What changed in biote Corp.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of biote Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+86 added−89 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-29)
Top changes in biote Corp.'s 2023 10-K
86 paragraphs added · 89 removed · 54 edited across 1 sections
- Item 6. [Reserved]+86 / −89 · 54 edited
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
54 edited+32 added−35 removed61 unchanged
Item 6. [Reserved]
Selected Financial Data — reserved (removed by SEC in 2021)
54 edited+32 added−35 removed61 unchanged
2022 filing
2023 filing
Biggest changeComparison of the years ended December 31, 2022 and 2021 The table and discussion below present our results for the years ended December 31, 2022 and 2021: Year Ended December 31, Increase/(Decrease) (U.S. dollars, in thousands) 2022 2021 $ % Revenue: Product revenue $ 163,133 $ 137,598 $ 25,535 18.6 % Service revenue 1,824 1,798 26 1.4 % Total revenue 164,957 139,396 25,561 18.3 % Cost of revenue (excluding depreciation and amortization included in selling, general and administrative, below) Cost of products 51,990 46,298 5,692 12.3 % Cost of services 2,585 2,519 66 2.6 % Cost of revenue 54,575 48,817 5,758 11.8 % Commissions 974 2,056 (1,082 ) (52.6 %) Marketing 4,628 4,908 (280 ) (5.7 %) Selling, general and administrative 165,502 49,054 116,448 237.4 % Income (loss) from operations (60,722 ) 34,561 (95,283 ) (275.7 %) Other income (expense), net: Interest expense (5,091 ) (1,673 ) (3,418 ) 204.3 % Gain from change in fair value of warrant liability 5,127 — 5,127 0.0 % Gain from change in fair value of earnout liability 61,770 — 61,770 0.0 % Loss from extinguishment of debt (445 ) — (445 ) 0.0 % Other income 1,073 17 1,056 * Total other income (expense), net 62,434 (1,656 ) 64,090 * Income before provision for income taxes 1,712 32,905 (31,193 ) (94.8 %) Income tax expense (benefit) 388 286 102 35.7 % Net income $ 1,324 $ 32,619 $ (31,295 ) (95.9 %) * Not a meaningful change Revenue Revenue for the year ended December 31, 2022 increased by $25.6 million to $165.0 million, or 18.3% as compared to the year ended December 31, 2021.
Biggest changeWe regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 63 Results of Operations Comparison of the years ended December 31, 2023 and 2022 The table and discussion below present our results for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Revenue: Product revenue $ 182,573 $ 163,133 Service revenue 2,787 1,824 Total revenue 185,360 164,957 Cost of revenue Cost of products 54,246 51,990 Cost of services 3,631 2,585 Cost of revenue 57,877 54,575 Selling, general and administrative 98,826 171,104 Income (loss) from operations 28,657 (60,722 ) Other income (expense), net: Interest expense, net (6,363 ) (4,047 ) Gain (loss) from change in fair value of warrant liability (13,411 ) 5,127 Gain (loss) from change in fair value of earnout liability (8,990 ) 61,770 Loss from extinguishment of debt — (445 ) Other income (expense) (16 ) 29 Total other income (expense), net (28,780 ) 62,434 Income (loss) before provision for income taxes (123 ) 1,712 Income tax expense 2,682 388 Net income (loss) $ (2,805 ) $ 1,324 Revenue Revenue for the year ended December 31, 2023 increased $20.4 million to $185.4 million, or 12.4% compared to the year ended December 31, 2022.
For initial trainings, progress is measured by the number of training sessions completed, and for contract-term services, progress is measured on a time-elapsed basis. The training completion and time-elapsed bases represent the most reliable measure of transfer of control to the clinic for trainings and contract-term services, respectively.
For initial training, progress is measured by the number of training sessions completed, and for contract-term services, progress is measured on a time-elapsed basis. The training completion and time-elapsed bases represent the most reliable measure of transfer of control to the clinic for trainings and contract-term services, respectively.
Our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of shares of Class A common stock by selling securityholders pursuant to the registration statement on Form S-1 filed with 65 the SEC on June 17, 2022, which could result in a significant decline in the trading price of our Class A common stock and potentially hinder our ability to raise capital at terms that are acceptable to us or at all.
