Business Context and Reporting Period
Company: biote Corp. (BTMD)
Filing Type: Form 10-Q (Unaudited)
Period Ended: September 30, 2024
Business Overview: biote Corp. operates a practice-building platform for therapeutic wellness and hormone optimization, training practitioners in the "Biote Method" and selling bio-identical hormone pellets and dietary supplements. The company recently acquired Asteria Health (a 503B manufacturer) and assets from Simpatra and BioSana to vertically integrate its supply chain.
Key Financial Metrics
| Metric (in thousands) | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Revenue | $51,384 | $45,557 | $147,357 | $139,657 |
| Net Income (Loss) | $12,657 | $19,642 | $(3,437) | $(14,883) |
| Net Income Attributable to biote Corp. | $10,702 | $7,530 | $(546) | $(4,418) |
| Operating Income | $12,184 | $7,599 | $28,844 | $23,149 |
| Adjusted EBITDA | $16,202 | $14,037 | $43,102 | $41,682 |
| Cash and Equivalents | $38,225 | $65,575 | $38,225 | $65,575 |
| Total Debt (Term + Revolving) | $122,548 | $115,625 | $122,548 | $115,625 |
| Share Repurchase Liability | $67,802 | $0 | $67,802 | $0 |
Note: Debt figures represent the sum of Term Loan ($110.9M) and Revolving Loans ($10.0M) before current portion and issuance costs. Share Repurchase Liability is a non-cash liability recorded for litigation settlements.
Material Changes vs. Prior Period
- Revenue Growth: Q3 2024 revenue increased 12.8% year-over-year, driven by a $2.5M increase in pellet procedure revenue and a $1.8M increase in dietary supplement sales. Service revenue also grew due to new technology fees (BioteRx).
- Profitability: While Q3 2024 reported a net income of $12.7M, this was significantly boosted by a $7.2M gain from the change in fair value of earnout liabilities. On a nine-month basis, the company reported a net loss of $3.4M, an improvement from the $14.9M loss in the prior year period.
- Acquisitions: The company completed the acquisition of Asteria Health (March 2024) and asset purchases from Simpatra and BioSana (January 2024), resulting in new goodwill ($5.5M) and intangible assets ($5.7M).
- Litigation Settlements: The company settled significant litigation with Dr. Gary S. Donovitz and Marci M. Donovitz, recording a combined share repurchase liability of $128.4M. This resulted in a substantial cash outflow of $62.2M in the nine months ended September 30, 2024.
- Financial Restatement: The company revised previously issued financial statements for Q1 and Q2 2024 to correct errors in the calculation of noncontrolling interest, which impacted the allocation of net loss.
Guidance, Outlook, and Risks
- Outlook: Management expects to continue growing the number of Biote-certified practitioners and expanding vertical integration. The company plans to narrow its vendor network to manage supply chain efficiency.
- Liquidity: Cash and cash equivalents decreased to $38.2M from $89.0M at year-end 2023, primarily due to litigation settlement payments and acquisitions. The company has $40.0M available under its revolving credit facility.
- Key Risks:
- Internal Controls: The company disclosed a material weakness in internal controls over financial reporting related to technical accounting personnel and segregation of duties, which has not yet been remediated.
- Regulatory: The business relies on 503B outsourcing facilities for hormone pellets. AnazaoHealth notified the company of its intent to terminate its agreement effective May 1, 2025. Additionally, the FDA's potential adoption of NASEM recommendations could restrict the use of compounded bioidentical hormones.
- Legal: Ongoing litigation with Right Value Drug Stores (seeking injunctive relief) and potential future claims related to product liability or intellectual property.
- Debt Covenants: The company previously experienced an event of default regarding the Donovitz settlement but obtained waivers from its lender.
Investor Verification Checklist
- Verify Cash Burn: Confirm the sustainability of operations given the $50.8M decrease in cash over nine months and the $128.4M share repurchase liability obligation.
- Assess Supply Chain: Evaluate the impact of the AnazaoHealth termination notice and the integration of the newly acquired Asteria Health facility.
- Review Restatements: Examine the specific adjustments made to Q1 and Q2 2024 financials regarding noncontrolling interest to ensure accurate trend analysis.
- Monitor Litigation: Track the status of the Right Value Litigation and the November 11 hearing on temporary injunctions.
- Check Debt Compliance: Verify continued compliance with the Truist Credit Agreement covenants (leverage ratio and fixed charge coverage) following the recent cash outflows.