Good day, and welcome to the Bioventus first quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to hand the call over to Dave Crawford, Vice President of Investor Relations. Please go ahead.
Thanks, Andrea, and good morning, everyone, and thanks for joining us. It is my pleasure to welcome you to the Bioventus 2026 first quarter earnings conference call. With me this morning are Rob Claypoole, President and CEO, and Mark Singleton, Senior Vice President and CFO. Rob will provide an update on our 2026 priorities and first quarter highlights. Mark will review the first quarter results and discuss our 2026 financial guidance. We will finish the call with Q&A. A presentation for today's call is available in the investors section of our website, bioventus.com.
Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the SEC, including Item 1A, Risk Factors, of the company's Form 10-K for the year ended December 31st, 2025. As such factors may be updated from time to time in the company's other filings made with the SEC, you are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made.
Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. This call will also include reference to certain financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles or GAAP. We generally refer to these as non-GAAP or adjusted financial measures. Important disclosures about and definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investors section of our website at bioventus.com. Now, I will turn the call over to Rob.
Thank you, Dave. Good morning, everyone, and thanks for joining our call today. Bioventus is off to a strong start to the year across our business as we successfully executed our plan, accelerated investment in our growth drivers, and delivered another quarter of solid financial results. We continue to strengthen our commercial, operational, and financial fundamentals across our company while we help patients recover so they can live life to the fullest. For my remarks this morning, I would like to provide an update on our performance regarding the three priorities we outlined at the start of the year and highlight our first quarter performance. As a reminder, our three priorities for the year are, one, accelerate our long-term revenue growth with increased investment into our business. Two, continue to increase earnings even as we significantly increase our investment into the business.
Three, continue to strengthen our robust cash flow and enhance our capital allocation optionality. We're off to a good start and are progressing well across all three of these priorities. As a result, we are raising our full-y ear guidance for adjusted EPS and cash from operations. Mark will provide more detail on that in a moment. Let me expand on each priority, starting with revenue growth and acceleration of investments into our business. First quarter revenue growth of 7% was slightly ahead of our expectations as we delivered strong revenue performance across our core portfolio. These results were achieved through a combination of factors, including strong focus on growth with disciplined resource allocation, increasing awareness of the differentiated clinical and economic value we bring to our customers, and effective commercial execution across geographies and channels.
Regarding our investment into the business, our continued ability to deliver above-market growth from our core portfolio is generating significant operating profit for us to invest into our future growth drivers of PNS, PRP, Ultrasonics, and our international segment to accelerate long-term growth. During the quarter, we increased investment across these four growth drivers, which included expansion of our commercial teams, stronger marketing to help raise awareness of our differentiated solutions, and additional physician training programs. We also gained important data-driven insights across our growth drivers that will shape and accelerate our investments throughout the rest of the year. To provide you with some further context, let me share a few examples of the increased investments we are making in PNS, as it will account for more than half of our planned investments this year.
As a reminder, we possess a significant opportunity with our world-class PNS technology and our rapidly expanding market. To capitalize on the opportunity, we've started to expand the sales organization and add clinical resources to assist in pre, intra, and postoperative patient and physician support. In addition, we're investing to support these teams with surgeon training and increased marketing to raise awareness. We also made the strategic decision to hire a dedicated general manager. I'm excited to have Megan Rosengarten join Bioventus as our general manager for PNS. Megan brings a proven track record of launching and scaling new medical device businesses around novel technologies and has held senior leadership roles across multiple leading med tech companies. Bringing Megan on board at this early stage reflects our belief in the significant potential of our PNS business and our intention to scale the business aggressively.
Turning to our second priority, increasing our earnings even as we invest in our future growth drivers. In the first quarter, we increased adjusted EBITDA by 24% and improved our adjusted EBITDA margin by well over 200 basis points. The increase in adjusted EBITDA, combined with our significant interest expense savings, enabled us to generate adjusted EPS of $0.15, nearly double compared to the first quarter last year. This is a testament to our earnings power, which is generated from our durable above-market growth and our stable peer-leading gross margin. Our strong start to the year with our operating margin exceeding expectations provides us with greater flexibility to invest aggressively in opportunities we identify while delivering on our full-year financial goal of increasing earnings.
