What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-11 compared with 2024-03-12 · 175 added, 194 removed, 372 unchanged (50% of the section changed)

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Executive Summary

We are a global medical device company focused on developing and commercializing clinically differentiated, cost efficient and minimally invasive treatments that engage and enhance the body’s natural healing process.

We operate our business through two reportable segments, U.S.

and International, and our portfolio of products is grouped into three areas:

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

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

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

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

We are a global medical device company focused on helping patients recover and live life to the fullest by relieving pain and addressing musculoskeletal challenges through a diverse portfolio of high-quality, innovative, and clinically-proven solutions.

We operate our business through two reporting segments, U.S.

and International, and our portfolio of products is comprised of five patient-focused areas, grouped into three businesses based on clinical use:

(i) Pain Treatments, (ii) Surgical Solutions and (iii) Restorative Therapies.

• Pain Treatments, comprised of:

◦ Knee Osteoarthritis (“KOA”) area :

Our product portfolio includes a range of intra-articular, hyaluronic acid (“HA”) injections that help relieve patient discomfort and improve quality of life.

◦ Peripheral Nerve Stimulation (“PNS”) area:

We are focused on developing a full portfolio of peripheral nerve stimulation products with solutions for acute, temporary and chronic pain.

• Surgical Solutions, comprised of:

◦ Ultrasonics:

Our Ultrasonics business offers precision bone resection for patients with degenerative spine conditions and spinal deformities.

This portfolio also enables precision ultrasonic neuro and general surgery to address brain tumors and pathologies of the liver and other organs.

◦ Bone Graft Substitutes (“BGS”) :

Our product portfolio includes a range of products that facilitate optimal bone fusion following a surgical procedure.

• Restorative Therapies, comprised of:

◦ Fracture Care:

We provide low-intensity pulse ultrasound to help patients who suffer from bone fractures that do not heal through traditional methods.

We plan to expand our United States clinical indications to address the healing of fresh fractures, especially for high-risk patients.

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

Years Ended December 31,

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Loss per Class A common stock, basic and diluted $ (0.52) $ (2.49)

(1) See below under Results of Operations-Adjusted EBITDA for a reconciliation of net (loss) income to Adjusted EBITDA.

Significant transactions

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

Significant developments

Advanced Rehabilitation Business

On September 30, 2024, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with a third-party purchaser to sell certain products within our advanced rehabilitation business, including the L100, L300 Go, L360, H200, Vector Gait & Safety System and Bioness Integrated Therapy System (BITS) (collectively, the “Advanced Rehabilitation Business”).

On December 31, 2024, we closed the sale of the Advanced Rehabilitation Business and received $24.7 million at closing, net of transactional fees, subject to a post-closing adjustment for net working capital.

We may also receive an aggregate of $20.0 million in potential earn-out payments, which are based on the achievement of certain revenue and financial metric thresholds in respect to sales of products from the Advanced Rehabilitation Business during the 2025 and 2026 fiscal years.

We have incurred $2.5 million in transactional fees resulting from the divestiture of the Advanced Rehabilitation Business.

The sale of the Advanced Rehabilitation Business is expected to enhance our strategic focus on our remaining businesses and improve liquidity, as the proceeds, net of transactional fees, were used to pay $20.0 million in long-term debt obligations.

We evaluated the Advanced Rehabilitation Business for impairment due to its divestiture.

As a result of this evaluation, we recorded impairments totaling $33.9 million for the year ended December 31, 2024 under the U.S.

reporting segment within the consolidated condensed statements of operations and comprehensive loss.

The impairment losses reduced 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 consideration agreed to with the purchaser for the Advanced Rehabilitation Business.

Reclassification

We reclassified SonicOne revenue and expense of the SonicOne Ultrasonic Cleansing and Debridement Systems (“SonicOne”) from the Restorative Therapies to the Surgical Solutions business in the first quarter of 2024.

SonicOne’s capabilities to remove devitalized or necrotic tissue and fiber deposits more closely aligns with Surgical Solutions’ soft tissue management.

SonicOne revenue reclassified for the year ended December 31, 2023 totaled $6.8 million for the U.S.

reporting segment and $0.3 million for the International reporting segment.

Allograft Delivery Device

The Allograft Delivery Device, a customized delivery system for our OSTEOAMP Flowable product, received FDA clearance in June 2024.

OSTEOAMP is an allograft-derived bone graft with growth factors used for reconstructive bone grafting procedures.

The Allograft Delivery Device is intended to be used for the delivery of hydrated allograft to an orthopedic site, therefore assisting with the use of OSTEOAMP Flowable, the fastest growing product in our bone graft substitutes portfolio, in minimally invasive surgical procedures as well as open procedures.

The European Union Medical Devices Regulation (“EU MDR”), which became effective in May 2021, was adopted with the aim of ensuring better protection of public health and patient safety.

Among other things, the EU MDR imposed changes to clinical evidence for medical devices, post-market clinical follow-up evidence, annual reporting of safety information for Class III products, and bi-annual reporting for Class II products, Unique Device Identification (“UDI”) for all products, submission of core data elements to a European UDI database prior to placement of a device on the market, reclassification of medical devices, and multiple labeling changes.

We were able to continue marketing our currently certified products in the European Union (“EU”) after the effective date of EU MDR until the associated certifications expire.

In April 2024, we received EU certification for our EXOGEN Bone Stimulation System, which will allow us to market it throughout the EU.

The certificate is valid for 5 years.

Wound Business

On May 22, 2023, we closed the sale of certain assets within our Wound Business, including the TheraSkin and TheraGenesis products (collectively, the “Wound Business” or the “Disposal Group”), for potential consideration of $84.7 million, including $34.7 million at closing, $5.0 million deferred for 18 months and up to $45.0 million in potential earn-out payments (“Earn-out Payments”), which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for sales of the TheraSkin and TheraGenesis products during the 2024, 2025 and 2026 fiscal years.

On May 22, 2023, we closed the sale of certain assets within its Wound Business, including the TheraSkin and TheraGenesis products (collectively, the “Wound Business” or the “Disposal Group”), for potential consideration of $84.7 million, including $34.7 million at closing, $5.0 million deferred for 18 months and up to $45.0 million in potential earn-out payments, which are based on the achievement of certain revenue thresholds by the purchaser of the Wound Business for sales of the TheraSkin and TheraGenesis products during the 2024, 2025 and 2026 fiscal years.

