10-Q: Biote Swings to Profit Amid Cost Savings, Legal Progress

Biote Corp. reported a significant shift from net losses to net income and increased Adjusted EBITDA, driven by cost efficiencies and strategic supply chain management, despite a decline in core pellet procedure revenue.

Summary

• Biote Corp. achieved a net income of $3.925 million for the three months ended June 30, 2025, a substantial improvement from a net loss of $(10.368) million in the same period last year.
• Year-to-date net income for the six months ended June 30, 2025, reached $19.764 million, compared to a net loss of $(16.094) million in the prior year.
• Adjusted EBITDA increased by 19.1% to $15.174 million for the three months ended June 30, 2025, and by 7.5% to $28.926 million for the six months ended June 30, 2025.
• Total revenue for the three months ended June 30, 2025, slightly decreased by 0.6% to $48.863 million, primarily due to a $3.2 million decline in pellet procedure revenue.
• Year-to-date total revenue increased by 2.0% to $97.855 million, driven by a $4.4 million increase in Biote-branded dietary supplements revenue and a $1.3 million increase in service revenue.
• The increase in dietary supplement revenue was attributed to a shift to the e-commerce site with Amazon.
• Cost of revenue decreased by $1.5 million (9.7%) for the three months and $2.3 million (8.1%) for the six months, reflecting cost savings from the vertical integration of Asteria Health.
• Selling, general and administrative expenses decreased by $3.4 million (12.2%) for the three months, due to lower employee-related expenses, reduced consulting, and legal fees.
• A one-time restructuring charge of $0.6 million was recorded for a workforce reduction of approximately 15 employee roles (7.2% of the workforce).
• Cash and cash equivalents decreased from $39.342 million at December 31, 2024, to $19.601 million at June 30, 2025.
• Net cash provided by operating activities decreased by $3.8 million to $13.6 million for the six months ended June 30, 2025, impacted by increased cash used for other assets, accounts payable, and accrued liabilities.
• The company settled the Right Value Litigation for an aggregate of $5.0 million, with $3.5 million paid in February 2025 and the remaining $1.5 million due by February 2026.
• The AnazaoHealth Pharmacy Services Agreement was extended through December 31, 2027, with a one-year extension option.
• A material weakness in internal control over financial reporting persists, related to the control environment and information technology general controls.

Sentiment

Score: 7

Explanation: The company achieved a significant turnaround from net losses to net income and increased Adjusted EBITDA, indicating improved operational efficiency and profitability. Strategic acquisitions and supply chain extensions are positive. However, revenue growth from core pellet procedures is declining, cash balances are down, and a material weakness in internal controls persists, alongside ongoing legal challenges. The overall financial performance improvement is strong, but underlying business growth challenges and control issues temper the positive sentiment.

Positives

• Achieved a significant turnaround from net losses to net income, reporting $3.925 million in Q2 2025 net income compared to a $(10.368) million net loss in Q2 2024.
• Adjusted EBITDA increased by 19.1% in Q2 2025 to $15.174 million and by 7.5% year-to-date to $28.926 million, indicating improved operational profitability.
• Cost of revenue decreased by 9.7% in Q2 2025 and 8.1% year-to-date, primarily due to cost savings from the vertical integration of Asteria Health.
• Selling, general and administrative expenses decreased by 12.2% in Q2 2025, reflecting effective cost management in employee-related costs, consulting, and legal fees.
• Realized an $8.856 million gain from the change in fair value of earnout liabilities for the six months ended June 30, 2025.
• Successfully extended the AnazaoHealth Pharmacy Services Agreement through December 31, 2027, ensuring continued supply chain stability for bioidentical hormone pellets.
• Resolved the Right Value Litigation with a $5.0 million settlement, with the majority already paid, reducing legal uncertainty.
• The Dallas 5th District Court of Appeals reversed the temporary injunction in the Cindy Latch litigation, a favorable legal development.
• The Yosaki and Mioko Trusts lawsuit was dismissed, although an appeal is pending.

Negatives

• Total revenue for the three months ended June 30, 2025, slightly decreased by 0.6% to $48.863 million compared to the prior year period.
• Pellet procedure revenue decreased by $3.2 million in Q2 2025 and $4.6 million year-to-date, attributed to a reduction in new clinic additions, clinic attrition, and lower procedure volumes from existing clinics.
• Cash and cash equivalents decreased significantly from $39.342 million at December 31, 2024, to $19.601 million at June 30, 2025.
• Net cash provided by operating activities decreased by $3.8 million for the six months ended June 30, 2025, due to increased cash used for other assets, accounts payable, and accrued liabilities.
• Incurred a one-time restructuring charge of $0.6 million related to a workforce reduction of approximately 15 employee roles.
• Interest expense, net, increased by $0.3 million in Q2 2025 and $1.5 million year-to-date, primarily due to higher accreted interest on share repurchase liabilities and lower interest income.
• A material weakness in internal control over financial reporting persists, specifically in the control environment and information technology general controls.