As we ramp up investment throughout the year, we may see some margin fluctuation from quarter- to- quarter, but our strong business model gives us the agility to invest significantly while holding our adjusted EBITDA margin around 20% for 2026. With respect to our third priority, accelerating cash flow, we had a great start to the year following our very strong performance last year. Cash from operations increased $28 million compared to the first quarter last year and marked our largest cash flow from operations in the first quarter since becoming a public company. Our strong cash flow gives us substantial capital deployment optionality. As mentioned previously, at this time, we plan to continue to prioritize strengthening our balance sheet by using our free cash flow to further reduce debt.
In conclusion, thanks to the solid execution of our team, we are off to a strong start, and we remain focused on building our momentum in the quarters ahead. We believe we have a powerful and differentiated combination of value drivers that sets Bioventus apart. We are confident in our portfolio, our strategy, and our investment approach as we continue our pursuit to become a $1 billion leading med tech company that delivers significant value for all of our stakeholders. Now I'll turn the call over to Mark.
Thank you, Rob, and good morning, everyone. Let me begin by saying that we had a strong first quarter, and we are well-positioned to increase investment in our future growth while continuing to strengthen our balance sheet with robust cash flow. I'm confident that with continued focus and disciplined execution, we will advance our business and create significant shareholder value. Turning to our headline results for the first quarter, revenue of $132 million increased 7% compared to the prior year period, driven by solid performance across all three of our businesses. Adjusted EBITDA of $24 million was nearly $5 million higher than the prior year and represented an increase of 24%.
Foreign currency exchange rates had a favorable impact for the quarter as we benefited by almost $2 million due to the impact from FX rate movements compared to the first quarter of last year. Adjusted EBITDA margin of 18% expanded 260 basis points compared to the first quarter last year. This was the result of higher revenue and improved gross margin, partially offset by the increase in investment that Rob highlighted. Adjusted earnings were $0.15 per diluted share for the quarter, nearly double compared to the $0.08 in the prior year period. Now let me provide some additional commentary on our quarterly revenue. In Global Pain Treatments, we delivered revenue growth of 8% compared to the prior year. As Rob mentioned, our revenue growth slightly exceeded our expectations, which was driven by a favorable rebate adjustment in HA.
Operationally, we experienced a slight increase in volume growth in the prior year as growth was impacted by a reduction in inventory levels as distributors as expected. Global Surgical Solutions revenue grew by 6% as we saw solid growth across the portfolio. We plan to continue to invest in marketing across the business to raise awareness through medical education, to train surgeons earlier in their careers, sales force expansion in targeted areas, and highlight our distinct clinical and economic value proposition. Shifting to Global Restorative Therapies, revenue grew 5% compared to the prior year. Our EXOGEN team delivered another strong quarter, and we continue to expect revenue growth in the mid-single- digits for the full-year. As one of our fourth growth drivers, we expect to build on our international segment's double-digit growth rate from last year.
International revenue growth increased 17% compared to the prior year, while on a constant currency basis, growth was 11%. We saw improved growth across Ultrasonics in Europe as we began increasing awareness of our innovative technology and open up another source of growth for Ultrasonics. We believe our positive momentum can continue given our increased strategic focus, talent additions, and improved commercial execution. Moving down the income statement, adjusted gross margin of 76% was 110 basis points higher than the prior year period due to the favorable rebate adjustment, as well as benefits from a refund of prior year tariffs. Adjusted total operating expenses and R&D expenses increased by $5 million as we increased investment to accelerate future revenue growth. Now for additional details on our bottom-line financial metrics.
Adjusted operating income of $20 million increased by nearly $3 million compared to the prior year. Adjusted net income of $13 million increased $7 million compared to the prior year period. This increase is the result of revenue growth, increased gross margin, and lower interest expense. Now shifting down to the balance sheet and cash flow statement. Cash flow from operations totaled $9 million, representing more than a $28 million increase compared to the first quarter last year. The stronger cash flow was driven by higher profitability, lower interest expense, and favorable working capital. We ended the quarter with $36 million in cash on hand and $272 million in outstanding debt. During the quarter, debt decreased $22 million as we continue to prioritize repaying the borrowing on our term loan.
We are confident our projected strong cash flow and increase in Adjusted EBITDA will drive our net leverage ratio below two by the end of the second quarter of 2026, which is ahead of schedule. We believe this reduction in our net leverage will drive additional interest expense savings and enable greater optionality for future capital deployment. Finally, as Rob highlighted, we are increasing our adjusted EPS and cash from operations guidance. We now expect adjusted earnings per share to range between $0.75-$0.79. This represents a $0.02 increase compared to our prior year guidance of $0.73-$0.77. For the year, we now expect cash from operations to range between $84 million and $89 million. This represents a $2 million increase compared to our prior year guidance.
