Biote Corp.

Thank you for standing by. My name is Tina, and I will be the conference operator. At this time, I would like to welcome everyone to the Biotese second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Simon Surowiecki, Investor Relations. Please go ahead.

Thank you for joining us today. This afternoon, Project published financial results for the second quarter on the June 30, 2026. This news release is available in the Investor Relations section of the company's website. Posting the first call of Bob Peterson, Interim Chief Executive Officer and Chief Financial Officer, and Marc Beer, Executive Chair. Before we get started, I'd like to remind everyone that the management will make some statements during this call that include forward-looking statements regarding, among other things, the company's financial results, future performance and growth opportunities, business outlook, strategic plans and anticipated benefits, goals, research and development, manufacturing and commercialization activities, its competitive position, regulatory process operations, benefits of its solutions, anticipated impacts of microeconomic conditions on business, built-up operations, venture conditions, and other matters that do not relate to historical facts. These statements are not guaranteed for future performance. They are subject to a variety of risks and guarantees, some of which are beyond the company's control. Actual results could differ materially from expectations expected in any forward-looking statement. These statements are subject to risks and guarantees and assumptions that are based on management current expectations as of today. Thank you for your time. Management also refers to just the EBITDA and just the 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 earnings reliefs, with the primary differences being flexed aid compensation, fair value adjustments to certain liabilities, and other non-operating expenses. These refer to a second quarter 2026 earnings relief for reconciliation of these non-GAAP measures to closest comparable GAAP measures. Now I'm going to call over to Bob Peterson.

