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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 June 29, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-37844
BIOVENTUS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware81-0980861
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
4721 Emperor Boulevard, Suite 100
Durham, North 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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareBVSThe Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  ☒
As of July 30, 2024, there were 65,186,901 shares of Class A common stock outstanding and 15,786,737 shares of Class B common stock outstanding.


BIOVENTUS INC.
TABLE OF CONTENTS
Consolidated Condensed Statements of Operations and Comprehensive Loss for the three and six months ended June 29, 2024 and July 1, 2023
Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three and six months ended June 29, 2024 and July 1, 2023
Consolidated Condensed Statements of Cash Flows for the six months ended June 29, 2024 and July 1, 2023




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 integration of Misonix and Bioness, potential acquisitions, expected expansion of our pipeline and research and development investment, cost savings initiatives, new therapy launches, expected timelines for clinical trial results and other development milestones, expected contractual obligations and capital expenditures, recent dispositions of non-core assets, our domestic and international operations and expected financial performance and condition, and impacts of the COVID-19 pandemic, inflation and ongoing conflicts in Israel. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
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: we might not meet certain of our debt covenants under our Credit and Guaranty Agreement and might be required to repay our indebtedness; risks associated with the potential divestiture of our Advanced Rehabilitation 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 or costs not covered by our insurers, 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”) 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”) 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; 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 limited number of third-party manufacturers to manufacture certain of our products; if our facilities are damaged or become inoperable, we will be unable to continue to research, develop and manufacture certain of our products; economic, political,

regulatory and other risks related to international sales, manufacturing and operations; failure to maintain contractual relationships; security breaches, unauthorized access to our disclosure of information, cyberattacks, or other incidents, or the perception that confidential information in our or our vendors’ or service providers’ possession or control is not secure; failure of key information technology and communications systems, process or sites; 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, 2023, as may be further updated from time to time in our other filings with the SEC. You are urged to consider these factors carefully in evaluating these forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Bioventus Inc.
Consolidated Condensed Statements of Operations and Comprehensive Loss
Three and Six Months Ended June 29, 2024 and July 1, 2023
(Amounts in thousands, except share amounts)
(Unaudited)
Three Months EndedSix Months Ended
June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Net sales$151,217 $137,069 $280,674 $256,128 
Cost of sales (including depreciation and amortization of
    $11,021, $12,301, $21,046 and $26,640, respectively)
47,578 47,946 88,655 93,086 
Gross profit103,639 89,123 192,019 163,042 
Selling, general and administrative expense94,785 74,844 173,191 155,702 
Research and development expense3,988 3,398 6,585 7,169 
Restructuring costs— 620 — 937 
Change in fair value of contingent consideration300 240 595 527 
Depreciation and amortization2,064 2,294 3,819 4,423 
Impairments of assets31,870 — 31,870 78,615 
Loss on disposals— 977 — 977 
Operating (loss) income(29,368)6,750 (24,041)(85,308)
Interest expense, net9,924 10,587 20,263 20,281 
Other expense (income)159 513 222 (1,075)
Other expense10,083 11,100 20,485 19,206 
Loss before income taxes(39,451)(4,350)(44,526)(104,514)
Income tax (benefit) expense, net(7,339)381 (6,432)235 
Net loss from continuing operations(32,112)(4,731)(38,094)(104,749)
Loss from discontinued operations, net of tax— — — (74,429)
Net loss(32,112)(4,731)(38,094)(179,178)
Loss attributable to noncontrolling interest -
    continuing operations		8,120 1,050 9,532 21,410 
Loss attributable to noncontrolling interest -
    discontinued operations		— — — 14,937 
Net loss attributable to Bioventus Inc.$(23,992)$(3,681)$(28,562)$(142,831)
Net loss$(32,112)$(4,731)$(38,094)$(179,178)
Other comprehensive (loss) income, net of tax
Change in foreign currency translation adjustments(426)303 (1,011)960 
Comprehensive loss(32,538)(4,428)(39,105)(178,218)
Comprehensive loss attributable to noncontrolling interest -
    continuing operations		8,204 989 9,732 21,215 
Comprehensive loss attributable to noncontrolling interest -
    discontinued operations		— — — 14,937 
Comprehensive loss attributable to Bioventus Inc.$(24,334)$(3,439)$(29,373)$(142,066)
Loss per share of Class A common stock from continuing
    operations, basic and diluted:		$(0.37)$(0.06)$(0.45)$(1.34)
Loss per share of Class A common stock from discontinued
    operations, basic and diluted:		— — — (0.95)
Loss per share of Class A common stock, basic and diluted$(0.37)$(0.06)$(0.45)$(2.29)
Weighted-average shares of Class A common stock
    outstanding, basic and diluted:		64,056,75962,551,28563,720,34262,338,018
The accompanying notes are an integral part of these consolidated financial statements.
1
Bioventus Inc.