We are pleased to reaffirm our 2026 revenue guidance we provided on March 5th of $600 million-$610 million. We expect year-over-year growth in revenue, adjusted EBITDA, and adjusted earnings per share to accelerate from the first half of 2026 to the second half of 2026 as we leverage the expected increase in revenue from our investments. Our guidance does not assume additional impact from U.S. dollar fluctuation for the year. We are off to a strong start to the year and plan to continue investing in our 4 growth drivers to accelerate revenue growth, deliver increased profitability, strengthen earnings power, and generate significant free cash flow. We believe this is a powerful combination that will help us build a leading med tech company and create increased value for our shareholders.
Operator, please open the line for questions.
We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. Our first question comes from Larry Solow, CJS Securities. Please go ahead.
Great. Good morning. Thanks for taking the questions. I guess just first clarification on the rebate. I assume you guys expected this, but you didn't know the timing. Is that why you haven't changed your revenue guidance? Does this just all flow to the bottom line? Is this like a net that just all kind of flows to the bottom line?
Hey, Larry, this is Rob. As mentioned, we had some rebate favorability and finished slightly ahead of our expectations. We called that out as it related to a one-time process change by one of our commercial payer partners. We don't anticipate that a similar level of variability moving forward, we thought it'd be best to point it out. Outside of this, delivered results consistent with our planning assumptions and expect our revenue growth to accelerate in the second half of the year as we keep executing our plan. Regarding the revenue guidance, we feel really good about the first quarter and where we're headed for the year,
a quarter into the year, which I mention because we normally wouldn't raise guidance this early.
Right.
It's a key year for us, you know, to invest in and activate our growth drivers, which we expect to accelerate throughout the year, especially in the back half. We're making the investments, executing our plan, and analyzing, you know, our leading growth metrics very diligently, and we'll keep you updated on our progress with that over the coming quarters. In the meantime, with cash and EPS, they're clearly ahead of schedule, and so we went ahead and raised our guidance on both of those. Overall, off to a good start, and we'll update you again next quarter on growth, cash, and the profit expectations.
No, no, absolutely. Just anecdotally, I don't know if you called out, but obviously early days for both the PRP and the TalisMann. Any just anecdotal update there? I don't think you gave any sales numbers, and they're probably modest. Just how the launches are going, how things are being received, any, you know, any thoughts there?
Thanks. We're encouraged by what we saw in the first quarter. It's, you know, we're again investing in the business and expanding. What, you know, the first quarter entailed, it further validated both the market opportunity and the value of our differentiated technology. I think, you know, with the two of them combined, equally important is we're learning a lot about how to maximize our success with the business over the coming years. That's exactly what this year is about, investing in and activating all four of our growth drivers and then, you know, diligently analyzing the performance every, you know, week, month, quarter, to shape our future decisions and investments to maximize that long-term success.
You know, with both PNS, PRP, and the others, I expect our learnings and our investments and our revenue growth to continue ramping up throughout the rest of the year. Just with respect to those two in particular, I'll also mention that we still expect what we've mentioned in the past, that combined PRP and PNS will contribute 200 basis points of growth this year. Off to a good start with those. Thanks.
Got it. Got it. Thanks, Rob. Appreciate it.
Yep.
The next question comes from Chase Knickerbocker of Craig-Hallum. Please go ahead.
Good morning. Thanks for taking the questions. I just maybe wanted to start on quantifying a couple things within Pain first. Maybe Mark, if you could just quantify for us what the impact of those rebates were in Pain, you know, on a year-over-year basis, if that's easiest. Then just as far as that negative impact on volumes from inventory, if you could just quantify those two dynamics, and then just following up on an earlier question, any sort of thoughts on, you know, what the contribution was from the new launches in Q1, just as we think about all the different moving pieces within Pain.
Thanks, Chase. Appreciate that. Yeah, when we look at a breakdown, you know, the pain question that we looked at and as I said in the script, you know, from an operational perspective, really kind of focus on volume. Our volumes were, you know, slightly positive from an overall, a global perspective. I think that's easiest to talk about with that. When you look at revenue growth, it's, you know, slightly positive overall in Pain Treatments without the, without the rebate benefit. Overall, it's really consistent with what we talked about in our fourth quarter remarks. I'd say, you know, without the rebate from a Bioventus perspective as well as the Pain Treatments.
