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.

Star 1 on your telephone keypad. Again, that's Star 1 to ask a question. And our first question comes from the line of Komal Garjala with Jefferies. Please go ahead.

Hey, guys. I guess the first question you, Bob, you sort of opened, or at least early in your prepared remarks, you talked about inorganic opportunities, but obviously we don't want to provide too many details, but can you Maybe just provide strategy or outlook, like what would be the ideal type of deal for you guys? And is it, you know, how adjacent is it to your core or is it more consolidating the core with others? In general, how does it, how would it work? Or what would you prefer?

Yeah, so I think the biggest thing here is it's a little bit early. We're not in a position to discuss the specifics. We are evaluating opportunities that can really support and strengthen the position that we're in now, the platform that we're participating in. And I would just say to really dive into your question a little bit is really we want to get into things that can expand our reach and accelerate our strategic objectives. These opportunities would include the capabilities to complement our core offerings. adjacent products too and to basically enhance the practitioner engagement and other opportunities to broaden our footprint within the space.

Okay, got it. And on the hysteria recall, you gave some figures, I think 3.3 million. Anything as it relates to the brand? Have you lost practitioners that are difficult to bring back? and it's now sort of the exercise now is to, you know, accelerate the recruitment of new ones. I'm curious beyond just the sort of losses of the moment, any lingering effects either in change of strategy or maybe new things we need to be thinking about.

Yeah, I know specifically related to Asteria, I have to say that, you know, the Asteria brand itself remains quite strong. People appreciated what we had done. And I can say that as it relates to building inventory and driving stock, we're really in a solid place. And we don't see that there will be any challenges in pushing back, shifting that inventory back over to Asteria. And I would just say as we begin to do that, then as you mentioned, we would start to see that gross margin improvement. So that's underway right now, and we haven't received too much pushback on it. So hopefully that answers your question.

Yep, great. Thank you very much.

Appreciate it.

Your next question comes from the line of Ajana Kim with TD Cohen.

Thank you for taking my question. Just Maybe additional color around compared to when you had the call last time to now sort of, you know, what led to lower volume than you expected and you mentioned also elevated clinic attrition and sort of what drove that sort of the quarter on quarter delta per se on the results. Just any additional color would be helpful there. and just related to that also, as you think about attrition, what are some measures that you're implementing in the second half to drive better retention? Any new measures that you're thinking of for to drive that retention up? That would be helpful. Thank you.

Thanks, Jonah. Yeah, first and foremost, attrition is still sitting at the high single digits rate. No material change. I would just say we're sitting at around that 8% level. The biggest thing that I would say just from a driver, you know, the recall and the supply challenges that we incurred did hit, it did hurt in the same store sales area and on procedure volumes. And the biggest thing that I would say just to put a bow on Q2 is that, you know, we're happy to say now that the supply challenges, as I mentioned to Komal, The supply challenges that we had seen in Q2 are now behind us from a supply perspective at Asteria. You know, the second part of your question is really a good one because you know that we, I highlighted on the prepared remarks that phase one was largely completed. And that was really the setup for focusing on our foundational fixes. The structure, the commercial team, expansion, operational processes, really focusing on data and systems improvement. But the exact question that you asked really dives into the second phase of the equation, which is really Salesforce productivity and performance. And I would tell you in that segment, the things that we're going to be doing differently, focusing on attrition, focusing on those same store sales, trying to drive new customer growth. We're really going to be in a position of focusing and strengthening our clinic retention and enhancing our practitioner experience from a retention perspective. And I would just say one of the things that we've learned and we've got line of sight into is that as we look at the data in our field activity, We know that when we're in accounts every month and in front of the practitioner, we don't lose that account. So with that in mind, knowing that attrition should improve. So really, that's going to be an activity-based focus that we focus in on in the second half of 2026 in a real data-driven approach and focusing in on accountability. And I would just say... A handful of other areas that we'd be focusing in on are going to be just accelerating sales productivity and driving new performance for the customers that are coming in the top of the funnel.

Got it. And just one more question. As you evaluate the business today, do you have the right number of sales force now? Do you need to expand more or do you feel comfortable where you are?

No, absolutely. I think the real key now, we've got a full sales force, which is fantastic. And now really it comes down to driving that activity focus on performance. And I really do believe put the right processes and operational processes and systems in place, now it's just a matter of driving that activity and focus in the second half.

Thank you.

Thanks, John.

Your next question comes from the line of Jalindra Singh with Truist Securities. Please go ahead.

Thank you, Anne. Thanks for taking my questions here. I want to follow up on your comment around new clinic productivity being slower as the sales focus on supporting recall impacted clinics. Is the issue simply delayed onboarding activity or are you seeing lower than expected utilization from these new clinics once they become active? And does the guidance assume any improvement in productivity in second half on these clinics?

Just do me a favor and say the last part of the question. I got the first part.

Does your guidance assume any improvement in the productivity for these clinics in second half?

