Biote Corp.

Good morning, ladies and gentlemen, and welcome to the Bioti second quarter 2022 financial results and business update. At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Mike Kavanagh, Managing Director of Investor Relations. Mike, over to you.

Good morning and thank you for joining us today. Yesterday, BioT released financial results for the quarter-ended June 30th, 2022. The release is currently available on the investor section of the company's website. Terry Weber, Chief Executive Officer, and Rob Gibbons, Chief Financial Officer, will host this morning's call. Before we get started, I would like to remind everyone that management will be making statements during this call and forward-looking statements regarding the company's financial results, business outlook, strategies, goals, research and development, manufacturing and commercialization activities, regulatory process operations, the impact of macroeconomic conditions on its business, results of operations, and financial conditions and other matters. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond our control. Our actual results could differ materially from expectations reflected in any forward-looking statements. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today, and BioT undertakes no obligation to update them in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. For a discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and our investor relations website, as well as the risks and other important factors discussed in today's earnings release. We will also refer to adjusted EBITDA, which is a non-GAAP financial measure to provide additional information to investors. A reconciliation of the non-gap-to-gap measure is provided with our press release, with the primary differences being stock-based compensation, fair value adjustments to certain liabilities, transaction-related expenses, and other non-operating expenses. I'd now like to turn the call over to Terry Weber.

Thank you, Mike, and thank you all for joining us on the call today. I'm excited to be speaking to all of you during our first earnings call as a public company. On the call today, I will give an overview of our recent achievements and share our outlook on the remainder of 2022 before turning the call over to Rob Gibbons, our Chief Financial Officer, who will review our financial results. We will then open the call up to questions. And please note, we're also joined today by our Chief Medical Officer, Dr. Ross McQueavy, who will be on the call to answer questions. As many of you know, the second quarter was transformational for BioT. We began our journey as a public company on May 27th. BioT decided to pursue the path to becoming a public company specifically to enable us to fund our expansion plans over the coming months and years. As a leader in the hormone optimization space, we expect that robust strategic expansion will further strengthen our already significant competitive moat. Moving to a high-level review of our results, I'm pleased to report that we experienced accelerating top-line growth in the second quarter with revenues increasing 19% over the same period in 2021 to $41.4 million, and we had a net income of $49.7 million a 409% increase year over year, primarily driven by several transactional related items. We also generated accelerated adjusted EBITDA growth with the adjusted EBITDA increasing 21% year over year compared to our first quarter adjusted EBITDA growth of 19%. These results are in line with our previously disclosed full year 2022 guidance. and we believe are reflective of our growth initiatives beginning to gain traction. We continue to generate positive net income and adjusted EBITDA as a company. These results demonstrated continued strong performance, and I'm reiterating our revenue guidance of $160 to $166 million and increasing our adjusted EBITDA guidance to $47 million to $51 million. Our revenue growth in the quarter was driven by steady and predictable growth on both practitioner procedures and nutraceutical sales. Importantly during the quarter, our patients' behaviors did not appear to be affected by adverse macroeconomic factors, such as high inflation, that have been prominent in the first half of 2022. We've seen steady participation and growth despite market conditions, and we believe that this is a significant validation of not only the value BioT offers to our patients who want to feel their best, but also to the affordability of a program that can often be life-changing. Coming out of the second quarter, our best-in-class franchise-building business model is in a very strong position. We have the largest provider base in the hormone optimization space with BioT-certified providers spread across a variety of medical specialties, However, at about 2% of the total provider market, we are just scratching the surface of the pool of potential practitioners. Our robust provider base is a springboard for expansion, and the high volume of procedures performed, over 2.5 million to date, facilitates continuous refinements to our program. A key competitive advantage is our end-to-end platform. accompanied by our training and the support that offers a complete hormone optimization business from day one, resulting in approximately a 90% retention rate across our provider base. This underscores the value of BioT to both the patients and to the providers. Our multi-year domestic expansion plan is our primary strategic focus. We plan to strengthen our leadership position by expanding our sales force to further drive our growth and bring our unique offering to even more providers and patients in the coming years. Our field sales team is supported by excellent internal infrastructure and marketing. Furthering the expansion of our executive team, we made three key appointments in this quarter. In June, Dr. Ross McQueavy was appointed our chief medical officer. In this role, Ross will continue to lead clinical research and publications with the goal of bringing the BioT method into mainstream medicine. Also in June, David Koch was appointed vice president of national accounts. David has close relationships with some of the biggest and most successful primary care and women's health accounts. The third edition was the appointment in May of Jay Buechler as our head of nutraceuticals. Jade will oversee our important dietary supplement offers, including further product development in those. To close my remarks, I want to thank the shareholders who recently committed to BioT. We look forward to reporting more progress on our next earnings call. And with that, I'd like to turn the call over to Rob Gibbons, our Chief Financial Officer, to review the financial results.