When we look at our, you know, two headwinds that we had in the first quarter, you know, being one less selling day and the lower distributor inventory, I think that those are both worth a couple of points of growth within the HA business. If you add those back, you know, and kind of normalize without, you know, without those headwinds, our growth would've been in the mid-single digits from operational perspective. We get into the new, you know, the new products, the PRP and the PNS, just like Rob had talked about in the earlier question.
I think Larry quantified it that way is, you know, you know, we obviously, PNS already had some growth on our baseline in 2025, so we, you know, we're continuing to grow there and then, you know, getting growth in our PRP business. Our expectations on that are really that that starts to accelerate throughout the year as the investment comes in and we get, you know, more and more momentum with that in the field. Right now it's playing out as we expected.
Got it. Then just on Surgical , you know, you guys had kind of laid out your expectations by product line, business segment, on the previous quarter call. That business is tracking on a year-over-year basis a little bit below kind of what we had kind of laid out expectations for 2026. Can you just kind of talk us through what the kind of movements within that business were in the quarter, kind of what went better and what went worse than expected? Was that just normal kind of seasonality that you were expecting in Q1?
Yeah. Chase, this is Rob. I You know, our plan for Surgical Solutions entails slower growth for the first quarter and then an increase in our growth rate sequentially throughout the year. We believe we'll get to double-digit growth in the second half and even for 2026 overall, as we gain additional share in BGS and see the impact from the investments we're making across Ultrasonics, trained surgeons, expand our sales force, and enhance awareness of our differentiated technology and clinical and economic value. Looking at a strong year for Surgical Solutions and expect that ramp in the second half.
Just last from me specifically on Ultrasonics, I mean, any specifics you can give us on the quarter just as far as, you know, capital growth versus disposables, you know, just the kind of current health of that business would be helpful. Thanks.
Well, overall, we remain very positive about Ultrasonics. We believe it's going to be a major growth driver for us. It's a big $1 billion market. We believe we can make our technology standard of care given the exceptional precision and control it enables, time it saves, and patient benefits it delivers. With respect to capital and disposables, in any given quarter, both of those are key to the number, with the majority of the revenue coming from the disposable side. We expect those to accelerate throughout the year as I mentioned, for Surgical Solutions overall and to get to double-digit growth for the full-year for Ultrasonics as we ramp up our investments and execute our plan.
Got it. Thank you.
The next question comes from Mike Petusky of Barrington Research. Please go ahead.
Hey, good morning, guys. Rob, I guess, just around Ultrasonics, obviously, you know, the lifeblood of getting that business to grow is, you know, education and training for surgeons. Can you give any detail around, you know, what you guys may be doing differently there in 2026 and going forward versus previous, just in terms of the effort and maybe urgency that you're trying to bring to bringing greater awareness to surgeons in terms of your technology? Thanks.
Thanks, Mike. It's a great question. Like you said, it's when we have the technology that we have and the opportunity to become a standard of care, training surgeons is critical to that. There's a few things. One is, as part of our strategic plan that we put in place, a much heavier focus on, emphasis on, and investment in the training of surgeons going forward. That includes, you know, keen understanding of which surgeons out there we wanna reach and when we wanna train them in their careers in order to maximize the success of the business overall. One, it's just a core part of our surgical plan going forward and of our investment profile for that business.
The second is, we've built up our medical affairs organization over the past several months, and that includes bringing on a new leader over medical education, someone who's led medical education for a number of other leading med tech companies. He's building the team around him in that area. It's not just from a focus standpoint and from an investment standpoint, but it's also bringing new talent on board in order to significantly ramp up the content quality, the folks that we have helping us with that training from outside, including KOLs, and just the frequency of that training throughout the rest of the year. We expect, you know, that to continue to ramp in 2027 as well.
I appreciate the question because it is absolutely a big focus for us in terms of driving the long-term growth and success of this business.
Okay. Then if I could sort of do a follow-up, I guess, on key growth drivers over time and even including this year. I'm just curious, at what point and in what way might you guys start to disclose, you know, in terms of some kind of quantification, you know, the PNS business, the progress you're making there, PRP? Like, given that you have quantified, hey, this is gonna add 200 basis points of growth in 2026, to me, it feels like at some point and in some way, there'll come a time to start talking about this, either in terms of, you know, incremental placements or revenue growth or percentage growth. Can you just talk about how you think about sort of ultimately disclosing as the year goes on?
Thanks.