Thanks, Simon, and good afternoon, everyone. I appreciate you joining us today. Before we get into the details of the quarter, I want to take a step back and talk about where the company stands and how we're thinking about the work ahead. Over the past year, BioT has achieved meaningful progress in advancing several foundational initiatives that we believe position the company to return to growth and generate improved financial performance. Most notably, We've strengthened our corporate culture, emphasizing accountability and discipline throughout the organization. We've also realigned and invested significantly in our commercial team, optimized our structure, and enhanced our capabilities to drive sustainable growth. The improvements we have achieved are meaningful and they reflect a tremendous amount of effort across the organization. At the same time, our reported financial results do not yet reflect the significant progress we've made internally against our strategic objectives. As we've discussed previously, the voluntary product recall earlier in the year created temporary headwinds that affected commercial activity. As we exit at the second quarter with these challenges largely resolved, Asteria Health is once again operating at normalized inventory and increased production levels supported by the addition of a second production shift. We expect that as we steadily increase our supply of internally manufactured pellets in the second half of the year, we will see a corresponding improvement in our profitability. When I stepped into the interim CEO role in June, I reinforced our continued commitment to advancing the operational and organizational initiatives already underway to make our platform more scalable, improve cross-functional execution, and support long-term growth. And that's exactly what we're doing. We are strengthening our commercial processes and team, improving operational alignment, building a performance-oriented data-driven culture, and investing in technology capabilities that will help drive growth. As we enter into the second half of 2026, we are moving into the next phase of our strategic roadmap, which is designed to drive deeper operational improvements across our business. In this phase, our goal is to restore procedure volume growth. Key areas of focus include strengthening and many more. We are committed to improving our clinic retention and enhancing the practitioner experience, accelerating sales productivity, and achieving a higher rate of quick start success for newly added clinics. These priorities will determine our long-term success, and they require disciplined, sustained effort across our organization. We now have the capacity to deepen our relationships with existing practitioners across our network and support them in ways that further enhance patient outcomes and long-term clinic performance. While we've made important progress in improving alignment and accountability, which should improve sales productivity, we are fine-tuning our sales processes, strengthening coaching, and development programs for our field teams. and ensuring our teams are laser focused on the activities that drive clinic engagement and procedure volume. This is a multi-quarter effort and we will continue to work to raise our sales productivity so that we can achieve our growth objectives. As an innovator in the hormone replacement therapy market and the established leader in clinical support, BioT remains focused on expanding our provider network and accelerating growth. We continue to strengthen our training and onboarding programs so new practitioners can ramp efficiently, build momentum, and stay engaged through their first year. Our commitment to early stage success remains unwavering. Alongside these operational and strategic initiatives, we continue to evaluate inorganic opportunities that complement our strategy and supplement our growth. To be clear, Organic growth remains our priority, and we will continue to improve our fundamentals. But we also recognize that as our market opportunity in hormone optimization and healthy aging solutions evolves, we can expand our platform, enhance our capabilities, and accelerate our strategic progress through inorganic means. Although we are not yet in a position to discuss the specifics, We are actively evaluating several opportunities that will allow us to expand our footprint in our market. However, what I can say is that inorganic growth represents an important complement to the internal work underway, and we will be thoughtful and disciplined in how we approach it. Now I'll review the second quarter financial results. Unless otherwise noted, All quarterly financial comparisons in my prepared remarks are made against the second quarter of 2025. Revenue decreased 9.5% to $44.2 million. Procedure revenue declined 13.9% to $30.3 million, which included an estimated $3.3 million impact related to the voluntary recall of certain hormone pellets shipped by Hysteria Health. Procedure revenue was primarily impacted by the following factors. One, lower procedure volume in existing clinics, which includes the impact of procedure deferrals and hormone pellet supply constraints related to the recall. Two, elevated clinic attrition. And three, slower productivity from new clinics as our sales team focused on supporting recall-impacted clinics. Dietary supplements revenue grew 5.7% to $11.4 million. The increase was primarily driven by the continued growth of our e-commerce channel. Overall, we continue to forecast our dietary supplements revenue will grow at a mid to high single digit rate for the 2026 year. Gross margin was 65.4%. The decrease was primarily due to $0.6 million of incremental costs related to the recall, which includes reduced operating efficiency at Asteria Health, coupled with increased sourcing of high-cost third-party pellets. In the second quarter, Asteria Health supplied around 30% of our ship pellets. as compared to a similar level in the first quarter of 2026 and over 50% in the fourth quarter of 2025. As I noted, we have fully restored Asteria Health's supply continuity and inventory levels are now normalized. As a result, we expect our third quarter product mix to improve as we source a lower percentage of pellets from our third-party suppliers which with time will improve our gross margin. Going forward, we aim to meet our practitioners' needs through the vertical integration of Asteria Health. Selling, general, and administrative expenses increased to $32.4 million from $24.2 million. The increase reflected higher legal expenses, I would note that we have recently resolved many of our outstanding legal matters, which we expect should reduce quarterly legal expenses going forward. Net loss was $7.4 million, and diluted loss per share attributed to BioP corporate stockholders was 23 cents. This compares to a net income of $3.9 million and diluted earnings per share attributed to BioT Corp. stockholders of 10 cents. Net loss for the second quarter of 2026 included a loss of $0.8 million due to the changes in the fair value of the earn-out liabilities. By comparison, net income for the second quarter of 2025 included a loss of $1.8 million due to the changes in the fair value of the earn-out liabilities. Adjusted EBITDA decreased to $5.6 million with an adjusted EBITDA margin of 12.6%. Cash flow used by operations in the second quarter was negative $1.2 million. As of June 30, 2026, cash and cash equivalents were $11.2 million as compared to $5.3 million in March 31, 2026. Now turning to our financial outlook for 2026. We expect procedure revenue to show sequential improvement in both the third and fourth quarters, benefiting from more consistent supply continuity and growth in new clinics. However, the impacts from the voluntary product recall earlier in the year have delayed our expected return to year-over-year procedure revenue growth. As a result, we are revising our full-year financial outlook to reflect our first half performance and our current expectation for the remainder of the year. With respect to our 2026 revenue outlook, Procedure revenue is expected to improve sequentially in both the third and fourth quarters versus prior guidance that anticipated a return to year-over-year growth in the second half. However, year-over-year procedure revenue in these periods is expected to be negative due to the first half disruption and other factors affecting near-term performance. Dietary Supplements revenue is expected to grow at a mid to high single digit rate from 2025. For the 2026 year, we estimate revenue above $175 million and adjusted EBITDA above $25 million. This compares to our prior guidance of revenue above $190 million and adjusted EBITDA above $38 million. In closing, despite our near-term financial results, I'm encouraged by the foundational progress we have achieved and our team's shared commitment to delivering on our next phase of our strategic roadmap. As we execute on our key initiatives, we are building a more resilient platform that we believe will support sustainable, profitable growth over the long term. Operator, let's now open the call for questions.