We received the deferred payment in November 2024, which was used to pay $5.0 million of long-term debt obligations.

We incurred $3.9 million in transactional fees resulting from the sale of the Wound Business.

The deconsolidation of the Disposal Group resulted in the recognition of a $1.5 million loss on disposal of a business recorded within the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2023.

The proceeds were used to prepay $30.0 million of long-term debt principal obligations.

We evaluated the Wound Business for impairment prior to its sale and recorded a $78.6 million impairment within the consolidated statements of operations and comprehensive (loss) income during the year ended December 31, 2023 as a result of this evaluation to reduce the intangible assets of the Disposal Group to reflect their respective fair values, less any costs to sell.

The fair value of the Disposal Group’s intangibles were determined based on the consideration received for the Wound Business.

On July 12, 2022, we acquired 100% of CartiHeal (2009) Ltd.

(“CartiHeal”), a privately held company headquartered in Israel and the developer of the proprietary Agili-C implant for the treatment of joint surface lesions in traumatic and osteoarthritic joints.

We purchased CartiHeal (the “CartiHeal Acquisition”) for an aggregate purchase price of approximately $315.0 million and an additional $135.0 million, becoming payable after closing upon the achievement of a certain sales milestone (“Sales Milestone Consideration”).

We paid $100.0 million of the aggregate purchase price upon closing, consisting of a $50.0 million escrow deposit and $50.0 million from a financing arrangement.

We also paid approximately $8.6 million of CartiHeal’s transaction-related fees and expenses and deferred $215.0 million (“Deferred Amount”) of the aggregate purchase price otherwise due at closing until the earlier of the achievement of certain milestones or the occurrence of certain installment payment dates.

We recognized a gain of $23.7 million due to the change in fair value of our equity method investment in CartiHeal as a result of the purchase during the third quarter of 2022.

The gain was recognized in other income within the consolidated statement of operations and comprehensive (loss) income.

We previously entered into an Option and Equity Purchase Agreement with CartiHeal (“Option Agreement”) in July 2020.

The Option Agreement provided us with an exclusive option to acquire 100% of CartiHeal’s shares (“Call Option”), and provided CartiHeal with a put option that would require us to purchase 100% of CartiHeal’s shares under certain conditions.

In August 2021, CartiHeal achieved pivotal clinical trial success, as defined in the Option Agreement, for the Agili-C implant.

In order to preserve our Call Option, in accordance with the Option Agreement and upon approval of the Board of Directors (“BOD”), we deposited $50.0 million into escrow in August 2021 for the potential acquisition of CartiHeal.

In April 2022, we exercised our Call Option to acquire all of the remaining shares of CartiHeal, excluding shares we already owned.

Our decision to exercise the Call Option followed the FDA’s March 29, 2022 premarket approval of CartiHeal’s Agili-C implant.

On June 17, 2022, the Company entered into an amendment to the Option Agreement with CartiHeal (“CartiHeal Amendment”) and Elron Ventures Limited, in its capacity as the shareholder representative, that provided for deferred payment of the consideration for CartiHeal to be paid in multiple tranches, one of which was $50.0 million due upon the earliest to occur of the publication in a peer-reviewed orthopedic journal of an article that presents the results of the pivotal clinical trial (“First Paper Milestone”) or July 1, 2023.

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

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

On February 27, 2023, we entered into a settlement agreement (the “Settlement Agreement”) with Elron Ventures Ltd.

(“Elron” and together with the Company, the “Parties”) as representative of CartiHeal’s selling securityholders under the Option Agreement collectively, the “Former Securityholders”).

Pursuant to the Settlement Agreement, Elron, on behalf of the Former Securityholders, agreed to forbear from initiating any legal action or proceedings relating to non-payment of any obligations arising under the Option Agreement during a period of 30 calendar days (the “Interim Period”) in exchange for (i) a one-time non-refundable amount of $10.0 million and (ii) a one-time non-refundable payment of $0.2 million to Elron to be used in accordance with the expense fund provisions of the Option Agreement.

The Interim Period expired on March 29, 2023 and we did not exercise our right to extend the Interim Period.

In addition, the Parties mutually released any further claims under the Option Agreement and related transaction documents, including without limitation a release by the Former Securityholders of any rights to enforce the provisions of the Option Agreement or make further monetary claims against us and/or our respective affiliates and representatives.

Upon execution of the Settlement Agreement, we transferred 100% of our shares in CartiHeal to a trustee (the “Trustee”) for the benefit of the Former Securityholders.

We had no ownership interest and no voting rights during the Interim Period.

We have concluded that upon execution of the Settlement Agreement, the Company ceased to control CartiHeal for accounting purposes, and therefore, deconsolidated CartiHeal (the “Deconsolidation”, or “Disposal”) effective February 27, 2023.

We treated the Disposal as a discontinued operation.

The loss upon disposal totaled $60.6 million and was recorded within loss from discontinued operations, net.

The loss resulting from the deconsolidation of the Disposal Group totaled $1.5 million for the year ended December 31, 2023 and was recorded in loss on disposals within the consolidated statements of operations and comprehensive loss.

We used the proceeds from the sale of the Wound Business to prepay $30.0 million of long-term debt obligations.

We evaluated the Wound Business for impairment prior to its sale and recorded a $78.6 million impairment within the consolidated statements of operations and comprehensive loss during the year ended December 31, 2023 as a result of this evaluation to reduce the intangible assets of the Disposal Group to reflect their respective fair values less any costs to sell.

The fair value of the Disposal Group’s intangibles was determined based on the consideration received for the Wound Business.

Credit and Guaranty Agreement

On July 11, 2022, we amended our Credit and Guaranty Agreement, dated as of December 6, 2019 (as previously amended on August 29, 2021 and October 29, 2021) in conjunction with the CartiHeal Acquisition to, among other things, provide for an $80.0 million term loan facility (“Term Loan Facility”).

On March 31, 2023, we further amended our Credit and Guaranty Agreement to, among other things, modify certain financial covenant provisions, waive the noncompliance at December 31, 2022 and increase the applicable interest rate.