Consolidated Condensed Balance Sheets as of June 29, 2024 and December 31, 2023
(Amounts in thousands, except share amounts)
(Unaudited)
June 29, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$31,994 $36,964 
Accounts receivable, net137,305 122,789 
Inventory87,606 91,333 
Prepaid and other current assets23,570 16,913 
Assets held for sale28,408 — 
Total current assets308,883 267,999 
Property and equipment, net31,938 36,605 
Goodwill7,462 7,462 
Intangible assets, net424,552 482,350 
Operating lease assets10,366 13,353 
Deferred tax assets6,884 — 
Investment and other assets2,088 3,141 
Total assets$792,173 $810,910 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$24,437 $23,038 
Accrued liabilities139,978 119,795 
Current portion of long-term debt38,566 27,848 
Current portion of contingent consideration18,745 — 
Other current liabilities3,829 4,816 
Liabilities held for sale5,908 — 
Total current liabilities231,463 175,497 
Long-term debt, less current portion344,716 366,998 
Deferred income taxes— 1,213 
Contingent consideration— 18,150 
Other long-term liabilities26,932 27,934 
Total liabilities603,111 589,792 
Commitments and contingencies (Note 11)
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
Class A common stock, $0.001 par value, 250,000,000 shares authorized as of June 29, 2024 and
   December 31, 2023, 65,172,159 and 63,267,436 shares issued and outstanding as of June 29, 2024
   and December 31, 2023, respectively
65 63 
Class B common stock, $0.001 par value, 50,000,000 shares authorized,
    15,786,737 shares issued and outstanding as of June 29, 2024 and December 31, 2023
16 16 
Additional paid-in capital500,969 494,254 
Accumulated deficit(350,098)(321,536)
Accumulated other comprehensive (loss) income(17)794 
Total stockholders’ equity attributable to Bioventus Inc.150,935 173,591 
Noncontrolling interest38,127 47,527 
Total stockholders’ equity189,062 221,118 
Total liabilities and stockholders’ equity$792,173 $810,910 
The accompanying notes are an integral part of these consolidated financial statements.
2
Bioventus Inc.
Consolidated Condensed Statements of Changes in Stockholders’ Equity
Three and Six Months Ended June 29, 2024 and July 1, 2023
(Amounts in thousands, except share amounts)(Unaudited)
Three Months Ended June 29, 2024
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive income (loss)Accumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at March 30, 202463,672,170 $64 15,786,737 $16 $496,977 $325 $(326,106)$46,156 $217,432 
Issuance of Class A common stock for equity plans1,499,989 1 — — 495 — — — 496 
Net loss— — — — — — (23,992)(8,120)(32,112)
Change in noncontrolling interest allocation— — — — 502 — — (502)— 
Equity based compensation— — — — 2,995 — — 677 3,672 
Translation adjustment— — — — — (342)— (84)(426)
Balance at June 29, 202465,172,159 $65 15,786,737 $16 $500,969 $(17)$(350,098)$38,127 $189,062 
Three Months Ended July 1, 2023
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive (loss) incomeAccumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at April 1, 202362,507,917 $63 15,786,737 $16 $492,475 $413 $(304,456)$51,851 $240,362 
Issuance of Class A common stock for equity plans296,589 — — — 139 — — — 139 
Net loss— — — — — — (3,681)(1,050)(4,731)
Change in noncontrolling interest allocation— — — — 108 — — (108)— 
Equity based compensation— — — — (2,124)— — (608)(2,732)
Translation adjustment— — — — — 242 — 61 303 
Balance at July 1, 202362,804,506 $63 15,786,737 $16 $490,598 $655 $(308,137)$50,146 $233,341 
Six Months Ended June 29, 2024
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive income (loss)Accumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at December 31, 202363,267,436 $63 15,786,737 $16 $494,254 $794 $(321,536)$47,527 $221,118 
Issuance of Class A common
stock for equity plans		1,904,723 2 — — 784 — — — 786 
Net loss— — — — — — (28,562)(9,532)(38,094)
Change in noncontrolling interest allocation— — — — 821 — — (821)— 
Equity based compensation— — — — 5,110 — — 1,153 6,263 
Translation adjustment— — — — — (811)— (200)(1,011)
Balance at June 29, 202465,172,159 $65 15,786,737 $16 $500,969 $(17)$(350,098)$38,127 $189,062 
Six Months Ended July 1, 2023
Class A Common StockClass B Common Stock
SharesAmountSharesAmountAdditional Paid-in CapitalAccumulated other comprehensive (loss) incomeAccumulated DeficitNon-
controlling
interest		Total Stockholders'
equity
Balance at December 31, 202262,063,014 $62 15,786,737 $16 $490,576 $(110)$(165,306)$86,984 $412,222 
Issuance of Class A common
stock for equity plans		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, 202362,804,506 $63 15,786,737 $16 $490,598 $655 $(308,137)$50,146 $233,341 
The accompanying notes are an integral part of these consolidated financial statements.
3
Bioventus Inc.
