Biote Corp. 2023 Form 10-K Summary
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023, with 2022 as the comparable period. Biote operates a practice-building platform for hormone optimization, providing practitioner training, software, inventory and practice support, and selling Biote-branded dietary supplements. It earns most revenue from procedure-based fees associated with the Biote Method; it does not receive compensation from outsourcing facilities for sales of hormone pellets. At year-end, the company reported more than 7,100 certified practitioners across approximately 4,100 clinics.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $185.4 million | $165.0 million |
| Gross profit and gross margin | $127.5 million; 68.8% | $110.4 million; 66.9% |
| Operating income (loss) | $28.7 million | $(60.7) million |
| Consolidated net income (loss) | $(2.8) million | $1.3 million |
| Adjusted EBITDA (non-GAAP) | $55.3 million | $50.1 million |
| Cash from operating activities | $26.9 million | $(9.2) million |
- Revenue grew 12.4%. Pellet procedure revenue was $141.0 million, dietary supplement revenue $38.1 million, and service revenue $2.8 million. Procedures performed increased 9.3%, active clinics billed increased 14.1%, and supplement sales increased 17.5%.
- Operating results improved substantially, mainly because 2022 included $78.0 million of accelerated share-based compensation related to the Business Combination and $21.6 million of transaction expenses. 2023 operating income was also affected by higher litigation, professional-services, employee and marketing costs.
- Consolidated net loss in 2023 included $22.4 million of combined losses from changes in fair value of warrant and earnout liabilities, versus combined gains of $66.9 million in 2022. The consolidated loss differs from the $3.3 million of net income attributable to Biote Corp. stockholders; reported basic and diluted EPS were $0.13. The Up-C structure and noncontrolling interests affect this presentation.
- Cash and cash equivalents were $89.0 million, versus $79.2 million a year earlier. Current assets were $122.3 million and current liabilities $22.2 million. Inventory rose to $17.3 million from $11.2 million.
- Term-loan principal was $115.6 million at year-end, including $6.25 million current; the balance-sheet carrying amount was $113.0 million including current and long-term portions, net of debt issuance costs. The $50 million revolving facility was undrawn. Cash exceeded gross term-loan principal by approximately $26.6 million.
- The term loan matures May 26, 2027, bears a variable rate that was approximately 8.0% at year-end, and is secured by substantially all company assets. Management estimated a 100-basis-point rate increase would add approximately $1.2 million to annual interest expense. Interest expense, net, was $6.4 million in 2023.
- Cash used in investing was $2.7 million, principally for capitalized software. Cash used in financing was $14.4 million, including $8.7 million of distributions and term-loan principal repayments.
Material changes, outlook and risks
- Management said current cash, expected operating cash generation and available revolving capacity should fund operations and debt service for at least the next 12 months. It provided no specific revenue or earnings guidance. Priorities include U.S. geographic expansion, more sales and support staff, greater training capacity, supplement growth and selective acquisitions; U.S. growth remains the primary focus before broader international expansion.
- On February 13, 2024, Biote and former owner Gary Donovitz signed a binding settlement term sheet. The contemplated repurchase of his Biote Holdings units and Biote shares totals approximately $76.9 million, payable over three years after the definitive agreement is signed. The settlement also includes mutual releases and two-year non-compete and non-solicitation terms. Confirm the definitive agreement and funding terms; the filing reports the term sheet, not completed repurchases.
- Biote was awarded $4.7 million in attorneys’ fees in 2023 in a separate Donovitz-related action, with potential additional fees of $0.2 million. The company disclosed other remaining litigation at year-end and described its ultimate outcome as uncertain.
- On January 24, 2024, the board authorized up to $20 million of Class A share repurchases. By March 11, 2024, Biote had repurchased 502,318 shares for $2.7 million. The company does not anticipate cash dividends in the foreseeable future.
- Subsequent events also include a January 2, 2024 asset purchase agreement for certain Simpatra intellectual property for $4.5 million and a January 17, 2024 definitive purchase agreement for Asteria Health, an outsourcing facility; Biote expected that acquisition to close in early 2024.
- Key business risks include regulatory scrutiny of compounded hormone products and dietary supplements; reliance on a small number of primary outsourcing facilities; practitioner adoption and retention; geographic concentration, with about 60% of 2023 revenue from ten core states; competition; and variable-rate debt. The filing notes that partner outsourcing facilities have received FDA warning letters and Form 483 observations. FDA action on compounded bioidentical hormones could materially affect the business.
- Internal control over financial reporting and disclosure controls were assessed as ineffective at December 31, 2023. A material weakness involving accounting competence for complex transactions and information-technology general controls remained unremediated. Prior control weaknesses contributed to restatements of the 2022 second- and third-quarter filings. Management described remediation efforts but gave no assurance of timely completion.
- Biote failed to timely deliver its 2023 budget under the credit agreement, triggering an event of default as of June 30, 2023; the lender waived it on July 27, 2023. The company reported compliance with required covenants at December 31, 2023.
- In 2023, the company exchanged all outstanding warrants for 3.09 million Class A shares valued at $17.5 million; no warrants remained outstanding at year-end. The earnout liability was $41.1 million.
- The independent auditor issued an unqualified opinion on the consolidated financial statements but did not provide an opinion on the effectiveness of internal control over financial reporting.
Important facts for investors to verify
- Read the audited statements and notes to reconcile consolidated net loss of $2.8 million with $3.3 million of income attributable to Biote Corp. stockholders and EPS of $0.13.
- Track cash conversion, inventory growth, procedure volumes, active clinics billed and supplement sales; distinguish reported Adjusted EBITDA from GAAP earnings and cash flow.
- Review the final Donovitz settlement agreement, the timing and funding of the approximately $76.9 million repurchase, and the effects on liquidity and debt covenants.
- Confirm whether the Asteria Health acquisition closed, its final purchase price and financing, and any integration or regulatory implications.
- Monitor progress in remediating the material weakness and whether subsequent filings report effective controls or further restatements.
- Assess compliance with debt covenants, variable-rate interest exposure, remaining principal due in 2027 and use of the revolving facility.
- Monitor FDA and state regulatory developments affecting 503B outsourcing facilities, compounded hormone pellets, Biote’s software and supplements, as well as any supplier disruptions or product-liability developments.