Thank you, Terri. As Terry mentioned, our revenues for the quarter were $41.4 million, which was a 19% year-over-year increase. This was driven by 19% growth in our practitioner procedures, as well as 20% growth in our dietary supplement sales. Excluding the cumulative recognition of legacy stock-based compensation and certain expenses recognized as part of the merger transaction, our SG&A costs increased by 20% in the second quarter as compared to the same period in 2021. This included $1.7 million of increases in payroll and related costs, as well as an increase in our travel and entertainment expenses of $200,000. These items were driven by additional headcount added in our sales force. Also, professional fees and insurance costs increased by $300,000 each respectively during the quarter. These increases were new costs associated with public company requirements, specifically audit and tax-related fees and directors' and officers' liability insurance coverage. Lastly, our depreciation and amortization increased by $200,000. This was due to an expansion of our corporate office that was completed and placed in service in the first quarter to accommodate our headcount and operational growth. Net income for the quarter was $49.7 million. This was a 409% increase year-over-year. This was primarily driven by several transaction-related items, such as the cumulative recognition of stock-based compensation of $79 million, gains from fair value adjustments to warrant and earn out liabilities of $3.4 million and $123 million, respectively, and also transaction closing expenses of $9.2 million. Our adjusted EBITDA was $13.1 million in the quarter, a 21% increase from the same quarter in 2021. Our calculation of adjusted EBITDA adjusts for changes related to stock-based compensation recognized during the quarter, as well as the fair value adjustments to certain liabilities that were mentioned above, and also the non-recurring transaction or merger-related expenses. As of June 30th, we have $82.7 million in cash and cash equivalents on our balance sheet. We believe this to be adequate to fund our growth and initiatives. During the second quarter, we generated $9.3 million of cash flow from operations when adjusted for the transaction-related costs. With that, I'll hand the call back over to Terri.

Thank you, Rob, for the financial update. And once again, thank you all for joining us today. I feel very good about BioT's steady and consistent results in our first quarter as a public company. and I look forward to updating you again when we report the third quarter earnings in the fall. However, if you'd like to connect with us before that, please contact our investor relations partners at ICR Westbrook. With that, I'd now like to open the call for questions. Operator, please begin the Q&A session.

Thank you, Terry. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone keypad at this time. We ask that while posing your question you please pick up your handset if listening on a speakerphone to provide optimum sound quality.

Please hold whilst we poll for questions. Thank you.

Your first question is coming from Brian Holland of Cowan & Company. Brian, please ask your question.

Yeah, thanks. Good morning. If I could just start with the financial results here. I think you mentioned something in the range of 20% growth in dietary supplements. Based on what I have here, it's a nice acceleration from one cue. So I guess a two-parter around that. Is that acceleration, is that merely comp driven? Maybe last quarter was a tougher comp, this one less so. If not, if that's a real clean acceleration, just any color around what might have been the contributing factors for that?

That's got some of the accelerating from our recovery from the first quarter. So we had a large promotion we talked about in the fourth quarter. And then first quarter, we had a little bit of an adjustment from that, that pull forward buying. So, the second quarter, we've got a recovery on that at a solid performance on our nutraceuticals.

Appreciate it. And is there any detail around the number of new partner clinics or total partner clinics at quarter end that you can share at this point?

I know Brian, so, as we said before, we are going to update that on an annual basis. I think I talked to you about how our model works in terms of we add clinics consistently through. We also call clinics and require certain terminations if they don't keep up with our model. So, because that doesn't even through the year, we report that on an annual basis, but we will be reporting that at the end of the year as well. But we're on track for adding new clinics. very comfortable to tell you that.

Understood. You mentioned in your prepared remarks no change in consumer behavior that you're seeing amidst these obviously significant wallet pressures elsewhere in their budget. Can you just remind us how you and importantly how you believe the consumer sees the value proposition here and why sort of in a recessionary environment you're you're less concerned about attrition

We're watching this very carefully, Brian. I'm very respectful of macroeconomics. We talk to and poll our practitioners probably every other week in terms of that kind of a conversation, so we're watching it very closely. Because BioT's procedure costs about $4 a day for women, about $4.50 for men, and because it's so life-changing, we haven't seen a change in the buying behavior with procedures. What I'm going to watch very closely because you report on consumer is I'm going to watch more of those consumables in that dietary supplement area. So that's where I'm keen on. We haven't seen a change in behavior yet, but I'm very careful to look at that. But our providers tell us that their patients have not had, they haven't seen any change in behavior in the procedures and people coming for those appointments. But obviously throughout this year, I'm going to be updating that.