Consolidated Condensed Statements of Cash Flows
Six Months Ended June 29, 2024 and July 1, 2023
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 29, 2024July 1, 2023
Operating activities:
Net loss$(38,094)$(179,178)
Less: Loss from discontinued operations, net of tax— (74,429)
Loss from continuing operations(38,094)(104,749)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization24,875 31,073 
(Benefit) provision for expected credit losses(537)640 
Equity-based compensation6,263 (886)
Change in fair value of contingent consideration595 527 
Deferred income taxes(8,098)(3,540)
Impairment of assets31,870 78,615 
Loss on disposals— 977 
Unrealized loss on foreign currency fluctuations536 601 
Other, net961 1,139 
Changes in operating assets and liabilities:
Accounts receivable(21,933)11,329 
Inventories(8,359)(13,074)
Accounts payable and accrued expenses22,552 14,765 
Other current and noncurrent assets and liabilities(1,474)(1,963)
Net cash from operating activities - continuing operations9,157 15,454 
Net cash from operating activities - discontinued operations— (2,169)
Net cash from operating activities9,157 13,285 
Investing activities:
Proceeds from sale of a business— 34,897 
Purchase of property and equipment(368)(4,957)
Investments and acquisition of distribution rights(709)— 
Net cash from investing activities - continuing operations(1,077)29,940 
Net cash from investing activities - discontinued operations— (11,506)
Net cash from investing activities(1,077)18,434 
Financing activities:
Proceeds from issuance of Class A common stock786 223 
Borrowing on revolver— 49,000 
Payment on revolver— (42,000)
Debt refinancing costs(1,180)(3,661)
Payments on long-term debt(11,320)(38,264)
Other, net(373)(166)
Net cash from financing activities(12,087)(34,868)
Effect of exchange rate changes on cash(963)701 
Net change in cash, cash equivalents and restricted cash(4,970)(2,448)
Cash, cash equivalents and restricted cash at the beginning of the period36,964 31,837 
Cash, cash equivalents and restricted cash at the end of the period$31,994 $29,389 
Supplemental disclosure of noncash investing and financing activities
Accrued liabilities for intellectual property$— $709 
Accounts payable for purchase of property, plant and equipment$205 $968 
The accompanying notes are an integral part of these consolidated financial statements.
4
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 1,030 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 ended on April 1, July 1 and September 30. The fourth and first quarters may vary in length depending on the calendar year.
Unaudited interim financial information
The accompanying unaudited consolidated condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) 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, 2023. The consolidated balance sheet at December 31, 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.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation. During the first quarter of 2024, the Company reclassified revenue and expense of the SonicOne Ultrasonic Cleansing and Debridement Systems (“SonicOne”) from the Restorative Therapies to the Surgical Solutions business. The reclassification of SonicOne activity affected 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 unaudited consolidated condensed financial statements reflects the Company’s results from continuing operations.
5
Use of estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. On an ongoing basis, management evaluates these estimates, including those related to contractual allowances and sales incentives, allowance for credit losses, inventory reserves, goodwill and intangible assets impairment, valuation of assets and liabilities assumed in acquisitions, useful lives of long lived assets, fair value measurements, litigation and contingent liabilities, income taxes, and equity-based compensation. Management bases its estimates on historical experience, future expectations and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
Recent accounting pronouncements
In addition to being a smaller reporting and an emerging growth company, the Company also is an accelerated 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.
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:
June 29, 2024December 31, 2023
Accounts receivable(a)
$140,204 $127,008 
Less: Allowance for credit losses(a)
(2,899)(4,219)
$137,305 $122,789 
(a)Accounts receivable of $7,688 attributable to the Company’s advanced rehabilitation business was reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
6
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 19.2% and 16.0% of the accounts receivable balance as of June 29, 2024 and December 31, 2023, respectively. Historically, the Company’s reserves have been adequate to cover credit losses.
Inventory
Inventory consisted of the following as of:
June 29, 2024December 31, 2023
Raw materials and supplies(a)
$24,841 $21,062 
Finished goods(a)
62,765 70,271 
$87,606 $91,333 
(a)Raw materials and supplies of $4,924 and finished goods inventory of $9,449 attributable to the Company’s advanced rehabilitation business were reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
Property and equipment, net
Property and equipment consisted of the following as of:
June 29, 2024December 31, 2023
Computer equipment and software$39,713 $37,860 
Demonstration and consignment inventory9,963 9,341 
Leasehold improvements3,933 3,763 
Furniture and fixtures(a)
4,586 4,163 
Finance leases15,737 15,737 
Machinery and equipment(b)
1,801 2,180 
Assets net yet placed in service2,021 4,065 
77,754 77,109 
Less accumulated depreciation(45,816)(40,504)
$31,938 $36,605 
(a)Furniture and fixtures of $51 and accumulated depreciation of $31 attributable to the Company’s advanced rehabilitation business were reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
(b)Machinery and equipment of $385 and accumulated depreciation of $133 attributable to the Company’s advanced rehabilitation business were reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
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Intangible assets, net
Intangible assets consisted of the following as of:
June 29, 2024December 31, 2023
Intellectual property(a)(b)
$626,007 $677,258 
Distribution rights61,325 61,325 
Customer relationships57,950 57,950 
IPR&D5,500 5,500 
Developed technology and other13,998 13,998 
Total carrying amount764,780 816,031 
Less accumulated amortization:
Intellectual property(a)(b)
(221,261)(218,031)
Distribution rights(51,790)(49,301)
Customer relationships(57,950)(57,950)
Developed technology and other(8,004)(7,521)
Total accumulated amortization(339,005)(332,803)
Intangible assets, net before currency translation425,775 483,228 
Currency translation(1,223)(878)
$424,552 $482,350 
(a)Intellectual property of $19,380 and accumulated amortization of $16,656 attributable to the Company’s advanced rehabilitation business were reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3.Acquisitions and divestitures for further details regarding assets held for sale.
