Biote Corp.

Hello and welcome to the BIOTE first quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one. Please note, this event is being recorded. I would now like to turn the conference over to Simon Seroviecki, Please go ahead.

Thank you for joining us today. This afternoon, Dante published financial results for the first quarter ended March 31st, 2025. This news release is available in the investor relations section of the company's website. Hosting today's call are Brett Christensen, Chief Executive Officer, Bob Peterson, Chief Financial Officer, and Mark Beer, Executive Chairman. Before we get started, I would like to remind everyone that management will make statements during this call that include forward-looking statements regarding, among other things, the company's financial results, future performance growth opportunities, business outlook, strategies, goals, research and development, manufacturing and commercialization activities, competitive position, regulatory process operations, benefits of its solutions, anticipated impact on macroeconomic conditions on its business, results of operations, financial conditions, and other matters that do not relate to historical facts. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control. Actual results could differ materially from expectations that reflect any forward-looking statements. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today. BioT undertakes no obligation to update them in the future. Therefore, these statements should not be relied upon if they are presented to the company's views as of any subsequent date. For discussion of risks and other important factors that could affect their actual results, please refer to our SEC filings, available on the SEC's website and the Investor Relations section of our website, as well as risks and other important factors discussed in earnings release. Management also refers to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided in an earnings release, with the primary differences being stock-based compensation, fair value adjustment to certain liabilities, transaction-related expenses, and other non-operating expenses. Please refer to our first quarter 2025 earnings release for reconciliation of these non-GAAP measures to close comparable GAAP measures. And I'll turn the call over to Brett.

Thank you, Simon, and thank you all for joining us. I'll begin by providing an update on our business and the key initiatives we announced today, and then I'll turn the call over to Bob for a review of our first quarter financials and our 2025 financial outlook. After our comments, we'll open the call for questions. In the first quarter, we generated strong financial performance with strength in our dietary supplements business, more than offsetting the expected softness in procedure revenue. We experienced continued improvement in our gross profit margin, which increased 300 basis points to 74.3% due to the vertical integration of a 503B manufacturing facility. Total revenue increased 4.7% and adjusted EBITDA decreased 3.4% compared to the same period in 2024, keeping us on track with our 2025 financial forecast for revenue and adjusted EBITDA. As we expected, procedure revenue was impacted by reduced commercial effectiveness in part due to the residual effect of the transition to our enhanced clinical decision support software, as well as ongoing competitive pressures. A slowdown in new clinic additions, as well as a minor decrease in procedure volumes and select reductions in average selling prices, also contribute to the decline in procedure revenue. On last quarter's earning call, I identified three areas of emphasis for 2025, which I believe are fundamental to commercial execution at a high level. The priorities were, one, accelerate new providers, two, maximize value from top-tier clinics, and three, improve commercial accountability and discipline. Consistent with these comments, today we announced a strategic organizational restructuring designed to drive sustainable, profitable growth and create long-term value for our stockholders. This restructuring builds on the foundational progress we achieved over the past year, supporting our expanded capabilities within the hormone optimization and therapeutic wellness space. We believe that the decisive actions we are taking will enable us to scale our business more effectively and deliver a high level of financial performance. We are focused on three major objectives. First, we intend to accelerate new provider wins to further expand our nationwide network. Second, we intend to strengthen relationships with our existing top tier providers. And third, we intend to improve our financial performance by strengthening accountability and improving consistency and discipline throughout the commercial organization. Among the key steps we are implementing is the realignment of our commercial team with a goal of increasing productivity and driving new clinic growth. As part of this realignment, we are working to transition certain commercial support functions to active field sales positions, effectively increasing our field sales team by approximately 25%. We expect that our expanded and strengthened sales force will enable us to recruit new clinics at an accelerated rate and provide the dedicated support our new providers require as they build their medical practices. Additionally, we are streamlining sales leadership to ensure better communication and efficiency to drive more consistent performance across the entire commercial team. We're also updating our sales compensation structure to align incentives with our sales goals. As we direct our sales efforts to drive a new clinic growth, we also recognize the importance of retaining and maximizing the value from our existing top tier providers. Over the past year, BioT has significantly expanded our capabilities and product offerings, encompassing hormone optimization, therapeutic wellness, and dietary supplements. At the same time, we have expanded our education, training, and technical resources, further differentiating BioT in the marketplace. By strengthening engagement with our top-tier providers, we believe we will be better positioned to reinforce our role as a trusted partner, offering a science-based approach to patient care and ongoing practice building support. As I noted last quarter, we are implementing these initiatives quickly, but recognize they will take time to show results. I strongly believe these actions will strengthen our commercial organization through increased productivity and deeper customer engagement and improve financial performance. As we move forward with our plans, I would like to reiterate my confidence in our exceptional team and our shared commitment to execute on our strategic priorities. While we expect 2025 will be a transition year from a financial standpoint, I believe the actions we announced today are essential to accelerating our growth and enabling us to realize our full potential. I look forward to updating you on our continued progress in the quarters ahead.

