Detailed Business Overview

biote Corp. (BTMD) is a leading solutions provider in preventive health care through the delivery of personalized hormone optimization and therapeutic wellness. The company has steadily built its business over the past 12 years, establishing itself as a trusted partner for practitioners seeking to enhance their patients' overall health and wellbeing.

biote Corp. was founded in 2012 and is headquartered in Irving, Texas. The company's primary focus is on providing a comprehensive, end-to-end practice-building platform that enables practitioners to establish, build, and successfully implement a program designed to optimize hormone levels using personalized solutions for their aging patient populations. This platform, known as the Biote Method, includes components such as education, training and certification, practice management software, inventory management software, and digital and point-of-care marketing support.

In May 2022, biote achieved a significant milestone by completing a business combination with Haymaker Acquisition Corp. III, a special purpose acquisition company. This transaction allowed biote to become a public company, trading on the Nasdaq Stock Market under the ticker symbol BTMD, providing the company with increased visibility and access to capital markets.

Throughout its history, biote has faced and overcome various challenges. In the process of preparing its financial statements for fiscal years 2020 and 2019, the company identified a material weakness in its internal control over financial reporting. This weakness was related to not maintaining a sufficient complement of qualified technical accounting and financial reporting personnel, which resulted in errors in the company's financial statements and related disclosures that required restatements. This experience has likely led to improved financial practices and controls within the organization.

In 2017, biote encountered regulatory challenges when it received a warning letter from the FDA regarding cGMP violations observed during an inspection of its facility, as well as unapproved new drug claims made for certain of its dietary supplement products. The company successfully resolved this issue with the FDA in 2018, demonstrating its ability to navigate and comply with complex regulatory requirements in the healthcare industry.

Despite these obstacles, biote has continued to execute on its strategy of training and partnering with practitioners to establish and grow hormone optimization practices. The company has successfully built a network of over 7,100 Biote-certified practitioners across the United States, who utilize the Biote Method to provide personalized solutions to their aging patient populations.

In addition to the Biote Method, the company also sells a complementary line of Biote-branded dietary supplements. These supplements are designed to work in conjunction with the company's hormone optimization therapies, providing patients with a holistic approach to managing the effects of aging.

Over the years, biote has steadily grown its network of Biote-certified practitioners and Biote-partnered clinics. As of the third quarter of 2024, the company had over 7,100 Biote-certified practitioners operating across the United States, with a strong presence in key geographic regions such as Texas, Oklahoma, New Mexico, Colorado, Arkansas, Louisiana, Mississippi, Alabama, Georgia, and Florida. This geographic concentration has made biote particularly sensitive to regulatory, economic, and competitive conditions in those states, which accounted for approximately 55.6% of the company's revenue in the first nine months of 2024.

The company operates in two main product segments: Product Revenue and Service Revenue. The Product Revenue segment includes sales of pellets, pellet insertion kits, and biote-branded dietary supplements. This segment generated $49.81 million in revenue during the three months ended September 30, 2024, an increase of 12.8% compared to the same period in the prior year. The increase in product revenue was primarily driven by a $2.5 million increase in revenue from pellet procedures and a $1.8 million increase in biote-branded dietary supplement sales. The company's pellet products are manufactured by third-party 503B outsourcing facilities and shipped directly to biote-certified practitioners, who then administer the pellets to patients. Additionally, the company's biote-branded dietary supplement portfolio is produced by third-party manufacturers and distributed through the company's e-commerce platform, allowing practitioners to invite their patients to purchase the supplements online.

The Service Revenue segment includes fees paid by biote-partnered clinics for training services and other contract-term services provided by the company. During the three months ended September 30, 2024, service revenue increased by $0.9 million, or 117.5%, compared to the same period in the prior year. This increase was primarily attributable to technology fees earned from physician orders placed through the company's new BioteRx platform, as well as an increase in training revenue as more practitioners were certified in the biote Method.

biote's primary objective is to increase the number of Biote-certified practitioners and grow the practice of its Biote-certified practitioners and Biote-partnered clinics. The company has continued to make progress in training and certifying new practitioners, including through its QuickStart program which helps new practitioners efficiently build and promote their hormone and therapeutic wellness practices. The company has also introduced targeted enhancements to its proprietary Clinical Decision Support software, which it believes strengthens its competitive position and supports its long-term growth objectives.