(b)The Company recorded an impairment loss of $31,870 for the three and six months ended June 29, 2024 in the U.S. reporting segment of net intellectual property solely attributable to the Company’s advanced rehabilitation business. 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 2024 and for the years ended December 31, 2025 through 2028 is expected to be $19,629, $37,412, $34,192, $35,243 and $31,012, respectively.
Accrued liabilities
Accrued liabilities consisted of the following as of:
June 29, 2024December 31, 2023
Gross-to-net deductions$68,349 $59,592 
Bonus and commission19,987 19,437 
Settlement and legal fees17,737 986 
Compensation and benefits9,081 9,709 
Accrued interest6,185 6,606 
Income and other taxes4,883 4,749 
Other liabilities(a)
13,756 18,716 
$139,978 $119,795 
(a)Accrued liabilities of $3,110 attributable to the Company’s advanced rehabilitation business were reclassified to liabilities held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
8
3. Acquisitions and divestitures
Advanced Rehabilitation Business
In May 2024, the Company began contract negotiations with a third-party (the “Buyer”) to sell certain products within its advanced rehabilitation business, including the L100, L300 Go, L360, H200, Vector Gait & Safety System and BITS-Bioness Integrated Therapy System (collectively, the “Advanced Rehabilitation Business”). The Advanced Rehabilitation Business is considered non-core and will require additional research and development expenditures to achieve its next stage of growth. The potential divestiture of the Advanced Rehabilitation Business is expected to simplify the Company’s business structure and improve liquidity, as the proceeds, net of transactional fees, are required to be used to reduce long-term debt obligations. Contract negotiations are ongoing with the Buyer and as of the end of the second quarter of 2024, the Company had incurred $2,500 in transactional fees resulting from the potential divestiture of the Advanced Rehabilitation Business.
The Company has classified the identifiable net assets of the Advanced Rehabilitation Business as held for sale. A significant portion of the Advanced Rehabilitation Business net assets were within the U.S. reporting segment. Assets and liabilities determined to be part of the Advanced Rehabilitation Business have been recorded as single amounts within the Company’s consolidated financial statements. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to sell, which is expected to occur within one year. The Company has ceased depreciating and amortizing the assets classified as held for sale. Assets and liabilities held for sale are reviewed each reporting period to determine whether existing carrying values are fully recoverable in comparison to estimated fair values less costs to sell.
The Company evaluated the Advanced Rehabilitation Business for impairment due to its potential divestiture and, as a result of this evaluation, recorded a $31,870 impairment under the U.S. reporting segment within the consolidated condensed statements of operations and comprehensive loss during the three and six months ended June 29, 2024 to reduce the intangible assets of the Advanced Rehabilitation Business to reflect their respective fair values less any costs to sell. The fair value of its intangibles was based on the preliminary consideration offered for the Advanced Rehabilitation Business.
The carrying amounts for the major classes of assets and liabilities of the Advanced Rehabilitation Business classified as held for sale were as follows:
June 29, 2024
Carrying amounts of assets classified as held for sale:
Accounts receivable$7,688 
Inventory14,373 
Prepaid and other current assets1,930 
Property and equipment, net272 
Intangible assets2,724 
Operating lease assets1,171 
Other assets250 
Total assets held for sale$28,408 
Carrying amounts of liabilities classified as held for sale:
Accounts payable$1,566 
Accrued liabilities3,110 
Other liabilities1,232 
Total liabilities held for sale$5,908 
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”), for potential consideration of $84,675, including $34,675 at closing, $5,000 deferred for 18 months and up to $45,000 in potential earn-out payments, which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for sales of the TheraSkin and TheraGenesis products during the 2024, 2025 and 2026 fiscal years.
The Company incurred $3,880 in transactional fees resulting from the sale of the Wound Business. The Company used the proceeds from the sale of its Wound Business to prepay $30,000 of long-term debt obligations. Refer to Note 4. Financial Instruments for further details regarding the Company’s outstanding long-term debt obligations.