Risks

• The success of dietary supplements in attaining significant market acceptance among clinics, practitioners, and patients is not guaranteed.
• Reliance on certain third parties to support the manufacturing of bioidentical hormones for prescribers, despite the recent agreement extension.
• Sensitivity to regulatory, economic, environmental, and competitive conditions in certain geographic regions.
• Ability to increase the use of the Biote Method by practitioners and clinics at the anticipated rate or at all.
• Ability to grow the business in a highly competitive industry.
• Limited operating history, which may make it difficult to evaluate future prospects.
• Ability to protect intellectual property from infringement or challenges.
• Heavy regulatory oversight in the industry, which could lead to changes in applicable laws or regulations.
• Inability to profitably expand in existing markets and into new markets.
• Potential adverse impact from other economic, business, and/or competitive factors, including future exchange and interest rates.
• Global economic conditions, including inflation and relatively high interest rates, could make it more difficult to obtain traditional financing on acceptable terms.
• Ongoing international conflicts (e.g., Russia-Ukraine, Middle East) could increase operating costs due to supply chain constraints and employee availability.
• International trade policies, including tariffs (e.g., on estradiol from China and trocars from Pakistan), sanctions, and trade barriers, may adversely affect business by raising costs, reducing margins, and disrupting supply chains.
• The complexity of tariffs may increase the risk of civil or criminal enforcement actions.
• Retaliatory trade policies or anti-U.S. sentiment could lead to increased preference for local competitors, heightened regulatory scrutiny, decreased intellectual property protections, and delays in regulatory approvals.
• The persistence of a material weakness in internal control over financial reporting could adversely affect the ability to record, process, summarize, and report financial information accurately.

Future Outlook

Operating and capital expenditures are expected to increase as the company continues to execute corporate growth plans aimed at elevating growth, achieving strategic objectives, and advancing patient health and wellness. The current cash position, anticipated cash from operations, and available revolving loans are believed to be sufficient to fund operations and debt service obligations for at least the next 12 months. The company is evaluating the potential implications of the recently signed 'One Big Beautiful Bill Act' on its deferred tax assets, valuation allowance assessments, and effective tax rate. It continues to monitor global economic trends, including inflation and trade policies, for potential impacts on its business and operating results.

Management Comments

• Our business model has been successful, remains differentiated, and is well positioned for future growth.
• With the Second Amendment in place and through our existing direct manufacturing capabilities, we are well-positioned to continue meeting the product demands of our current Biote-practitioners while focusing on expanding our Biote-certified clinic network.
• For at least the next 12 months, our current cash position, coupled with anticipated cash generated from operations and the capacity under our revolving loans, is sufficient to fund our operations and our debt service obligations.
• The claims asserted in the July 12, 2024 Litigation are without merit and we intend to vigorously defend against them.
• The ultimate liability, if any, from various legal actions arising in the ordinary course of business will not have a material effect on our financial condition or results of operations.

Industry Context

The company operates in the therapeutic wellness and hormone optimization sector, focusing on training healthcare providers in bioidentical hormone replacement pellet therapy and selling complementary dietary supplements. Its strategy involves increasing the number of certified practitioners, growing existing clinic practices through support and marketing, and increasing sales of Biote-branded dietary supplements, including through e-commerce channels like Amazon. The acquisition of Asteria Health reflects a strategic move towards vertical integration to strengthen supply chain control and reduce production costs, a common trend in industries seeking greater efficiency and resilience. The shift of dietary supplement sales to e-commerce aligns with broader industry trends towards direct-to-consumer and online distribution models.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• **Right Value Litigation**: Settled for $5.0 million, with $3.5 million paid on February 28, 2025, and the remaining $1.5 million due by February 17, 2026. This includes a mutual release of claims.
• **Yosaki and Mioko Trusts Litigation**: A lawsuit alleging breaches of fiduciary duties, aiding and abetting, and unjust enrichment. The lawsuit was dismissed on March 15, 2025, but the Plaintiffs appealed to the Delaware Supreme Court on April 15, 2025, and briefing is complete.
• **Cindy Latch Litigation**: A lawsuit alleging misappropriation of name, image, and likeness. A temporary restraining order and temporary injunction were initially granted, but the temporary injunction was reversed by the Dallas 5th District Court of Appeals on April 15, 2025. A motion for partial summary judgment on the breach of contract claim was filed by Latch on May 23, 2025, with no ruling yet. Trial is currently docketed for April 27, 2026.
• **Gary S. Donovitz / NIL Litigation**: A lawsuit alleging misappropriation of name, image, and likeness. Multiple temporary restraining orders and injunctions have been issued by Texas and Delaware courts. The Delaware Chancery Court issued a temporary restraining order precluding Donovitz from prosecuting the Texas litigation. Donovitz removed the action to the U.S. District Court for the District of Delaware on July 18, 2025, and BioTE has sought to remand the case back to the Delaware Chancery Court.