Our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of shares of Class A common stock by selling securityholders pursuant to the registration statement on Form S-1 filed with the SEC on June 17, 2022, which could result in a significant decline in the trading price of our Class A common stock and potentially hinder our ability to raise capital at terms that are acceptable to us or at all.
However, the pellets are recorded as inventory on our financial statements from the date of shipment until such time as they are administered in a patient treatment as monitored and recorded in our BioTracker system as an additional service for administrative convenience of Biote-certified practitioners and Biote-partnered clinics. These products have a finite life ranging from six to twelve months.
However, the pellets are recorded as inventory on our financial statements from the date of shipment until such time as they are administered in a patient treatment as monitored and recorded in our BioTracker system as an additional service for administrative convenience of Biote-certified practitioners and Biote-partnered clinics. 60 These products have a finite life ranging from six to twelve months.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) March 4, 2026, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. 68 Ite m 7A.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) March 4, 2026, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. 69 Ite m 7A.
We estimate that an increase of 100 basis points in the interest rates related to our long-term debt would increase our annualized interest expense by $1.2 million. We do not engage in any strategies to limit our exposure to this interest rate risk.
We estimate that an increase of 100 basis points in the interest rates related to our long-term debt would increase our annualized interest expense by approximately $1.2 million. We do not engage in any strategies to limit our exposure to this interest rate risk.
Our product revenue also includes revenue earned from sales of pellet insertion kits and Biote-branded dietary supplements. Revenue from the sale of pellet insertion kits and Biote-branded dietary supplements is recognized when the clinic or clinic’s patient (supplements only) obtains control of the product and is generally at the time of shipment from our distribution facility or supplier.
Our product revenue also includes revenue earned from sales of pellet insertion kits and Biote-branded dietary supplements. Revenue from the sale of pellet insertion kits and Biote-branded dietary supplements is recognized when the clinic or clinic’s patient (supplements only) obtains control of the product and is generally at the time of shipment from our distribution facility.
Some of these limitations are as follows: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; 64 • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.
Some of these limitations are as follows: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and 65 • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.
Off-Balance Sheet Commitments and Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Contractual Obligations Our principal contractual obligations and commitments consist of obligations to pay loan principal and interest under our long-term debt agreement and obligations under our operating lease agreement.
Off-Balance Sheet Commitments and Arrangements As of December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Contractual Obligations Our principal contractual obligations and commitments consist of obligations to pay loan principal and interest under our long-term debt agreement and obligations under our operating lease agreement.
Item 6. [Reserved]. Ite m 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 6. [Reserved]. 59 Ite m 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our most critical accounting estimates include revenue recognition, the valuation of inventory, the valuation of stock compensation, the valuation of earnout liability and the valuation of warrant liability. 66 Our significant accounting policies are described in Note 2 to our consolidated financial statements.
Our most critical accounting estimates include revenue recognition, the valuation of inventory, the valuation of stock compensation and the valuation of earnout liability. Our significant accounting policies are described in Note 2 to our consolidated financial statements.
Revenue is deferred for amounts billed or received prior to delivery of the services. Cost of Revenue Cost of service revenue consists primarily of costs incurred to deliver trainings to Biote-partnered clinics.
Revenue is deferred for amounts billed or received prior to delivery of the services. Cost of Revenue Cost of service revenue consists primarily of costs incurred to deliver training to Biote-partnered clinics.
While the option to receive and right to use the reusable trocars through the term of the contract represents an embedded lease, we have adopted the practical expedient within ASC 842 to combine the lease and non-lease components and account for the combined component under ASC 606. 61 For Biote Method arrangements, we recognize revenue for trainings and for management services over time.
While the option to receive and right to use the reusable trocars through the term of the contract represents an embedded lease, we have adopted the practical expedient within ASC 842 to combine the lease and non-lease components and account for the combined component under ASC 606. 62 For Biote Method arrangements, we recognize revenue for training and for management services over time.
The Biote Method is a comprehensive, end-to-end practice building platform that provides Biote-certified practitioners with the components specifically developed for practitioners in the hormone optimization space: Biote Method education, training and certification, practice management software, inventory management software, and information regarding available hormone replacement therapy (“HRT”) products, as well as digital and point-of-care marketing support.
