Q3 2023 biote Corp Earnings Call
[music].
Good day and welcome to the bio T third quarter 2023 earnings conference call.
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And now I would like to turn the conference over to Simon serve yet keep for Investor Relations.
Please go ahead.
Good morning, Thank you for joining us today.
Last evening, Betsy published French results for the quarter ended September 32023.
This release is available on the Investor Relations section of the company's web site.
Terry Webber, Chief Executive Officer, and <unk>, Chief Financial Officer will host this morning's call.
Before we get started I'd like to remind everyone that management will make statements. During this call that include forward looking statements regarding among other things the company's furniture adult future.
Future performance and growth opportunities business outlook strategies goals.
Research and development manufacturing commercialization activities regulatory process operations, the effect of macroeconomic condition docs business results of operations and financial conditions.
These statements are not guarantee the 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 reflected in any forward looking statements.
These statements are subject to risks uncertainties and assumptions that are based on management's current expectations as of today.
Boucher undertakes no obligation to update them in the future. Therefore, do you see them, which 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 your first our SEC filings available on the Sec's website, and the Investor Relations section of our website, there's always risks and other important factors discussed in the earnings release.
Management will also refer to adjusted EBITA and adjusted EBITDA margin, which are non-GAAP financial measures provide additional information to investors.
Reconciliation of the non-GAAP to GAAP measure is provided in 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 see our third quarter 'twenty to write their earnings press release, which is available on the Investor Relations section of our website.
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A reconciliation of adjusted EBITDA and adjusted EBITDA margin to their most directly comparable GAAP financial measure.
I will now turn the call over to Terry Webber.
Thank you Simon and thank you all for joining us on the call with me today is stomach cancer, our Chief Financial Officer, who will review our financial results and discuss our outlook for 2023.
Mark beer, our executive Chairman and Dr. Ross Mcquivey, our Chief Medical Officer are also on todays call to help answer your questions. During the Q&A session. Following our remarks.
Iot continued to generate profitable growth in the third quarter as we made further progress building our hormone optimization practice. We also advanced our efforts to create an evidence based therapeutic wellness platform.
Adjusted EBITDA grew at a double digit rate and adjusted EBITDA margins remained strong.
From a strategic standpoint, we achieved significant progress in our commercial evaluation of complementary hormone and therapeutic wellness products deliberate by a robust technology platform.
I am pleased with the positive response, we received from our top providers to our enhanced offerings reinforcing our conviction in the long term growth opportunity for biotech to become a single source provider of hormone and therapeutic wellness solutions.
We also continued to strengthen our presence in men's health by engaging with key opinion leaders educating practitioners and extending our outreach and marketing efforts.
Third quarter revenue increased approximately 9% year over year with growth in both dietary supplements and procedures.
Terry settlements revenue increased approximately 5%, which represented what we consider it can be a more typical rate of growth given the absence of a promotional event this quarter.
Procedure revenue increased approximately 7% as the increase in the number of procedures was partially offset by a decrease in average selling prices climb.
Primarily from volume discounting to our top practitioners and to a lesser extent competitive dynamics in the market.
We also continued to see heightened interest in the G. L. P. One weight loss products that have diverted patient attention from hormone therapies and temporarily limited our practitioners capacity to provide a pellet treatments.
While we maintained a high level of profitability in the quarter I am not satisfied with the pace of our procedure revenue growth, which was below our typical historical rate.
We are committed to improving our procedure revenue and remain focused on generating profitable growth.
As confident as ever in our strategy and then our ability to capitalize on the growth opportunity within the hormone optimization and preventive wellness market.
Our recently completed optimization of sales territories is showing early signs of success.
Specifically in terms of the number of newly trained providers and the speed that we onboard those new practitioners in clinics. We are also seeing improved rates of procedure growth from those new clinics within the first 12 months.
As a reminder, the majority of our revenue.
It is generated by our legacy accounts.
As I discussed on our last call, we're strategically transitioning our sales and marketing efforts to encompass the broader category of therapeutic wellness in doing so we are monetizing and expanding our existing hormone practice, while adding complementary wellness therapies that address.
The patient's unique needs and weight loss sexual health and preventive wellness.
With an expanded suite of hormone and wellness solutions under a single platform. We believe biotech can enhance patient health, while elevating our value proposition to our growing network of practitioners.
Over the last several months, we've trialed a proprietary technology platform that provides an expanded scope of wellness offerings to approximately 30 biotech certified health care practitioners across 17 high performing sales territories in 11 different states, we will continue.
To expand our commercial test in the fourth quarter of 2023.
The response from both patients and practitioners to our wellness offerings and our commercial trial has been exceptionally positive.
Patients indicated that they value our broader product offerings and the convenience of treatment from a single provider.
Given this favorable feedback we have accelerated our efforts to secure consistent access to an expanded range of wellness therapeutics.