Sure. So I would say that from a new customer perspective that we bring in, we haven't seen them ramp as quickly as we would have liked. And I would think that that is primarily due to the sales force being really focused on supply challenges in Q2. You know, when clinics don't have the pellets that they need, the reps have to go in and really support, and that takes them away from driving performance. And I would just say from a guidance perspective, I mean, we are expecting to see quarter-over-quarter improvements sequentially. And I would just say that that is going to be the primary driver that we expect on procedure revenue in the second half of the year based on the Phase 2 approach that we're going to be driving from a Salesforce productivity perspective.

and one more on supplement revenue. That seems so strong, up, I think, 6%, even with disruption in the procedure of business. How do you see that business evolving over the next few years, and what's driving the resilience in that business? Any color around supplement revenue business?

Sure. I mean, adoption and penetration in our existing clinicians is strong. As you saw in Q1, The number was a little bit higher. We're starting to lap tougher comps. But the resilience in that space, we know that the product portfolio that we have based on the CDSS, the clinical decision support software that we have, makes solid recommendations for nutraceuticals. And we also know that everyone who is on a pellet procedure should be on DIMM. So our host of products are very complementary to the procedure that we offer. And so I think that's really the primary driver of the resilience that we're seeing in the new circles.

Great. Thanks a lot. Thank you.

Your next question comes from the line of George Kelly with Roth Capital Partners. Please go ahead.

Hey, everyone.

Thanks for taking my questions.

First, hey, Bob. First one for you is just maybe a follow-up on the prior question on your expectation for sequential improvement in procedure revenue in 3Q. Just wondering what you're seeing that's giving you confidence in that projection. I don't know if you could talk to what you've seen in July or maybe at the tail end of 2Q and just the trends that you're seeing with respect to procedure growth would be helpful.

Yeah, for sure. Thanks, George. And, you know, first of all, I think before we even get started, we have to make sure that everybody is aware of the recall and the supply challenges are behind us. Knowing that we have adequate supply, that is absolutely key. And I would say, as I mentioned at the earlier part of the call, we're driving a level of accountability throughout the field. And as I said, you know, when you're face-to-face with that dock, and with that practitioner, we know that we can retain that business. So here's what I would say. We are expecting the sequential improvement to Q3 to Q4 based on the normalization of supply that we have. We've executed phase one, the real focused approach on the foundational fixes and we're starting to see some of the benefits of the operational fixes that we talked about regarding phase two. Second half improvement, I would just say is we do believe that we can get there. The sequential improvements are a realistic expectation. And I would tell you the information that we have that can really support this, if you look back at the end of 2025 up through January right before we saw the – Right before we had the impact of the supply challenges and the recall, we saw growth in those three months, several months leading up to the recall. As we reviewed performance of our customers from the time of the recall to the end of Q2, what we saw was, as you're aware, well over 50% of our business was tied in to Asteria. and the remaining portion of our business was tied into pellets from other providers. What we saw is that the Asteria cohort declined in overall procedure volume and comparatively, when we looked at the non-Asteria cohort, that cohort showed steady growth over a period during the supply shortage. As we know, the supply challenge is being behind us, knowing that we do have inventory filled. Knowing the information that I just shared, we believe and have conviction that we can grow sequentially in the second half of 2026. Okay. Okay.

Okay. Okay. That's helpful. And then second question for me on attrition. Outside of the recall, is there any kind of factors? I don't know if it's competition or anything else worth flagging that's kind of new and impacting your attrition number?

Yeah, George, not really. And the one thing that I would say is competition is consistent. I don't see an up or a down from a pressure perspective on attrition. It really has stayed relatively flat. and I think that is the real key on attrition. The big key for me from shifting over to a little bit of the same store sales front is if we look at the information that we just talked about, get the supply back into the hands, get the reps in front of the doctors, those are the big keys that we need to make sure are occurring and that should help both attrition and new customer growth for that matter. So, I mean, that's the real focus. How do we become activity focused on performance in the second half?

Okay, that's helpful. And I guess just one last quick modeling question. SG&A in the quarter was over $32 million. You flagged the Legal expenses. Was there a settlement that was added back to EBITDA? Was that included in SG&A? Or maybe if you could kind of just put all the legal stuff together, trying to get something normalized SG&A.

No. So, I mean, right. So SG&A on non-adjusted SG&A included a lot of legal expense. And the increases in legal for Q2 was due to the acceleration of several legal matters. and a bunch of pre-litigation support. These legal matters were settled and resolved in a positive way, which will assist in decreasing expense in the later part of the year. And I think the big thing to note here, George, is that with all of these settlements, this will pretty much eliminate all material and outstanding legal matters. Many of these will now be resolved. So, you know, looking into from a modeling perspective, the total adjusted impact is around 6 million in the front half of the year.

Okay. Okay. Thank you.

Of course.

And with no further questions in queue, I would like to turn the call back over to Bob Peterson 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.

Thank you again for joining us today. This does conclude today's call. You may now disconnect.