We were in compliance as of December 31, 2023 with the financial covenants as stated within the Credit and Guaranty Agreement.

On January 18, 2024, we further amended our Credit and Guaranty Agreement to modify certain financial covenants.

Refer to Liquidity and Capital Resources—Credit Facilities for further information.

During the second quarter of 2022, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our 2021 and 2022 acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.

We incurred $1.0 million and $4.3 million in expenditures during the years ended December 31, 2023 and 2022, respectively, related to MOTYS.

No further costs are expected on MOTYS.

Consolidated Appropriations Act

In July 2022, in connection with the Consolidated Appropriations Act, 2021 (“CAA”), the Centers for Medicare and Medicaid Services (“CMS”) began utilizing new pricing information the Company reported to it pursuant to the newly adopted reporting obligations to adjust the Medicare payment to healthcare providers using our Durolane and Gelsyn-3 products.

On January 18, 2024, we further amended the 2019 Credit Agreement to modify certain financial covenants under the 2019 Credit Agreement.

Refer to Liquidity and Capital Resources—Credit Facilities for further information regarding the January 2024 amendment.

Components of our results of operations

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We report sales net of contractual allowances, rebates and returns.

We sell our products primarily through our direct sales team, who manage and maintain the sales relationship with healthcare providers, distribution centers or specialty pharmacies.

Certain surgical products are sold through independent distributors to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures.

We sell our products primarily through our direct sales team, which manages and maintains the sales relationship with healthcare providers, distribution centers or specialty pharmacies.

Certain Surgical Solutions products are sold through independent distributors to hospitals so our neurosurgeon and orthopedic spine surgeon customers can use them in procedures.

In certain international markets, we also sell to independent distributors on prearranged business terms, who manage or maintain the sales relationship with their physician customers.

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Our cost of sales primarily consists of costs of products purchased from our third-party suppliers, direct labor and allocated overhead associated with manufacturing and assembly, excess and obsolete inventory charges, shipping, inspection and related costs incurred in making our products available for sale or use.

In addition, cost of sales includes depreciation related to production as well as amortization of product-related intellectual property and distribution rights associated with commercialized products.

In addition, cost of sales includes depreciation related to production as well as amortization of product-related intellectual property and distribution rights associated with marketed products.

Certain products are manufactured by or obtained from third-party suppliers primarily located in Japan, Switzerland, Sweden and the United States.

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Selling, general and administrative expense also includes third-party marketing, supply chain and distribution, product recall costs, information technology, legal, human resources, insurance and facilities expenses, selling, general and administrative expenses also include commissions, generally based on a percentage of sales, to our direct sales team and independent distributors.

We expect our selling, general and administrative expenses will increase with the continued expansion of our sales organization and commercialization of our current and pipeline products.

We expect our selling, general and administrative expenses will increase with the continued expansion of our sales organization and marketization of our current and pipeline products.

We plan to hire more personnel to support the growth of our business.

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Research and development expense

Research and development expense primarily consists of employee compensation, equity compensation and related expenses, as well as contract research organization service expenses related to clinical trials.

Research and development expense primarily consists of employee compensation, equity-based compensation and related expenses, as well as contract research organization service expenses related to clinical trials.

We expense internal research and development costs as incurred and research and development costs incurred by third parties as they perform contracted work.

Our research and development expenses may vary substantially from period to period based on the timing of research and development activities.

We are focused on internal research and development to broaden our portfolio across all products and undertake clinical research to support their commercialization.

We are focused on internal research and development to broaden our portfolio across all products and undertake clinical research to support their marketization.

As a result, we expect our research and development expenses to vary from low to the mid-single digits as a percentage of net sales as we introduce new products, extend existing product lines and expand indications.

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Restructuring costs primarily consist of employee severance, legal, consulting and temporary labor expenses.

Restructuring costs recorded in 2023 and 2022 are the result of:

i) aligning our organizational and management cost structure to improve profitability and cash flow;

and ii) headcount reductions related to 2021 acquisitions.

Restructuring costs recorded in 2021 were the result of headcount reductions related to acquisitions.

Restructuring costs recorded in 2023 and 2022 are the result of aligning our organizational and management cost structure to improve profitability and cash flow.

Depreciation and amortization

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Interest expense includes any fair value gain or losses on these swaps.

Other expense (income)

Other expense (income) primarily consists of foreign currency transaction and remeasurement gains and losses on transactions denominated in currencies other than our functional currency.

Other (income) expense

Other (income) expense primarily consists of foreign currency transaction and remeasurement gains and losses on transactions denominated in currencies other than our functional currency.

Our foreign currency transaction and remeasurement gains and losses are primarily related to foreign currency denominated cash, liabilities and intercompany receivables and payables.

Other expense (income) may also include certain nonrecurring items.

Other (income) expense may also include certain nonrecurring items.

Income tax expense

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federal, state and local income taxes at the prevailing corporate tax rates with respect to our taxable income.

In addition to tax expenses, we are obligated to make payments under the TRA, which could be significant.

The TRA obligates us to pay to the Continuing LLC Owner 85% of the amount of any realized tax benefits (or in some circumstances are deemed to realize) resulting from (i) increases in the tax basis of assets of BV LLC as a result of (a) any future redemptions or exchanges of LLC Interests and (b) certain distributions (or deemed distributions) by BV LLC and (ii) certain other tax benefits arising from our making payments under the TRA.

In addition to tax expenses, we are obligated to make payments under the tax receivable agreement (“TRA”), which could be significant.

The TRA obligates us to pay to Smith & Nephew, Inc.

(“Continuing LLC Owner”) 85% of the amount of any realized tax benefits (or in some circumstances are deemed to realize) resulting from (i) increases in the tax basis of assets of BV LLC as a result of (a) any future redemptions or exchanges of LLC Interests and (b) certain distributions (or deemed distributions) by BV LLC and (ii) certain other tax benefits arising from our making payments under the TRA.

For more information, see Item 8.

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Non-GAAP Financial Measures - Adjusted EBITDA

We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator that management uses as a measure of operating performance as well as for planning purposes, including the preparation of our annual operating budget and financial projections.

We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it is a useful indicator that management uses to measure operating performance and for planning purposes, including the preparation of our annual operating budget and financial projections.

