biote Corp. (BTMD) Earnings Call Transcript

Thank you for standing by. My name is Tina, and I will be your conference operator. At this time, I would like to welcome everyone to the Biote Second Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Szymon Serowiecki, Investor Relations. Please go ahead.

Thank you for joining us today. Good afternoon. Biote published financial results for the second quarter ended June 30, 2026. This news release is available in the Investor Relations section of the company's website. Hosting today's call are Bob Peterson, Interim Chief Executive Officer and Chief Financial Officer; and Marc Beer, Executive Chairman. Before we get started, I'd like to remind everyone the management will make some statements during this call that include forward-looking statements regarding, among other things, the company's financial results, future performance and growth opportunities, business outlook, strategic plan anticipated benefits, goals, research and development, manufacturing and conversation activities, its competitive position, regulatory process operation, benefit of its solutions, anticipated impacts of macroeconomic conditions on its business, results of operations, financial conditions and other matters that do not relate to historical facts. These statements are not guarantee future performance. They are subject to 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. Biote undertakes no obligation to update them in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. For discussion of risks and important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website in the Investor Relations section of our website as well as risks and other important factors discussed in the earnings release. Management also refers to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided in the earnings release with the primary differences being stock-based compensation, fair value adjustments to certain liabilities and other non-operating expenses. Please refer to our second quarter 2026 6 earnings release for reconciliation of these non-GAAP measures to closest comparable GAAP measures. I'll now turn the call over to Bob Peterson.