I will now turn the call over to Bob. Thank you, Brett, and good afternoon, everyone. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the first quarter of 2024. First quarter revenue increased 4.7% to $49.0 million. Procedure revenue decreased 3.6% to $36.0 million, primarily reflecting reduced commercial effectiveness and a slowdown in new clinic additions. As Brett noted, We are redirecting our commercial efforts to drive new clinic growth now that all of our existing clinics are utilizing our enhanced clinical decision support software. Dietary supplement revenue increased 25.5% to $9.3 million, primarily driven by the growth of our e-commerce channel. We continue to expect solid growth this year from our dietary supplements business. Gross profit margin was 74.3%, a 300 basis point increase. The improvement reflected cost savings from the continued vertical integration of our 503 manufacturing facility, as well as effective cost management. While we expect to maintain strong gross profit margins, this metric has historically fluctuated quarter to quarter, depending on our product mix and other factors. Selling, general, and administrative expenses increased 16.4% to $26.7 million, reflecting an increased level of investment in sales and marketing focused on driving new customer growth and professional services. Notably, SG&A expenses decreased approximately 19.2% compared to the elevated level reported in the fourth quarter of 2024, due to the absence of certain employee-related investments and legal expenses. Net income was $15.8 million, inclusive of a $10.7 million gain due to a change in the fair value of the earn-out liabilities. Diluted earnings per share attributable to Biotique Corp stockholders was 37 cents per share. This compares to a net loss in the first quarter of 2024 of $5.7 million, inclusive of a $12.1 million loss due to the change in the fair value of the earn-out liabilities, and diluted loss per share attributable to BioT Corp stockholders of 12 cents per share. Adjusted EBITDA decreased 3.4% to $13.8 million, with an adjusted EBITDA margin of 28.1%. The decreases in adjusted EBITDA and adjusted EBITDA margin primarily reflected increased sales and marketing expense to drive growth, partially offset by improved gross profit. First quarter cash flow from operations was $6.5 million. As of March 31st, 2025, cash and cash equivalents were $41.7 million, compared to $39.3 million as of December 31st, 2024. Now turning to our financial outlook for 2025. We maintain our previously stated guidance of revenue of $202 to $208 million and adjusted EBITDA of $59 to $64 million. For the second quarter of 2025, we expect revenue and adjusted EBITDA to be similar to slightly higher than that of the second quarter of 2024. Also, the company expects to incur a one-time charge of approximately $0.6 million to $0.8 million in the second quarter of 2025 due to the restructuring. I'll now turn the call back to Brett for his closing comments.

Thanks, Bob. Before we open the call for questions, I would like to say a few words. Our financial performance over the past few years has been inconsistent, falling short of our expectations and those of our investors. While I've only recently joined the company as CEO, I have been here long enough to recognize our shortcomings as an organization and what specific actions are required to drive outstanding commercial execution and financial performance. The restructuring plan we announced today represents a significant step forward for BioTee. While it will take time to achieve our goals and we may experience some speed bumps along the way, I am confident that we are on the right path with the right people and with the right processes to achieve long-term success and build shareholder value. Operator, let's now open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star, then Q. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Kamil Gajrawala with Jefferies. Please go ahead.

Hey, guys. Good evening. Can we maybe talk a little bit more about the supplements business and if there was Anything maybe one time in it? It's obviously quite a, you know, quite a result. I just want to make sure we, you know, are we looking at something that's a new run rate based on the changes that you've made? Or, you know, is there just something maybe more temporary in there that we should be aware of?

No, no, no. Hey, Camille, how are you? Look, I think the biggest piece of the supplements business that we saw solid performance in was our e-commerce business. I would say it was a little bit more, it performed a little bit better than expected. And I think we have a solid runway in this space, and we're comfortable where we are right now in the business that we're in. So with additional procedure growth, we could see some benefit in this space, but no one-time items in this space, really just solid performance in the e-commerce space.

