biote Corp. (BTMD) is a leading solutions provider in preventive health care, delivering personalized hormone optimization and therapeutic wellness services to a growing network of practitioners and their patients. With a strong focus on innovation, education, and clinical research, biote has established itself as a trusted authority in the burgeoning field of hormone optimization and therapeutic wellness.
Business Overview and History biote Corp. was founded in 2012 and is headquartered in Irving, Texas. The company's primary mission is to provide a comprehensive practice-building platform that enables physicians and nurse practitioners to establish, build, and successfully implement programs designed to optimize hormone levels using personalized solutions for their aging patient populations. The company's flagship offering, the Biote Method, is a comprehensive, end-to-end practice-building platform that equips Biote-certified practitioners with the necessary training, software, and support to successfully implement hormone optimization therapies in their clinics.
In addition to the Biote Method, the company offers education, training and certification, practice management software, inventory management software, and information regarding available hormone replacement therapy products. biote has also developed a line of Biote-branded dietary supplements to complement its hormone optimization services.
Over the years, biote has faced and overcome several challenges. In 2016, the company received a warning letter from the FDA regarding cGMP violations observed during an inspection and unapproved new drug claims for certain dietary supplement products. However, biote was able to address these issues and receive a closeout from the FDA in 2018, demonstrating its commitment to maintaining compliance with applicable regulations.
The company has also had to navigate changes in the regulatory landscape surrounding compounded bioidentical hormones. To address this challenge, biote has built relationships with FDA-registered 503B outsourcing facilities to support its practitioners, ensuring a steady supply of compliant hormone products.
Despite these challenges, biote has experienced significant growth, expanding its network of Biote-certified practitioners from a handful of early adopters to over 7,100 practitioners as of the third quarter of 2024. This expansive network has enabled biote to serve a growing patient base, with over 1.2 million patients treated using the Biote Method to date. The company's growth has been particularly concentrated in certain geographic regions, indicating potential for further expansion into new markets.
In May 2022, biote completed a business combination with Haymaker Acquisition Corp. III, a special purpose acquisition company, which resulted in biote becoming a publicly traded company on the Nasdaq stock exchange. This transaction provided the company with additional capital and resources to accelerate its growth strategy. Since the transaction, biote has continued to execute on its key initiatives, including the recent acquisition of Asteria Health, a 503B manufacturer of compounded bioidentical hormones, further strengthening the company's supply chain and vertical integration capabilities.
The company was involved in litigation with its founder, Dr. Gary S. Donovitz, and his ex-wife, Marci M. Donovitz, related to the company's going public transaction. On April 23, 2024, the company settled all outstanding litigation with Dr. Donovitz, agreeing to repurchase his shares for approximately $76.9 million over a three-year period. The company also settled litigation with Marci M. Donovitz on June 28, 2024, agreeing to repurchase her shares for $60 million over a three-year period.
Financial Overview biote's financial performance has been characterized by consistent revenue growth and improving profitability. For the nine months ended September 30, 2024, the company reported revenue of $147.4 million, up 5.5% from the same period in the prior year. This growth was driven by a 7.6% increase in procedure revenue, as well as a 68.6% increase in service revenue, which includes technology fees and training fees.
Financials Gross profit margin for the nine-month period was 70.5%, reflecting the benefits of the company's vertical integration efforts and operational efficiency initiatives. Adjusted EBITDA for the nine months ended September 30, 2024, was $43.1 million, with an adjusted EBITDA margin of 29.3%.
For the most recent fiscal year (2023), biote reported revenue of $185.36 million, net income of $3.32 million, operating cash flow of $26.88 million, and free cash flow of $24.17 million.
In the most recent quarter (Q3 2024), the company achieved revenue of $51.38 million, representing a year-over-year growth of 12.8%. Net income for the quarter was $12.66 million, with operating cash flow of $15.56 million and free cash flow of $14.70 million. The increase in Q3 2024 revenue was primarily driven by a 7.1% increase in procedure revenue and a 21.7% increase in dietary supplement revenue. The increase in procedure revenue was due to continued growth in the company's top-tier accounts, while the dietary supplement revenue benefited from improvements in the company's Amazon business.
Liquidity As of September 30, 2024, biote had $38.2 million in cash and cash equivalents, and $40.0 million in available borrowing capacity under its revolving credit facility. The company's debt-to-capital ratio stood at 9.2% as of the same date, indicating a strong balance sheet and ample liquidity to support its growth initiatives. The company's debt-to-equity ratio was -0.07, current ratio was 1.50, and quick ratio was 1.16 as of September 30, 2024.
Performance by Geographic Markets The company generates the majority of its revenue (approximately 59.4% in Q3 2024 and 55.6% for the first 9 months of 2024) from Texas, Oklahoma, New Mexico, Colorado, Arkansas, Louisiana, Mississippi, Alabama, Georgia and Florida. The company has a presence in Puerto Rico, Mexico and the Dominican Republic, and is looking to expand into Argentina, Brazil, Colombia, and Canada as permitted by law.
Guidance For 2024, biote is adjusting its previously reported financial guidance due to two temporary headwinds impacting their Q4 results: the residual impact on Q4 procedure revenue as they assist practitioners with additional workflow support and training on the updated Clinical Decision Support software, and clinic closures in several core states due to Hurricanes Helene and Milton, delaying certain procedure revenue into early 2025.
The updated 2024 guidance is: - Revenue of $197 million to $201 million (previously $200 million to $204 million) - Adjusted EBITDA of $58 million to $61 million (previously $60 million to $63 million)
biote expects procedure and nurture revenue growth to reaccelerate in 2025 after the temporary disruptions in Q4 2024. They are confident the enhanced Clinical Decision Support software will strengthen their competitive position and support their long-term growth objectives.