As a result, we anticipate the nationwide launch of our new wellness offerings and technology platform to occur in the first quarter of 'twenty 'twenty four.
We believe our strategic transition to broader therapeutic wellness will enhance our leadership position in the hormone optimization market.
As I noted earlier, we continue to focus on capturing a greater share of this significant growth opportunity in men's health.
Our research indicates that on the whole men, regardless of age or taking a more active role in their health.
Increasingly seeking treatments for symptoms.
To further expand our presence in men's health, we are engaging with key opinion leaders, whose advocacy strengthened support for formula optimization in men. Additionally.
Additionally, we are working in close partnership with certain biotech providers to expand their treatment programs for men.
As a part of these efforts we have launched new marketing programs led educational seminars and facilitated the sharing of best practices among biotech providers.
Although we have only recently commenced our men's health initiative I'm pleased with the progress we've achieved so far and with our current growth trajectory in this important market.
I will now turn the call over to summer to discuss our financial results.
Thank you Terry and good morning, everyone third quarter revenue increased eight 5% year over year to $45 6 million with product revenue up seven 8% and service revenue up 83, 3%.
Within product revenue procedure revenue increased seven 4% and supplements revenue increased five 1% year over year.
Service revenue reflected an increase in trading sessions provided to biotech practice sure.
Gross profit margin was 68, 9% an improvement of 70 basis points from third quarter of 2022.
The increase in gross profit margin was primarily due to effective product cost management.
Selling general and administrative expenses were $23 8 million, an increase of 3 million or 14, 3% from the third quarter of 2022.
Excluding the impact of share based compensation and litigation expenses legal settlements transaction related expenses mergers and acquisition expenses and other selling general and administrative expenses would have been $17 8 million in the third quarter of 2023.
This compares to $17 million in the third quarter of 2022, representing an increase of four 7% over the prior year period.
Operating income was $7 6 million, reflecting higher revenues and improved gross profitability, partially offset by increased SG&A expenses.
Operating income in the third quarter of 2023 was essentially unchanged from that of the prior year period as growth in revenue and improved gross profit were offset by increased personnel and other expenses to build our infrastructure.
Net income was $19 6 million compared to net income of <unk> 5 million in the third quarter of 2020 to be.
The increase in net income in the third quarter of 2023 was primarily due to a net change in the fair value of earn out liabilities of $17 5 million.
Adjusted EBITDA was 14 million in the third quarter of 2023 with an adjusted EBITDA margin of 38%.
This compares to adjusted EBITDA of $12 2 million with an adjusted EBITDA margin of 29, 2% in the third quarter of 2022.
Just that EBITDA and adjusted EBITDA margin in the third quarter of 2023 increased primarily due to higher sales and improved gross profit.
Third quarter operating cash flow was approximately 200000 and totaled $19 9 million year to date.
Turning to our financial outlook, we anticipate continued revenue and adjusted EBITDA growth in 2023 <unk>.
Consistent with our prior guidance, we expect 2023 revenue of $190 million to $200 million and adjusted EBITDA of $56 million to $60 million. We expect our 2023 results to be toward the lower end of your guidance ranges.
We anticipate that fourth quarter revenue benefit from the launch of new dietary supplement products as well as the seasonal promotion.
Now I will turn the call back to Terry for closing comments.
Thank you summer biotech remains committed to enhancing patient health, while delivering profitable growth to our stakeholders.
Through our strategic growth initiatives, we are working to actively address the need for an evidence based approach to hormone optimization and preventive wellness therapies.
Ultimately, we strive to become the leading platform provider of evidence based therapeutic wellness solutions, and we continue to make progress towards achieving our vision.
Now I'd like to open the call for questions.
Operator, please begin the Q&A session.
Thank you.
And we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
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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.
And our first question is coming from Jonna Kim from to the Cowen Jenna. Please go ahead.
Hi, It's Tom Soccer Jonah.
Could you discuss how your wellness offerings, and we will look versus competitors and why do you think there's advantage competitive advantage in the market.
This space and then additionally, when can we expect to see a material impact on financial results post launch. Thanks.
Great. Good morning, good questions here. So we're expanding this business focus to wellness because that whole categories really growing so we see patients and providers seeking that wider range of not at hormone products as well as these wellness solutions like weight loss and sexual health.
So, we're really monetizing and expanding that perhaps our practice to capitalize on this large and growing opportunity.
We believe that we've got the best most robust therapeutics wellness platform.
At the market at launch so.
Our trial of an expanded suite of requesting wellness products has met with very positive response, and that's why we're confident in growing the opportunity. So.
So we expanded our fourth quarter cast and then we are looking to a nationwide launch in the front end of 2024. So we haven't really provided specific guidance yet in 2024, but we're confident with this additional hormone products and wellness products that the.