Okay, great. And then, too, let me just try to understand the procedures, number of procedures, and what happened there. You also, in your prepared remarks, mentioned competition a little bit. So there's some things that you guys are doing, obviously, as part of the process of optimizing the business, but is there anything changing in the marketplace itself that we should be aware of?

Hi, Camille. This is Brett. Nothing significant has changed in the marketplace at all. We highlighted the headwinds to our procedure business. And I would say it's really volume related. And in that, we didn't mention competition, but competition is not new for us. That's an ongoing headwind. And like every other company, we're going to have competition. We've also highlighted in the past that our attrition has been relatively stable at around 5%, which is a great number and pretty predictable. This past quarter, we expected softness in procedure volume, and we highlighted that last call mainly due to our launch of our clinical decision support software at the end of last year. That did a couple of things. One, it slowed down meaningfully new starts. It distracted our field organization, and new practice starts had a dip at the end of last year. In the annuity models, you know, that will follow us this year, and we highlighted that last call, and certainly we expected the contribution from new clinics this quarter to be lighter than usual. So that was probably the biggest component. Second component was really just a slight decline in volume from our base business that we believe is associated with the launch of that CDSS as well.

Okay, got it. And are we fully deployed with that, and now it's sort of Matter of time, are we still in processes of the rollout?

We are fully deployed with CDSS. All of our users are using the new version. The feedback is excellent, especially from new clinics. And this is going to be, remember, this is going to be really key to us advancing in the future and making what we do more mainstream to the average physician. It's critical to get the dose right. And the new CDSS helps them do just that. So it's going to give them comfort. to do pellets and to do testosterone in their clinic. So it's a valuable foundation. We have no regrets of launching it. We just saw the headwind for the disruption from last year. Got it.

Okay, great. Thank you.

Thank you. The next question comes from Les Zuleski with Truist. Please go ahead.

Yes, good evening. Thank you for taking my questions. I have three, essentially, to start off with. First one on You know, I think we've heard about the realigning of the sales force over the past few quarters. What is different about today's realignment announcement? Is this aimed, I guess, at sales, back office, leadership roles, or more broadly across the organization? And I have two follow-ups.

Yeah. Hi, Les. This is Brett. We didn't do any realignment last quarter, so the realignment that we announced today is new. And it's the only one that we've done, frankly. So what we did was focused around growth. It was not a cost-cutting effort for us. We're not in cost-cutting mode. We're in growth mode. But what I highlighted in the last call and what you probably heard me say is we needed to change a lot of things in the organization to get us more focused and more aligned to growth. And one of those things was the alignment of our commercial organization. So we needed different territory alignments. We need different comp plans. We need everything focused on growing the business and the little less on maintaining the business. So if you noticed in our release, one of the things that we highlighted was we effectively grew the sales team this week by about 25% as we transitioned nearly 20 people in the field from support roles to sales roles. And so that's going to be really important for us to have everybody focused on growing the business. And that was the alignment change that we announced this week.

Okay. I guess on that front, the individuals, was it redundancies and more on the support roles or not sales included, or is it also sales included? And I guess maybe perhaps overall, maybe use a baseball terminology if you could. can you help us kind of reconcile where you are in, I guess, CDSS implementation, the new sales reorg, although that seems to be new, and as well as vertical integration, maybe kind of item by item, if you could.

Sure. I'll let Bob take the last part of that. But as far as CDSS goes, We're in late innings, if not, the game is over for CDSS. So we are fully integrated with CDSS. And so while we're still, the only reason we're talking about it, Les, is that in this annuity model, as you know, new starts follow us for a year. So you need, whatever we're doing this quarter, the contribution we get from new starts is a function of all the new clinic starts that we added over the last year. And frankly, the quality of those starts and how they started. And so CDSS just meant a decline in new starts and probably, you know, new starts that got off to a slower start than normal because, again, they were distracted and our field was distracted with CDSS. But today we are fully implemented with CDSS, and there is no more work being done as far as rollout, you know, system change, training, any of that. We're fully aligned and implemented with CDSS. Bob, do you want to talk about vertical integration?

Okay, Les. On the vertical integration front, I'd say we're probably in around the fourth inning. to use your baseball analogy. Look, we have not expanded too much further than we had on the last call, and a goal to not disrupt our clinics. That's a mantra that we have since the CDSS, and we are in the process now of expanding and getting prepared for conversion, but that is, I'd say we're probably in the fourth inning. You're seeing some of the benefits that now on the on the margin front, but that's kind of where we would, I would say we are on, on, on Asteria.

