||
BIOVENTUS INC.
Consolidated condensed statements of operations and comprehensive (loss) income
(Amounts in thousands, except share and per share data, unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
||||||||||||
| Net sales | $ | 108,890 | $ | 85,908 | $ | 300,484 | $ | 222,570 | |||||||
| Cost of sales (including depreciation and amortization of $6,637 and $5,477, $17,491 and $16,076 respectively) | 29,821 | 23,444 | 85,546 | 62,521 | |||||||||||
| Gross profit | 79,069 | 62,464 | 214,938 | 160,049 | |||||||||||
| Selling, general and administrative expense | 69,636 | 50,295 | 173,372 | 131,104 | |||||||||||
| Research and development expense | 6,153 | 3,569 | 11,936 | 8,311 | |||||||||||
| Restructuring costs | 1,798 | — | 1,798 | — | |||||||||||
| Change in fair value of contingent consideration | 651 | — | 1,292 | — | |||||||||||
| Depreciation and amortization | 1,878 | 1,667 | 5,655 | 5,305 | |||||||||||
| Impairment of variable interest entity assets | — | — | 5,674 | — | |||||||||||
| Operating (loss) income | (1,047 | ) | 6,933 | 15,211 | 15,329 | ||||||||||
| Interest expense | 1,347 | 1,880 | 152 | 7,095 | |||||||||||
| Other expense (income) | 757 | (3,285 | ) | 2,821 | (4,539 | ) | |||||||||
| Other expense (income) | 2,104 | (1,405 | ) | 2,973 | 2,556 | ||||||||||
| (Loss) income before income taxes | (3,151 | ) | 8,338 | 12,238 | 12,773 | ||||||||||
| Income tax (benefit) expense | (882 | ) | 373 | 759 | 302 | ||||||||||
| Net (loss) income | (2,269 | ) | 7,965 | 11,479 | 12,471 | ||||||||||
| Loss attributable to noncontrolling interest | 1,198 | 492 | 8,260 | 1,164 | |||||||||||
| Net (loss) income attributable to Bioventus Inc. | $ | (1,071 | ) | $ | 8,457 | $ | 19,739 | $ | 13,635 | ||||||
| Net (loss) income | $ | (2,269 | ) | $ | 7,965 | $ | 11,479 | $ | 12,471 | ||||||
| Other comprehensive (loss) income, net of tax | |||||||||||||||
| Change in foreign currency translation adjustments | (366 | ) | 943 | (1,225 | ) | 687 | |||||||||
| Comprehensive (loss) income | (2,635 | ) | 8,908 | 10,254 | 13,158 | ||||||||||
| Comprehensive loss attributable to noncontrolling interest | 1,300 | 492 | 8,182 | 1,164 | |||||||||||
| Comprehensive (loss) income attributable to Bioventus Inc. | $ | (1,335 | ) | $ | 9,400 | $ | 18,436 | $ | 14,322 | ||||||
| Loss per share of Class A common stock(1): | |||||||||||||||
| Basic and diluted | $ | (0.03 | ) | $ | (0.15 | ) | |||||||||
| Weighted-average shares of Class A common stock outstanding(1): | |||||||||||||||
| Basic and diluted | 41,837,581 | 41,816,706 | |||||||||||||
| (1) Per share information for the nine months ended October 2, 2021 represents loss per share of Class A common stock and weighted-average shares of Class A common stock outstanding from February 16, 2021 through October 2, 2021, the period following Bioventus Inc.'s initial public offering and related transactions described in Note 1. Organization and Note 7. Earnings per share within the Notes to the Unaudited Condensed Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarter ended October 2, 2021. | |||||||||||||||
BIOVENTUS INC.
