Business context and reporting period
Biote Corp. filed this Form 10-K for the fiscal year ended December 31, 2022. The filing reports annual results, not a standalone fourth-quarter income statement. Biote provides a practice-building platform for hormone-optimization practitioners, including training, software, inventory-management and marketing support, and sells branded dietary supplements. Most revenue is tied to procedure-based fees; the company does not manufacture the compounded hormone pellets used by practitioners.
Biote completed its SPAC business combination on May 26, 2022 and adopted an “Up-C” structure. The 2022 and 2021 comparison is affected by the transaction and different ownership/accounting structures; 2022 net income also includes substantial noncash fair-value gains and stock-based compensation.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $165.0 million | $139.4 million |
| Operating income (loss) | $(60.7) million | $34.6 million |
| Net income | $1.3 million consolidated; $(1.0) million attributable to Biote Corp. stockholders | $32.6 million consolidated |
| Adjusted EBITDA (non-GAAP) | $50.1 million | $40.2 million |
| Cash from operating activities | $(9.2) million | $33.7 million |
| Cash and cash equivalents at year-end | $79.2 million | $26.8 million |
| Term-loan principal at year-end | $121.9 million | $37.5 million |
Revenue rose 18.3%. Product revenue was $163.1 million, including $129.0 million from pellet procedures and $32.4 million from supplements; service revenue was $1.8 million. Gross profit, calculated as revenue less reported cost of revenue, was approximately $110.4 million, or 66.9% of revenue, compared with $90.6 million, or 65.0%, in 2021.
Reported operating loss reflected $82.2 million of share-based compensation and $21.6 million of business-combination and related transaction expenses within sharply higher selling, general and administrative costs. Net income included $66.9 million of gains from changes in warrant and earnout fair values, alongside $5.1 million of interest expense. The filing’s Adjusted EBITDA excludes specified items and should not be treated as a substitute for GAAP results or cash flow.
Year-end current assets were $101.2 million and current liabilities were $18.8 million. The company also had an undrawn $50 million revolving facility. Total liabilities were $169.9 million, exceeding total assets of $111.6 million; stockholders’ equity was negative $58.3 million. Operating cash outflow included $30.8 million of reduced accrued expenses, including payment of transaction-related costs. Investing cash outflow was $1.8 million and financing cash inflow was $63.5 million.
Material changes versus 2021
- Revenue increased 18.3%; procedures performed rose 17.8%, active clinics billed increased 13%, and supplement sales grew 19.0%.
- Operating results shifted from $34.6 million of operating income to a $60.7 million operating loss, mainly due to transaction-triggered stock compensation, transaction costs and higher public-company costs.
- Net income fell 95.9%, while Adjusted EBITDA increased 24.6%. The gap reflects significant noncash and transaction-related items.
- Operating cash flow moved from $33.7 million provided to $9.2 million used. Cash increased primarily with business-combination proceeds and debt financing, while principal debt rose substantially.
- Biote added 740 partnered clinics in 2022 and reported more than 6,400 certified practitioners across approximately 3,600 clinics at year-end. About 64% of revenue came from ten core states.
Outlook, risks and unusual items
- Outlook: No numerical financial guidance is provided. Management said available funding was expected to cover operations, working capital, capital expenditures and debt service for at least the next 12 months. It planned further U.S. sales-force and training-capacity expansion in 2023, while treating U.S. execution as the priority before selective international expansion.
- Debt and rates: The $125 million Truist term loan matures in 2027, bears a variable rate, and is subject to leverage and fixed-charge-coverage covenants. Biote reported compliance at December 31, 2022. The stated rate was 6.92304% at year-end; a 100-basis-point increase was estimated to add about $1.2 million to annualized interest expense.
- Regulatory and supply exposure: Compounded hormone products are made by independent 503B outsourcing facilities, primarily three named providers. Biote says it does not control their manufacturing; the filing notes those facilities have received FDA warning letters and Form 483 observations. Changes in compounding rules, FDA action, or supply disruption could materially affect the business. Dietary supplements and convenience kits also face FDA and FTC requirements.
- Controls and restatements: Management concluded disclosure controls were not effective at year-end because of an unremediated material weakness in accounting for complex transactions. The weakness contributed to restatements of the June and September 2022 quarterly reports. The auditor gave an unqualified opinion on the financial statements, but did not express an opinion on internal-control effectiveness.
- Legal matter: The company is involved in litigation with founder and stockholder Gary Donovitz and related parties concerning alleged promises, contractual obligations and other claims. Biote disputes the allegations and says the matter is not expected to materially affect results or financial position; a Texas jury trial was scheduled for September 11, 2023.
- Other risks: Geographic concentration, dependence on practitioner adoption and third-party manufacturers, competition, potential patient injury or product liability, data security, inflation and variable-rate borrowing are significant risks. Management reported hurricane-related closures of 140 clinics in Florida and Puerto Rico in 2022.
Most important facts for investors to verify
- Reconcile GAAP net income, the parent-attributable loss, the $66.9 million fair-value gains and the $50.1 million non-GAAP Adjusted EBITDA; assess the sustainability of underlying earnings and cash generation.
- Review the cash-flow statement and transaction-cost disclosures to understand the operating cash outflow and the company’s ongoing working-capital needs.
- Check the term-loan balance, variable interest rate, covenant headroom, repayment schedule and availability/conditions of the $50 million revolver.
- Track remediation of the material weakness, the impact of the quarterly restatements, and the timeliness and reliability of future reporting.
- Monitor FDA and state actions affecting compounding facilities, availability of pellet products, and the company’s regulatory and quality controls for supplements and convenience kits.
- Review developments in the Donovitz litigation and any resulting costs, restrictions or settlements.
- Assess potential dilution and ownership concentration, including member exchange rights, earnout securities, the equity plans and the standby equity purchase agreement.