biote Corp. Q1 2023 Earnings Call
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Operator: Good day and welcome to the biote Q1 2023 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 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Szymon Serowiecki, IR representative from AdvisIRy Partners. Please go ahead.
Good day and welcome to the bio T first quarter.
Corrugate, when you're twenty-three 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 todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on that Touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over just Simon serve yet ski IR representative from Advisory partners.
Please go ahead.
Szymon Serowiecki: Good morning and thank you for joining us today. Yesterday, Biote published financial results for the quarter ended 31 March 2023. This release is available on the investor relations section of the company's website. Terry Weber, Chief Executive Officer, and Samar Kamdar, 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 that include forward-looking statements regarding the company's financial results, business outlook, strategies, goals, research and development, manufacturing, commercialization activities, regulatory process operations, the impact of macroeconomic conditions on its business, results of operations, 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.
Good morning, and thank you for joining us today yesterday biopsy publish venture results for the quarter ended March 31 2023.
This release is available on the Investor Relations section of the company's website.
Terry Webber, Chief Executive Officer, and Summer Comdata, Chief Financial Officer will host this morning's call.
How we get started I'd like to remind everyone that management will make the sandwich.
All forward looking statements regarding the company's debenture adults.
This outlook strategies goals research and development manufacturing and commercialization activities.
Regulatory process operations, the impact of macroeconomic conditions on its business.
With operations 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.
Szymon Serowiecki: These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today. Biote 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 website and our investor relations website, as well as risks and other important factors discussed in the earnings release. We will also refer to adjusted EBITDA, which is a non-GAAP financial measure, to provide additional information to investors.
Yeah.
These statements are subject to risks uncertainties and assumptions that are based on management's current expectations as of today.
<unk> undertakes no obligation to update them in the future there.
Therefore, these statements should not be relied upon as representing the company's views as 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 risks and other important factors discussed in the earnings release.
We will also refer to adjusted EBITDA, which is a non-GAAP financial measure to provide additional information to investors.
Szymon Serowiecki: A reconciliation of the non-GAAP to GAAP measure is provided with the press release, with the primary differences being stock-based compensation, fair value adjustments to certain liabilities, transaction-related expenses, and other non-operating expenses. We are directed to our Q1 2023 earnings press release, which is available on the investor relations section of our website at ir.biote.com for reconciliation of adjusted EBITDA to the closest comparable GAAP measure. I would now like to turn the call over to Terry Weber.
Installation of the non-GAAP to GAAP measure is provided with the press release with the primary differences being stock based compensation.
Fair value adjustments of certain liabilities transaction related expenses and other non operating expenses.
Our directly to our first quarter 'twenty earnings press release, which is available on the Investor Relations section of our website.
Sure that buyout your dot com for reconciliation of adjusted EBITDA to the closest comparable GAAP measure.
I would now like to turn the call over to Terry Webber.
Terry Weber: Thank you, Simon, thank you all for joining us. On the call with me today is Samar Kamdar, our chief financial officer, who will review our financial results and discuss our outlook for 2023. Marc Beer, our executive chairman, and Dr. Ross McQuivey, our chief medical officer, are also on today's call to answer your questions during the Q&A session, which will follow our remarks. Building on our accomplishments from last year, Biote achieved financial and strategic progress in Q1 of 2023. Not only did we achieve solid financial performance, we launched a major new initiative focused on the large and underserved men's health market. We also continued to make necessary investments to strengthen our infrastructure to support our long-term profitable growth.
Thank you Simon and thank you all for joining us on the call with me today is summer, Canada, Our Chief Financial Officer, who will review, our financial results and discuss our outlook for 2023.
Mark beer, our executive Chairman and Dr. Ross liquidity, our Chief Medical Officer are also on today's call to answer your questions. During the Q&A session, which will follow our remarks.
Building on our accomplishments from last year, <unk> achieved financial and strategic progress in the first quarter of 2023, not only did we achieve solid financial performance will be launched a major new initiative focused on the large and underserved men's health market. We also continue to make necessary investments.
And our infrastructure to support our long term profitable growth.
Terry Weber: Before discussing our Q1 results, I'd like to emphasize that we remain dedicated to building long-term shareholder value, not only through the execution of our growth strategy, but also through improvements to our capital structure. As you recall, earlier this year, we completed a secondary offering, increasing the liquidity of our common stock without diluting current shareholders. Yesterday, we launched a warrant exchange offer and a consent solicitation to simplify our capital structure and reduce the potential dilutive impact of the warrants. For additional information about the warrant exchange offer and the consent solicitation, please refer to our registration statement on the form S-4 filed with the SEC yesterday, 9 May. We will continue to pursue other opportunities that enhance our capital structure. Now let's turn to our Q1 performance.