Related Party Transactions

• A consulting agreement was entered into with Ms. Teresa S. Weber (former CEO) on January 30, 2025, for her to serve as a strategic advisor for up to one year. Payments of $0.06 million were made during the three months ended June 30, 2025, and $0.1 million during the six months ended June 30, 2025.
• Purchases of dietary supplements from a vendor in which the Company's founder holds a minority interest totaled $0 during the three months ended June 30, 2025, and $0.08 million during the six months ended June 30, 2025.

Stakeholder Impact

• **Shareholders**: Experienced a positive shift from net losses to net income and increased Adjusted EBITDA, which could improve investor confidence. However, the decline in core pellet procedure revenue and the persistence of a material weakness in internal controls present ongoing concerns. The share repurchase program continues, potentially benefiting shareholders.
• **Employees**: Approximately 15 employee roles (7.2% of the workforce) were impacted by an organizational restructuring plan, resulting in one-time severance payments.
• **Customers (Clinics/Practitioners)**: The decline in pellet procedure revenue due to fewer new clinic additions and lower existing clinic volumes indicates challenges in customer acquisition and retention for the core business. However, the extension of the AnazaoHealth Pharmacy Services Agreement ensures continued supply chain stability for bioidentical hormone pellets.
• **Suppliers**: The company has concentrations of credit risk with one lender for its outstanding debt and revolving loans, and relies on a few key vendors for inventory purchases (78.8% from three vendors in Q2 2025).
• **Creditors**: The company is in compliance with all financial covenants associated with its Truist Credit Agreement and has repaid approximately 64% of its share repurchase liabilities, indicating sound debt management.

Next Steps

• Continue to execute corporate growth plans to elevate growth, achieve strategic objectives, and further advance patient health and wellness.
• Evaluate the provisions of the 'One Big Beautiful Bill Act' and its potential implications for deferred tax assets, valuation allowance assessments, and effective tax rate.
• Continue to assess the likelihood of the realization of deferred tax assets and adjust the valuation allowance accordingly.
• Continue to monitor ongoing changes to global trade policies, including tariffs.
• Remediate the identified material weakness in internal control over financial reporting by hiring additional accounting and finance personnel, implementing enhanced system capabilities, reconciliation controls, review controls, and financial close checklists.
• Review and assess access within information systems and implement mitigating controls where proper segregation of duties may not be feasible, including user access reviews for key systems.
• Trial on the Cindy Latch Litigation is currently on the 101st Judicial District Court's two-week docket beginning on April 27, 2026.
• Briefing on the motion to remand in the Gary S. Donovitz litigation has not yet been completed, and a hearing on whether to extend the Delaware temporary restraining order or convert it to a preliminary injunction is pending.

Key Dates

Recommendation

The company's financial performance shows a notable turnaround, moving from significant net losses to profitability and demonstrating growth in Adjusted EBITDA. This indicates improved operational efficiency and cost management, partly due to vertical integration. The extension of a key supply agreement and the settlement of a major lawsuit reduce immediate operational and legal uncertainties. However, the decline in revenue from core pellet procedures, coupled with a decrease in cash reserves, raises concerns about the sustainability of organic growth in its primary business segment. Furthermore, the persistent material weakness in internal controls over financial reporting is a serious governance issue that could lead to future financial misstatements or operational inefficiencies. Given these mixed signals – strong profitability improvement against underlying revenue challenges and control deficiencies – a seasoned investor would likely adopt a 'hold' stance, waiting for clearer evidence of consistent revenue growth in the core business and successful remediation of the internal control weaknesses before making a more definitive investment decision.

Keywords

Biote, hormone optimization, bioidentical hormone replacement, pellet therapy, dietary supplements, wellness, healthcare, SEC filing, 10-Q, financial results, corporate governance, litigation, supply chain, medical technology, BTMD