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The Company evaluated the Wound Business for impairment prior to its sale and recorded a $78,615 impairment within the consolidated condensed statements of operations and comprehensive loss during the six months ended July 1, 2023 as a result of this evaluation to reduce the intangible assets of the Wound Business to reflect their respective fair values less any costs to sell. The fair value of its intangibles was determined based on the consideration received for the Wound Business. The loss resulting from the deconsolidation of the Wound Business totaled $977 for the three and six months ended July 1, 2023 and was recorded in loss on disposals within the consolidated condensed statements of operations and comprehensive loss.
CartiHeal (2009) Ltd.
On July 12, 2022, the Company completed the acquisition of 100% of the remaining shares in CartiHeal (2009) Ltd. (“CartiHeal”), a developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints. On February 27, 2023, the Company entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd. (“Elron”), as representative of CartiHeal’s former securityholders (the “Former Securityholders”). Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings related to non-payment of any obligations including deferred purchase price and contingent consideration totaling $215,000 and $135,000, respectively, under the Company’s previous agreements to purchase CartiHeal from the Former Securityholders.
Pursuant to the Settlement Agreement, the Company also transferred 100% of its shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders and made a one-time non-refundable payment of $10,150 to Elron to be used for purposes set forth in the Settlement Agreement. 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 and the Company treated the deconsolidation of CartiHeal as a discontinued operation. The loss on disposal was $60,639 and was recorded within discontinued operations, net of tax within the consolidated condensed statements of operations and comprehensive loss for the six months ended July 1, 2023. Refer to Note 14. Discontinued operations for further information regarding the impact of CartiHeal on the Company’s consolidated condensed financial statements for the six months ended July 1, 2023.
4. Financial instruments
Long-term debt consisted of the following as of:
June 29, 2024December 31, 2023
Amended Term Loan due October 2026 (9.34% at June 29, 2024)
$371,128 $382,448 
Revolver due October 2025 (9.34% at June 29, 2024)
15,000 15,000 
Less:
Current portion of long-term debt(38,566)(27,848)
Unamortized debt issuance cost(1,459)(917)
Unamortized discount(1,387)(1,685)
$344,716 $366,998 
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 (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, Inc., in which the Company prepaid $80,000 on the Original Term Loan. The 2019 Credit Agreement, as amended, subsequent to the prepayment, was comprised of a $360,750 term loan (“Term Loan”) and the Revolver.
On July 11, 2022, the Company further amended the 2019 Credit Agreement in conjunction with the acquisition of CartiHeal (the “CartiHeal Acquisition”). Pursuant to that amendment, an $80,000 term loan facility (the “July 2022 Term Loan” and, together with the Term Loan, the “Term Loan Facilities”) was extended to the Company to be used for: (i) the financing of the CartiHeal Acquisition; (ii) the payment of related fees and expenses; (iii) repayment of the draws made on the Revolver; and (iv) working capital needs and general corporate purposes of the Company, including without limitation for permitted acquisitions.
On March 31, 2023, the Company entered into an additional amendment to the 2019 Credit Agreement to, among other things, modify certain financial covenants, waive covenant noncompliance at December 31, 2022, and to modify interest rates applicable to borrowings under the 2019 Credit Agreement.
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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 June 29, 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 October 29, 2025, the Company will be subject to certain additional requirements and covenants, including a requirement to maintain Liquidity (as defined in the Amended 2019 Credit Agreement) of not less than $10,000 as of the end of each calendar month during such period. The Term Loan Facilities will mature on October 29, 2026. The Revolver will mature on October 29, 2025.
The January 2024 amendment had deferred financing costs of $1,180, of which $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 six months ended June 29, 2024. The March 2023 amendment had deferred financing costs of $3,661, of which $1,617 was recorded in selling, general and administrative expense within the consolidated condensed statements of operations and comprehensive loss and $2,044 was capitalized on the consolidated condensed balance sheets during the six months ended July 1, 2023. There were no losses on debt refinancing and modification as a result of either the January 2024 or March 2023 amendments.
As of June 29, 2024, $368,282 was outstanding on the Term Loan Facilities, net of original issue discount of $1,387 and deferred financing costs of $1,459. 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 $381, $915, $762 and $1,138 for the three months June 29, 2024 and July 1, 2023 and the six months ended June 29, 2024 and July 1, 2023, respectively.
The estimated fair value of the Term Loan Facilities was $370,664 as of June 29, 2024. The fair value of these obligations was determined based on the midpoint of the Bloomberg Valuation. This is classified as a Level 2 instrument within the fair value hierarchy.
Revolver and Letters of Credit
The Revolver is a five-year revolving credit facility that includes revolving and swingline loans as well as letters of credit (“LOC”) and, inclusive of all, could not exceed $45,000 at any one time as the Revolver capacity was reduced by $5,000 at December 31, 2023 in accordance with the 2019 Credit Agreement then in effect. The Revolver was further reduced by $5,000 at June 30, 2024, limiting borrowing capacity to $40,000. The Company had $15,000 outstanding borrowings on its Revolver as of June 29, 2024 and December 31, 2023. LOCs are available in an amount not to exceed $7,500. The Company had two LOCs outstanding as of June 29, 2024, leaving approximately $5,800 available. Revolving loans are due at the earlier of termination or maturity. Swingline loans are available as base rate option loans only and must be outstanding for at least five days. Swingline loans are due the fifteenth or last day of a calendar month or maturity, whichever is earlier.
