Q1 2025 biote Corp Earnings Call

Speaker Change: 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.

Speaker Change: 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 Serowiecki. Please go ahead.

Thank you for joining us today.

Szymon Serowiecki: This afternoon, Fati published fan shows for the first quarter and March 31st, 2025.

Speaker Change: Posting Thursday's call, Robert Kertzensen, Chief Executive Officer, Bob Peterson, Chief

Speaker Change: Forgas started to elect some of my everyone that made you only a semester in this call that includes forward-looking statements regarding, among other things, the company's financial results, its future-performed growth opportunities, business outlook, strategies, goals,

Speaker Change: We shouldn't develop it. Manufacturing commercialization activities, competitive position, regulatory process operations, benefits of its solutions, anticipated impact on mecha-recognomative science business, fields of operations, venture conditions, and other matters that relate to historical facts.

Speaker Change: These things are not guarantees for future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control.

Speaker Change: Actual results could differ materially from expectations or effects in any forward-looking statements.

Speaker Change: These statements are subject to risks, uncertainties, and assumptions that are based on the current expectations as of today. Biote undertakes obligations to update them in the future. Therefore, these statements should not be relied upon or represented in the company's views as of any subsequent date.

Speaker Change: For discussion, risks on their important factors that could affect their actual results, please refer to SEC Philanx, available on the SEC's website, and the Invest Relations Section of our website, as well as risks on the important factors discussed in earnings release.

Speaker Change: Major Olser referred to it as an EBITDA, and just an EBITDA margin, with a non-GAAP financial measures to provide additional information to investors.

Speaker Change: A reconciliation of the non-gap-to- GAAP measures is provided in an arranged release, but the primary difference is being stock-based compensation.

Fair value distance center liabilities, transactional expenses, and other non-operating expenses.

Speaker Change: Please refer to our first quarter of 2025 earnings release for a conversation of these non-GAAP measures to close comparable GAAP measures .

And I'll turn the call over to Bret.

Bret Christensen: 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 in our 2025 financial outlook.

Adora Comments will open the call for questions.

Bret Christensen: In the first quarter, we generated strong financial performance, with strength in our dietary supplements business, more than offsetting the expected softness and procedure revenue. [inaudible]

Bret Christensen: 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.

Bret Christensen: 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.

Bret Christensen: 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.

Bret Christensen: 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

Bret Christensen: On last quarter's earning call, 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.

Bret Christensen: Consistent with these comments, today we announced a strategic organizational restructuring designed to drive sustainable profitable growth and include long-term value for our stockholders.

Bret Christensen: 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.

Bret Christensen: 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.

Bret Christensen: We are focused on three major objectives. First, we intend to accelerate new provider wins to further expand our nationwide network.

Bret Christensen: 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.

Bret Christensen: Among the key steps we are implementing is the realignment of our commercial team with the goal of increasing productivity and driving new clinic growth.

Bret Christensen: As part of this re-alignment, we are working to transition certain commercial support functions to active field sales divisions, effectively increasing our field sales team by approximately 25%.

Bret Christensen: 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.

Bret Christensen: Additionally, we are streamlining sales leadership to ensure better communication and efficiency to drive more consistent performance across the entire commercial team.

Bret Christensen: We're also updating our sales compensation structure to align incentives with our sales goals.

Bret Christensen: As we direct ourselves efforts to drive a new clinic growth, we also recognize the importance of retaining and maximizing the value for our existing top-tier providers.

Bret Christensen: But for the past year, biOTS significantly expanded our capabilities and product offerings, encompassing hormone optimization, therapeutic wellness, and dietary supplements.

at the same time.

Bret Christensen: We have expanded our education, training, and technical resources, further differentiating

Bret Christensen: By strengthening engagement with our top two 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.

Bret Christensen: As I noted last quarter, we are implementing these initiatives quickly, but recognized it 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.

Bret Christensen: 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.

Bret Christensen: 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.

Bob Peterson: Thank you, Bret, 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.

Bob Peterson: Procedure revenue decreased 3.6% to $36.0 million, primarily reflecting reduced commercial effectiveness and the slowdown in new clinic additions.

Bret Christensen: As Bret 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.

Bret Christensen: Dietary Supplement Revenue increased 25.5% to $9.3 million, primarily driven by the Growth of our e-commerce channel.