Yeah. Thanks. Great. Another great question. We're very interested in that as well. You know, as we've mentioned before, we're investing and executing our plan with our growth drivers and keep emphasizing really analyzing the data and learning a lot regarding commercial activity and the customer behavior about this. Having dynamic real-time discussions across our team on what's working well and where we can do better and leveraging our small size and big ambition to make adjustments swiftly and decisively. What we've said before is that we wanna get a few quarters into this year, we're only one quarter into it, to understand both that commercial activity and the customer behavior more or better so that we can then come out and have the kind of conversation that you're referring to there.
Getting more specific about the numbers behind each business, and even more importantly, communicating what we expect out of those over the next three years or so. As I've mentioned in other forums, Mike, I expect us to be able to have that conversation with you by the end of this year.
All right. Very good. Thank you.
Thanks.
The next question comes from Caitlin Roberts of Canaccord. Please go ahead.
Hey, guys. It's Michaela for Caitlin. Thanks for taking the question and congrats on a strong start to the year. First one from us is how much of the anticipated $13 million investment in growth areas that you called out on your last earnings call have you allocated already? Maybe can you provide further breakdown or color on that spend?
Morning, Michaela. This is Mark. We look at our $13 million of investments really, say, you know, 25% through the year right now and say that we've been, you know, invested slightly less than that. When we look at it, we're really going to be accelerating the investment over the next three quarters. If you look at our operating expense in the first quarter, we expect that to accelerate into second quarter, you know, and the rest of the year. We'll see a step up in our expense, you know, for the remainder part of the year after first quarter.
The investments for that, as we've talked about in the first, fourth quarter call, and Rob referred to it a little bit today, you know, a significant amount of that is in PNS, which, you know, is one of our main growth drivers that we're focused on and discussed a lot today. When we look at what we're investing inside of that, it's, you know, bringing on and ramping up our sales force, bringing on our, you know, clinical expertise to make sure that we have the clinical resources to help us, you know, drive the demand and help our customers and physicians in that.
Just, you know, continue resources that support that overall, and the sales reps and then also medical education is a big investment that we're making within that business, similar to what we talked about in Ultrasonics. That also is an investment that we're making within the $13 million. Really, most all of those investments are, you know, targeted around the growth drivers, but, you know, a big portion of that's PNS and then put into Ultrasonics and PRP as well. All around the same things, you know, sales resources, clinicians, and medical education would be the three main areas.
Great. Thanks. Maybe if I can just sneak in another quick one on PNS. Have you moved out of the pilot launch, and how should we think about the current user mix? Are they primarily existing HA users? Maybe can you talk about any early initiatives Megan has helped drive in PNS?
Hey, Michaela. Michaela, it's Rob. I think you may have mixed PNS and PRP there, let me talk about both of them. For PNS and PRP, we've moved out of the pilot stage. Now we're ramping up. Different dynamics there. For PRP, we're leveraging our existing commercial team for HA, whereas for PNS, we're gonna be building that team over the coming quarters for quite some time. While they're both out of pilot launch, different dynamics in terms of the investment that we're putting into the, to the business for both. As I mentioned, we're really encouraged by what we're seeing for both.
In Q1, we're learning a lot and more than anything, it's just validating the market opportunity for both and the strong value that our differentiated technology brings to the space. Very excited about both PNS and PRP going forward. Was there a follow-on question to that?
Yeah. Thanks. Yeah. Can you maybe talk about any early initiatives that Megan plans to implement or has implemented so far in PNS?
Yeah, sure. Yeah, sure. Thanks. Yeah. It's again, really excited to have Megan on board. She has a track record of with big with promising differentiated technology of scaling it into big businesses, so really excited to have her on board. You know, really the focus right now is on scaling the business. It's again, we have this fantastic technology, a market that's growing very fast. We're getting high interest from the customers that we're going to, and now we're building the organization and our commercial efforts. Mark alluded to a number of those things. This is everything from building up the sales team, to the clinical resources around that team, to the medical education that we're putting in place, to the evidence that we're putting in place.
We had a good plan in place when Megan came on board, and she's doing a fantastic job executing on that plan, leading the team to execute on that plan to scale the business for the future. Again, while it's early, it's just a very promising growth driver for us, and we're encouraged what we saw in the first quarter, and we're really looking forward to the path ahead.
Got it. Thanks so much, guys.
Thank you.
This concludes our question and answer session. I would like to turn the call back over to Rob Claypoole for any closing remarks.
Thank you. Thanks, everyone, for your interest in Bioventus. Once again, we delivered a solid performance throughout our business in the first quarter, and we are confident in our ability to build on our momentum to deliver above-market revenue growth, improve earnings, and accelerate our cash flow to create significant shareholder value. Thanks for joining our call.
The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.