Consolidated condensed statements of cash flows
(Amounts in thousands, unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
||||||||||||
| Operating activities: | |||||||||||||||
| Net (loss) income | $ | (2,269 | ) | $ | 7,965 | $ | 11,479 | $ | 12,471 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities from continuing operations: | |||||||||||||||
| Depreciation and amortization | 8,522 | 7,276 | 23,185 | 21,789 | |||||||||||
| Equity-based compensation | 5,938 | 7,390 | (10,621 | ) | 619 | ||||||||||
| Change in fair value of contingent consideration | 651 | — | 1,292 | — | |||||||||||
| Change in fair value of Equity Participation Rights | — | — | (2,774 | ) | (788 | ) | |||||||||
| Change in fair value of interest rate swap | (81 | ) | (21 | ) | (1,391 | ) | 1,980 | ||||||||
| Impairments related to variable interest entity | — | — | 7,043 | — | |||||||||||
| Other, net | 404 | (205 | ) | (210 | ) | 823 | |||||||||
| Changes in working capital | (2,578 | ) | (1,164 | ) | (18,129 | ) | 9,858 | ||||||||
| Net cash from operating activities - continuing operations | 10,587 | 21,241 | 9,874 | 46,752 | |||||||||||
| Net cash from operating activities - discontinued operations | — | (400 | ) | — | (400 | ) | |||||||||
| Net cash from operating activities | 10,587 | 20,841 | 9,874 | 46,352 | |||||||||||
| Investing activities: | |||||||||||||||
| Purchase of Bioness, Inc., net of cash acquired | (1,000 | ) | — | (46,790 | ) | — | |||||||||
| Investments | (11,124 | ) | (16,630 | ) | (11,124 | ) | (16,630 | ) | |||||||
| Purchase of property and equipment | (1,926 | ) | (1,281 | ) | (4,568 | ) | (2,331 | ) | |||||||
| Other | 864 | 152 | — | — | |||||||||||
| Net cash from investing activities - continuing operations | (13,186 | ) | (17,759 | ) | (62,482 | ) | (18,961 | ) | |||||||
| Net cash from investing activities - discontinued operations | — | — | — | 172 | |||||||||||
| Net cash from investing activities | (13,186 | ) | (17,759 | ) | (62,482 | ) | (18,789 | ) | |||||||
| Financing activities: | |||||||||||||||
| Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting discounts and offering costs | — | — | 107,777 | — | |||||||||||
| Proceeds from issuance of Class A and B common stock | 417 | — | 747 | — | |||||||||||
| Borrowing on revolver | — | — | — | 49,000 | |||||||||||
| Payments on revolver | — | (49,000 | ) | — | (49,000 | ) | |||||||||
| Payments on long-term debt | (3,750 | ) | (2,500 | ) | (11,250 | ) | (5,000 | ) | |||||||
| Refunds (distributions) - members | (996 | ) | (5,616 | ) | (183 | ) | (14,691 | ) | |||||||
| Other, net | (17 | ) | — | (28 | ) | — | |||||||||
| Net cash from financing activities | (4,346 | ) | (57,116 | ) | 97,063 | (19,691 | ) | ||||||||
| Effect of exchange rate changes on cash | (206 | ) | 272 | (377 | ) | 86 | |||||||||
| Net change in cash, cash equivalents and restricted cash | (7,151 | ) | (53,762 | ) | 44,078 | 7,958 | |||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 138,068 | 126,240 | 86,839 | 64,520 | |||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 130,917 | $ | 72,478 | $ | 130,917 | $ | 72,478 | |||||||
Use of Non-GAAP Financial Measures
Net Sales and International Net Sales Growth on a Constant Currency Basis
Net Sales and International Net Sales Growth on a Constant Currency Basis is a non-GAAP measure, which is calculated by translating current and prior year results at the same foreign currency exchange rate. Constant currency can be presented for numerous GAAP measures, but is most commonly used by management to facilitate the comparison sales in foreign currencies to prior periods and analyze net sales performance without the impact of changes in foreign currency exchange rates.
Organic Revenue Growth
The Company defines the term “organic revenue” as revenue in the stated period excluding the impact from business acquisitions and divestitures. The Company uses the related term “organic revenue growth” to refer to the financial performance metric of comparing the stated period organic revenue with the reported revenue of the corresponding period in the prior year. The Company believes that these non-GAAP financial measures, when taken together with our GAAP financial measures, allows the Company and its investors to better measure the Company’s performance and evaluate long-term performance trends. Organic revenue growth also facilitates easier comparisons of the Company’s performance with prior and future periods and relative comparisons to its peers. The Company excludes the effect of acquisitions and divestitures because these activities can have a significant impact on the Company's reported results, which the Company believes makes comparisons of long-term performance trends difficult for management and investors.
Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income, and Non-GAAP Earnings per share of Class A Common Stock.
We present Adjusted EBITDA, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin, Non-GAAP Net Income, and Non-GAAP Earnings per share of Class A Common Stock, all non-GAAP financial measures, to supplement our financial reporting, because we believe these measures are useful indicators of our operating performance.
We define Adjusted EBITDA as net income (loss) from continuing operations before depreciation and amortization, provision of income taxes and interest expense (income), 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 equity compensation, restructuring costs, loss on debt retirement and modification, COVID-19 benefits, net, succession and transition charges, foreign currency impact, acquisitions and integration costs, inventory step-up costs, equity loss in unconsolidated investments, change in fair value of contingent consideration, impairments related to variable interest entity and other non-recurring costs. See the table below for a reconciliation of net income to Adjusted EBITDA. Our management uses Adjusted EBITDA principally as a measure of our operating performance and believes that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties often use it in their evaluation of the operating performance of companies in industries similar to ours. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections.
Our management uses Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income, Non-GAAP Operating Expense, Non-GAAP Operating Margin and Non-GAAP Net Income principally as measures of our operating performance and believe that these non-GAAP financial measures are useful to better understand the long term recurring performance of our core business and to facilitate comparison of our results to those of peer companies. Our management also uses these non-GAAP financial measures for planning purposes, including the preparation of our annual operating budget and financial projections.
We define Non-GAAP Gross Profit as gross profit, 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 depreciation and amortization included in the cost of goods sold and acquisition costs in cost of goods sold. We define Non-GAAP Gross Margin as the calculated ratio of Non-GAAP Gross Profit to net sales. See the table below for a reconciliation of gross profit and gross margin to Non-GAAP Gross Profit and Gross Margin.
We define Non-GAAP Operating Income as operating income, 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 depreciation and amortization included in the cost of goods sold, amortization included in operating expenses, restructuring costs, change in fair value of contingent consideration, COVID-19 expense, succession and transition charges, acquisition and integration costs, inventory step-up costs, impairments related to variable interest entity and other non-recurring costs. Non-GAAP Operating Margin is defined as defined as Non-GAAP Operating Income divided by net sales. See the table below for a reconciliation of Operating Income and operating margin to Non-GAAP Operating Income and Non-GAAP Operating Margin.
We define Non-GAAP Operating Expense as operating expenses, adjusted to exclude certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include amortization included in operating expenses, restructuring costs, change in fair value of contingent consideration, COVID-19 expense, succession and transition charges, acquisition and integration costs, impairments related to variable interest entity and other non-recurring costs. See the table below for a reconciliation of Operating Expenses to Non-GAAP Operating Expenses.
We define Non-GAAP Net Income as Net Income, 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 depreciation and amortization included in the cost of goods sold, amortization included in operating expenses, restructuring costs, change in fair value of contingent consideration, loss on debt retirement and modification, COVID-19 expense, COVID-19 income, succession and transition charges, acquisition and integration costs, inventory step-up costs, impairments related to variable interest entity and other non-recurring costs. See the table below for a reconciliation of Net Income to Non-GAAP Net Income.
We define Non-GAAP Earnings per Class A share as Earnings per Class A share, 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 depreciation and amortization included in the cost of goods sold, amortization included in operating expenses, restructuring costs, change in fair value of contingent consideration, acquisition and integration costs and other non-recurring costs, divided by weighted average number of shares of Class A common stock outstanding during the period. See the table below for a reconciliation of loss per Class A share to Non-GAAP Earnings per Class A share.
