Biote Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial statements are unaudited. Biote provides training and practice-building services for hormone-optimization clinics and sells related products, including dietary supplements; it also acquired a 503B hormone-compounding manufacturer during the quarter.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $46.8 million | $44.8 million | +4.4% |
| Gross profit / margin | $33.4 million / 71.4% | $31.0 million / 69.1% | Margin +2.4 percentage points |
| Operating income / margin | $10.4 million / 22.3% | $7.9 million / 17.6% | Operating income +32.3% |
| Net loss | $(5.8) million | $(21.4) million | Loss narrowed |
| Net loss attributable to Biote shareholders; diluted EPS | $(2.1) million; $(0.06) | $(6.8) million; $(0.39) | Weighted-average shares: 34.6 million vs. 17.6 million |
| Adjusted EBITDA (non-GAAP) | $14.2 million | $13.1 million | +8.0% |
| Operating cash flow | $7.4 million | $13.0 million | Down $5.6 million |
Pellet-procedure revenue rose $2.3 million to $37.4 million; dietary-supplement revenue fell $0.9 million to $7.4 million. Service revenue increased 11.8%, partly from fees associated with the BioteRx platform. Lower product costs, particularly supplements, supported gross-margin improvement. SG&A was essentially flat at $23.0 million.
The smaller GAAP net loss mainly reflects a lower noncash loss on remeasurement of earnout liabilities: $12.1 million in Q1 2024 versus $25.4 million in Q1 2023. The 2023 quarter also included a $1.6 million warrant-liability loss; no warrants remained outstanding after the 2023 exchange offer. Adjusted EBITDA is a company-defined non-GAAP measure and excludes, among other items, earnout remeasurement, share-based compensation, and certain litigation and transaction costs.
Financial position, debt and liquidity
- Cash and cash equivalents were $78.8 million at March 31, down from $89.0 million at December 31, 2023. Current assets were $114.4 million and current liabilities $24.1 million.
- Operating cash flow was $7.4 million; investing used $12.2 million, including $11.1 million for acquisitions; financing used $5.4 million, including $4.1 million of share repurchases and $1.6 million of term-loan principal repayments.
- Term-loan principal was $114.1 million, with a reported interest rate of approximately 7.93% and maturity in May 2027. The loan is secured by substantially all company assets. Scheduled principal due in 2027 is $96.9 million. The $50.0 million revolving facility was undrawn at quarter-end.
- Management said cash, expected operating cash flow, and revolver availability should fund operations and debt service for at least the next 12 months. This is management’s assessment, not a guarantee.
- Total liabilities were $205.0 million against assets of $160.1 million; stockholders’ deficit was $44.9 million. The Level 3 earnout liability was $54.0 million at quarter-end.
Material changes, outlook and risks
- Acquisitions: Biote acquired Asteria Health, a 503B compounded-hormone manufacturer, on March 18 for $8.4 million cash plus a $0.5 million contingent payment. Preliminary purchase accounting includes $5.5 million goodwill, which is not tax-deductible. Biote also acquired Simpatra intellectual property for $1.5 million cash, shares and a potential share earnout, and BioSana assets for $0.7 million cash plus a potential earnout. Asteria’s purchase-price allocation remains preliminary.
- Donovitz settlement, after quarter-end: On April 23, Biote agreed to repurchase the founder’s relevant shares and paired interests for approximately $76.9 million over three years. On April 26 it repurchased 5.1 million Class A shares and 3.1 million paired interests for approximately $32.2 million and canceled 3,985,887 earnout securities. The company expects to record the settlement impact in Q2; the filing does not provide a clear estimate of that accounting impact or its full cash-flow timing.
- Debt covenant event: Biote reported an event of default as of March 31 after failing to notify its lender of the planned founder-related repurchases, despite stating it was otherwise in compliance with required financial covenants. The lender waived the default on April 26 and agreed that the specified settlement payments would not continue to constitute a default.
- Share repurchases: Biote bought 740,921 shares for $4.1 million during Q1 under a $20.0 million authorization. It later repurchased another 256,043 shares for $1.5 million and canceled the program.
- Controls: Management concluded disclosure controls were not effective at March 31 because a previously reported material weakness in financial reporting had not been remediated. The weakness relates to accounting competence and controls over complex transactions, as well as IT access, change-management and segregation-of-duties controls. Management said remediation is ongoing and may not be completed in 2024.
- Outlook and risks: No specific revenue or earnings guidance is provided. Management expects operating and capital expenditures to increase with growth. Key risks include regulation of compounded hormones and 503B facilities, dependence on third-party manufacturers, clinic adoption and competition, acquisition integration, variable-rate debt and refinancing, and the unresolved effectiveness of internal controls. Management said inflation had not materially affected results to date but could raise costs.
Important facts for investors to verify
- Review the settlement agreement and subsequent disclosures for the timing and funding of the remaining founder repurchases, the Q2 accounting charge or other impacts, and implications for debt covenants and liquidity.
- Monitor term-loan covenant compliance, the 2027 principal balloon, interest costs, and the actual availability of the revolving facility.
- Assess the final Asteria purchase-price allocation, acquired-business performance and integration, and any resulting segment disclosures or goodwill impairment risk.
- Track clinic and procedure growth against supplement declines, and distinguish GAAP results from Adjusted EBITDA and its exclusions.
- Follow remediation and testing of the material weakness and any future control deficiencies or financial-statement corrections.
- Monitor FDA and state oversight of compounded hormones and the compliance status and operational continuity of key 503B outsourcing facilities.