Business Context and Reporting Period
biote Corp. filed this Form 8-K reporting the completion, on May 26, 2022, of the business combination between Haymaker Acquisition Corp. III and BioTE Holdings, LLC. Haymaker changed its name to biote Corp., which ceased to be a shell company upon closing. The filing also provides Form 10 information and financial statements for the three months ended March 31, 2022 and 2021 through incorporated or filed exhibits.
The combined company uses an Up-C structure. At closing, biote Corp. held 9,161,771 Biote units and issued 58,565,824 shares of Class V voting stock to the former Biote members. Class A common stock and warrants began trading on Nasdaq on May 27, 2022 under the symbols BTMD and BTMDW, respectively.
Key Financial Metrics and Capitalization
| Metric | Reported information |
|---|---|
| Business combination cash | The filing states that HYAC transferred cash based on trust-account and other cash balances after redemptions and that Biote received $125.0 million of term-loan proceeds. The filing text is unclear regarding the aggregate Closing Date Cash, citing both $305.5 million and $137.3 million in the relevant description. |
| Debt financing | $125.0 million senior secured Term Loan A, borrowed in full at closing, plus a $50.0 million senior secured revolving facility. |
| Debt maturity | May 26, 2027 for both the term loan and revolving commitments. |
| Interest rates | SOFR plus a margin of 2.50% or 2.75%, or Base Rate plus a margin of 1.50% or 1.75%, depending on the applicable pricing tier and election. |
| Term-loan amortization | Quarterly installments totaling 5% of the original principal amount annually, with the remaining balance due at maturity. |
| Shares outstanding at closing | 9,161,771 Class A shares and 58,565,824 Class V voting shares. |
| Warrants outstanding | 13,504,166 warrants, generally exercisable at $11.50 per share. |
| Dividends | No cash dividends had been paid. Management did not expect dividends in the foreseeable future, and credit-facility covenants restrict dividend capacity. |
The filing does not provide clear revenue, net income, operating cash flow, margins, cash balance, or liquidity figures in the supplied text. Those amounts are referenced in the March 31, 2022 financial statements and MD&A exhibits.
Material Changes Versus the Prior Comparable Period
- HYAC completed its acquisition of BioTE and became biote Corp., replacing the former special-purpose acquisition company structure with an operating public company.
- Public stockholders redeemed 30,525,729 Class A shares before closing.
- The company replaced an existing revolving credit facility with the new senior secured term loan and revolving facility.
- The company entered into a tax receivable agreement requiring payment to members of generally 85% of realized U.S. federal, state, and local tax savings attributable to specified basis increases and related benefits.
- Biote members retained 58,565,824 Biote units and received corresponding Class V voting shares. Retained units may generally be exchanged for Class A shares or, at the company’s election, cash equivalent to the market value of one Class A share.
- Deloitte & Touche LLP replaced Marcum LLP as the company’s independent registered public accounting firm. Marcum’s prior report included substantial doubt regarding HYAC’s ability to continue as a going concern, but no disagreement or reportable event was disclosed.
- The company adopted a new board, executive leadership structure, equity incentive plan, employee stock purchase plan, amended charter, and amended and restated bylaws.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- No quantitative revenue, earnings, cash-flow, or operating guidance is provided in the filing.
- The tax receivable agreement may materially reduce future cash flow. In specified circumstances, including certain changes of control, early termination, payment defaults, or material breaches, the company may owe an accelerated lump-sum payment based on the present value of forecast future tax benefits.
- The company depends on distributions from Biote to fund tax receivable agreement payments because its principal asset is its ownership interest in Biote.
- The credit agreement is secured by substantially all assets of the loan parties and includes quarterly financial covenants. The total net leverage ratio must generally remain at or below 4.25:1.00 initially, declining to 4.00:1.00 and then 3.75:1.00. The fixed charge coverage ratio must be at least 1.25:1.00 beginning with the third quarter of 2022.
- Defaults, including covenant breaches, insolvency events, specified cross-defaults, invalidity of loan documents or liens, and changes of control, may permit acceleration of the debt and termination of revolving commitments.
- Related-party arrangements include a four-year founder advisory agreement with an annual fee of $300,000 and a four-year independent contractor agreement with an affiliate of the founder’s spouse providing for an annual fee of $250,000, in each case plus specified benefits or expense reimbursement.
- Members and the sponsor are subject to lock-up restrictions, generally six months for specified shares and units, with shorter restrictions for certain sponsor warrants.
- Management identifies risks related to realizing business-combination benefits, competition, growth execution, COVID-19 effects, regulation, interest and exchange rates, litigation, Nasdaq listing, transaction costs, and the company’s ability to meet its debt covenants.
Most Important Facts for Investors to Verify
- Review Exhibit 99.1 and Exhibit 99.3 for Biote’s March 31, 2022 revenue, profitability, cash flow, balance-sheet liquidity, and year-over-year changes.
- Reconcile the filing’s inconsistent description of the $305.5 million cash amount and the stated $137.3 million Closing Date Cash.
- Assess opening net debt, interest-rate exposure, required amortization, and compliance headroom under the leverage and fixed-charge coverage covenants.
- Review the tax receivable agreement to estimate potential long-term cash payments and accelerated-payment exposure.
- Evaluate dilution and control implications from the Up-C structure, exchange rights, warrants, earnout securities, and Class V voting shares.
- Review the pro forma financial information in Exhibit 99.5 and the risk factors incorporated from the proxy statement.
- Consider the absence of a dividend policy, the credit agreement’s dividend restrictions, and the concentration of voting ownership among insiders and former Biote members.