We believe that Adjusted EBITDA is useful to our investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours.

We define Adjusted EBITDA as net (loss) income from continuing operations before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance.

These items include acquisition and related costs, impairment of goodwill, impairment of assets, restructuring and succession charges, equity compensation expense, financial restructuring costs, loss on disposal of a business and other items.

We define Adjusted EBITDA as net loss from continuing operations before depreciation and amortization, provision of income taxes and interest expense, net, adjusted for the impact of certain cash, non-cash and other items that we do not consider in our evaluation of ongoing operating performance.

These items include acquisition and divestiture related costs, certain shareholder litigation costs, impairments of assets, restructuring and succession charges, equity-based compensation expense, financial restructuring costs and other items.

Adjusted EBITDA by segment is comprised of net sales and costs directly attributable to a segment, as well as an allocation of corporate overhead costs primarily based on a ratio of net sales by segment to total consolidated net sales.

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Additionally, other companies might define their non-GAAP financial measures differently than we do.

Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Annual Report, including in all tables referencing Adjusted EBITDA, to its most directly comparable U.S.

Investors are encouraged to review the reconciliation of the non-GAAP measure provided in this Annual Report on Form 10-K, including all tables referencing Adjusted EBITDA to its most directly comparable U.S.

GAAP measure.

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Impairment of assets 6.3 % 15.4 %

Impairment of goodwill — % 24.3 %

Loss on disposals 0.1 % 0.7 %

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Acquisition and related costs (b)

Restructuring and succession charges (c)

Equity compensation (d)

Financial restructuring costs (e)

Impairment of assets (f)

Shareholder litigation costs (c)

Restructuring and succession charges (d)

Equity-based compensation (e)

Financial restructuring costs (f)

Impairment of assets (g)

36,357 78,615

Impairment of goodwill (g)

Loss on disposal of a business (h)

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Adjusted EBITDA $ 108,882 $ 88,862

(a) Includes for the years ended December 31, 2023 and 2022, respectively, depreciation and amortization of $48,503 and $45,622 in cost of sales and $8,862 and $9,776 in operating expenses presented in the consolidated statements of operations and comprehensive (loss) income.

(b) Includes acquisition and integration costs related to completed acquisitions, amortization of inventory step-up associated with acquired entities, loss on disposal of fixed assets related to acquired businesses, and changes in fair value of contingent consideration.

(c) Costs incurred were the result of adopting restructuring plans to reduce headcount, contract termination, reorganize management structure and consolidate certain facilities.

(d) Includes compensation expense resulting from awards granted under our equity-based compensation plans.

The year ended December 31, 2023 includes the reversal of equity compensation expenses totaling $3.8 million related to the transition of our executive leadership.

(e) Financial restructuring costs include advisory fees and debt amendment related costs.

(f) Represents a non-cash impairment charge for intangible assets attributable to our Wound Business due to its divestiture during the year ended December 31, 2023.

Represents asset impairment charges on Trice Medical, Inc.

for the year ended December 31, 2022.

(g) Represents a non-cash impairment charge due to the decline in the Company’s market capitalization.

(h) Represents the loss on the disposal of the Wound Business.

(i) Other items primarily includes charges associated with strategic transactions, such as potential acquisitions or divestitures, projects associated with improving business capabilities/efficiencies and costs attributable to MOTYS.

During the 2022 fiscal year, prior to obtaining the results from our Phase 2 trial, we elected to discontinue the development of MOTYS to focus our resources on other priorities, including the integration of our acquisitions and our expanded R&D and product development portfolio we inherited with these acquisitions.

We incurred $1.0 million and $4.3 million in costs during the years ended December 31, 2023 and 2022, respectively, related to MOTYS.

No further costs are expected on MOTYS.

(a) Includes for the years ended December 31, 2024 and 2023, respectively, depreciation and amortization of $41.9 million and $48.5 million in cost of sales and $7.7 million and $8.9 million in operating expenses presented in the consolidated statements of operations and comprehensive loss.

(b) Includes acquisition and integration costs related to completed acquisitions and changes in fair value of contingent consideration.

(d) Costs incurred were the result of adopting restructuring plans to reduce headcount, contract termination, reorganize management structure and consolidate certain facilities.

(e) Includes compensation expense resulting from awards granted under our equity-based compensation plans.

The year ended December 31, 2024 includes increased award activity as a result of certain annual employee bonuses granted in the form of equity awards.

The year ended December 31, 2023 includes the reversal of $3.8 million in equity-based compensation expenses related to the transition of our executive leadership.

(f) Financial restructuring costs include advisory fees and debt amendment related costs.

(g) Activity in 2024 includes:

(i) a non-cash impairment charge of $33.9 million for intangible assets solely attributable to our Advanced Rehabilitation Business due to the decision to divest the business and (ii) a non-cash impairment charge of $2.5 million for rented right-of-use assets involving exited office and warehouse spaces.

Activity in 2023 relates to the non-cash impairment charge attributable to our divested Wound Business.

(h) Represents the loss on the disposal of the Advanced Rehabilitation and Wound Businesses for the years ended December 31, 2024 and 2023, respectively.

(i) Other items primarily include charges associated with strategic transactions, such as potential acquisitions or divestitures and a transformative project to redesign systems and information processing.

During the year ended December 31, 2024, other items primarily consisted of the following:

(i) divestiture costs related to the Company’s Advanced Rehabilitation Business, including transactional fees, totaled $4.7 million;

(ii) transformative project costs of $1.7 million;

and (iii) strategic transaction costs of $0.4 million.

During the year ended December 31, 2023, other items mainly consisted of the following:

(i) strategic transaction costs totaling $4.8 million, including divestiture costs of $1.1 million related to Advanced Rehabilitation;

(ii) transformative project costs of $4.5 million;

(iii) transition and severance costs of $2.8 million;

and (iv) $1.0 million in costs related to the discontinuance of MOTYS.