Okay, great. And then if I could just ask about the NASDAQ suspension, just curious if there's any update you can provide with respect to where you are in that process. I know there's a few concurrent paths you're pursuing. If you could just remind us what you've done at this point and maybe any intel or any detail you've received back from NASDAQ with regard to the process.

Oh, yeah. Thank you for asking for that. So, we filed for relisting on August 1st. So, we took that path of the relisting because we thought it would be our fastest path to being listed again. We believe we meet that criteria today, and we believe we'll be back on shortly. So, we'll update you as soon as we're notified. So, we're very hopeful.

Okay. Thanks. And then last question for me for Ross. I was just curious if you could share, as you're getting your feet wet here, Sort of what's in your research queue and maybe any, any thing you can share with respect to cadence for future publications, we should be looking out for

Yeah, I appreciate the question, Brian. I think, you know, what intrigues me the most about this opportunity of BioT is the plethora of data that exists out there. So, you heard Teri talk about in her prerecorded statement of 2.5 million procedures being done over the last 10 years, which provides us with an opportunity to really dig into that data. We have a couple of studies that we are currently developing. both retrospective in nature, but looking forward to the future of doing more prospective data and a registry so that we can really follow these patients over the long term.

So Brian, what we just recently met with a hundred or so of our top providers. And I think that the top discussion was data, data, data, the amount of data they keep on those patients that we keep on, you know, those patients in terms of, um, working with them through our data software systems is that they're excited to be part of it. And I think it's going to be something that we're going to talk about regularly on these calls is what we have in that their close relationship and longitudinal relationship with the patients they've had on this therapy for the extent of their relationship with biotech. So we're very excited to have Ross and his team really focused on bringing that to national publications.

Perfect. I appreciate all the color. I'll leave it there. Best of luck.

Thank you.

Thank you.

Your next question is coming from George Kelly from Roth Capital Partners. George, please ask your question.

Hi, everyone. Thanks for taking my questions, and congrats on a strong quarter. So a few questions for you. The first one is on your EBITDA guidance. I see you took that higher. I believe it was a million bucks at the bottom and the top end of the range. So just curious what changed versus the prior expectation? What gave you confidence to raise it?

Well, you know how I am. I talked to you before, George, about the fact that we really wanted to always deliver steady and predictable results. But we were able to see after the second quarter that our expense control really stayed intact and delivered. So I think I was very comfortable with raising that guidance.

Okay, gotcha. And then second question for you about the Salesforce. So I know you've been adding a lot of new folks there. Curious just for a status update on where you are now, what your plans are, kind of, you know, how it should progress throughout the back half of the year. And then, Terry, we've talked before about your efforts targeting larger hospital groups. And just curious, you know, what the Salesforce effort is regarding that and when could it start to bear fruit?

Oh, great question. I think we had told you before we were going to expand the Salesforce 50% in this next year. So we are on target for all of that expansion. The part that I think it's most interesting is that we added into a lot of white space that we talked about before, you know, the West coast also even into Utah, Idaho, we've gone into the middle West and to the Northeast. And what we've seen is that those new salespeople are performing. So they're coming on on track. Getting trained in period, we thought they would and beginning to deliver new relationships in that white space area where people hadn't heard of before. So that model is performing right across the board and we're going to continue to add those sales personnel in the second half of the year. And thanks for asking the question on the national accounts, because you saw in my remarks earlier, we added ahead of national accounts. So, what had happened before was our regular sales people had gotten those relationships started with some of these hospital groups, but it's a whole different sales effort. So, by adding a really seasoned exec, who's got a deep experience, and he's now beginning to build his team. in the national sales account. So, George, stay tuned. I would say you're going to see the fruit of that in 23. We've been negotiating contracts that's gone well with those groups, but I think that will take the time. By the time we train and that begins to flow, it'll be in 23. But we got an excellent exec in David Koch, and he hit the ground running.

Okay, great. And then a quick modeling question. I may have missed this in your prepared remarks, but did you give procedure revenue? And if not, I'm kind of, I'm backing into a 20-ish percent growth year over year in that. Is that ballpark?

Yes, that's accurate.

Yeah. Okay, great. And then last question for me is just about your go-forward capital priorities. Now that you've got, I mean, your balance sheet, you've got 80, I think you said 80-something million of cash. Okay. What are your plans with that? What are the main priorities as far as M&A or anything else that we should be thinking of?

I think if I put you back to the fact that the first thing we have to deliver to you and to the shareholders is this geographic scale model. So that's first and foremost, absolutely where I'm committed as well as the research that Ross talked about earlier, but Obviously, I shouldn't have said obviously. My English teaching mother would say never to do that. But we are looking at what are those strategic plays in the future and in 23 that we're going to give us that kind of real disruptiveness going forward and ability to really lock the market down. I think we're the number one performer, and we believe we can continue to do that. And obviously, we'll look at M&A opportunities. and be thinking about that in the second half of the year to look at in 23. But, you know, this year is all about our strategic, you know, growth in that sales department and in these new markets. I couldn't be more excited about how these new markets will offer a chance for those practitioners and those patients to really understand BioT and become part of the family.