Before discussing our first quarter results I'd like to emphasize that we remain dedicated to building long term shareholder value not only through the execution of our growth strategy, but also through improvements to our capital structure.
As you recall earlier this year, we completed a secondary offering.
Creasing the liquidity of our common stock without diluting current shareholders and yesterday, we launched a warrant exchange offer and consent solicitation to simplify our capital structure and reduce the potential dilutive impact of the warrants.
For additional information about the warrant exchange offer and consent solicitation. Please refer to our registration statement.
S. Four filed with the SEC yesterday may now.
And we will continue to pursue other opportunities that enhance our capital structure.
Now, let's turn to our first quarter performance.
Terry Weber: Q1 revenue increased approximately 21% from the comparable period last year, driven by growth in procedures and dietary supplement sales. Procedures grew at approximately 14% as consumers continued to seek affordable and effective treatments for a range of age-related conditions. Procedure growth was broad-based, reflecting our geographic reach and our expanded practitioner network. Dietary supplement sales were strong in Q1, benefiting from the introduction of a new direct-to-patient distribution channel. This new sales channel enables patients to purchase Biote-branded supplements conveniently from a practitioner's website or from Biote directly. For practitioners, this sales channel provides an additional source of revenue, regardless of whether the patients purchase supplements from their practitioner or from Biote. Our financial performance in Q1 again demonstrated the advantages of our capital-light business model.
First quarter revenue increased approximately 21% from the comparable period last year.
Driven by growth in procedures and dietary supplement sales.
Procedures grew approximately 14% as consumers continue to seek affordable and effective treatments for a range of age related conditions.
Procedure growth was broad based reflecting our geographic reach and our expanded practitioner network.
Dietary supplement sales were strong in the first quarter that study from the introduction of a new direct to patient distribution channel.
New sales channel enables patients to first <unk> branded supplement convenient re.
From a practitioner website.
From Iot directly.
Practitioners as sales channel provides an additional source of revenue.
Regardless of whether the patients purchased supplements from that practitioner more from biopsy.
Our financial performance in the first quarter again, demonstrating the advantages of our capital light business model.
Terry Weber: Gross profit margins improved from Q1 2022, reflecting our successful efforts to generate cost efficiencies. Adjusted EBITDA margins were strong, even as we continued to invest in our people and expand our infrastructure. As consumers continue to take a more proactive role in their healthcare, the acceptance of the Biote Method will continue to fuel demands for our protocols. Even today, with more than 6,400 practitioners serving more than 400,000 active patients, we believe we're just beginning to tap into the considerable demand for personalized hormone replacement therapy. To better capitalize on what we expect to be a promising long-term growth opportunity, we recently launched a new initiative specifically centered around men's health. Generally speaking, men are reluctant to seek healthcare treatment.
Profit margins improved from the first quarter of 2022.
I think our successful efforts to generate cost efficiencies.
In addition, adjusted EBITDA margins were strong even ask that you continue to invest in our people and expand our infrastructure.
As consumers continue to take a more proactive role in their health care. The acceptance of the biotech method will continue to fuel demand for our protocols.
Even today with more than 6400 practitioners, serving more than 400000 active patients.
We believe we're just beginning to tap into the considerable demand for personalised hormone replacement therapy.
To better capitalize on what we expect to be a promising long term growth opportunity. We recently launched a new initiative, specifically centered around women's health.
Generally speaking men are reluctant to seek health care treatment when they do seek care for concerns such as low testosterone. We believe the treatment plan that includes four month therapy can enhance patient health outcomes.
Terry Weber: When they do seek care for concerns such as low testosterone, we believe a treatment plan that includes hormone therapy can enhance patient health outcomes. Our conversations with urologists and other practitioners support this view, as millions of men over the age of 45 suffer symptoms of low testosterone, yet often do not seek or receive treatment. To lead our expansion in men's health, we're pleased to have recruited John Denny, a healthcare industry veteran. We believe John's extensive relationships with practitioners in the men's health industry and the urology field will be instrumental in accelerating our long-term growth and the presence in this underserved market. Concurrent with our efforts to promote men's health, Biote recently hosted an advisory panel with world-renowned academic urologists. These independent medical researchers confirmed that they consider pellets as the preferred delivery method for testosterone therapy.
Our conversations with urologists and other practitioners.