Years Ended December 31, Change

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Pain Treatments $ 234,936 $ 197,954 $ 36,982 18.7 %

Restorative Therapies 116,851 134,214 (17,363) (12.9 %)

Surgical Solutions 167,706 141,888 25,818 18.2 %

Restorative Therapies 104,167 110,018 (5,851) (5.3 %)

net sales 506,809 449,860 56,949 12.7 %

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Pain Treatments 26,353 22,847 3,506 15.3 %

Restorative Therapies 20,222 20,420 (198) (1.0 %)

Surgical Solutions 21,549 19,715 1,834 9.3 %

Restorative Therapies 18,569 19,923 (1,354) (6.8 %)

Total International net sales 66,471 62,485 3,986 6.4 %

Total net sales $ 573,280 $ 512,345 $ 60,935 11.9 %

Net sales decreased $5.4 million, or 1.2%, compared to the prior year.

Net sales increased $56.9 million, or 12.7%, compared to the prior year.

Changes by major product groups were:

(i) Pain Treatments—$3.1 million increase due to volume partially offset with lower reported ASP during most of 2023, thereby generating lower reimbursement levels;

(ii) Restorative Therapies—$17.4 million net sales decrease due primarily to the divestiture of our Wound Business;

and (iii) Surgical Solutions—$8.8 million net sales increase due to volume growth.

(i) Pain Treatments—$37.0 million increase due to volume growth primarily driven by Durolane;

(ii) Surgical Solutions—$25.8 million net sales increase due to volume growth;

and (iii) Restorative Therapies—$5.9 million net sales decrease due primarily to the divestiture of our Wound Business ($11.1 million of revenue in 2023) and lower volume from the Advanced Rehabilitation Business, partly offset by increased volumes and higher average selling price related to our EXOGEN Bone Stimulation System in 2024.

International

Net sales increased $5.6 million, or 9.9%, due to volume growth in Pain Treatments and Surgical Solutions, partially offset with a volume decline in Restorative Therapies from advanced rehabilitation.

Net sales increased $4.0 million, or 6.4%, due to volume growth in Pain Treatments and Surgical Solutions, partially offset with a volume decline in Restorative Therapies.

Gross profit and gross margin

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Total 67.7 % 64.1 % 3.6 %

Gross profit decreased $2.4 million, or 0.8%, primarily due to the divestiture of our Wound Business, the decrease in selling price within Pain Treatments and an increase in cost of sales due to inventory write-offs.

The change in gross margin included a decrease from product mix and selling price, offset with a decrease in rebates and the absence of amortization of acquisition related assets in 2022 compared with 2023.

Gross profit increased $54.6 million, or 18.5%, primarily due to volume growth in Pain Treatments, Surgical Solutions and our EXOGEN Bone Stimulation System, partially offset by the Wound Business divestiture.

Gross margin increased due to product mix.

International

Gross profit remained consistent with prior period.

Gross margin decreased due to product mix.

Gross profit increased $5.4 million, or 16.1% compared with the prior period, which is primarily due to an increase in volume for Pain Treatments, specifically Durolane, and Surgical Solutions.

Gross margin increased due to product mix.

Selling, general and administrative expense

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Selling, general and administrative expense $ 340,894 $ 303,879 $ 37,015 12.2 %

Selling, general and administrative expense decreased $28.3 million, or 8.5%, primarily due to a decrease in equity-based compensation of $14.5 million due to employee turnover and the decline in stock price and cost saving initiatives.

These initiatives resulted in a decrease of $7.3 million in other administrative and marketing related costs and a decline of $6.3 million in bad debt due to increased collections.

Selling, general and administrative expense increased $37.0 million, or 12.2%, primarily due to increases in:

(i) compensation and related costs of $24.4 million;

(ii) accounting and legal costs of $10.8 million, mostly related to the settlement of shareholder litigation;

and (iii) equity-based compensation of $8.2 million.

These increases were partially offset with a $12.2 million decrease in consulting expenses resulting from fewer strategic transactions, project initiatives and debt refinancing costs in 2024 compared to 2023.

Research and development expense

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Research and development expense $ 13,639 $ 13,446 $ 193 1.4 %

Research and development expense decreased $10.4 million, or 43.6%, primarily due to:

(i) a decrease of $8.2 million in consulting costs;

(ii) a decline of $1.0 million in supplies expense due to cost reduction efforts;

and (iii) a decrease of $0.4 million in equity-based compensation due to employee turnover.

Research and development expense remained consistent with the prior year comparable period.

Restructuring costs

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Restructuring costs $ (52) $ 840 $ (892) (106.2 %)

Restructuring costs for the year ended December 31, 2023 primarily included costs incurred as a result of an initiative to align the Company’s organizational and management cost structure to improve profitability and cash flow through headcount reduction and reducing third-party related costs.

Costs incurred for the year ended December 31, 2022 included costs to reduce headcount, reorganize management structure and to consolidate certain facilities for acquired businesses.

There were expense reversals during the year ended December 31, 2024 primarily due to employee transitions associated with prior restructuring initiatives.

Costs incurred for the year ended December 31, 2023 were primarily the result of an initiative to align the Company’s organizational and management cost structure to improve profitability and cash flow through reducing headcount and third-party related costs.

Change in fair value of contingent consideration

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Change in fair value of contingent consideration $ 1,423 $ 719 $ 704 97.9 %

The fair value of contingent consideration during year ended December 31, 2023 remained consistent with the prior year comparable period.

The activity for both periods relates to contingent consideration associated with the acquisition of Bioness in March 2021.

Changes in fair value for both periods relates to contingent consideration associated with the acquisition of Bioness in March 2021.

Depreciation and amortization

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Depreciation and amortization $ 7,652 $ 8,842 $ (1,190) (13.5 %)

Depreciation and amortization decreased during year ended December 31, 2023 compared with the prior year primarily due to:

(i) the impairment of intellectual property intangible assets associated with the Wound Business, which was divested during the second quarter of 2023;

and (ii) a decline in amortization for certain customer relationships that became fully amortized during the first quarter of 2023.

These decreases were partially offset with an increase in depreciation expense for information technology assets, right-of-use assets associated with finance leases and consignment and demo assets.

Depreciation and amortization decreased during the year ended December 31, 2024 compared with the prior year primarily due to the write-off of consigned fixed assets and fewer assets to depreciate due to divestitures.

Impairment of assets

We evaluated the Advanced Rehabilitation Business for impairment during the second quarter of 2024 due our decision to divest the business.