Great. That, that is helpful. Perhaps on the supplement side, maybe a kind of talk to your exposure to, to tariffs potentially from API sourcing. And then second, you know, you've called out the e-commerce business being a little bit stronger than you expect. Any sort of more color on that? Thank you.

Yeah, so on tariffs, look, at this point, we don't see an impact to our business on the tariff front. In our core pellet business, we're largely sourced domestically, and where we have had exposure to overseas providers, we've increased our inventory coverage to lock-in price. So I don't see any significant direct exposure in the current year. And as far as the Nutra business, You know, we've talked about it a little bit over time. Our e-commerce business has, since we've taken over, we are seeing solid growth in that space. And I think what I could highlight here is that a good amount of that growth is centered around that one piece of the business. So solid performance to date and, yeah, a continuation of what we started in August of last year.

Thank you.

Thank you. The next question comes from Jonathan with TD Cohen. Please go ahead.

Thank you for taking my question.

Could you just elaborate a little bit on the decline in the volume from the base business and whether you think that will continue to improve as we move throughout the year? And when can we start to see some improvements from the realignment that you talked about today? Thank you very much.

Thanks, Joni. I'll try to give as much color as I can on our procedure revenue. So you heard me mention earlier to Camille's question. It was mainly volume related. So I'll hit that again real quick. Two real components there. The contribution from new starts, which has been lower. And I'm sure everybody's clear on that as we talked about it a lot. And so most of what we did today in the restructure, the realignment, and the new the new start of what we're doing at BioT is really aimed at that, at growing new starts. The other components, though, we get a lot of volume from our base business. And while attrition has been fairly stable, there might have been a slight uptick in attrition this past quarter that we believe is temporary. And we do believe that attrition will stabilize and be a constant around 5%. The other, there was also a small contribution to selective ASP declines, which were concessions due to CDSS in the field. And so those are the components. Of course, always the components of an annuity model is volume, the contribution you get from new starts, and any changes to ASP. What we've been really good at is keeping ASP and attrition relatively constant. And that's why you'll hear us talk over and over again about the effort to increase new starts in the field.

Got it. And any softness you're seeing from the consumer side from any macro headwinds at this point?

We don't typically see too much softness as far as price sensitivity, if that's what you're referring to. It's really hard to gauge. I mentioned that there was a slight decline in volume in our existing business, but we do believe that is related to the launch of CDSS last year. Nothing even anecdotally that I could comment on as far as macro effects and pricing sensitivity.

Got it.

Thank you very much.

Thank you.

The next question comes from Jeff Van Sinderen with B. Reilly. Please go ahead.

Great. Hi, everyone. Brett, I wonder, given that you've been there for a quarter or so, can you speak a little bit more about what you've learned on a granular level to the degree that you feel comfortable doing that and kind of what the specific inefficiencies are that you've uncovered outside of the CDSS? And I guess also what steps you might take to turn around the new clinic additions, what other steps you might take to get those ramps back up again and get procedure growth up?

Sure, Jeff. I'll start with the first one, just sort of what I've learned. You know, I guess how I would describe that is I've really gained just clarity on some of what I highlighted in the call from Q4. And in Q4, I highlighted the amazing opportunity that brought me to BioT, the massive TAM, the really under-penetrated marketplace as far as physicians that are both utilizing testosterone therapy, but also the nutraceuticals that we offer, and just the need for better execution as an organization to capture more of that TAM. And so I would say what's changed since that call is I've just gained more clarity in exactly what we need to do to get there. The restructure that we announced today that took place this week is step one. It's not the answer. It's step one to the answer of a real culture shift in the organization where the entire company is focused on growth. You know, we are a company, and this sort of gets to the second part of your question here. We were a company that had a fantastic start. And when you start from zero, you grow territories to the point where it's tough to grow them. And this is where structure and comp plans And those types of things come into play where you've got to split territories. You've got to make sure you've got incentives that don't penalize sales reps for getting their territory split. You need a comp plan that is really focused on growth and less on maintaining the base. And then, of course, you need the right messaging to communicate the value proposition that we're offering to our customers, which isn't just product. It is the training, the education, the systems. Everything we do to help clinicians practice build. We're the only ones in the marketplace doing this. Others are going around and competing on price. So I've got a lot of clarity into, one, the value that BioT offers. And I think it's fantastic. And I couldn't be more optimistic about the long-term prospects here. But two, just what we need to do in the short term this year, as we highlighted this year, is a transition year for us. So we're making a lot of changes here. Some of them are disruptive. All of them will be good for the long-term. And what we're just trying to assess now is, you know, when we'll start to see the results of those changes. But, you know, I know what a strong commercial organization looks like and those elements, and we're slowly putting those places, those things into place. But the restructure this week was paramount in the start of what we're doing.