Bret Christensen: We continue to expect solid growth this year from our dietary supplements business.

Gross Prophet Margin was 74.3%, a 300 basis point increase.

Bret Christensen: The improvement reflected cost savings from the continued vertical integration of our 503B manufacturing facility, as well as effective cost management.

Bret Christensen: 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.

Bret Christensen: 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.

Bret Christensen: Notably, SGNA 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.

Bret Christensen: That income was 15.8 million dollars, inclusive of a 10.7 million dollar gain due to a change in the fair value of the burnout liabilities.

Bret Christensen: This compares to in that 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 earned availability abilities.

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Bret Christensen: The decreases in adjusted EBITDA and adjusted EBITDA in margin, primarily reflected in free sales and marketing expense to try growth, partially offset by improved growth profit.

First quarter cash flow from operations was $6.5 million.

Bret Christensen: As of March 31st, 2025, Cash and Cash equivalent for $41.7 million compared to $39.3 million as of December 31st, 2024.

Now turning to our financial outlook for 2025.

Bret Christensen: We maintain our previously stated guidance of revenue of $202 to $208 million and adjusted the EBITDA of $59 to $64 million.

Bret Christensen: for the second quarter of 2025. We expect revenue and adjusted IVIDA to be similar to slightly higher than that of the second quarter of 2024.

Bret Christensen: Also, the company expects to incur a one-time charge of approximately 0.6 million to 0.8 million dollars in the second quarter of 2025 due to the restructuring.

Bret Christensen: I'll now turn the call back to Bret for his closing comments.

Bret Christensen: 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, following short of our expectations and those bar investors.

Speaker Change: While I've only recently joined the company of 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.

Speaker Change: The restructuring plan we announced today represents a significant step forward with probioty.

Speaker Change: 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 your holder value operator. Let's now open the call for questions.

Speaker Change: Thank you. We will now begin the question and answer session.

Speaker Change: To ask a question, you may press stars and one on your telephone keypad. If you are using a speaker phone, please stick up your handset before pressing the keys.

Speaker Change: to a draw your question, you may press star, then do. At this time, we will pause momentarily to assemble our roster.

Speaker Change: Today's first question comes from Kaumil Gajrawala with Jeffries. Please go ahead.

Speaker Change: 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, that was just a quite day.

Speaker Change: Quite a result, we just want to make sure we're looking at something. It's a new run rate based on the changes that you've made, or is there just something

Speaker Change: No, no, no, hey, Kaumil, how are you? Look, I think the biggest piece of the supplements business that we saw solid performance in was our e-commerce business.

Speaker Change: 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 it's...

Speaker Change: With additional procedure growth, we could see some benefit in the space but no one-time items in the space really just solid performance in the e-commerce space.

Okay, great.

and then two, let me just try to understand.

Speaker Change: and the procedures, number of procedures, and what happened there, you also, you prepare remarks mentioned in competition a little bit.

So, um...

Speaker Change: There's so many things that you guys are doing, obviously, as part of the process. Optimizing the business, but is there anything changing in the marketplace itself that we should be aware of?

Kaumil, this is Bret.

Nothing significant to change to the marketplace at all [inaudible]

Speaker Change: We highlighted the headwinds to our procedure business, and I would say it's

Speaker Change: It's really volume-related, and in that, we did mention competition, competition is not new for us, that's an ongoing...

Speaker Change: headwind, and like every other company we're going to have competition. We've also highlighted

Speaker Change: in the past that our nutrition 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

Speaker Change: at the end of last year. That did a couple of things.

Speaker Change: One, it slowed down, meaningfully, new starts. It distracted our field organization.

Speaker Change: and new practice starts at the end of last year.

Speaker Change: In the nudy 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.

Speaker Change: that we believe is associated with the launch of that CDSS as well.

Speaker Change: Okay, and are we fully deployed with that and now, as a matter of time, are we still in

Speaker Change: We are fully deployed with CDSS. All of our users are using the new version. The feedback is excellent.

Speaker Change: to New Palace and to New Testosterone in their clinic. So it's a valuable foundation. We have no regrets of launching it. We just saw the headwind for the destruction from last year.

Okay, great. Thank you.

Speaker Change: Thank you. The next question comes from Les Sulewski with Truist. Please go ahead.

Les Sulewski: Yes, good evening. Thank you for taking my questions. I have three essentially a start off with the first one on...