As a result of this evaluation, we recorded a $33.9 million impairment to reduce the intangible assets of the Advanced Rehabilitation Business to reflect their respective fair values less any costs to sell.

We based the fair value of its intangibles on the consideration agreed to with the purchaser for the Advanced Rehabilitation Business.

We also recorded impairment losses of $2.5 million during the year ended December 31, 2024 for 2 right-of-use assets, specifically office and warehouse spaces, which the Company exited during 2024.

Our decision to divest the Wound Business required us to evaluate whether certain of its assets were impaired.

We recorded a $78.6 million non-cash impairment charge as a result of this evaluation to reduce the intangible assets to their fair values less costs to sell.

The fair value of intangibles of the Wound Business was determined based on the consideration offered for the Wound Business.

Impairment of goodwill

We concluded that the carrying value of the U.S.

reporting unit exceeded its fair value and recorded a non-cash goodwill impairment charge of $189.2 million during the year ended December 31, 2022, of which $124.7 million was recorded in the impairment of assets and $64.5 million in loss on discontinued operations, net of tax, respectively, within the consolidated statements of operations and comprehensive (loss) income.

We recorded a $78.6 million non-cash impairment charge in 2023 as a result of this evaluation to reduce the intangible assets to their fair values less costs to sell.

We determined the fair value of intangibles of the Wound Business based on the consideration offered for the Wound Business.

Loss on disposals

The loss on disposals during the year ended December 31, 2024 resulted from the sale of the Advanced Rehabilitation Business.

The loss on disposals during the year ended December 31, 2023 resulted from $1.5 million in working capital adjustments associated with the sale of our Wound Business and a $2.0 million loss on fixed assets disposed of during the integration of acquisitions.

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Other (income) expense $ (1,645) $ (1,290) $ (355) 27.5 %

Interest expense, net increased $28.7 million due to:

(i) an increase in interest of $16.0 million due to higher interest rates;

(ii) the absence of $6.4 million benefit resulting from the change in fair value of our interest rate swap, which was discontinued during the fourth quarter of 2022;

(iii) an increase of $3.9 million due to higher margin rates on our Term Loan;

(iv) a $0.9 million increase in amortization of discount and deferred financing costs;

and (v) an increase of $0.8 million in lease finance interest expense.

Other (income) expense changed $11.1 million due to the $10.3 million impairment of the Trice Medical, Inc.

investment during 2022 and the receipt of $1.5 million from the settlement of a legal claim during 2023, partially offset with changes in foreign currency.

Income tax expense (benefit), net

Interest expense, net decreased during the year ended December 31, 2024 compared to the prior year primarily due to less debt outstanding and a decrease in interest rates.

Other (income) expense during 2024 primarily consisted of an increase of $1.0 million in foreign currency gains, resulting from recognizing previously unrealized gains and losses on the assets and liabilities of the Advanced Rehabilitation Business, which was sold in the fourth quarter of 2024.

Activity during 2023 primarily included a $1.5 million receipt from the settlement of a legal claim.

Income tax (benefit) expense, net

Years Ended December 31, Change

(in thousands, except for percentage) 2024 2023 $ %

Income tax expense (benefit), net $ 85 $ (44,374) $ 44,459 (100.2) %

Income tax (benefit) expense, net $ (5,293) $ 85 $ (5,378) NM

Effective tax rate

The $44.5 million change in income taxes was driven by movement in net losses before income taxes and the implementation of a full valuation allowance during the first quarter of 2023.

NM - Not Meaningful

10.8 % (0.1) % 10.9 %

The $5.4 million change in income taxes was due to the recognition of deferred tax benefits resulting from the impairments recorded.

Noncontrolling interest

Years Ended December 31, Change

(in thousands, except for percentage) 2023 2022 $ %

Continuing LLC Owner $ 39,395 $ 54,240 $ (14,845) (27.4 %)

Other noncontrolling interest — 447 (447) (100.0 %)

Total $ 39,395 $ 54,687 $ (15,292)

Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC in which we own 80.0%.

Subsequent to the IPO and related transactions, we are the sole managing member of BV LLC of which we owned 80.6% and 80.0% at December 31, 2024 and 2023, respectively.

We have a majority economic interest, the sole voting interest in, and control the management of BV LLC.

As a result, we consolidate the financial results of BV LLC and report a non-controlling interest representing the 20.0% that is owned by the Continuing LLC Owner.

As a result, we consolidate the financial results of BV LLC and report a noncontrolling interest representing the 19.4% that is owned by the Continuing LLC Owner.

Noncontrolling interest activity during year ended December 31, 2024 was the result of losses recorded.

Segment Adjusted EBITDA

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International $ 13,461 $ 10,194 $ 3,267 32.0 %

Adjusted EBITDA increased $22.2 million, or 39.2%, primarily due to cost saving initiatives, a reduction in bad debt and declines in administrative and travel expenses as previously discussed, partially offset with lower gross profit.

Adjusted EBITDA increased $16.8 million, or 21.3%, due to revenue growth and increased gross profit.

International

Adjusted EBITDA decreased $1.9 million primarily due to increased compensation costs and a slight decline in gross profit.

Adjusted EBITDA increased $3.3 million or 32.0%, due to increased gross profit.

Liquidity and Capital Resources

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Our principal liquidity needs have historically been for acquisitions, working capital, research and development, clinical trials, and capital expenditures.

We expect these needs to continue as we develop and commercialize new products and further our expansion into international markets.

We have implemented previously announced restructuring initiatives to enhance our current financial position and sources of liquidity.

These restructuring efforts delivered $9.0 million to $10.0 million in cost savings on an annualized basis.

Refer to Item 8.

Financial Statements and Supplementary Data—Notes to the Consolidated Financial Statements—Note 10.

Restructuring costs for further details regarding these cost cutting efforts.

We anticipate that to the extent that we require additional liquidity, we will obtain funding through additional equity financings or the incurrence of other indebtedness or a combination of these potential sources of liquidity.

We expect these needs to continue as we develop and market new products and further our expansion into international markets.

We believe that we have enough liquidity to continue operations for the next twelve months.

We anticipate that to the extent that we require capital, we will obtain funding through additional equity financings or the incurrence of other indebtedness or a combination of these potential sources of capital.