Reconciliation of Net (Loss) Income to Adjusted EBITDA (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| ($, thousands) | October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
|||||||||||
| Net (loss) income | $ | (2,269 | ) | $ | 7,965 | $ | 11,479 | $ | 12,471 | ||||||
| Depreciation and amortization(a) | 8,522 | 7,276 | 23,185 | 21,789 | |||||||||||
| Income tax (benefit) expense | (882 | ) | 373 | 759 | 302 | ||||||||||
| Interest expense | 1,347 | 1,880 | 152 | 7,095 | |||||||||||
| Equity compensation(b) | 5,938 | 7,390 | (10,621 | ) | 619 | ||||||||||
| Restructuring costs(c) | 1,798 | — | 1,798 | — | |||||||||||
| COVID-19 benefits, net(d) | — | (3,057 | ) | — | (4,158 | ) | |||||||||
| Succession and transition charges(e) | — | 771 | 344 | 5,345 | |||||||||||
| Foreign currency impact(f) | 17 | (98 | ) | (47 | ) | (58 | ) | ||||||||
| Acquisition and integration costs(g) | 1,575 | — | 6,604 | — | |||||||||||
| Inventory step-up costs(h) | — | — | 2,106 | — | |||||||||||
| Equity loss in unconsolidated investments(i) | 419 | — | 1,320 | — | |||||||||||
| Change in fair value of contingent consideration(j) | 651 | — | 1,292 | — | |||||||||||
| Impairments related to variable interest entity(k) | — | — | 7,043 | — | |||||||||||
| Other non-recurring costs(l) | 4,199 | 601 | 6,858 | 884 | |||||||||||
| Adjusted EBITDA | $ | 21,315 | $ | 23,101 | $ | 52,272 | $ | 44,289 | |||||||
(a) Includes for the three months ended October 2, 2021 and September 26, 2020 and the nine months ended October 2, 2021 and September 26, 2020, respectively, depreciation and amortization of $6,637, $5,477, $17,491 and $16,076 in cost of sales and $1,878, $1,667, $5,655 and $5,305 presented in the consolidated statements of operations and comprehensive (loss) income with the balance in research and development.
(b) The three and nine months ended October 2, 2021 primarily includes equity-based compensation expense (income) resulting from awards granted under the Company’s current equity based compensation plan (2021 Plan) and compensation costs. The nine months ended October 2, 2021 also includes the change in fair market value of accrued equity-based compensation related to the BV LLC Phantom Profits Interest Plan (Phantom Plan) due to expected pricing with our IPO. Equity compensation expenses for the three and nine months ended September 26, 2020 represents compensation from the Company’s management incentive plan and Phantom Plan as well as the change in fair market value of accrued equity-based compensation related to the plans due to the impact of the COVID-19 pandemic on our business.
(c) Costs incurred as a result of adopting a restructuring plan for businesses recently acquired to reduce headcount, reorganize management structure and consolidate certain facilities.
(d) Represents income resulting from the Coronavirus Aid, Relief and Economic Security ("CARES") Act offset by additional cleaning and disinfecting expenses and contract termination fees for canceled events.
(e) Primarily represents costs related to the CEO transition.
(f) Foreign currency impact represents realized and unrealized gains and losses from fluctuations in foreign currency and is included within other (income) loss in the consolidated statements of operations and comprehensive (loss) income.
(g) Represents costs incurred to acquire and integrate Bioness.
(h) Amortization of the inventory step-up associated with the Bioness acquisition.
(i) Represents CartiHeal equity investment losses.
(j) Represents changes in fair value of contingent consideration associated with the Bioness acquisition.
(k) Represents loss on impairment on Harbor's long-lived assets, and the Company's investment in Harbor.
(l) Other non-recurring costs primarily includes charges associated with strategic transactions, such as potential acquisitions and public company preparation costs, primarily accounting and legal fees.