The Biote Method is a comprehensive, end-to-end practice building platform that provides Biote-certified practitioners with the components specifically developed for practitioners in the hormone optimization space: Biote Method education, training and certification, practice management software, inventory management software, and information regarding available HRT products, as well as digital and point-of-care marketing support.
Cost of procedures increased by $4.6 million for the period, consisting of $4.8 million attributable to volume increases in pellets dispensed which was offset by a reduction of $0.2 million related to broken, damaged, or expired pellets. Biote branded dietary supplement costs increased $0.5 million or 3.5%, due to higher sales volume.
Cost of procedures increased $1.3 million for the period, consisting of $1.4 million attributable to volume increases in pellets dispensed which was offset by a reduction of $0.1 million related to broken, damaged, or expired pellets. Biote branded dietary supplement costs increased $0.4 million or 3%, due to higher sales volume.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, and employee availability and wage increases, which may result in additional stress on our working capital resources.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with global health crises and ongoing international conflicts such as the conflict between Russia and Ukraine and the Israel-Hamas war, and employee availability and wage increases, which may result in additional stress on our working capital resources.
The variable interest rate on our long-term debt has increased since our last fiscal year, to a rate of 6.92304% as of December 31, 2022 from a rate of 3.1% as of December 31, 2021. Inflation We do not believe that inflation has had a material effect on our business, financial condition, or results of operations.
The variable interest rate on our long-term debt has increased since our last fiscal year, to a rate of 8.0% as of December 31, 2023 from a rate of 6.9% as of December 31, 2022. Inflation We do not believe that inflation has had a material effect on our business, financial condition, or results of operations.
Unless the context otherwise requires, all references in this section to the “Company,” “Biote,” “we,” “us, or “our” refer to the business of biote Corp. and all references in this section to the “BioTE Companies” refer to biote Corp. and its subsidiaries 58 following the Business Combination.
Unless the context otherwise requires, all references in this section to the “Company,” “Biote,” “we,” “us”, or “our” refer to the business of the “BioTE Companies” prior to the business combination and to biote Corp. and its subsidiaries from and following the Business Combination in the present tense.
Selling, general and administrative expense also includes rent occupancy costs, office expenses, recruiting expenses, entertainment allocations, depreciation and amortization, share-based compensation, transaction related expenses, other general overhead costs, insurance premiums, professional service fees, research and development and costs related to regulatory and legal matters.
Also included are rent occupancy costs, office expenses, recruiting expenses, marketing and advertising expenses, entertainment allocations, depreciation and amortization, share-based compensation, transaction related expenses, other general overhead costs, insurance premiums, professional service fees, research and development and costs related to regulatory and legal matters.
By virtue of our historical performance over the past 11 years, we believe that our business model has been successful, remains differentiated, and is well positioned for future growth. Our go-to-market strategy focuses on: • Increase the number of Biote-certified practitioners .
We also sell a complementary Biote-branded line of dietary supplements. By virtue of our historical performance over the past 12 years, we believe that our business model has been successful, remains differentiated, and is well positioned for future growth. Our go-to-market strategy focuses on: • Increase the number of Biote-certified practitioners .
The increase was primarily driven by a $24.7 million increase of procedure and Biote-branded dietary supplement revenue. Procedures performed increased by 17.8% versus the prior year resulting in a $19.5 million increase in procedure revenue. During the year ended December 31, 2022, the number of active clinics billed increased by 13% over the year ended December 31, 2021.
The increase was primarily driven by a $17.7 million increase of procedure and Biote-branded dietary supplement revenue. Procedures performed increased 9.3% versus the prior year resulting in a $12.0 million increase in procedure revenue. During the year ended December 31, 2023, the number of active clinics billed increased 14.1% over the year ended December 31, 2022.
Biote-branded dietary supplement sales increased by 19.0% or $5.2 million over the same period in the prior year. Service revenue increased by 1.4% over the same period in the prior year resulting from an increase in the number of training sessions during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biote-branded dietary supplement sales increased 17.5% or $5.7 million over the same period in the prior year. Service revenue increased 52.8% over the same period in the prior year resulting from an increase in the number of training sessions during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our revenue was $165.0 million and $139.4 million, our net income was $1.3 million and $32.6 million, and our Adjusted EBITDA was $50.1 million and $40.2 million, for the years ended December 31, 2022 and 2021, respectively.