Thanks, Szymon, and good afternoon, everyone. I appreciate you joining us today. Before we get into the details of the quarter, I want to take a step back and talk about where the company stands and how we're thinking about the work ahead. Over the past year, Biote has achieved meaningful progress in advancing several foundational initiatives that we believe position the company to return to growth and generate improved financial performance. Most notably, we've strengthened our corporate culture, emphasizing accountability and discipline throughout the organization. We have also realigned and invested significantly in our commercial team, optimize our structure and enhanced our capabilities to drive sustainable growth. The improvements we have achieved are meaningful, and they reflect a tremendous amount of effort across the organization. At the same time, our reported financial results do not yet reflect the significant progress we've made internally against our strategic objectives. As we've discussed previously, the voluntary product recall earlier in the year created temporary headwinds that affected commercial activity. As we exited the second quarter with these challenges largely resolved, Asteria Health is once again operating at normalized inventory and increased production levels, supported by the addition of a second production shift. We expect that as we steadily increase our supply of internally manufactured pellets in the second half of the year, we will see a corresponding improvement in our profitability. When I stepped into the Interim CEO role in June, I reinforced our continued commitment to advancing the operational and organizational initiatives already underway to make our platform more scalable, improved cross-functional execution and support long-term growth. And that's exactly what we're doing. We are strengthening our commercial processes and team, improving operational alignment, building a performance-oriented data-driven culture and investing in technology capabilities that will help drive growth. As we enter into the second half of 2026, we are moving into the next phase of our strategic road map, which is designed to drive deeper operational improvements across our business. In this phase, our goal is to restore procedure volume growth. Key areas of focus include: strengthening clinic retention and enhancing the practitioner experience, accelerating sales productivity and achieving a higher rate of quick start success for newly added clinics. These priorities will determine our long-term success, and they require disciplined, sustained effort across our organization. With our larger commercial team, we now have the capacity to deepen our relationships with existing practitioners across our network and support them in ways that further enhance patient outcomes and long-term clinic performance. While we've made important progress in improving alignment and accountability, which should improve sales productivity, we are fine-tuning our sales processes, strengthening coaching and development programs for our field team and ensuring our teams are laser-focused on the activities that drive clinic engagement and procedure volume. This is a multi-quarter effort, and we will continue to work to raise our sales productivity so that we can achieve our growth objectives. As an innovator in the hormone replacement therapy market and the established leader in clinical support, Biote remains focused on expanding our provider network and accelerating growth. We continue to strengthen our training and onboarding programs, so new practitioners can ramp efficiently, build momentum and stay engaged through their first year. Our commitment to early-stage success remains unwavering. Alongside these operational and strategic initiatives, we continue to evaluate inorganic opportunities that complement our strategy and supplement our growth. To be clear, organic growth remains our priority and we will continue to improve our fundamentals. But we also recognize that as our market opportunity in hormone optimization and healthy aging solutions evolves, we can expand our platform, enhance our capabilities and accelerate our strategic progress through inorganic means. Although we are not yet in a position to discuss the specifics, we are actively evaluating several opportunities that will allow us to expand our footprint in our market. However, what I can say is that inorganic growth represents an important complement to the internal work underway, and we will be thoughtful and disciplined in how we approach it. Now I'll review the second quarter financial results. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the second quarter of 2025. Revenue decreased 9.5% to $44.2 million. Procedure revenue declined 13.9% to $30.3 million which included an estimated $3.3 million impact related to the voluntary recall of certain hormone pellets shipped by Asteria Health. Procedure revenue was primarily impacted by the following factors: one, lower procedure volume in existing clinics, which includes the impact of procedure deferrals and hormone pellet supply constraints related to the recall; two, elevated clinic attrition; and three, slower productivity from new clinics as our sales team focused on supporting recall impacted clinics. Dietary supplements revenue grew 5.7% to $11.4 million, the increase was primarily driven by the continued growth of our e-commerce channel. Overall, we continue to forecast our dietary supplements revenue will grow at a mid- to high single-digit rate for the 2026 year. Gross margin was 65.4% compared to 71.6%. The decrease was primarily due to $0.6 million of incremental costs related to the recall, which includes reduced operating efficiency at Asteria Health, coupled with increased sourcing of high-cost third-party pellets. In the second quarter, Asteria Health supplied around 30% of our ship pellets as compared to a similar level in the first quarter of 2026 and over 50% in the fourth quarter of 2025. As I noted, we have fully restored Asteria Health's supply continuity and inventory levels are now normalized. As a result, we expect our third quarter product mix to improve as we source a lower percentage of pellets from our third-party suppliers, which, with time, will improve our gross margin. Going forward, we aim to meet our practitioners' needs through the vertical integration of Asteria Health. Selling, general and administrative expenses increased to $32.4 million from $24.2 million. The increase reflected higher legal expenses. I would note that we have recently resolved many of our outstanding legal matters which we expect should reduce quarterly legal expenses going forward. Net loss was $7.4 million and diluted loss per share attributed to Biote corporate stockholders was $0.23. This compares to a net income of $3.9 million and diluted earnings per share attributed to Biote Corp stockholders of $0.10. Net loss for the second quarter of 20 included a loss of $0.8 million due to the changes in the fair value of the earnout liabilities. By comparison, net income for the second quarter of 2025 included a loss of $1.8 million due to the changes in the fair value of the earnout liabilities. Adjusted EBITDA decreased to $5.6 million with an adjusted EBITDA margin of 12.6%. Cash flow used by operations in the second quarter was negative $1.2 million. As of June 30, 2026, cash and cash equivalents were $11.2 million as compared to $5.3 million in March 31, 2026. Now turning to our financial outlook for 2026. We expect procedure revenue to show sequential improvement in both the third and fourth quarters benefiting from more consistent supply continuity and growth in new clinics. However, the impacts from the voluntary product recall earlier in the year have delayed our expected return to year-over-year procedure revenue growth. As a result, we are revising our full year financial outlook to reflect our first half performance and our current expectation for the remainder of the year. With respect to our 2026 revenue outlook, procedure revenue is expected to improve sequentially in both the third and fourth quarters versus prior guidance that anticipated a return to year-over-year growth in the second half. However, year-over-year procedure revenue in these periods is expected to be negative due to the first half disruption and other factors affecting near-term performance. Dietary supplements revenue is expected to grow at a mid- to high single-digit rate from 2025. For the 2026 year, we estimate revenue above $175 million and adjusted EBITDA above $25 million. This compares to our prior guidance of revenue above $190 million and adjusted EBITDA above $38 million. In closing, despite our near-term financial results, I'm encouraged by the foundational progress we have achieved and our team's shared commitment to delivering on our next phase of our strategic road map. As we execute on our key initiatives, we are building a more resilient platform that we believe will support sustainable, profitable growth over the long term. Operator, let's now open the call for questions.

And our first question comes from the line of Kaumil Gajrawala with Jefferies.