5. Fair value measurements
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, 2023.
11
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 3 inputs:
June 29, 2024December 31, 2023
TotalLevel 3TotalLevel 3
Liabilities:
Current portion of contingent consideration$18,745 $18,745 $— $— 
Contingent consideration— — 18,150 18,150 
Total liabilities:$— $— $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.
Unobservable inputs
A summary of unobservable Level 3 inputs utilized for the above liabilities are as follows:
Valuation TechniqueUnobservable inputsRange
Bioness contingent considerationDiscounted cash flowPayment 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 June 29, 2024 and July 1, 2023 and six months ended June 29, 2024 and July 1, 2023 totaled $300, $240, $595 and $527, respectively, and were recorded as the change in fair value of contingent consideration within the consolidated condensed statements of operations and comprehensive loss.
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 (collectively, the “2021 Plan Awards”). As of June 29, 2024, 19,564,333 shares of Class A common stock have been authorized to be awarded under the 2021 Plan and 8,921,686 shares were available for 2021 Plan Awards.
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 June 29, 2024, 600,000 shares of Class A common stock were authorized to be awarded under the 2023 Plan and 84,700 shares were available for Retention Awards.
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Activity under the Plans
Expense
Equity-based compensation, net for Awards granted under the Plans for the three and six months ended June 29, 2024 totaled $3,457 and $6,048, respectively. Equity-based compensation, net for Awards granted under the Plans for the three and six months ended July 1, 2023 totaled $2,797 and $1,079, respectively, in expense reduction as a result of expense reversals due to executive leadership transitions. 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 June 29, 2024 and July 1, 2023.
Restricted Stock Units
During the three and six months ended June 29, 2024, the Company granted time-based RSUs which vest at various dates through 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 $7,091 at June 29, 2024, and is expected to be recognized over a weighted average period of approximately 2.40 years. A summary of the RSU award activity for the six months ended June 29, 2024 is as follows (number of units in thousands):
Number of unitsWeighted-average grant-date fair value per unit
Unvested at December 31, 20232,066 $4.51 
Granted2,429 5.45 
Vested(1,550)4.56 
Forfeited or canceled(105)7.33 
Unvested at June 29, 20242,840 $5.12 
Stock Options
During the three and six months ended June 29, 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 months ended June 29, 2024 is shown in the following table:
Risk-free interest rate
3.9% - 4.3%
Expected dividend yield— %
Expected stock price volatility
36.1% - 36.4%
Expected life of stock options (years)
6.25
The weighted-average grant date fair value of options granted during the six months ended June 29, 2024 was $2.25 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 $4,342 at June 29, 2024, and is expected to be recognized over a weighted average period of approximately 2.86 years.
A summary of stock option activity is as follows for the six months ended June 29, 2024 (number of options in thousands):
Number of optionsWeighted-average exercise priceWeighted average remaining contractual termAggregate intrinsic value
Outstanding at December 31, 20234,347 $8.68 
Granted1,763 5.18 
Exercised(229)5.21 
Forfeited or canceled(747)10.51 
Outstanding at June 29, 20245,134 7.53 7.66$4,968 
Exercisable and vested at June 29, 20241,982 $9.95 5.57$855 
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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 $5.75 per share as this was the closing price of the Company’s Class A common stock on June 28, 2024, the last trading day of the second 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 June 29, 2024, the aggregate number of shares reserved for issuance under the ESPP was 1,393,982. A total of 125,622 shares were issued under the ESPP and $215 of expense was recognized during the three and six months ended June 29, 2024. A total of 144,851 and 366,927 shares were issued under the ESPP and $65 and $193 of expense was recognized during the three and six months ended July 1, 2023, respectively.
7. Stockholders’ equity
On February 16, 2021, the Company closed an IPO of 9,200,000 shares of Class A common stock through an UP-C structure with BV LLC. In connection with the IPO, the Company amended and restated the limited liability agreement of BV LLC (“BV LLC Agreement”) to provide for a new single class of common membership interests in BV LLC (“LLC Interests”) and exchange all of the existing membership interests in BV LLC (the “Original BV LLC Owners”) for new LLC Interests. The Company also amended its certificate of incorporation to authorize the following shares: (i) 250,000,000 shares of Class A common stock with a par value of $0.001 per share; (ii) 50,000,000 shares of Class B common stock with a par value of $0.001 per share, which have voting rights but no economic interest, and some of which were issued to the Original BV LLC Owners; and (iii) 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors. In connection with the completion of the IPO, the Company acquired, by merger, certain entities that were part of the Original BV LLC Owners (“Former BV LLC Owners”), for which the Company issued 31,838,589 Class A common stock as merger consideration (“IPO Mergers”) and cancelled the Class B common stock held by such Former BV LLC Owners. The IPO Mergers are deemed to be a recapitalization transaction.