Competitive Landscape and Growth Opportunities The hormone optimization and therapeutic wellness market is highly competitive, with a diverse array of players ranging from large pharmaceutical companies to smaller, specialized providers. However, biote's unique business model, focus on education and training, and strong relationships with its network of Biote-certified practitioners have allowed the company to establish a leading position in the industry.
One of biote's key competitive advantages is its proprietary Clinical Decision Support (CDS) software, which was recently enhanced to provide Biote-certified practitioners with more robust treatment recommendations and an expanded range of patient care options. This software, coupled with the company's expansive data set and advanced analytics capabilities, enables practitioners to deliver highly personalized, evidence-based therapies to their patients.
Looking ahead, biote sees significant growth opportunities in both its core hormone optimization business and its expanding therapeutic wellness offerings. The company is actively working to grow its network of Biote-certified practitioners, particularly through its QuickStart program, which has proven effective in accelerating the ramp-up of new clinics. Additionally, biote is leveraging its BioteRx platform to offer a broader range of wellness products and services, including sexual health, weight management, and preventative care solutions.
The total U.S. market opportunity for hormone replacement therapy (HRT) products is estimated to have exceeded $7 billion as of 2020 and is expected to grow approximately 7% annually through 2026. The company believes its business opportunity in providing educational and practice management services is large and will similarly grow.
Product Segments and Offerings biote Corp. generates the majority of its revenue from product sales, which includes pellets, pellet insertion kits, and Biote-branded dietary supplements. Product revenue accounted for $143.95 million, or 97.7% of total revenue, during the nine months ended September 30, 2024.
Pellets The primary product offered by biote Corp. is bioidentical hormone pellets. These pellets are compounded by third-party 503B outsourcing facilities and then prescribed by Biote-certified practitioners to their patients as part of the Biote Method. Revenue from pellet procedures, including the related inventory management services provided to clinics, was $113.73 million, or 79.2% of total product revenue, during the first nine months of 2024. The company relies on its relationships with AnazaoHealth, Right Value Drug Stores, and Asteria Health to support the manufacturing and distribution of these bioidentical hormone pellets.
Dietary Supplements biote Corp. also sells a line of Biote-branded dietary supplements through its eCommerce platform. These supplements are produced by third-party manufacturers and are offered to Biote-certified practitioners and their patients. Dietary supplement revenue was $25.95 million, or 18.0% of total product revenue, during the nine months ended September 30, 2024.
Pellet Insertion Kits In addition to the pellets themselves, biote Corp. also sells disposable pellet insertion kits to Biote-certified practitioners. These kits, which contain supplies like gloves, antiseptic, and a disposable trocar, generated $3.22 million, or 2.2% of total product revenue, in the first nine months of 2024.
Service Revenue While product sales make up the majority of biote Corp.'s revenue, the company also earns service revenue from fees associated with its Biote Method training and other contract-term services provided to Biote-partnered clinics. Service revenue totaled $3.40 million, or 2.3% of total revenue, during the nine-month period.
Training Revenue: A portion of service revenue comes from fees paid by Biote-partnered clinics for the initial training of practitioners on the Biote Method. This training revenue was $1.15 million, or 33.8% of total service revenue, in the first nine months of 2024.
Contract-Term Services: The remaining service revenue is generated from ongoing contract-term services provided to Biote-partnered clinics, such as practice management resources, inventory management, and digital/point-of-care marketing support. This revenue stream was $2.25 million, or 66.2% of total service revenue, during the nine-month period.
Risks and Challenges While biote has demonstrated impressive growth and operational execution, the company faces several risks and challenges that investors should be aware of. These include:
1. Regulatory Scrutiny: As a provider of hormone optimization and compounded drug therapies, biote is subject to extensive regulatory oversight, both at the federal and state levels. Any changes in the regulatory landscape or non-compliance with applicable laws and regulations could have a significant impact on the company's business.
2. Supply Chain Disruptions: biote's reliance on third-party manufacturers and compounding facilities for its hormone pellets and other products creates exposure to potential supply chain disruptions, which could impact the company's ability to serve its network of Biote-certified practitioners.
3. Competition and Pricing Pressure: The hormone optimization and therapeutic wellness market is highly competitive, and biote may face increasing pricing pressure as new entrants and larger players seek to gain market share.
4. Reliance on Key Practitioners: biote's success is heavily dependent on its ability to attract and retain Biote-certified practitioners, who are essential to the company's growth and the delivery of its services. The loss of key practitioners or an inability to effectively train and support new practitioners could impact the company's performance.
5. Geographic Concentration: With a significant portion of revenue coming from a handful of states, biote is exposed to regional economic fluctuations and regulatory changes that could disproportionately affect its business.
6. Natural Disasters: As evidenced by the impact of Hurricanes Helene and Milton on Q4 2024 results, natural disasters in core markets can temporarily disrupt operations and delay revenue recognition.
Despite these risks, biote's strong market position, innovative product offerings, and proven track record of execution position the company well to continue capitalizing on the growing demand for personalized hormone optimization and therapeutic wellness solutions.
Conclusion biote Corp. (BTMD) has established itself as a leading authority in the hormone optimization and therapeutic wellness space, leveraging its comprehensive Biote Method platform, proprietary technology, and extensive network of Biote-certified practitioners to deliver personalized, evidence-based solutions to a growing patient base. With a focus on innovation, education, and clinical research, biote is well-poised to continue driving growth and enhancing its competitive position within the rapidly evolving preventive health care market. The company's diverse product offerings, strong financial performance, and strategic initiatives demonstrate its commitment to long-term success in the expanding hormone optimization and therapeutic wellness industry.