Our revenue was $185.4 million and $165.0 million, our net loss was $2.8 million and our net income was $1.3 million, and our Adjusted EBITDA was $55.3 million and $50.1 million, for the years ended December 31, 2023 and 2022, respectively.
Cost of revenue Cost of revenue for the year ended December 31, 2022 increased by $5.8 million, to $54.6 million, or 11.8% as compared to the year ended December 31, 2021. The increase was primarily due to the net impact of higher volumes at sustained unit costs.
Cost of revenue Cost of revenue for the year ended December 31, 2023 increased $3.3 million, to $57.9 million, or 6.1% compared to the year ended December 31, 2022. The increase was primarily due to the net impact of higher volumes at sustained unit costs.
These provisions provide for decreasing management fees owed to us based on the number of new patients treated. This can result in declines in revenue we realize from management fees from existing Biote-partnered clinics unless these are offset by revenue generated from newly acquired Biote-partnered clinics which begin at higher fee levels under the MSA.
This can result in declines in revenue we realize from management fees from existing Biote-partnered clinics unless these are offset by revenue generated from newly acquired Biote-partnered clinics which begin at higher fee levels under the MSA.
The need for strategic inventory levels to ensure competitive delivery performance to our Biote-partnered clinics are balanced against the risk of inventory obsolescence due to clinic requirements.
In estimating obsolescence, we utilize information that includes projecting future demand. 68 The need for strategic inventory levels to ensure competitive delivery performance to our Biote-partnered clinics are balanced against the risk of inventory obsolescence due to clinic requirements.
We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain additional financing on terms favorable to us. The exercise price of our Warrants is $11.50 per Warrant.
We can provide no assurance that additional financing will be available at all or, if available, that we would be able to obtain additional financing on terms favorable to us.
Other Income / Expense Other income and other expense consist of the foreign currency exchange gains and losses for sales denominated in foreign currencies, interest income and other income or payments not appropriately classified as operating expenses.
Other Income / Expense Other income and other expense consist of the foreign currency exchange gains and losses for sales denominated in foreign currencies and other income or payments not appropriately classified as operating expenses. Income Taxes We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions in which we operate.
To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (1) identify the contract(s) with a clinic; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy performance obligations.
Revenue Recognition To determine revenue recognition for arrangements within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers , and subsequent amendments (collectively, “ASC 606”), we perform the following five steps: (1) identify the contract(s) with a clinic; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy performance obligations.
Gain from Change in Fair Value of Earnout Liability Gain from change in fair value of earnout liability consists of the change in fair value of the Member and Sponsor earnouts from the Closing Date to the balance sheet date.
Gain (Loss) from Change in Fair Value of Earnout Liability Gain (loss) from change in fair value of earnout liability consists of the change in fair value of the Member and Sponsor earnouts during the period.
Additionally, the recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results.
Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results.
In connection with the Business Combination, on the Closing Date, BioTE Medical entered into a credit agreement with Truist Bank and Truist Securities, Inc. providing for (i) the Revolving Loans, a $50.0 million senior secured revolving credit facility in favor of BioTE Medical and (ii) the Term Loan, a $125.0 million senior secured term loan A facility in favor of BioTE Medical, which was borrowed in full at the Closing Date.
Following the Closing of the Business Combination, the Company was organized in an umbrella partnership-C corporation (“Up-C”) structure in which the business of the Company is operated by Holdings and its subsidiaries, and Biote’s only material direct asset consists of membership interests in Holdings. 61 In connection with the Business Combination, on the Closing Date, BioTE Medical entered into a credit agreement with Truist Bank and Truist Securities, Inc. providing for (i) the Revolving Loans, a $50.0 million senior secured revolving credit facility in favor of BioTE Medical and (ii) the Term Loan, a $125.0 million senior secured term loan facility in favor of BioTE Medical, which was borrowed in full at the Closing Date.
We assume the risk of loss due to expiration, damage or otherwise. Additionally, the products offered in our Biote-branded dietary supplement portfolio are produced by third-party manufacturers located in the United States. Prior to 2021, our Biote-branded dietary supplements were dropped-shipped directly to our customers from our vendors.
