biote Corp. Q2 FY2025 earnings call

• Biote implemented a strategic organizational restructuring in May 2025 to drive growth, with key objectives to accelerate new provider wins, strengthen relationships with existing practitioners, and improve financial performance. - On the commercial side, they brought in new leadership like Joey Lopes, recruited external sales talent, updated sales compensation structure, and revamped sales team recruitment and training. - On the foundational side, they conducted a top-to-bottom review of core functions and internal processes. Initial progress has been made, but it will take time.

In the second quarter, revenue was approximately $48.9 million. Procedure revenue was softer than anticipated. Dietary supplement revenue increased 30.4% to $10.7 million, accounting for about 21.9% of total revenue. Gross profit margin was 71.6%, a 280 basis point increase. Selling, general and administrative expenses decreased 12.2% to $24.2 million. Net income was $3.9 million. Adjusted EBITDA increased 19.1% to $15.2 million with an adjusted EBITDA margin of 31.1%.

• Adjusted fiscal 2025 revenue guidance to be above $190 million and adjusted EBITDA guidance to be above $50 million. - Forecast procedure revenue declines of high single digits for the full year and dietary supplement growth at approximately a mid-teens percentage rate. - Expect second half procedure revenue growth to be similar to the second quarter, with strong but moderating sales growth in dietary supplements.

• Organizational restructuring may have a disruptive effect on business. - Uncertainties from macroeconomic conditions, competition, etc. - Lingering effects of the clinical decision support software disruption. - Impact of personnel adjustments.

Q: I just wanted to drill into the new clinic additions a little bit more and just understand where the biggest delta is between performance versus your expectations coming out of last quarter that resulted in the guide down? And then secondly, just if anything has changed in the marketplace as it relates to competition or more broadly the consumer?

A: Yes. Thanks, Kaitlyn, for the question. Our guide down was essentially, we took a look at a number of scenarios. So we've seen a slowdown of new starts. We've seen volume at existing clinics go down slightly. And then, of course, we've seen attrition tick up this year. And all of those things we've spoken about and highlighted, including last quarter. So as those headwinds persist, we've looked into the future and said, what are the different scenarios throughout the year, which got us comfortable with the guide of something north of $190 million for 2025. Again, all of our initiatives are focused on the top line and essentially made to drive growth in that number, but it does take a little bit of time. And we do need to get new clinic additions going in a better direction, higher, and we also need to improve retention with our existing clinics. So the initiatives that we've got in place to do that are both short term and long term. And we've spoken a lot about the short-term initiatives around the reorganization and sales force changes. And then we've got longer-term initiatives we haven't spoken about too much yet that are really designed around improving the value proposition to our customers, which will do 2 things: help us bring more clinics on board, and make our offering more sticky to improve retention. So that will continue to be our focus.

Q: My question is just around what would be the biggest change in the sales force and the way that you market just given the restructuring there? I would love any color there. And you did mention the attrition is a little bit higher. Also on that front, what are some of tangible changes that you are already seeing, if any, based on your restructuring? That would be helpful.

A: Joanna, thanks for the question. The sales force changes that really needed to happen, one, and are going to be essential for us to drive growth going forward have essentially just all been around what the focus of that team and what we've incentivized with that team. So without getting into too much detail, we had a compensation plan and a focus that was around maintaining the business essentially. And that's not uncommon with a company that's new as we were. So especially the way we started was growing -- you grow your business, you get compensated for that book of business, and that just sort of happens in perpetuity. The challenge with that model is you get reps that have really large territories and not only don't get compensated on growing those territories, but just have a hard time growing large territories because all of your efforts are around servicing the existing base. And so in order for us to scale, we need smaller territories, we need growth targets, and we need a comp plan that pays everybody on a growth target. So that, in a nutshell, are the biggest changes. But on top of that, we wanted a single voice that everybody heard. So we consolidated leadership and elevated individuals so that we have one person leading the sales team. Everybody is hearing the same thing. That's going to lead to greater accountability, better messaging, greater efficiency across the team. And then we've done a number of initiatives around hiring profiles, our recruiting and our sales training, which all have been revamped. So we've got a team that's starting to come together that we think is going to be fantastic and able to drive growth in the short term. And then we -- as far as your question on attrition, attrition is essentially about, one, making sure you've got that sales team in place because if you've got vacancies, it's hard to service and defend your business. And then two, making sure as a leader in the space like we are and a premium product, you've got to make sure your value proposition is strong and always getting stronger. And so we do have a number of initiatives there that will just make doing business with Biote easier and we think increase the gap of what we offer versus others in the industry and make us strong with retention.