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spk00: significant amount of capital to get this operation up and running in the interim. When we look at the strategic nature of the operation, I think expanding a little bit of capabilities from a machinery and a design perspective is going to be the primary investments that we take. So I think that's really the focus that we have at Asteria.
spk04: Great. Thank you.
spk03: Your next question comes from Jonah Kim with TD Callen.
spk04: Thank you for taking my question. Just curious, are you still experiencing outside of your core markets at this point and also any color around new product pipeline and how long it typically takes to get new products in the market? That would be helpful. Thank you so much.
spk05: So I missed the first part, Joan, of your question. Could you repeat that? Because it gapped out.
spk04: Yeah, sure. I was just asking about how the pace of expansion outside of your core markets at this point, how fast should we expect that on an annual basis? And then, yeah, the second question was around R&D and innovation. Thank you.
spk05: The first question, our geographic expansion is going very well. So we've seen real pockets of good uptake on the new providers that we're bringing to training and their ability to really go into those new markets and start a practice. So you know we've got a highly experienced sales force, the best in hormone optimization certainly. in the US and they've really been able to index those providers that would be capable of having very successful hormone practices. So the expansion geographically is going well and we expect it to go well through the rest of the year and you'll be able to see those results second half of 24 and into 25 as those new markets develop. And I'll try to give some more color as we go on in the year on some of those new markets. And then the second question you had was on innovation products. So I think we have a real need in this country for these therapeutic wellness, these wellness products on healthy aging. So we are developing those products. We've got a wonderful doctor, Doreen Satil, a very excellent functional medicine doctor and formulator. and we are looking at providing those new products in those categories I discussed, and I think that innovation process is going well. What we have to ensure is that we have access to those products in all 50 states, and certainly we're available. Some of the states like California are more limited, but getting that access and consistent delivery on those new products. So we're encouraged, and it's moving effectively. It's not overnight.
spk03: Thank you. Our next question comes from Kamil Garvajalo with Jefferies.
spk01: Hi. Can I maybe follow up on one of the earlier questions on procedure growth? Just to make sure that I heard, is the primary driver of the growth the existing clinics, or have you ever broken it, or could you give me a sense of how much of the growth has come from new ones?
spk05: So the primary growth in that procedure, that 6.6 year-over-year procedure growth, is in our existing clinics. And I would say there are two categories. One is that top-tier clinic. We're continuing to expand their business and their increased amount of hormone optimization. The second is targeting that second-tier clinics to move them into a top-tier. And then always, as we've said, those new clinics provide, and I don't give the exact numbers, but they provide that base to build over the next 18 months. So we're bringing more clinics to training quicker, and you'll see that acceleration in the second half of the year as that quick start program really gets them engaged in increasing their procedures in that first 90 days. So you'll see, but three quarters or, you know, the greater one is from our existing clinics and really working with them to grow their business. And then to a lesser degree on those new clinics, but they're performing well.
spk01: Okay. Got it. How was the new clinic ads this quarter versus in the past? I don't think you give a number, but you know, better or worse on same pace.
spk00: We typically, as you know, we typically don't give, um, specifics on new customer ads. But one thing I can tell you, as we look at the new customer growth, and as Terry said a little bit earlier, no one's better than BioT than bringing in new customers into the hormone business. And I can say that as we start to see, we're seeing a higher quality new customer coming in the door. And I can tell you that we've never been more focused on who we're targeting and how we're indexing. So I can tell you we're coming off of one of our best years since 2018 from an onboarding perspective of new customers. And as Terry said, a big contributor to that is our quick start program, which is proving to be pretty effective.
spk01: Okay, great. And maybe longer term, as your business is evolving with BioTRX and such, is there a different margin structure? How should we – think about how the business might look? Actually, there's two big, between the vertical integration and with the addition of new products. How should we just be thinking about what the P&L will look like over time?
spk05: I'll talk about the new products, and then I'll pass it to Bob to talk about the margins in our stereo. I think if you look at 2024, I would look at it a very nominal contribution on those new products in that we're getting a transaction fee. We're not actually manufacturing those products yet. So we have acquired a 503B. That will be in our future. But at this point, it's a transaction fee. So what it does, though, it gives us that one-stop shop. Our providers are doing GLP-1s and they are doing hormone optimization. As a matter of fact, at a new training last Friday, 100 providers, I asked how many were doing GLP-1s. Well over a third were already doing GLP-1s. So how testosterone in our core business works with that side effect of the GLP-1s and the loss of lean muscle mass, we really believe testosterone will be core to that conversation over the next few years. So that BioTRX becomes critical in what we educate on how we teach those providers to use both sets of products, right? I think this therapeutic wellness category is only going to expand, and you're not going to see the same type of a provider as you did two years ago. Your family practice providers, all of the OBGYNs, everyone's expected to understand how to navigate these products and their side effects, and that's where BioT really comes in. And then I'll let Bob comment on the integration.