We assume the risk of loss due to expiration, damage or otherwise. Additionally, the products offered in our Biote-branded dietary supplement portfolio are produced by third-party manufacturers located in the United States. Biote contracts with a third-party to provide warehousing, co-packing and logistics services for our Biote-branded dietary supplements.
Income Taxes We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions in which we operate. We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of 62 assets and liabilities using statutory rates.
We recognize deferred tax assets and liabilities based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates.
An additional component of the increase was $21.6 million of transaction-related expenses related to the Business Combination and other associated capital structure transactions recognized during the period. These consisted of the excess closing costs of the Business Combination over the Business Combination proceeds received; costs associated with sponsor share transfers and certain compensation paid resulting from the transaction.
The transaction-related expenses consisted of the excess closing costs of the Business Combination over the Business Combination proceeds received, costs associated with sponsor share transfers and certain compensation paid resulting from the transaction.
We also sell a complementary Biote-branded line of dietary supplements. We generate revenue by charging the Biote-partnered clinics fees associated with the support Biote provides for HRT and from the sale of Biote-branded dietary supplements.
Components of Results of Operations Revenue We generate revenue by charging the Biote-partnered clinics fees associated with the Biote Method and from the sale of Biote-branded dietary supplements.
Income Tax Expense (Benefit) Income tax expense for the year ended December 31, 2022 decreased by $0.1 million as compared to the year ended December 31, 2021.
Income Tax Expense (Benefit) Income tax expense for the year ended December 31, 2023 increased $2.3 million compared to the year ended December 31, 2022.
Gain from Change in Fair Value of Warrant Liability Gain from change in fair value of warrant liability consists of the change in fair value of the warrant liability from the Closing Date to the balance sheet date.
Gain (Loss) from Change in Fair Value of Warrant Liability Gain (loss) from change in fair value of warrant liability consists of the change in fair value of the warrant liability during the period.
The gain from the change in fair value of our earnout liability of $61.8 million was primarily a result of the decrease in the closing price of our Class A common stock listed on Nasdaq to $3.73 per share on December 31, 2022 from $9.02 per share on the Closing Date.
Gain (Loss) from Change in Fair Value of Earnout Liability The change in the gain (loss) from change in fair value of the earnout liability was primarily due to the change in the closing price of our Class A common stock during the years ended December 31, 2023 and 2022.
Future demand is affected by market conditions, new products and strategic plans, each of which is subject to change with little or no forewarning. In estimating obsolescence, we utilize information that includes projecting future demand.
Dietary supplements are evaluated at the product level based on sales of our products in the recent past and/or expected future demand. Future demand is affected by market conditions, new products and strategic plans, each of which is subject to change with little or no forewarning.
Interest Expense Interest expense consists primarily of cash and non-cash interest under our term loan facility and commitment fees for our unused line of credit.
Interest Expense, Net Interest expense, net consists primarily of cash and non-cash interest under our Term Loan, commitment fees for our unused Revolving Loans and interest income earned on our money market account and now matured short-term investment.
If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or other efforts. A recession or additional market corrections resulting from the impact of the evolving effects of the COVID-19 pandemic could materially affect our business and the value of our securities.
If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or other efforts.
The allowance for pellets is determined based on the age of the specific manufacturing lots of the product and its remaining life until expiration. Dietary supplements are evaluated at the product level based on sales of our products in the recent past and/or expected future demand.
We regularly review our inventories and write down our inventories for estimated losses due to obsolescence or expiration. The allowance for pellets is determined based on the age of the specific manufacturing lots of the product and its remaining life until expiration.
These include: tenure of its practitioners as Biote-certified practitioners; the number of certified practitioners in an individual clinic; the number of patients served by a clinic; the clinic’s patient demographics; and the clinic’s geographic location and population density. The master services agreements (“MSAs”) we enter into with Biote-partnered clinics contain tiered pricing provisions for the management fees.
Revenue generated from individual Biote-partnered clinics varies significantly due to many factors. including but not limited to, the tenure of practitioners as Biote-certified practitioners; the number of certified practitioners in an individual clinic; the number of patients served by a clinic; the clinic’s patient demographics; and the clinic’s geographic location and population density.