Les Sulewski: 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 a, I guess, a sales back office, leadership roles, or more broadly a crusty organization and have two thoughts?

Bret Christensen: Yeah, I left the spread. We didn't do any realignment last quarter, so that the realignment that we announced today is new. And it's the only one that we've done, frankly. So, what we did was was focused around growth. It was not a cost-cutting effort for us. We were not in cost-cutting mode, we're in growth mode.

Bret Christensen: 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 line to growth and one of those things.

Bret Christensen: was the alignment of our commercial organization. So we needed different territory alignments, we need different complex, we need everything focused on growing the business.

Bret Christensen: 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%.

Bret Christensen: as we transition 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 chase that we announced this week.

Speaker Change: Was it redone season, and I'm 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 ining you are in, I guess, CDS implementation, the new sales?

Speaker Change: Rior Galbal, that seems to be new and as well as vertical integration, maybe kind of light of item by item if you could.

I'll let Bob take the last part of that, but, uh... [inaudible]

Speaker Change: As far as CDSS goes, we are in late innings if not, the game is over for CDSS so we are fully integrated with CDSS .

Speaker Change: and so while we're still, the only reason we're talking about it less is that in this annuity model, as you know, New Starts follow us for a year. So you need whatever we're doing in this quarter, the contribution we get from New Starts is a function of all the new clinic starts that we added up at the last year, and frankly the quality of those stars and how they started.

Speaker Change: And so, CDSS just meant a decline in new stars and probably new stars 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.

Speaker Change: and there is no more work being done as far as roll out.

Speaker Change: You know, system change, training, any of that. We're fully aligned and implemented with CDSS. Bob, do you want to?

Speaker Change: on the vertical integration front. Actually, we're probably in the round the fourth inning to use your baseball analogy.

Speaker Change: 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.

Speaker Change: 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 margin front.

Speaker Change: But that's kind of where we, I would say we are on a stereo.

Speaker Change: Great, that is helpful. Perhaps on the supplement side, maybe A kind of talk to your exposure 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 what color on that. Thank you.

Speaker Change: Yeah, so on tariffs, look at this point, we don't see the impact to our business on the tariff fund. 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 the lock-in price.

Speaker Change: So, I don't see any significant direct exposure in the current year. And as far as the new trip business, we've talked about it a little bit over time. Our e-commerce business has had the sense we've taken over. We are seeing...

Speaker Change: 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. Thank you very much.

Thank you.

Speaker Change: Thank you. The next question comes from Jonathan with TDCO and please go ahead.

Speaker Change: Thank you for taking my question. Could you just elaborate a little bit on the decline in the volume from the business and what they're...

Speaker Change: 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.

Speaker Change: Thanks, Tony. I'll try to give as much color as I can on our procedure revenue. So you heard me mention earlier to Kaumil's question. It was mainly volume related. So I'll hit that again real quick. Two real components there. The contribution from Newstarts, which has been lower. And I'm sure everybody's clear on that as we talked about it.

Speaker Change: A lot. And so most of what we did today in the re-structure, the re-alignment, and the new start of what we're doing at Biote is really aimed at growing new stars.

Speaker Change: The other components, though, you know, 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 of.

ASP declines with which were concessions due to CDSS.

in the field.

Speaker Change: and so those are the components, of course, always the components of an annuity model, is volume, the contribution you get from new stars, and any changes to ASP. Well, we've been really good at 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 stars in the field.

Speaker Change: And any softness you are seeing from the consumer side, from any macro-headwinds at this point?

Speaker Change: 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. [inaudible]

Speaker Change: 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 macroefection pricing sensitivity.

but I thank you very much.

Thank you.

Speaker Change: The next question comes from Jeff and Sam Sinderen with B. Riley. Please go ahead.

Speaker Change: 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 CDSF.

Speaker Change: and I guess also what steps you might take to turn around the new clinic editions, what other steps you might take to get those.

Ramp, stock up again.

and get procedure growth ups.

Jeff: Sure, Jeff, I'll start with the first one, sort of what I've learned.

Q4.

Jeff: In a Q4 I highlighted, you know, the amazing opportunity that brought me to biote, the massive Tam, the really under penetrated marketplace.

Jeff: as far as physicians that are both utilizing testosterone therapy but also the nutraceuticals that we offer.

Jeff: and just the need for better execution as an organization to capture more of that camp.

Jeff: and so I would say what's changed since that call if I could just gain more clarity and exactly what we need to do to get there.

Jeff: The restructure that we announced today 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. [inaudible]

Jeff: You know, we are a company and this sort of gets to the second part of your question here.

Jeff: to the point where it's tough to grow them, and this is where structure and complands

Jeff: 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 land that is really focused on growth and less on maintaining the base.

Jeff: 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 products.

Jeff: 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.

Jeff: So I've got a lot of clarity into what the value the biote offers and I think it's fantastic and it couldn't be more optimistic about the long-term prospects here.

Jeff: But, too, just what we need to do in the short term this year, as we highlighted this year's a transition year for us.

Jeff: So we're making a lot of changes here. Some of them are disruptive. All of them will be good for the long term.

Jeff: 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 and a start of what we're doing. [inaudible]

Speaker Change: Okay, good to hear. And then, not to be the dead horse of the soul of the business, but I guess I'm just trying to reconcile a little bit here. Very strong in the quarter. It doesn't sound like any one-time items.

Speaker Change: But I think your guidance is baking in kind of a sequentially slower growth there. Can you remind us of the year of your comparisons? Maybe that's the major thing.

Speaker Change: Just trying to understand why that business would slow down sequentially as far as the growth.

Speaker Change: growth from a guide perspective. And what we're seeing now is...

Speaker Change: We are in the, as we were just mentioning on a prior question, when the earlier phases of this with our e-commerce platform.

Speaker Change: And as we get throughout the remainder of the year we will start laughing solid performance in the e-commerce space.

Speaker Change: which would potentially drive us lower. But yeah, the performance that we saw in Q1 was solid in that space.

Speaker Change: Okay, so just to clarify there, the comparisons get tougher and 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.

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

Hey everybody, thanks for taking my questions.

George Kelly: Just a couple for you, first on Asteria, I was curious, if you plan over the course of 2020-2025 to grow penetration,

George Kelly: and where am I to sort of end the year and I guess secondarily? Have there been issues with ramping production there?

George Kelly: Oh, and in fact our inventory levels are at solid points.

George Kelly: So we've not had any issues from a stereo perspective. I can tell you our focus right now has been on smooth transition and of the focus on not disrupting the clinic.

George Kelly: We do have a plan to expand further in the remaining months of the year, and we have that baked into our guide.

George Kelly: So we will continue to expand in this arena throughout the remainder of the year, just in a tempered fashion.

Speaker Change: Okay, understood. And then second question on your 2025 guide for procedure revenue growth. I think it's plus two to four percent. Just curious what gives you confidence in that guide?

Speaker Change: It's been a pretty steady deceleration for, I don't know, a year and a half, two years now, and including in the first quarter with it being negative, so I'm just wondering what...

Speaker Change: Can you help sort of give us confidence that you see that reversing? And perhaps what have you seen so far in Q2 in April ?

Bret Christensen: So let me give you an overview and a Bret feel free to add. So as Bret 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.

Bret Christensen: New penetrations, new customer penetrations, new monitoring hour and filling our clinic pipeline and maximizing the value from our top-tier providers.

Bret Christensen: 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.

Bret Christensen: as we start to reinvigorate that new customer volume in this annuity model.

Bret Christensen: 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.

Bret Christensen: Looking to your question to be pretty direct, is there potential risk around the 2% to 4% procedure revenue growth? The answer is yes.

Bret Christensen: and we recognize that certain actions have to go to plan to achieve that two to four percent preceded revenue growth. But that said, we are confident overall on the overall guide for the year on Revenue and Epidae.

Speaker Change: And maybe Bret, 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 and the reality models. [inaudible]

volume, ASP, attrition

Speaker Change: and we're confident in each of those, which is really difficult to predict at this moment.

Speaker Change: 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, however,

Speaker Change: We're going to, there's a lot of early indicators into what we're doing here, including, [inaudible]

Speaker Change: You know, training volumes, training classes, new starts coming on board. Those things we'll see before we'll report revenue.

Speaker Change: on an increase in procedure growth. So we're confident that the changes we're making and it's difficult to project.

Speaker Change: 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 two to four percent, but we definitely see the line of sight to get there.

Okay, thank you.

Szymon Serowiecki, Bret Christensen, Teresa Weber

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

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

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