Holders of the Company’s Class A and Class B common stock are entitled to one vote per share and, except as otherwise required, will vote together as a single class on all matters on which stockholders generally are entitled to vote. Holders of Class B common stock are not entitled to receive dividends and will not be entitled to receive any distributions upon the liquidation, dissolution or winding up of the Company. Shares of Class B common stock may only be issued to the extent necessary to maintain the one-to-one ratio between the number of LLC Interests and the number of shares of Class B common stock held by Smith & Nephew, Inc. (the “Continuing LLC Owner”). Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Shares of Class B common stock will be canceled on a one-for-one basis upon the redemption or exchange of any outstanding LLC Interests.
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 months ended June 29, 2024 or during the year ended December 31, 2023. The following table summarizes the ownership interest in BV LLC as of June 29, 2024 and December 31, 2023 (number of units in thousands):
June 29, 2024December 31, 2023
LLC Interests
Ownership %
LLC Interests
Ownership %
Number of LLC Interests owned
Bioventus Inc.65,172 80.5 %63,267 80.0 %
Continuing LLC Owner15,787 19.5 %15,787 20.0 %
Total80,959 100.0 %79,054 100.0 %
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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 EndedSix Months Ended
June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Numerator:
Net loss from continuing operations, net of tax$(32,112)$(4,731)$(38,094)$(104,749)
Net loss attributable to noncontrolling interests —
    continuing operations		8,120 1,050 9,532 21,410 
Net loss attributable to Bioventus Inc. Class A
    common stockholders — continuing operations		$(23,992)$(3,681)$(28,562)$(83,339)
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		64,056,759 62,551,285 63,720,342 62,338,018 
Net loss per share of Class A common stock from
    continuing operations, basic and diluted		$(0.37)$(0.06)$(0.45)$(1.34)
Net loss per share of Class A common stock from
    discontinued operations, basic and diluted		— — — (0.95)
Net loss per share of Class A common stock,
    basic and diluted		$(0.37)$(0.06)$(0.45)$(2.29)
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 June 29, 2024 and July 1, 2023 were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion:
Three Months EndedSix Months Ended
June 29, 2024July 1, 2023June 29, 2024July 1, 2023
LLC Interests held by Continuing LLC Owner(a)
15,786,737 15,786,737 15,786,737 15,786,737 
Stock options4,208,043 6,730,685 4,177,250 7,623,865 
RSUs49,784 766,427 25,029 974,238 
Total20,044,564 23,283,849 19,989,016 24,384,840 
(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.
15
The Company’s prior restructuring plans adopted in 2021 and 2022 focused on aligning its organizational and management cost structure to improve profitability and cash flow, reduce headcount and the consolidation of facilities. These plans have been completed. There were no restructuring expenses incurred during the three and six months ended June 29, 2024. Restructuring expenses incurred during three and six months ended July 1, 2023 totaled $620 and $937, respectively. Payments for restructuring liabilities during the six months ended June 29, 2024 and July 1, 2023 totaled $961 and $3,085, respectively.
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 and six months ended June 29, 2024 and July 1, 2023, the Company’s effective tax rate was 18.6%, 8.8%, and 14.4% and 0.2%, respectively. The change in rate for the three and six months ended June 29, 2024 compared to the prior year comparable period was primarily due to losses 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.
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 8.8 years.
The components of lease cost were as follows:
Three Months EndedSix Months Ended
June 29, 2024July 1, 2023June 29, 2024July 1, 2023
Operating lease cost$938 $1,010 $1,826 $2,079 
Short-term lease cost(a)
326 229 406 435 
Financing lease cost:
Amortization of finance lease assets174 393 332 628 
Interest on lease liabilities217 229 438 366 
Total lease cost$1,655 $1,861 $3,002 $3,508 
(a)Includes variable lease cost and sublease income, which are immaterial.
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Supplemental cash flow information and non-cash activity related to leases were as follows:
Six Months Ended
June 29, 2024July 1, 2023
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases$2,319 $2,227 
Operating cash flows from financing leases$438 $337 
Financing cash flows from finance leases$373 $175 
Right-of-use assets obtained in exchange for lease obligations:
Operating lease obligations$132 $254 
Financing lease obligations$— $15,567 
Supplemental balance sheet and other information related to leases were as follows:
June 29, 2024December 31, 2023
Operating lease assets(a)
$10,366$13,353
Operating lease liabilities—current(b)
$3,038$4,057
Operating lease liabilities—noncurrent(b)
8,46910,573
Total operating lease liabilities$11,507$14,630
Property, plant and equipment, net (finance leases)$13,491$14,279
Finance lease liabilities—current$791$759
Finance lease liabilities—noncurrent9,98110,386
Total financing lease liabilities$10,772$11,145
Weighted average remaining lease term (years) for leases
Operating leases3.43.8
Finance leases8.89.3
Weighted average discount rate for leases
Operating leases4.8 %4.7 %
Finance leases8.1 %8.1 %
(a)Operating lease assets totaling $1,171 attributable to the Advanced Rehabilitation Business were reclassified to assets held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
(b)Current and noncurrent operating lease liabilities of $983 and $249, respectively, were reclassified to liabilities held for sale within the June 29, 2024 consolidated condensed balance sheets. Refer to Note 3. Acquisitions and divestitures for further details regarding assets held for sale.
