10-Q: Biote Corp. Reports Q3 2024 Results, Revenue Up 12.8% Year-Over-Year

Biote Corp. announced its third quarter 2024 results, highlighting a 12.8% increase in revenue compared to the same period last year, driven by growth in product and service revenue.

Summary

• Biote Corp.'s revenue for the third quarter of 2024 reached $51.4 million, a 12.8% increase compared to $45.6 million in the third quarter of 2023.
• Product revenue increased to $49.8 million, up from $44.8 million, driven by a $2.5 million increase in pellet procedures and a $1.8 million increase in dietary supplements.
• Service revenue rose to $1.6 million, compared to $0.7 million in the prior year, due to technology fees from the new BioteRx platform and increased training revenue.
• The company reported a net income of $12.7 million for the quarter, compared to $19.6 million in the same period last year.
• Adjusted EBITDA for the quarter was $16.2 million, compared to $14.0 million in the third quarter of 2023.
• For the nine months ended September 30, 2024, revenue was $147.4 million, a 5.5% increase from $139.7 million in the same period of 2023.
• The company reported a net loss of $3.4 million for the nine-month period, compared to a net loss of $14.9 million in the prior year.
• Adjusted EBITDA for the nine-month period was $43.1 million, compared to $41.7 million in the same period of 2023.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While revenue growth is positive, the decrease in net income, ongoing litigation, and a material weakness in internal controls temper the overall sentiment. The company is taking steps to improve its supply chain and expand its business, but faces significant challenges.

Positives

• Revenue growth was strong, driven by both product and service segments.
• The company's new BioteRx platform is contributing to increased service revenue.
• The company is focused on vertical integration through strategic acquisitions.
• The company is managing its supply chain by narrowing its vendor network.
• The company is in compliance with all required financial covenants associated with the Credit Agreement.

Negatives

• Net income decreased in the third quarter compared to the same period last year.
• The company incurred significant expenses related to share repurchases and litigation settlements.
• The company has a material weakness in its internal control over financial reporting.
• The company is facing litigation with Right Value Drug Stores, LLC.
• The company received notice of termination of the Pharmacy Services Agreement with AnazaoHealth Corporation, effective May 1, 2025.

Risks

• The company's success depends on the market acceptance of the Biote Method and its dietary supplements.
• The company relies on third-party outsourcing facilities for hormone pellet production.
• The company faces significant competition in the medical practice-building and dietary supplement markets.
• The company is subject to extensive and complex healthcare laws and regulations.
• The company's operations are concentrated in certain geographic regions, making it sensitive to local conditions.
• The company may be subject to product liability claims.
• The company may not be able to maintain its listing on the Nasdaq Stock Market.
• The company may require additional capital to support business growth.
• The company is subject to data privacy and security risks.
• The company is subject to risks associated with international expansion.

Future Outlook

The company expects its operating and capital expenditures to increase as it expands operations and grows its clinic base. The company believes that its current cash position, coupled with anticipated cash generated from operations and the capacity under its revolving loans, is sufficient to fund its operations and debt service obligations for at least the next 12 months.

Management Comments

• The company is focused on vertical integration through strategic transactions.
• The company is narrowing its current vendor network to better manage its supply chain.
• The company believes it can continue to meet product demands through existing manufacturing capabilities and vendor network while expanding vertical integration.

Industry Context

The company operates in the therapeutic wellness and hormone optimization space, which is experiencing growth. The company's business model is similar to a franchise model, providing a comprehensive platform for practitioners. The company is focused on expanding its reach and increasing the adoption of its methods and products.

Comparison to Industry Standards

• The company's revenue growth of 12.8% in Q3 2024 is strong compared to the overall growth rate of 7% annually through 2026 expected for the HRT market.
• The company's focus on vertical integration through acquisitions is a strategy used by other companies in the healthcare and pharmaceutical industries to control supply chains and reduce costs.
• The company's reliance on third-party outsourcing facilities for hormone pellet production is a common practice in the compounding pharmacy industry, but it also exposes the company to risks related to regulatory compliance and supply chain disruptions.
• The company's legal challenges, including the Donovitz Litigation and the June 5, 2024 Litigation, are not uncommon in the healthcare industry, where intellectual property and business disputes can arise frequently.

Legal Proceedings

• The company is involved in litigation with Right Value Drug Stores, LLC.
• The company is involved in litigation with Yosaki and Mioko Trusts.
• The company settled all outstanding litigation with Dr. Gary S. Donovitz.
• The company settled litigation with a trust associated with Marci M. Donovitz.

Related Party Transactions

• The company purchases dietary supplements from a vendor in which the company's founder holds a minority interest.
• The company engages the services of its Chief Executive Officer's brother-in-law through a consulting firm.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and the ongoing litigation.
• Employees may be affected by the organizational changes and the company's efforts to manage growth.
• Customers (Biote-certified practitioners and Biote-partnered clinics) may be affected by changes in the supply chain and the termination of the Pharmacy Services Agreement with AnazaoHealth Corporation.
• Suppliers may be affected by the company's efforts to narrow its vendor network.
• Creditors may be affected by the company's debt obligations and the potential for future capital raises.

Next Steps

• The company will continue to focus on vertical integration through strategic transactions.
• The company will continue to narrow its current vendor network to better manage its supply chain.
• The company will continue to expand its business into new markets.
• The company will continue to work to remediate the identified material weakness in internal control over financial reporting.

Key Dates

Keywords

Biote, hormone optimization, pellet therapy, dietary supplements, revenue, EBITDA, litigation, acquisitions, internal control, financial results, healthcare, pharmacy, compounding