I guess the first question, you -- Bob, you sort of opened or at least earlier in your prepared remarks, you talked about inorganic opportunities. But obviously, we you don't want to provide too many details. But can you maybe just provide strategy or outlook? Like what would be the ideal type of deal for you guys? And is it -- how adjacent is it to your core? Or is it more consolidating the core with others? In general, how does it -- how would it work? What would you prefer?

Yes. So I think the biggest thing here is we're -- it's a little bit early. We're not in a position to discuss the specifics. We are evaluating opportunities that can really support and strengthen the position that we're in now, the platform that we're participating in. And I would just say to really dive into your question a little bit is really we want to get into things that can expand our reach and accelerate our strategic objectives. These opportunities would include the capabilities to complement our core offering, adjacent products, too, and to basically enhance the practitioner engagement and other opportunities to broaden our footprint within the space.

Okay. Got it. And on the Asteria recall, you gave some figures, I think, $3.3 million. Anything as it relates to the brand, have you lost practitioners that are difficult to bring back. And it's now sort of -- the exercise now is to accelerate the recruitment of new ones? I'm just curious beyond just the sort of losses of the moment, any lingering effects either in change of strategy or maybe new things we need to be thinking about?

Yes. Specifically related to Asteria, I have to say that the Asteria brand itself remains quite strong. People appreciated what we had done. And I can say that as it relates to building inventory and driving stock, we're really in a solid place. And we don't see that there will be any challenges in pushing back shifting that inventory back over to Asteria. And I would just say as we begin to do that, then as you mentioned, start to see that gross margin improvement. So we're -- that's underway right now, and we haven't received too much push back on it. So hopefully, that answers your question.

Your next question comes from the line of Jonna Kim with TD Cowen.

Just maybe additional color around compared to when you had the call last time to now sort of what led to lower volume than you expected? And you mentioned also elevated cleaning attrition and sort of what drove that sort of the quarter-on-quarter delta per se on the results? Just any additional color would be helpful there. And just related to that also, as you think about attrition, what are some measures that you're implementing in the second half to drive better retention? Any new measures that you're thinking of for -- to drive that retention up? That would be helpful.

Thanks, Jonna. Yes, first and foremost, attrition is still sitting at the high single digits rate. No material change. I would just say we're sitting at around that 8% level. The biggest thing that I would say just from a driver, the recall and the supply challenges that we incurred did hit -- did hurt in the same-store sales area and on procedure volumes. And the biggest thing that I would say, just to put a bow on Q2 is that we're happy to say now that the supply challenges, as I mentioned to Kaumil, the supply challenges that we are -- had seen in Q2 are now behind us from a supply perspective at Asteria. The second part of your question is really a good 1 because you know that we -- I highlighted on the prepared remarks that Phase 1 was largely completed. And that was really the setup for focusing on our foundational fixes, the structure of the commercial team expansion, operational processes, really focusing on data and systems improvement. But the exact question that you asked really dives into the second phase of the equation, which is really sales force productivity and performance. And I would tell you, in that segment, the things that we're going to be doing differently, focusing on attrition, focusing on those same-store sales, trying to drive new customer growth. We're really going to be in a position of focusing and strengthening our clinic retention and enhancing our practitioner experience from a retention perspective. And I would just say 1 of the things that we've learned and we've got line of sight into is that as we look at the data that -- in our field activity, we know that when we are in accounts every month and in front of the practitioner, we don't lose that account. So with that in mind, knowing that attrition should improve. So really, that's going to be an activity-based focus that we're focusing on in the second half of 2026 in a real data-driven approach and focusing in on accountability. And I would just say a handful of other areas that we'd be focusing in on are going to be just accelerating sales productivity and driving new performance for the customers that are coming in the top of the funnel.

Got it. And just 1 more question. As you evaluate the business today, do you have the right number of sales force now? Or do you need to expand more? Or do you feel comfortable where you are?

No, absolutely. I think the real key now we are -- we've got a full sales force, which is fantastic. And now really, it comes down to driving that activity focus on performance. And I really do believe, put the right processes and operational processes and systems in place. Now it's just a matter of driving that activity and focus in the second half.

Your next question comes from the line of Jailendra Singh with Truist Securities.

So maybe I want to follow up on your comment around new clinic productivity being slower as the sales focus on supporting recall impacted clinics. Is the issue simply delayed onboarding activity? Or are you seeing lower-than-expected utilization from these new clinics once they become active? And does your guidance assume any improvement in productivity in the second half on these clinics?