spk00: Yeah, and I think, Terry, you hit on it. I think right now... when we look at the transaction fee and how it isn't going to be material to our year, when you think longer term, it would be great at some point to do what we're doing with this theory to be fully integrated. But at this point, we don't really have line of sight into executing that plan as of yet.
spk01: Got it.
spk00: Thank you.
spk03: Your next question comes from George Kelly with Roth MKN. Hey, everybody.
spk02: Thanks for taking my questions. So maybe to start with Asteria, just to follow up on some of the questions that have already been asked, but I'm curious how quickly you expect to shift your core hormone pellet production to that facility.
spk00: Now it's a really good question. When you see when we executed the closing date, obviously we've been working quite diligently to get all the strategic parts up and running. And I would just tell you we may be seeing a little bit slower uptake in the Q2 range, as we have talked about in the past. We really want to get the ground running. I still think we are on a strong pace to deliver in the second half. I think everything is starting to line up in place. I think just the late start based on the closing has caused a little bit of a slowdown in the beginning of Q2. Does that answer your question, George?
spk02: Is it fair to say by year end the vast majority of your pellet business will be produced internally?
spk05: Yes. I think what we're talking about, what Bob is trying to say, is that when we're looking at state licenses, yes, I'd say the vast majority by the end of the year, George, but the only thing we don't control is the state license from California or some of the other states that mandate their own timing and schedule as you convert licenses.
spk00: And another thing, George, just to keep – oh, sorry, go ahead.
spk02: Nope, go ahead, Bob. I interrupted you.
spk00: No, no, no. The only other thing I would say is as we start the conversion process, there will be a little bit of a lag also due to the bleed down of existing inventory within the clinic. So as Terry mentioned, very clear on how we obtain state licensure, but there could be that slight delay for people who maybe are over-indexed on inventory as they bleed down when they start to take on new inventory. that will be another factor we'll have to watch closely.
spk02: Okay, that's helpful. And then next topic I wanted to cover relates to your guidance and commentary about your sort of one-half versus two-half expectations on procedure revenue growth. I'm curious, the 6.6% growth now that you've reported for two consecutive quarters, do you think that's the bottom? And then as you look to the acceleration that you've talked to in the back half, is that mostly driven by new products, or is it really just the core business kind of starting to find its momentum again, and new products are more of a 25 and beyond kind of story?
spk05: I think we can kind of answer that multiple ways, George, so definitely that that Q1 performance was consistent with our expectations, and we feel as if we understand our providers and we understand the competitive market. And I feel that we're very confident in where those procedure revenue growth is going to come from in Q2 as well as Q3 and Q4. So although we point you to Q3 and Q4, and we've got solid performance plans in place and really looking at that formulas and very comfortable with them for that Q3 and Q4. And I'll have Bob talk a little bit about some of the individual programs.
spk00: Yeah, sure. And George, good question. And we factored the following kind of piece parts into our guidance. I would say that the two big pieces, one is on the procedure side. And I'll just hit the high points and then I can dive into any of them in more depth. But you heard from Terry, you heard from me earlier, the heightened focus on our top tier growth is absolutely mission critical for us. We are seeing these performing well, and we expect to have that play through in the second half. Additionally, as I just mentioned, and I won't go into this too much because I've already commented, but we need to be growing new customers. And we've seen with the quick starts and the other items that we've mentioned, pretty solid uptick there. One that I think is we didn't dive into too much, but it's how do we drive those existing customers that may be newer or in the middle of their journey, of their life cycle with us? How do we start to drive them leveraging our Salesforce and internal data to drive opportunities to really expand within our portfolio? And I think that's a, That's a real key for us because the more people we can get into our top tiers, the better we'll perform. And Terry mentioned it earlier, and I would just echo it. We do have a really great sales force that's really battle-tested in this area, and I think that's key to mention. And the only other side of the equation that I would bring up is as we look at neutrals, we need to continue to expand neutrals into our existing customer base. continue to make good penetrations, especially in those newer customers. And even some of the older customers that may not be acclimated to Nutra's. And that's a real focus of our sales force. And we're seeing good uptake there. And then finally, as you know, and we've talked about on the prior call, is that conversion from Amazon and from a prior distributor and seeing that growth. Because that should, if we can get that up and running, which we're on pace to do, In the second half, that will be very accretive.
spk02: Okay. That was all helpful info. Thank you.
spk00: Thank you.
spk03: This is our question and answer session. I would like to turn the conference over back for any closing remarks.
spk05: We'd like to say thank you to all of you for joining us. We look forward to updating you as the year goes on on our therapeutic wellness. and the real positive impact we're seeing on hormone optimization and the interest throughout the U.S. So looking forward to our next call. Thank you.
spk01: Thank you.
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