Reconciliation of Net (Loss) Income to Non-GAAP Net Income (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| ($, thousands) | October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
|||||||||||
| Net (loss) income | $ | (2,269 | ) | $ | 7,965 | $ | 11,479 | $ | 12,471 | ||||||
| Depreciation & amortization included in cost of goods sold | 6,637 | 5,477 | 17,491 | 16,076 | |||||||||||
| Amortization included in operating expenses | 1,241 | 1,408 | 3,813 | 4,537 | |||||||||||
| Restructuring costs(a) | 1,798 | — | 1,798 | — | |||||||||||
| Change in fair value of contingent consideration | 651 | — | 1,292 | — | |||||||||||
| COVID-19 expense(b) | — | 130 | — | 277 | |||||||||||
| COVID-19 income(c) | — | (3,187 | ) | — | (4,435 | ) | |||||||||
| Succession and transition charges (d) | — | 771 | 344 | 5,345 | |||||||||||
| Acquisition and Integration costs(e) | 1,575 | — | 6,604 | — | |||||||||||
| Inventory step-up costs(f) | — | — | 2,106 | — | |||||||||||
| Impairments related to variable interest entity(g) | — | — | 7,043 | — | |||||||||||
| Other non-recurring items(h) | 4,199 | — | 6,858 | — | |||||||||||
| Non-GAAP Net income | $ | 13,832 | $ | 12,564 | $ | 58,828 | $ | 34,271 | |||||||
(a) Costs incurred as a result of adopting a restructuring plan for businesses recently acquired to reduce headcount, reorganize management structure and consolidate certain facilities.
(b) Additional cleaning and disinfection expenses and contract termination fees for canceled events included in operating expenses.
(c) Represents income resulting from the Coronavirus Aid, Relief and Economic Security ("CARES") Act.
(d) Primarily represents costs related to the CEO transition.
(e) Represents costs incurred to acquire and integrate Bioness.
(f) Amortization of the inventory step-up associated with the Bioness acquisition.
(g) Represents loss on impairment on Harbor's long-lived assets, and the Company's investment in Harbor.
(h) Other non-recurring costs primarily includes charges associated with strategic transactions, such as potential acquisitions and public company preparation costs, primarily accounting and legal fees.
Reconciliation of Loss per share of Class A Common Stock to Non-GAAP Earnings per share of Class A Common Stock (unaudited)
| Three Months Ended October 2, 2021 |
|||
| Weighted average Class A Common Stock outstanding, basic & diluted | 41,837,581 | ||
| Loss per share of Class A Common Stock (basic & diluted) | $ | (0.03 | ) |
| Depreciation and amortization included in cost of goods sold | 0.12 | ||
| Amortization included in operating expenses | 0.02 | ||
| Restructuring costs(a) | 0.03 | ||
| Change in fair value of contingent consideration | 0.01 | ||
| Acquisition and Integration costs(b) | 0.03 | ||
| Other non-recurring items(c) | 0.07 | ||
| Non-GAAP Earnings per share of Class A Common Stock (basic & diluted) | $ | 0.25 | |
(a) Costs incurred as a result of adopting a restructuring plan for businesses recently acquired to reduce headcount, reorganize management structure and consolidate certain facilities.
(b) Costs related to the Bioness acquisition.
(c) Other non-recurring primarily consists of charges associated with potential strategic transactions, such as potential acquisitions.
Reconciliation of Gross Profit to Non-GAAP Gross Profit and Gross Margin to Non-GAAP Gross Margin (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| ($, thousands) | October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
|||||||||||
| Gross Profit | $ | 79,069 | $ | 62,464 | $ | 214,938 | $ | 160,049 | |||||||
| Gross Margin | 72.6 | % | 72.7 | % | 71.5 | % | 71.9 | % | |||||||
| Depreciation and Amortization included in cost of goods sold | 6,637 | 5,477 | 17,491 | 16,076 | |||||||||||
| Acquisition costs in cost of goods sold | — | — | 2,106 | — | |||||||||||