As of December 31, 2024, we have the ability to borrow up to $40.0 million using our Revolving Credit Facility and available letters of credit.

We may explore divestiture opportunities for non-core assets to improve our liquidity position.

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Any failure to raise capital in the future might have a negative impact on our financial condition and our ability to pursue our business strategies.

Initial public offering

On February 16, 2021, in connection with our IPO, we issued and sold 9,200,000 shares of our Class A common stock at a price to the public of $13.00 per share, resulting in gross proceeds to us of approximately $119.6 million, before deducting the underwriting discount, commissions and estimated offering expenses payable by us.

Bioventus Inc.

is a holding company and has no material assets other than the ownership of LLC Interests in BV LLC and has no independent means of generating revenue.

Deterioration in the financial condition, earnings, or cash flow of BV LLC and its subsidiaries for any reason could limit or impair their ability to pay such distributions.

In addition, the terms of our financing arrangements, including the Amended 2019 Credit Agreement, contain covenants that may restrict BV LLC and its subsidiaries from paying such distributions, subject to certain exceptions.

Further, BV LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of BV LLC (with certain exceptions), as applicable, exceed the fair value of its assets.

Subsidiaries of BV LLC are generally subject to similar legal limitations on their ability to make distributions to BV LLC.

Bioventus Inc., as the managing member, causes BV LLC to make cash distributions to the owners of LLC Interests in an amount sufficient to (i) fund tax obligations in respect of allocations of taxable income from BV LLC;

and (ii) cover Bioventus Inc.

operating expenses, including payments under the TRA.

Future cash requirements

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Our 2019 Credit Agreement (as amended on August 29, 2021 and October 29, 2021), and in effect from October 29, 2021 to July 11, 2022, consisted of a $360.8 million term loan (“Term Loan”) and a $50.0 million revolving credit facility (the “Revolver”).

On July 11, 2022, we amended the 2019 Credit Agreement in conjunction with the CartiHeal Acquisition to provide for an incremental $80.0 million term loan facility (together with the Term Loan, the “Term Loan Facilities”) to be used in part to fund the CartiHeal Acquisition.

The Company was not in compliance with certain of its covenants under the 2019 Credit Agreement in effect as of December 31, 2022.

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.

On July 11, 2022, the Company further amended the 2019 Credit Agreement in conjunction with the acquisition of CartiHeal.

The Company was not in compliance with certain financial covenants under the 2019 Credit Agreement in effect as of December 31, 2022.

As a result, on March 31, 2023, we entered into another amendment to the 2019 Credit Agreement to, among other things, modify certain financial covenants, waive the noncompliance at December 31, 2022 and modify interest rates applicable to borrowings under the agreement.

We were in compliance with the financial covenants as of December 31, 2023 as stated within the 2019 Credit Agreement then in effect.

The Revolver’s capacity was reduced $5.0 million on December 31, 2023 and again on June 30, 2024 in accordance with the amendments to the 2019 Credit Agreement resulting in a maximum capacity of $40.0 million as of December 31, 2024.

We were in compliance with the financial covenants as of December 31, 2024 and 2023 as stated within the 2019 Credit Agreement then in effect.

On January 18, 2024 (the “Closing Date”), we 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 modify certain financial covenants under the 2019 Credit Agreement.

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Pursuant to the Amended 2019 Credit Agreement, the margin at each applicable leverage ratio will be increased by 1.00% per annum.

SOFR loans and base rate loans had a margin of 3.25% and 2.25%, respectively, subsequent to July 11, 2022 and prior to March 31, 2023.

As of the March 2023 amendment, SOFR loans and base rate loans had a margin of 4.25% and 3.25%, respectively.

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.

Subsequent to 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 Term Loan Facilities will mature on October 29, 2026.

The Revolver will mature on October 29, 2025.

The capacity on the Revolver was reduced to $43.2 million at December 31, 2023 and will be further reduced by $5.0 million at June 30, 2024 in accordance with the Amended 2019 Credit Agreement.

The Amended 2019 Credit Agreement contains customary affirmative and negative covenants, including those related to financial reporting and notification, restrictions on the declaration or payment of certain distributions on or in respect of 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:

(i) a maximum debt leverage ratio of not greater than 5.65 to 1.00 for the testing period ending March 31, 2024, 5.00 to 1.00 for the testing period ending June 30, 2024, 4.75 to 1.00 for the testing period ending September 30, 2024, 4.50 to 1.00 for the testing period ending December 31, 2024, 4.25 to 1.00 for testing period ending March 31, 2025, 4.00 to 1.00 for testing period ending June 30, 2025 and each testing period thereafter, and, beginning with the testing period ending March 31, 2025, to be subject to a temporary increase to 4.50 to 1.00 upon certain events, and (ii) an interest coverage ratio not less than 1.75 to 1.00 for the testing period ending March 31, 2024, 1.75 to 1.00 for the testing period ending June 30, 2024, 1.75 to 1.00 for the testing period ending September 30, 2024, 2.00 to 1.00 for the testing period ending December 31, 2024, 2.00 to 1.00 for the testing period ending March 31, 2025, 2.25 to 1.00 for the testing period ending June 30, 2025, 2.50 to 1.00 for the testing period ending September 20, 2025 and 3.00 to 1.00 for the testing period ending December 31, 2025 and each testing period thereafter.

Financial covenant requirements include (i) a maximum debt leverage ratio of not greater than 4.50 to 1.00 for the testing period ending December 31, 2024, 4.25 to 1.00 for the testing period ending March 31, 2025, 4.00 to 1.00 for the testing period ending June 30, 2025 and at the end of each testing period occurring thereafter, and beginning on March 31, 2025, to be subject to a temporary increase to 4.50 to 1.00 upon certain events;

and (ii) an interest coverage ratio not less than 2.00 to 1.00 for the testing period ending December 31, 2024, 2.00 to 1.00 for the testing period ending March 31, 2025, 2.25 to 1.00 for the testing period ending June 30, 2025, 2.50 to 1.00 for the testing period ending September 30, 2025 and 3.00 to 1.00 for the testing period ending December 31, 2025 and each testing period thereafter.

In addition, during the period commencing on the Closing Date and ending upon the satisfaction of certain conditions occurring not prior to 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 $10.0 million as of the end of each calendar month during such period.