Cash Flows The following table summarizes our consolidated cash flows for the years ended December 31, 2022 and 2021: Year Ended December 31, Increase/(Decrease) 2022 2021 $ % Consolidated Statements of Cash Flows Data: Net cash (used in) provided by operating activities $ (9,157 ) $ 33,720 $ (42,877 ) (127.2 %) Net cash used in investing activities (1,838 ) (3,807 ) 1,969 51.7 % Net cash provided by (used in) financing activities 63,460 (20,343 ) 83,803 412.0 % Operating Activities Comparison of the years ended December 31, 2022 and 2021 Cash flows from operating activities for the year ended December 31, 2022 decreased $42.9 million as compared to the year ended December 31, 2021.
Cash Flows The following table summarizes our consolidated cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Consolidated Statements of Cash Flows Data: Net cash provided by (used in) operating activities $ 26,883 $ (9,157 ) Net cash used in investing activities (2,713 ) (1,838 ) Net cash provided by (used in) financing activities (14,380 ) 63,460 Operating Activities Cash flows from operating activities result primarily from fees associated with the Biote Method and from the sale of Biote-branded dietary supplements.
Further, global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide resulting from the effects of COVID-19 and otherwise. If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted.
Recent Developments Impact of Global Economic Trends Global economic conditions have been challenging, with disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide resulting from the effects of public health crises and otherwise.
As of December 31, 2022, we had cash and cash equivalents of $79.2 million and a $50 million revolving line of credit.
Additionally, as of both December 31, 2023 and 2022, we had $50.0 million of revolving loans available under our Truist credit agreement.
The following is a reconciliation of net income (loss) to Adjusted EBITDA (in thousands) for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Net income $ 1,324 $ 32,619 Interest expense 5,091 1,673 Income tax expense 388 286 Depreciation and amortization 2,199 1,400 Loss from extinguishment of debt and other non-operating items (628 ) (17 ) Share-based compensation expense 82,180 — Transaction-related expenses 21,627 2,387 Litigation and other 4,843 1,869 Gain from change in fair value of warrant liability (5,127 ) — Gain from change in fair value of earnout liability (61,770 ) — Adjusted EBITDA $ 50,127 $ 40,218 Liquidity and Capital Resources We derive liquidity primarily from debt and equity financing activities.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA: Year Ended December 31, (in thousands) 2023 2022 Net income (loss) $ (2,805 ) $ 1,324 Interest expense, net 6,363 4,047 Income tax expense 2,682 388 Depreciation and amortization 2,994 2,199 Loss from extinguishment of debt (1) — 445 Share-based compensation expense (2) ` 9,057 82,180 Litigation expenses-former owner (3) 6,770 3,603 Litigation-other (4) 633 477 Legal settlement (gain) loss (5) 1,048 88 Transaction-related expenses (6) 2,118 21,627 Other expenses (7) 1,174 646 Merger and acquisition expenses (8) 2,821 — (Gain) loss from change in fair value of warrant liability 13,411 (5,127 ) (Gain) loss from change in fair value of earnout liability 8,990 (61,770 ) Adjusted EBITDA $ 55,256 $ 50,127 (1) Represents unamortized debt issuance costs of $0.4 million charged to extinguishment of debt upon full repayment of the Company’s credit agreement with Bank of America.
Additionally capitalized software development costs decreased by $0.9 million. Financing Activities Comparison of the years ended December 31, 2022 and 2021 Net cash provided by financing activities for the year ended December 31, 2022 increased $83.8 million as compared to the year ended December 31, 2021. The increase is primarily due to the completion of the Business Combination with Haymaker.
Investing Activities Net cash used in investing activities increased $0.9 million to $2.7 million for the year ended December 31, 2023 compared to $1.8 million for the year ended December 31, 2022, principally related to expenditures for capitalized software development costs.
Other Income Other income for the year ended December 31, 2022 increased by $1.1 million to $1.1 million as compared to the year ended December 31, 2021. The increase was primarily due to interest income earned on higher on hand cash balances and currency fluctuations during the period.
Interest Expense, Net Interest expense, net for the year ended December 31, 2023 increased $2.3 million to $6.4 million, or 57.2%, compared to the year ended December 31, 2022. The increase was primarily a result of higher interest rates incurred during the period, partially offset by interest income earned on our money market account and no matured short-term investment.