Okay, excellent. Thank you.

Thank you. Your next question is coming from Greg Fraser of Truist. Greg, please ask your question.

Good morning, folks. Thanks for taking the question. I wanted to just follow up on the comments on the macroeconomic environment and not seeing an impact on the business so far. I'm curious if you've detected any changes in patient behavior in counties or locales where perhaps the population might be more at risk of pressures on discretionary spending, maybe in lower income areas, even if the changes haven't been material so far.

We've been talking about this, you know, we've been on the phone and been in person with these practitioners in some of the areas of southern Louisiana, Kentucky, the rural areas of some of the Texas areas that you're talking about, Greg. And, you know, where I think the practitioner that I really went in depth with is a couple of them, you know, the average income in that county is $36,000 for household income. The other one was $34,000 for household income. and they haven't seen a change in the behavior in terms of the procedure, because it is such a strong life-enhancing procedure for those patients. So I'm asking constantly, the area, as I said a little bit earlier, that I'm going to be more concerned about is as we go into the second half of the year and You know, patients are looking at groceries. Will they look differently at nutraceuticals? That is going to be something I watch as well as the procedures. But all of them have reinforced. They've seen no change in that behavior. And we spent a lot of time on this in the last three weeks directly asking those providers in those areas.

Got it. That's very helpful. Has pricing for pellet therapy and pricing growth as set by your physician partners generally been consistent over time?

It's been consistent over time. We saw some providers take price increases in the early part of this year. I haven't heard a lot, but it still averages about $350 for females. So we haven't seen a big change. We saw the changes in California and New York City, that type of thing.

Got it. Okay. Bringing on new clinic partners obviously is a priority as well as increasing utilization among your current partner base. Can you just talk a bit about the average timeline to productivity for a new clinic? How long does it generally take for a new clinic to reach Sort of the volume of an average mature clinic.

We give that about 18 months. What happens is you'll see them coming out of the gate in the first six months and doing usually ramping up to a point that they get very knowledgeable, comfortable with the procedure and which patients are best candidates for this. But then we see as that goes to one year, and then on to the eighteen months, but they usually have a mature average pattern at about eighteen months, but that state consistent George over the last three years that I've been looking at it that ramping up period. And what we've been working on is obviously helping them ramp up earlier to get more and more comfortable with the complexities of this protocol, trying to dose and things like that. So there's where our field staff has been much more involved in getting that earlier adoption. We saw that where we see some real strengthening in that post-COVID. I think it's just easier to get into offices. They're getting their staffing issues. under their belts and things. So we're seeing a more normal, you know, pre-2020 type pattern.

Got it. Okay. My last question, I'm just curious, on the physicians that have adopted teletherapy and where you've had the most success, does the age of the physician tend to skew younger maybe, you know, towards folks that weren't practicing when the Women's Health Initiative data came out? Any kind of trend there to point out? Thanks so much. Yeah.

There's two really interesting trends. I'm so glad you asked it. Because one of the regular pattern we've seen, and I'm looking over at Dr. McQueavy because he's my perfect person here to explain this pattern. What we normally see is an OBGYN or family practice has a young practice often, and they age with their patients. So as that practitioner gets to be more senior and is delivering perhaps less babies, and his patient base changes, they all of a sudden are seeing a lot of patients that they don't really are comfortable treating with all the menopause symptoms, et cetera. And then we see them coming to training to get that training they didn't get in med school. So we really see as that practitioner ages with his or her patients is when we most likely see them coming to training. But you did hit on something that I have noticed is that we have an openness from the younger practitioners to be open to this therapy. And so you're seeing them coming out of fellowships and some of our adoption recently by endocrinologists where traditionally they've been not so comfortable with some of the hormone therapies. We're seeing young endocrinologists with a very open mind. So we see both patterns, but the normal pattern is as those patients get older, in those OBGYN practices, that's when that practitioner is coming to us. So we tend to train a lot of seasoned practitioners.

Great. Thanks for the color and for taking the questions.

Thank you.

Okay. There appears to be no further questions in the queue. I will now hand back over to Terri for any closing remarks.

Well, thank you all for joining us. We're excited. This is our first earnings call, and I'm still breathing, so thank you. We look forward to updating you again when we report the third quarter earnings, but we will be issuing press releases as soon as we're relisted, and we think that's something we're excited to get out to you. And in the interim, if you'd like to connect with us, please contact our investor relations partners at ICR Westwick. Thank you so much for joining us this morning. We'll speak to you soon.