Fear as millions of men over the age of 45 suffer symptoms of low testosterone you often do not see or receive treatment.
To me our expansion and Michelle we're pleased to have recruited John Danny healthcare industry veteran.
We believe John's extensive relationships with practitioners and the medisoft industry in urology feel will be instrumental in accelerating our long term growth and the precedent in this underserved market.
Concurrent with our efforts to promote Bento <unk> recently hosted an advisory panel with world renowned academic urologist. These independent medical research has confirmed that they considered pellets as the preferred delivery method for testosterone therapy.
Terry Weber: Following this panel, we're continuing our dialogue with leading researchers and providing access to our practitioners' clinical data to help guide future research efforts. While we address the substantial growth opportunity in men's health, we remain committed to advancing the body of science supporting hormone therapy for women. Led by Dr. Ross McQuivey, our Chief Medical Officer, Biote recently commenced a clinical study comparing subcutaneous pellet therapy versus transdermal hormone therapy in symptomatic post-menopausal women. This first-of-its-kind study has generated interest within the medical community. In addition to conducting clinical research, we continue to educate and train providers and make resources available to further build awareness of the benefits of hormone therapy. I am pleased with the progress we're making both within the medical community and the broader public. Thanks to the dedication of the entire Biote team, we are helping to enhance patient health and the quality of life.
Following this panel, we're continuing our dialogue with leading researchers and providing access to our practitioners clinical data to help guide future research efforts.
While we address the substantial growth opportunity as Michelle we remain committed to advancing the body of science supporting hormone therapy for women.
Dr. Ross <unk>, our Chief Medical Officer, Brian recently commenced.
Study, comparing subcutaneous teletherapy versus transdermal hormone therapy, and symptomatic post menopausal women.
This first of its kind study has generated interest within the medical community.
In addition to conducting clinical research, we continue to educate and train providers and make resources available to further build awareness of the benefits of hormone therapy.
I'm pleased with the progress, we're making both within the medical community and the broader public.
Thanks to the dedication of the entire biotech team, we are helping to enhance patient health and the quality of life.
Terry Weber: We're building long-term value for stakeholders as we differentiate and strengthen the Biote brand. I will now turn the call over to Samar Kamdar, our Chief Financial Officer, to review our financial results in detail.
And we're building long term value for stakeholders, as we differentiate and strengthen the biotech brand.
I will now turn the call over to summer, Canada, Our Chief Financial Officer to review our financial results in detail.
Samar Kamdar: Thank you, Terry. Revenue for Q4 was $44.8 million, a 20.7% increase year-over-year, reflecting 13.8% growth in procedure revenue and 46% growth in dietary supplement revenue. As Terry noted, in Q1, we increased efficiency in our distribution channel for supplements, which benefited supplement sales. Historically, supplements have represented approximately 20% of our total sales annually, and we believe this percentage will remain consistent. Gross profit margin was 69.1%, up 220 basis points from Q1 2022. The increase in gross profit margin was primarily due to improved contract pricing with suppliers and effective product cost management. Although gross profit margins will vary slightly from quarter to quarter, depending on the product mix and other factors, we continue to expect gross margins to be in the mid-60s range going forward.
Thank you Terry revenue for the fourth quarter was $44 8 million, a 27% increase year over year, reflecting 13, 8% growth in procedure revenue and 46% growth in dietary supplement revenue.
As Terry noted in the first quarter, we increased efficiency in our distribution channel for supplements, which benefited supplement sales.
Historically supplements that represented approximately 20% of our total sales annually and we believe this percentage will remain consistent.
Gross profit margin was 69, 1% up 220 basis points from the first quarter of 2022.
The increase in gross profit margin was primarily due to improved contract pricing with suppliers and effective product cost management.
Although gross profit margin will vary slightly from quarter to quarter, depending on the product mix and other factors. We continue to expect gross margin to be in the mid sixties range going forward.
Samar Kamdar: Selling, general, and administrative expenses were $23.1 million, an increase of 52.9% from Q1 of 2022. I'll now provide some additional detail on this quarterly expense increase on a year-over-year basis. $1.5 million of this increase was related to the expansion of our sales team, representing a 33.9% increase from Q1 of 2022. As we have stated, we expect this continued investment in our sales efforts to begin to produce returns starting in H2 of 2023 and all of 2024. Included in the growth of SG&A expense, we had three categories of other expenses. First, public company-related costs of $1 million that did not exist in Q1 of 2022. Second, non-cash stock compensation expense of $2.2 million. Third, non-recurring expenses totaling $2.5 million. Operating income was $7.9 million, down from $9.8 million in Q1 of 2022.