| Non-GAAP Gross Profit | $ | 85,706 | $ | 67,941 | $ | 234,535 | $ | 176,125 | |||||||
| Non-GAAP Gross Margin | 78.7 | % | 79.1 | % | 78.1 | % | 79.1 | % | |||||||
Reconciliation of Operating (Loss) Income to Non-GAAP Operating Income and Operating Margin to Non-GAAP Operating Margin (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| ($, thousands) | October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
|||||||||||
| Operating (loss) income | $ | (1,047 | ) | $ | 6,933 | $ | 15,211 | $ | 15,329 | ||||||
| Operating Margin | (1.0 | %) | 8.1 | % | 5.1 | % | 6.9 | % | |||||||
| Depreciation and Amortization included in cost of goods sold | 6,637 | 5,477 | 17,491 | 16,076 | |||||||||||
| Amortization included in operating expenses | 1,241 | 1,408 | 3,813 | 4,537 | |||||||||||
| Restructuring costs(a) | 1,798 | — | 1,798 | — | |||||||||||
| Change in fair value of contingent consideration | 651 | — | 1,292 | — | |||||||||||
| COVID-19 expense(b) | — | 130 | — | 277 | |||||||||||
| Succession and transition charges(c) | — | 771 | 344 | 5,345 | |||||||||||
| Acquisition and Integration costs(d) | 1,575 | — | 6,604 | — | |||||||||||
| Inventory step-up costs(e) | — | — | 2,106 | — | |||||||||||
| Impairments related to variable interest entity(f) | — | — | 5,674 | — | |||||||||||
| Other non-recurring items(g) | 4,199 | — | 6,858 | — | |||||||||||
| Non-GAAP Operating Income | $ | 15,054 | $ | 14,719 | $ | 61,191 | $ | 41,564 | |||||||
| Non-GAAP Operating Margin | 13.8 | % | 17.1 | % | 20.4 | % | 18.7 | % | |||||||
(a) Costs incurred as a result of adopting a restructuring plan for businesses recently acquired to reduce headcount, reorganize management structure and consolidate certain facilities.
(b) Additional cleaning and disinfection expenses and contract termination fees for canceled events included in operating expenses.
(c) Primarily represents costs related to the CEO transition.
(d) Costs related to the Bioness acquisition.
(e) Amortization of the inventory step-up associated with the Bioness acquisition.
(f) Represents loss on impairment on Harbor's long-lived assets.
(g) Other non-recurring primarily consists of charges associated with potential strategic transactions, such as potential acquisitions.
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| ($, thousands) | October 2, 2021 |
September 26, 2020 |
October 2, 2021 |
September 26, 2020 |
|||||||||||
| Operating Expenses | $ | 80,116 | $ | 55,531 | $ | 199,727 | $ | 144,720 | |||||||
| Amortization included in operating expenses | 1,241 | 1,408 | 3,813 | 4,537 | |||||||||||
| Restructuring costs(a) | 1,798 | — | 1,798 | — | |||||||||||
| Change in fair value of contingent consideration | 651 | — | 1,292 | — | |||||||||||
| COVID-19 expense(b) | — | 130 | — | 277 | |||||||||||
| Succession and transition charges(c) | — | 771 | 344 | 5,345 | |||||||||||
| Acquisition and Integration costs(d) | 1,575 | — | 6,604 | — | |||||||||||
| Impairments related to variable interest entity(e) | — | — | 5,674 | — | |||||||||||
| Other non-recurring items(f) | 4,199 | — | 6,858 | — | |||||||||||
| Non-GAAP Operating Expenses | $ | 70,652 | $ | 53,222 | $ | 173,344 | $ | 134,561 | |||||||
(a) Costs incurred as a result of adopting a restructuring plan for businesses recently acquired to reduce headcount, reorganize management structure and consolidate certain facilities.
(b) Additional cleaning and disinfection expenses and contract termination fees for canceled events included in operating expenses.
(c) Primarily represents costs related to the CEO transition.
(d) Costs related to the Bioness acquisition.
(e) Represents loss on impairment on Harbor's long-lived assets.
(f) Other non-recurring primarily consists of charges associated with potential strategic transactions, such as potential acquisitions.