Financial Performance and Outlook

biote's financial performance in the third quarter of 2024 was highlighted by double-digit growth in both revenue and adjusted EBITDA. Revenue increased 12.8% year-over-year to $51.4 million, driven by continued growth in procedures and a strong return to growth in the company's dietary supplement business. Gross profit margin improved by 160 basis points to 17.5%, reflecting cost savings from the vertical integration of Asteria Health, a 503(b) outsourcing facility acquired by biote in 2024, as well as continued cost management efforts.

The company reported net income of $10.7 million for the quarter, with diluted earnings per share growing 38% compared to the prior year quarter. Operating cash flow for the quarter was $15.6 million, while free cash flow reached $14.7 million.

Despite some temporary headwinds in the fourth quarter of 2024, including the impact of Hurricane Helene and disruptions related to the rollout of the company's enhanced Clinical Decision Support software, biote remains confident in its ability to drive accelerated procedure revenue growth in 2025. The company believes its updated software, which expands the range of patient profiles and treatment options that Biote-certified practitioners can address, will strengthen its competitive position and support its long-term growth objectives.

In the previous quarter, biote had provided guidance for 2024 of $200 million to $204 million in revenue and $60 million to $63 million in adjusted EBITDA. However, due to the temporary headwinds mentioned earlier, the company has adjusted its guidance. For the full year 2024, biote now expects revenue of $197 million to $201 million and adjusted EBITDA of $58 million to $61 million. This revised guidance reflects the temporary headwinds encountered in the fourth quarter, but the company remains optimistic about its ability to capitalize on the growing demand for hormone optimization and therapeutic wellness services.

Liquidity

biote's liquidity position remains strong. As of September 30, 2024, the company had $38.23 million in cash and cash equivalents. Additionally, the company has a $50 million revolving credit facility, of which $40 million was available as of the same date. This provides biote with significant financial flexibility to support its growth initiatives and navigate potential challenges.

The company's current ratio stands at 1.50, while its quick ratio is 1.16, indicating a healthy short-term liquidity position. These ratios suggest that biote has sufficient current assets to cover its short-term liabilities, which is crucial for maintaining smooth operations and meeting near-term financial obligations.

Competitive Landscape and Risks

biote operates in a highly competitive medical practice-building and dietary supplement market, facing rivals ranging from large pharmaceutical companies to smaller, specialized players. The company's success will depend on its ability to maintain market acceptance for the Biote Method and its Biote-branded supplements, as well as its capacity to attract and retain Biote-certified practitioners and Biote-partnered clinics.

Regulatory risk is also a key concern, as biote's operations are subject to a complex web of federal and state laws governing the compounding, manufacturing, and marketing of its products. Failure to comply with these regulations could result in significant penalties and disruptions to the company's business.

Additionally, biote's reliance on third-party outsourcing facilities for the compounding of bioidentical hormone pellets introduces supply chain risks, as evidenced by the recent termination notice received from one of its key suppliers, AnazaoHealth. While the company is working to mitigate these risks through the expansion of its own 503(b) manufacturing capabilities, including the acquisition of Asteria Health, any disruptions to its supply chain could have a material impact on the company's operations.

The company's geographic concentration in certain states, particularly in the southern United States, also exposes it to regional economic and regulatory risks. Natural disasters, such as the recent hurricanes that affected some of biote's core markets, can temporarily disrupt operations and impact financial performance.

Conclusion

biote Corp. has built a strong foundation in the hormone optimization and therapeutic wellness space, leveraging its Biote Method and Biote-branded dietary supplements to drive growth and profitability. The company's recent strategic initiatives, including the acquisition of Asteria Health and the rollout of its enhanced Clinical Decision Support software, position it well to capitalize on the increasing demand for personalized, evidence-based approaches to aging and overall health management.

The company's financial performance in the third quarter of 2024 demonstrates its ability to generate strong revenue growth and improve profitability. While temporary headwinds have led to a slight adjustment in full-year guidance, biote's underlying business fundamentals remain solid, with double-digit growth in both its product and service revenue segments.

However, biote must navigate a complex regulatory environment and intensifying competitive landscape to sustain its momentum. Successful execution of its growth strategies, effective management of its supply chain, and ongoing innovation in its product and service offerings will be critical to the company's long-term success. The company's strong liquidity position, with ample cash and available credit, provides a solid foundation for pursuing these objectives.

Investors should closely monitor biote's progress in expanding its practitioner network, enhancing its software offerings, and vertically integrating its manufacturing capabilities. These factors, along with the company's ability to navigate regulatory challenges and maintain its competitive edge, will be key determinants of biote's future success in shaping the future of preventive health care.