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.
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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.
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 (the “Court”), Ciarciello v. Bioventus, Inc., No. 1:23– CV – 00032-CCE-JEP (M.D.N.C. 2023). The complaint asserted violations of Sections 10(b) and 20(a) of the Exchange Act and of Sections 11 and 15 of the Securities Act and generally alleges that the Company failed to disclose certain information regarding rebate practices, its business and financial prospects, and the sufficiency of internal controls regarding financial reporting. The complaint seeks damages in an unspecified amount. On April 12, 2023, the Court appointed Wayne County Employees’ Retirement System as lead plaintiff. The plaintiff’s amended consolidated complaint was filed with the Court on June 12, 2023. On July 17, 2023, the defendants filed a motion to dismiss the complaint raising a number of legal and factual deficiencies with the amended consolidated complaint. In response to the defendants’ motion to dismiss, the lead plaintiff filed a second amended complaint on July 31, 2023. The defendants moved to dismiss the second amended complaint on August 21, 2023, which the Court granted in part and denied in part on November 6, 2023. The Court dismissed the plaintiff’s Securities Act claims, but allowed the plaintiff’s Exchange Act claims to proceed into discovery.
On July 15, 2024, a Stipulation and Agreement of Settlement (the “Settlement Agreement”) by and between the lead plaintiff and the defendants was filed with the Court. The Settlement Agreement, which is subject to Court approval, provides among other things for (i) the dismissal of all claims against the defendants, including the Company; (ii) a settlement amount of $15,250, together with interest earned thereon, to be paid by the defendants and/or the defendant’s insurers within 30 days after the later of (x) the date of entry by the Court of an order preliminarily approving the terms of the settlement or (y) receipt by the defendants from lead counsel of the information necessary to effectuate a transfer of the settlement funds; and (iii) no admission of liability or wrongdoing by any party. The Company incurred $12,502 and $13,670 of net shareholder litigation costs (including estimated settlement and reimbursement) during the three and six months ended June 29, 2024 under the Settlement Agreement, which were recorded in selling, general and administrative expense within the consolidated condensed statements of operations and comprehensive loss. The Company expects to be reimbursed approximately $6,500 of the fees incurred to date, which was recorded in other current assets within the June 29, 2024 consolidated condensed balance sheets.
On October 4, 2023, certain of the Company’s current and former directors and officers were named as defendants in a derivative shareholder lawsuit (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Grogan, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:23-CV-01099-RGA (D. Del. 2023). The complaint asserts violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On January 12, 2024, the Court agreed to stay this case pending resolution of the Ciarciello case. The Company may incur further legal costs until settlement is ultimately approved and executed by the Court.
On February 9, 2024, another plaintiff filed a derivative shareholder lawsuit against certain of the Company’s current and former directors and officers (in which the Company is a nominal defendant) filed in the United States District Court for the District of Delaware, Sanderson, on behalf of Bioventus Inc., v. Reali, et.al., No. 1:24-cv-00180-RGA (D. Del. 2024). Like the Grogan case, this case asserts violations of Section 10(b) of the Exchange Act, breaches of fiduciary duties and related state law claims, and a claim for contribution, and generally alleges the same purported misconduct as alleged in the Ciarciello case. On May 1, 2024, the parties filed a stipulation to consolidate the two derivative matters and stay them on terms similar to those entered in the Grogan case. On May 2, 2024, the United States District Court for the District of Delaware granted the stipulation and ordered the consolidation of the Sanderson and Grogan cases (as consolidated, the “Grogan Case”).
The Company believes the claims alleged in the Grogan Case lacks merit and intends to defend itself vigorously. The outcome of this matter is not presently determinable, and any loss is neither probable nor reasonably estimable.
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Bioness stockholder litigation
On February 8, 2022, a minority shareholder of Bioness filed an action in the Delaware State Court of Chancery in connection with the Company’s acquisition of Bioness, Teuza, a Fairchild Technology Venture Ltd. v. Lindon, et. al., No. 2022-0130 -SG. This action names the former Bioness directors, the Alfred E. Mann 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. On April 27, 2023, the Court issued an order which, among other things, dismissed Bioventus from the case.
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 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 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”) 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 June 29, 2024 and July 1, 2023 and the six months ended June 29, 2024 and July 1, 2023 totaled $4,594 $4,119, $8,173 and $6,440, 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