Okay. Good to hear. And then... Not to beat a dead horse with the supplement business, but I guess I'm just trying to reconcile a little bit here. Very strong in the quarter. Doesn't sound like any one-time items. But I think your guidance is baking in kind of a sequentially slower growth there. Can you remind us of the year-over-year comparisons? Maybe that's the major thing. Just trying to understand, you know, why that business would slow down sequentially as far as the growth.

No, I think what we've said in the past is that we would have a 5% to 10% growth from a guide perspective. And what we're seeing now is we are in the, as we were just mentioning on a prior question, we're in the earlier phases of this with our e-commerce platform. And, you know, as we get throughout the remainder of the year, we will start lapping solid performance in the e-commerce space. which would potentially drive us lower. But yeah, the performance that we saw in Q1 was solid in that space.

Okay, so just to clarify there, the comparisons get tougher in, is it Q3 and Q4? I just wasn't sure on the time.

In the second half of the year as we started onboarding Amazon.

Okay, okay, fair enough. Thanks for taking my questions.

Of course.

Thank you. The next question comes from George Kelly with Roth Capital Partners. Please go ahead.

Hey, everybody. Thanks for taking my questions. Just a couple for you. First, on Asteria, I was curious if you plan over the course of 2020 to 2025 to grow penetration. And where might you sort of end the year? And I guess secondarily, have there been issues with ramping production there?

No. And in fact, our inventory levels are at solid points. So we've not had any issues from the stereo perspective. I can tell you our focus right now has been on smooth transition production. and the focus on not disrupting the clinic. We do have a plan to expand further in the remaining months of the year, and we have that baked into our guide. So we will continue to expand in this arena throughout the remainder of the year, just in a tempered fashion.

Okay, understood. And then second question on your 2025 guide for procedure revenue growth. I think it's plus 2% to 4%. Just curious, what gives you confidence in that guide? It's been a pretty steady deceleration for, I don't know, a year and a half, two years now, including in the first quarter with it being negative. So I'm just wondering what is it – Can you help sort of give us confidence that you see that reversing and perhaps what have you seen so far in Q2 and April?

So let me give you an overview and Brett, feel free to add. So as Brett said, we've taken decisive action and we're changing a lot on the commercial team. We know what we need to do to drive new penetrations, new customer penetrations, new monitoring our and filling our clinic pipeline and maximizing the value from our top tier providers. And we have line of sight into the actions that are needed. So let's just, we'll level set there. As shared, we expect a slower start in the first half of the year as we shared, as we start to reinvigorate that customer, new customer volume in this annuity model. We know that this is going to be a bit of a transition year in the space, and we believe that we will begin to see the benefits of this restructure in the latter half of the year as we begin to drive the culture of accountability and growth. Look, to your question, to be pretty direct, is there a potential risk around the 2 to 4% procedure revenue growth? The answer is yes. And we recognize that certain actions have to go to plan to achieve that 2% to 4% procedure revenue growth. But that said, we are confident overall in the overall guide for the year on revenue and EBITDA. And maybe, Brett, if you wanted to add anything to the key facets that we want to achieve.

Yeah, George, you heard me talk quite a bit about what we're doing to change each of those components in the annuity model, volume, ASP, attrition. And we're confident in each of those. What's really difficult to predict at this moment is just how quickly we'll see results from all the changes that we're making. We're going to learn a lot over the next quarter, maybe not in the form of results that we'll report. However, there's a lot of early indicators into what we're doing here, including training volumes, training classes, new starts coming on board. Those things we'll see before we'll report revenue on an increase in procedure growth. So we're confident in the changes we're making, and it's difficult to project when you'll start to see revenue change materially from the changes. But as Bob said, we're comfortable in the top line overall, and there will be pressure on the 2% to 4%, but we definitely see the line of sight to get there.

Okay. Thank you.

Thank you. This concludes our question and answer session. I would now like to turn the call back over to Brett Christensen for closing remarks.

Thank you everyone for joining us today. We appreciate your interest in BioT and look forward to speaking with you on our next conference call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.