Reconciliation of Guidance Range for Gross Profit to Non-GAAP Gross Profit and Gross Margin to Non-GAAP Gross Margin for the twelve months ending December 31, 2021
| ($, thousands) | 2021 Guidance Low |
2021 Guidance High |
Twelve Months Ended December 31, 2020 |
||||||||
| Net Sales | $ | 425,000 | $ | 430,000 | $ | 321,161 | |||||
| Cost of Sales | 123,700 | 125,600 | 87,642 | ||||||||
| Gross Profit | 301,300 | 304,400 | 233,519 | ||||||||
| Gross Margin | 70.9 | % | 70.8 | % | 72.7 | % | |||||
| Depreciation and Amortization included in cost of goods sold | 25,200 | 26,000 | 21,169 | ||||||||
| Acquisition costs in cost of goods sold | 4,100 | 4,100 | — | ||||||||
| Non-GAAP Gross Profit | $ | 330,600 | $ | 334,500 | $ | 254,688 | |||||
| Non-GAAP Gross Margin | 77.8 | % | 77.8 | % | 79.3 | % | |||||
Reconciliation of Guidance Range for Net Income to Non-GAAP Net Income for the twelve months ending December 31, 2021
| ($, thousands) | 2021 Guidance Low |
2021 Guidance High |
Twelve Months Ended December 31, 2020 |
||||||||
| Net income | $ | 1,800 | $ | 3,700 | $ | 14,722 | |||||
| Depreciation and Amortization included in cost of goods sold | 25,600 | 26,400 | 21,168 | ||||||||
| Amortization included in operating expenses | 5,500 | 5,500 | 5,868 | ||||||||
| Loss on debt retirement and modification | 2,000 | 2,000 | — | ||||||||
| COVID-19 expense | — | — | 576 | ||||||||
| COVID-19 income | — | — | (4,699 | ) | |||||||
| Succession & Transition | 300 | 300 | 5,609 | ||||||||
| Restructuring costs | 2,800 | 3,000 | 563 | ||||||||
| Acquisition and Integration costs | 13,100 | 13,100 | — | ||||||||
| Inventory step-up costs | 4,100 | 4,100 | — | ||||||||
| Change in fair value of contingent consideration | 1,900 | 2,000 | — | ||||||||
| Impairments related to variable interest entity | 7,000 | 7,000 | — | ||||||||
| Other non-recurring costs (a) | 8,000 | 8,500 | 3,590 | ||||||||
| Non-GAAP Net income | $ | 72,100 | $ | 75,600 | $ | 47,397 | |||||
(a) Represents anticipated charges in connection with potential strategic investments.
Reconciliation of Guidance Range for Net Income to Adjusted EBITDA
for the twelve months ending December 31, 2021
| ($, thousands) | 2021 Guidance Low |
2021 Guidance High |
Twelve Months Ended December 31, 2020 |
||||||||
| Net Income | $ | 1,800 | $ | 3,700 | $ | 14,722 | |||||
| Depreciation and amortization | 33,700 | 34,500 | 28,643 | ||||||||
| Loss on debt retirement and modification | 2,000 | 2,000 | — | ||||||||
| Income tax expense | 2,400 | 2,900 | 1,192 | ||||||||
| Interest expense | 2,800 | 3,000 | 9,751 | ||||||||
| Equity compensation | (3,900 | ) | (3,900 | ) | 10,103 | ||||||
| COVID-19 benefits, net | — | — | (4,123 | ) | |||||||
| Succession and transition charges | 300 | 300 | 5,609 | ||||||||
| Restructuring costs | 2,800 | 3,000 | 563 | ||||||||
| Foreign currency impact | — | — | (117 | ) | |||||||
| Equity loss in unconsolidated investments | 1,800 | 1,800 | 467 | ||||||||
| Acquisition and Integration costs | 13,100 | 13,100 | — | ||||||||
| Inventory step-up costs | 4,100 | 4,100 | — | ||||||||
| Change in fair value of contingent consideration | 1,900 | 2,000 | — | ||||||||
| Impairments related to variable interest entity | 7,000 | 7,000 | — | ||||||||
| Other non-recurring costs (a) | 8,000 | 8,500 | 5,633 | ||||||||
| Adjusted EBITDA | $ | 77,800 | $ | 82,000 | $ | 72,443 | |||||
(a) Represents anticipated charges in connection with potential strategic investments.
| Investor Inquiries: | Press and Media Inquiries: | |
| Dave Crawford | Thomas Hill | |
| Bioventus | Bioventus | |
| investor.relations@bioventus.com | thomas.hill@bioventus.com |