The Term Loan Facilities matures on October 29, 2026 and the Revolver matures on October 29, 2025.

Refer to Item 8.

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Information regarding cash flows

Cash, cash equivalents and restricted cash as of December 31, 2023 totaled $37.0 million, compared to $30.2 million as of December 31, 2022.

Cash and cash equivalents as of December 31, 2024 totaled $41.6 million, compared to $37.0 million as of December 31, 2023.

As of December 31, 2024, $22.1 million and $19.5 million of our cash and cash equivalents was held within the U.S.

and International segments, respectively.

The change in cash was primarily due to the following:

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Net cash from discontinued operations — (13,675) 13,675 (100.0 %)

Effect of exchange rate changes on cash 629 521 108 20.7 %

Net change in cash, cash equivalents and restricted cash $ 5,127 $ (67,376) $ 72,503 (107.6 %)

Effect of exchange rate changes on cash (2,560) 629 (3,189) NM

Net change in cash and cash equivalents $ 4,618 $ 5,127 $ (509) (9.9 %)

Operating Activities

Net cash in operating activities from continuing operations increased $28.9 million, primarily due to lower employee compensation and cost reduction efforts.

These inflows were partially offset with an increase in interest payments, taxes and inventory payments.

Net cash in operating activities from continuing operations increased $21.3 million, due to cash collections from sales growth and the timing of working capital payments.

These operating inflows were partially offset with:

(i) increases in employee compensation due to higher bonus payments in 2024 compared to prior year;

(ii) an increase in inventory purchases;

and (iii) an increase in interest payments.

Investing Activities

Net cash flows in investing activities from continuing operations increased $38.9 million, primarily due to the $34.7 million receipt of cash resulting from the sale of the Wound Business, $2.7 million less in capital expenditures and $1.5 million less in other investments and acquisitions in 2023.

Net cash flows in investing activities from continuing operations decreased $4.4 million, primarily due to $10.0 million less net cash received from the sale of businesses, partially offset with $6.4 million less in capital expenditures.

Financing Activities

Cash flows from financing activities decreased $27.9 million, primarily due to:

(i) borrowings of $79.7 million in long-term debt to fund the acquisition of CartiHeal in 2022;

(ii) an increase of $18.2 million in debt principal payments;

and (iii) $5.0 million less in proceeds from the issuance of stock as there were significantly more option exercises in 2022.

These financing outflows were partially offset with $15.0 million in net additional borrowings under our revolving credit facility in 2023.

(i) net outflows totaling $30.0 million related to our revolving credit facility as $15 million was repaid in 2024 compared to $15 million in net borrowings during 2023;

and (ii) an increase of $6.3 million in debt principal payments.

These outflows were partially offset with:

(i) a deferred consideration receipt of $4.5 million in 2024 resulting from the prior year sale of the Wound Business;

(ii) $2.5 million less debt financing costs paid in 2024;

and (iii) $1.7 million more in proceeds from the issuance of stock as stock option exercises increased in 2024 compared to 2023.

Discontinued Operations

Net cash flows from discontinued operations in 2023 were primarily the result of $10.2 million in fees used to settle the CartiHeal disposition and $1.4 million in cash held by the CartiHeal entity at the time of disposal.

Net cash flows from discontinued operations in 2022 primarily related to the $104.8 million purchase of CartiHeal.

Recently Issued Accounting Pronouncements

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By their nature, these judgments are subject to an inherent degree of uncertainty.

On an ongoing basis, we evaluate our judgments, including those related to inventories and the recoverability of long-lived assets.

We use historical experience and other assumptions as the basis for our judgments in making these estimates.

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Due to inherent uncertainty related to research and development, actual results could differ materially from the assumptions used in the discounted cash flow model.

Additionally, there are risks including, but not limited to, delay or failure to receive regulatory requirements to conduct clinical trials, required market clearances, or patent issuance, and that the research and development project does not result in a successful commercial product.

Contingent consideration

4 unchanged sentences

After the initial valuation, the Company will use its best estimate to measure contingent consideration at each subsequent reporting period.

Gains and losses are recorded with selling, general and administrative expenses within the consolidated statements of operations and comprehensive (loss) income.

Gains and losses are recorded with selling, general and administrative expenses within the consolidated statements of operations and comprehensive loss.

Impairment of goodwill and indefinite-lived intangible assets

20 unchanged sentences

reporting unit for the year ended December 31, 2022.

The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive (loss) income.

The impairment was recorded within impairment of goodwill on the consolidated statements of operations and comprehensive loss.

There were no goodwill impairment charges for the years ended December 31, 2024 and 2023.

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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, net of actual forfeitures.

Assumptions used in determining stock option fair value include risk-free interest rate, expected dividend yield, expected price volatility, expected life of stock options and weighted-average fair value of stock options granted.

Assumptions used in determining stock option fair value include the risk-free interest rate, expected dividend yield, expected price volatility, expected life of stock options and weighted-average fair value of stock options granted.

The expected term of the options granted is estimated using the simplified method.

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Treasury security rate with a contractual life that approximates the expected term of the option.

Prior to the IPO, we operated two equity-based compensation plans, the Management Incentive Plan (“MIP”) and the Phantom Profits Interest Plan (“Phantom Plans”).

We used independent third-party valuation specialists in 2020 using year-to-date October data in each year to assist management in performing the annual valuation of MIP and 2015 Phantom Plan Units.

We utilized valuation specialists in April 2020 as we believed COVID-19 represented a triggering event that might indicate impairment.

The specialists assisted management in the determination of the fair value of the awards granted using the Monte Carlo option pricing model.

The subjective assumptions and the application of judgment in determining the fair value of the awards represent management’s best estimates.

The most significant assumptions utilized in the MIP and Phantom Plan were expected volatility, time outstanding, risk-free rate and expected dividend yield.

Expected volatility was based on the historical volatility of our peer group.

The risk-free rate was based on U.S.

Government Constant Maturity Treasury rates for a term corresponding to the amount of time the awards were expected to be outstanding.

The expected dividend yield assumption had the rate of zero as we have not previously issued dividends and did not anticipate paying dividends in the foreseeable future.

The tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis