Digi (DGII) Q2 2026 Earnings Call Transcript

Biote reported Q1 revenue of $44.9 million, down 8.3% year over year, as a voluntary hormone pellet recall and supply constraints cut procedure revenue 13.2% to $31.3 million and compressed gross margin to 68.9% from 74.3%. Adjusted EBITDA fell to $8.7 million, though dietary supplement revenue rose 19.1% to $11.0 million and management reaffirmed full-year 2026 guidance for revenue above $190 million and adjusted EBITDA above $38 million. The company expects supply normalization and a return to procedure revenue growth in the second half, but near-term margin pressure and operational disruption remain.

Analysis

The key signal is not the headline revenue miss; it is that a temporary supply shock exposed how concentrated the operating model still is around procedure throughput and field execution. Management is essentially asking investors to underwrite a second-half re-acceleration that depends on three sequential fixes: replenishing safety stock, restoring rep productivity, and converting a large training cohort into billable volume with a lag. That creates a classic “guide unchanged, but the path got steeper” setup, where near-term numbers can keep disappointing even if the long-term thesis remains intact.

Second-order, the recall may actually improve the moat if Asteria’s second shift and inventory discipline prove durable. If internal supply normalizes, Biote can reclaim gross margin while also reducing dependency on third-party pharmacies, which should improve pricing power and service reliability versus smaller peers that cannot absorb the same compliance burden. But there is an uncomfortable counterpoint: the company is still carrying very little cash relative to the operating swing being discussed, so any slippage in the normalization timetable would quickly turn this from a temporary margin issue into a balance-sheet and credibility issue.

The market is likely underappreciating the asymmetry in the second half. If procedure volume snaps back, the levered earnings rebound could be sharp because the sales force is already built and practitioner training is running near capacity; if not, the current year guide becomes vulnerable despite being left unchanged. The consensus mistake is to treat the recall as a one-quarter event when the real risk is a multi-quarter demand deferral that also obscures whether underlying attrition has truly stabilized.

Key Decisions for Investors

• Short BTMD into any post-earnings relief rally; use a 4-8 week horizon and look for a fade if management leans on second-half promises without hard April/May volume proof. Risk: a rapid inventory normalization headline could trigger a sharp squeeze.
• If you need exposure, structure it with BTMD call spreads rather than stock: the setup is binary around supply recovery, so defined-risk upside participation is preferable to outright long equity.
• Pair trade: long higher-quality healthcare services names with recurring demand and short BTMD as the operationally levered laggard. The thesis is that execution risk, not sector beta, is driving the next leg of underperformance.
• Watch for a tactical cover signal if gross margin starts inflecting before revenue does; that would indicate Asteria normalization is real and could front-run the stock by 1-2 quarters.