Yeah.
Selling general and administrative expenses were $23 1 million, an increase of 52, 9% from the fourth quarter of 2022.
I'll now provide some additional detail on the quarterly expense increase on a year over year basis.
$1 $5 million of this increase was related to the expansion of our sales team representing a 33, 9% increase from the first quarter of 2022.
As we have stated we expect this continued investment in our sales efforts to begin to produce returns starting in the back half of 2023 and all of 2024.
Also included in the growth of SG&A expense, we had three categories of other expenses.
First public company related costs of $1 million that did not exist in Q1 of 2022.
Second noncash stock compensation expense of $2 2 million and third nonrecurring expenses totaling $2 5 million.
Operating income was $7 9 million down from $9 8 million in the first quarter of 2022.
Samar Kamdar: The decrease in operating income was due to increased SG&A expense, partially offset by improved gross profit on higher sales. Net loss was $21.4 million compared to net income of $9.4 million in Q1 of 2022. The net loss in Q1 of 2023 was primarily the result of lower operating income, increased interest expense, and the net change in the fair value adjustment to warrant and earn out liabilities of $27 million. Adjusted EBITDA was $13.1 million in Q1 of 2023, with an Adjusted EBITDA margin of 29.2%. This compares to Adjusted EBITDA of $11.7 million with an Adjusted EBITDA margin of 31.4% in Q1 of 2022. Adjusted EBITDA in Q1 of 2023 increased primarily due to higher sales and improved gross profit, while Adjusted EBITDA margin decreased due to increased operating expenses.
The decrease in operating income was due to increased SG&A expense, partially offset by improved gross profit on higher sales.
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Compared to net income of $9 4 million in the first quarter of 2022.
The net loss in the first quarter of 2023 was primarily the result of lowering operating income increased interest expense and the net change in the fair value adjustments to warrant and earn out liabilities of $27 million.
Adjusted EBITDA was $13 1 million in the first quarter of 2023 with an adjusted EBITDA margin of 29, 2%.
This compares to adjusted EBITDA of $11 $7 million with an adjusted EBITDA margin of 31, 4% in the first quarter of 2022.
Adjusted EBITDA in the first quarter of 2023 increased primarily due to higher sales and improved gross profit while adjusted EBITDA margin decreased due to increased operating expenses.
Samar Kamdar: We generated $13 million in Q1 operating cash flow. We expect the current strength of our balance sheet, coupled with positive cash flow generation to support our strategic growth initiatives. Turning to our financial guidance, we reaffirm our outlook for continued revenue and adjusted EBITDA growth in 2023, with revenue of $190 to $200 million and adjusted EBITDA of $56 to $60 million. As we stated when originally providing 2023 guidance, we anticipate results will be somewhat stronger in H2 2023 as compared to H1, given the 9-month productivity lead time required for sales team members added in late 2022. Now, I'll turn the call back to Terry for her closing comments.
We generated $13 million in first quarter operating cash flow, we expect the current strength of our balance sheet, coupled with positive cash flow generation to support our strategic growth initiatives.
Turning to our financial guidance, we reaffirm our outlook for continued revenue and adjusted EBITDA growth in 2023 with revenue of $190 million to $200 million and adjusted EBITDA of 56 to 69.
As we stated when we originally provided in 2023 guidance, we anticipate results will be somewhat stronger in the second half of 2023 as compared to the first half given the nine months productivity lead time required for sales team members added in late 2022.
Now I'll turn the call back office areas closing Qualcomm.
Terry Weber: Thank you, Samar. I am pleased with Biote's Q1 performance and excited about our long-term opportunity to promote health and wellness for both men and women. While we continue to invest to strengthen our capabilities and support our strategic expansion, we remain well-positioned to generate continued profitable growth. Now I'd like to open the call up for questions. Operator, please begin the question and answer session.
Yeah.
Thank you summer.
I am pleased with <unk> first quarter performance and excited about our long term opportunity to promote health and wellness for both men and women.
While we continue to invest to strengthen our capabilities and support our strategic expansion, we remain well positioned to generate continued profitable growth.
Now I'd like to open a follow up for questions.
Please begin with your question Andy is Seth.
Yeah.
Yeah.
Okay.
Yeah.
Operator: Thank you. I would like to ask that the microphones in the speaker lines be placed down, please. Let's try it again. We're getting a lot of echo. Please, can we get microphones down on your side? Thank you. We're still getting echo. Are we all set?
Okay.
Thank you.
I would like to add.
Mike.
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Please can we go to Michael on that.