We will see those initial benefits in 2024, and we'll be able to not only increase our procedure revenue, but the whole wellness category and we think we've got the single source provider for this we've got already have the 6400 providers, they're very interested in this.
And this is how we'll launch in 'twenty four.
Great and a quick follow up what are you seeing in quarter to date trends and then what would give you confidence for any upside to the potential excuse me I won't give you upside.
2 million above the lower and guide range this year.
I missed the first part of your question I Couldnt hear it could you repeat the first one.
Yes, just a quarterly trends and then what would what could lead to any potential upside relative to come in at the lower end of the guidance range.
Okay, so you're saying quarter.
Trends or trends. So we're looking at continuing in this year on our you know accelerated looking at the growth on the new.
<unk> for next year, but we'll also be looking to 'twenty four for that.
Q4 is expected to benefit from the launch of our new supplement so we've got new supplements as well as the seasonal promotion. That's included in our 2023 guidance. So we remain committed to continued profitable growth. But then we're looking at that 2024 launch they have impact on both for.
<unk> growth and this expanded wellness Tam.
Great. Thank you.
And our next question comes from Les Sulewski from Truest Securities last please go ahead.
Hi, This is Jeremy on for Lisa Thanks for taking our questions.
Can you provide some more color on the commercial trials of the wellness therapeutics.
And what has the feedback been from partners and do you expect additional providers to partner with you as your platform expands and then also could you just give some color on the sales force changes transition and how has that been shaping up.
<unk>.
Right. So good morning, Yeah, we are.
Currently testing this with our providers and we've seen a very positive response, so far so that plan to expand this commercial cashes going on right now in the fourth quarter and then we're preparing for that nationwide launch in the first quarter of 24. So we're very committed to this increase Tam from both our.
Our added wellness R hormone therapies as well as these new where our wellness therapies. So I think we're excited about that and to answer your second question I'm looking at those sales territory realignment, yes, we're seeing accelerated growth both in the clinics and the procedures.
We're also onboarding practitioners faster, which accelerates the ramp of the demand for these products and services.
Even though it will delay as you know we have a little bit of a cycle delay, but adding these clinics, but we will see impact of that in 'twenty four as well. So we continue to invest in this infrastructure and in the single source provider for these expanded hormone as well as wellness therapies.
So we are we believe it will expand in answer to your question will expand the overall Tam market for providers interested in hormones as well as these new products.
And we're clearly the provider to give them the one stop shop.
Great. Thank you.
Yeah.
And we have a question now from J P. Willem from Ross M km J.
J P. Please go ahead.
Good morning, everyone.
Taking the questions.
If we could maybe start on the procedure revenue growth.
I'm curious if you could maybe just talk a little bit more about that in kind of the deceleration that we have seen for a couple of quarters now.
Maybe you don't want to go into quite as much detail, but I'm just trying to get a sense of.
Kind of what the increase in procedures, where and then kind of how much that was offset by a volume.
Volume discounting or competitive.
That'd be that'd be helpful. If you could kind of help break that down for us.
Yeah I'll go to those two questions. Thanks. This morning. So there were two primary factors that affected our procedure revenue growth in Q3. So it was one was the decrease in Asps as.
As we provided volume discounts to our top practitioners.
Practitioners, we have been dynamic pricing model that we've had and as they hit the higher tiers.
There was also this heightened interest in wellness products, such as the G. L. P. One weight loss category that really diverted the patient attention from hormones, but it also temporarily limits are limited our providers capacity for treatment, we have one provider and talk about it as a tidal wave in their practice, but this.
Wellness markets evolving as the category continues to grow and we feel like we're really positioned to capitalize on the opportunity through that existing dominance in the hormone practice and then adding these desirable wellness products.
And then talking about the ASP decline.
Decline.
The slight ASP decrease was primarily due to this volume discounting to our top practitioners and to a lesser extent the S. Asps decreased due to competitive dynamics in the marketplace.
But our growth in procedures to new clinic acquisition more than offsets the potential for those ASP declines.
Tam remains large and we have the right strategy to capitalize on this growth.
Yeah.
Great.
Very very helpful. And then maybe if I could just one follow up.
Is there anything you can share on the negotiations with the man.
Departures.
So the negotiations with the manufacturers are going well, we have longstanding relationships with our compounding manufacturers. So you know in many cases, we're their largest customer. So these are very positive relationships and we've been able to expand these test products.
With these manufacturers so it's going very well relationship remains closed.
That's what this commercial test as far as ensuring we have access in all of our markets for these new products.
Understood that's what going forward. Thank you.
Thank you very much. This concludes our question and answer session and I would now like to turn the conference back over to Terry Weber for some closing remarks.
Thank you everyone for joining us in this early morning.
And we really look forward to providing more updates in the months to come speak with you soon.
And the conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.