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Operator: Have that mic issue.
Of that.
Please proceed.
Operator: It's just the microphones in your room that need to have the volume down. Got it.
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Operator: Pull your speaker lines open.
For the speaker lines.
Operator: Okay. Got it.
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Operator: Group. That's what I did wrong. Yeah. Okay. I think I got it fixed on this side. Sorry for the technicality there. We are going to get started with the Q&A session then. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Again, if you would like to ask a question, please press star one. Our first question comes from Greg Fraser from Truist Securities. Greg, please go ahead.
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Fixed on this side sorry.
Sorry for the technicality there.
And we are going to get started with the Q&A session to ask a question you May Press Star then one on your Touchtone phone and if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed.
I'd like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Yes.
And again, if you would like to ask a question.
Please press star one.
Our first question comes from Greg Fraser from Truest Securities. Greg. Please go ahead.
Greg Fraser: Thank you. Good morning, folks. I had a question on the geographic expansion. For the core 10 states, do you have a sense for how penetrated you are with respect to the target prescribers that you're calling on? What are the key states that you're focused on this year, and how should folks think about the potential timeline for growing prescriber penetration in, say, California to the level that you've reached in Texas?
Thank you and good morning folks.
I had a question on the geographic expansion for.
For the for the core 10 state do you have a sense for how penetrated you are with respect to the target prescribers that you are calling on what are the key states that youre focused on this year and how should folks think about that.
In terms of timeline for growing prescriber penetration in say, California to the level that you reached in Texas.
Terry Weber: That was a series of questions. Good morning, Greg. As we've talked about over the last three years, we've reduced our concentration in those top 10 states. Where we had first reported at 70%, we are now at 64% of our market is in those 10 core states. As we talked about, we've expanded into that West, Northwest you're referring to, the Midwest, Mid-Atlantic, Northeast. That progress is going well. We'll continue to look to add providers. That's the key piece here is getting those providers educated so we can connect those patients with those providers. We'll continue to look at that new expansion territories, which will be those new states as well, those West Coast states that we've added in Idaho, Utah, et cetera. We will continue that expansion throughout the US, and we're excited about it.
That was a series of questions good morning, Greg So.
As we've talked about over the last three years, we've reduced our concentration in those top 10 States, where we had first reported at 70%. We're now at 64% of our market is in those 10 core states and as we talked about we.
We've expanded into that west northwest, you're referring to the Midwest mid Atlantic northeast that progress is going well, we'll continue to look to add providers thats. The key piece here is getting those providers educated so we can.
Connect those patients with those providers. So we'll continue to look at that new expansion territories, which you'll be those new states as well those west coast States that we've added in Idaho, Utah et cetera. So we will continue that expansion throughout the U S and we're excited about it.
Greg Fraser: Got it. In terms of competition, you've obviously had a lot of success growing the business, and you've enjoyed greater visibility since going public. I'm curious if you've seen or detected any signs of the number two player getting more aggressive and trying to take more business. Thank you.
Got it.
In terms of competition, you, obviously had a lot of success growing the business.
You would enjoy greater visibility since going public I am curious if you've seen our debtor.
Any signs of the number two player getting more aggressive in trying to take.
More business. Thank you.
Terry Weber: Well, I think one of the blessings and curses of going public is everybody sees your every detail about the company, and we become a clearer target for all competitors. It's just a great story that we have here. We've got this differentiated model. Our tech platforms, what we offer in the Biote Method, continues to be a competitive moat. I think we just watch those competitors. There's quite a few telemedicine men's health groups out there, too. A lot of noise in the market, but nothing substantial.
Well I think one of the blessings and curses of going public as everybody sees your every detail about the company and we become a clear target for all competitors is just a great story that we have here, but we got this differentiated model our tech platforms, what we offer in the biotech method continues to be a.
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And I think we just watch those competitors, there's quite a few telemedicine men's health groups out there too so a lot of noise in the market, but nothing substantial.
Greg Fraser: Thank you.
Thank you.
Operator: If you would like to pose a question, please press star one. If no further questions are here, we are going to conclude question and answer session and turn the conference back over to Terry Weber for some final remarks. Thank you.
And again, if you would like to pose a question. Please press star one.
If no further.
<unk> are here, we're going to conclude the question and answer session.
Ill turn the conference back over to Terry Weber for some final remarks. Thank you.
Terry Weber: Thank you so much for joining us today. We look forward to updating you again soon. Have a great week. Thank you.
Yeah.
Thank you so much for joining us today.
We look forward to updating you again soon and have a great week. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
And the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