Marketing Marketing expense for the year ended December 31, 2022 decreased by $0.3 million to $4.6 million, or 5.7%, as compared to the year ended December 31, 2021. 63 Selling, General and Administrative Selling, general and administrative expense for the year ended December 31, 2022 increased by $116.4 million to $165.5 million, or 237.4%, as compared to the year ended December 31, 2021.
Additionally, there was an increase in both trocar and shipping and freight costs of $0.7 million and $0.2 million, respectively. Selling, General and Administrative Selling, general and administrative expense for the year ended December 31, 2023 decreased $72.3 million to $98.8 million, or (42.2%), compared to the year ended December 31, 2022.
Investing Activities Comparison of the years ended December 31, 2022 and 2021 Net cash used in investing activities for the year ended December 31, 2022 decreased by $2.0 million as compared to the year ended December 31, 2021. This decrease was primarily driven by a reduction in purchases of property and equipment of $1.1 million, primarily reusable trocars.
Net cash provided by operating activities increased $36.0 million to $26.9 million for the year ended December 31, 2023 compared to cash used by operating activities of $9.2 million for the year ended December 31, 2022.
The impact of the COVID-19 pandemic and the related disruptions caused to the global economy did not have a material impact on our business during the years ended December 31, 2022 and 2021. We experienced a decrease in Biote-partnered clinic demand and Biote-branded dietary supplement shipments in the second quarter of fiscal year 2020.
The impact of global health crises and the related disruptions caused to the global economy did not have a material impact on our business during the years ended December 31, 2023 and 2022. Additionally, the recent trends of rising inflation may also materially adversely affect our business and corresponding financial position and cash flows.
The increase also included a $7.2 million increase in payroll and related expenses due to increases in sales incentives consistent with sales growth for the period and additional sales and management hiring; $0.7 million of travel and entertainment expenses due to increases in sales force headcount.
These decreases were partially offset by a $5.3 million increase in employee-related expenses due to an overall increase in headcount, an increase in sales incentives consistent with sales growth for the year and an increase in severance expense.
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Beginning in 2021, Biote contracted with a third-party to provide warehousing, co-packing and logistics 59 services for our Biote-branded dietary supplements. As such our consolidated balance sheets as of December 31, 2022 and December 31, 2021 reflect inventories relating to these items. Revenue generated from individual Biote-partnered clinics varies significantly. This variability is due to many factors.
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As such our consolidated balance sheets as of December 31, 2023 and December 31, 2022 reflect inventories relating to these items.
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Recent Developments Impact of the COVID-19 Pandemic and Other Trends In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic (the “COVID-19 pandemic”), and the virus continues to spread in areas where we partner with Biote-certified practitioners and Biote-partnered clinics and sell our dietary supplements.
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A recession or additional market corrections resulting from the impact of the effects of global health crises, such as the COVID-19 pandemic, could materially affect our business and the value of our securities.
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Several public health organizations have recommended, and many local governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place and social distancing ordinances, which have resulted in a significant deterioration of economic conditions in many of the states in which we operate.
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Chief Financial Officer Transition On January 8, 2024, the Company appointed Robert C. Peterson as Chief Financial Officer (principal accounting and principal financial officer) of the Company. In connection with his appointment, the Company entered into an employment agreement with Mr. Peterson, dated as of January 8, 2024, which provides for Mr.
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This decrease was primarily the result of closures or reduced capacity at Biote-partnered clinics in various geographies within the United States. During the second half of fiscal year 2020, clinic demand returned to pre-COVID-19 pandemic levels.
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Peterson’s at-will employment as the Chief Financial Officer for a term commencing on January 8, 2024 and continuing until terminated by either the Company or Mr. Peterson. Samar Kamdar, the Company’s prior Chief Financial Officer, transitioned out of his role, effective immediately. On January 11, 2024, Mr.
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During this and subsequent periods, we have not experienced any material disruptions in our supply chain or in our ability to fulfill orders as a result of the COVID-19 pandemic.
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Kamdar entered into an executive transition agreement with the Company, which provided that Mr. Kamdar would remain employed by the Company through February 29, 2024, to assist with the transition and work on special projects.
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Operations prior to the Business Combination are those of the BioTE Companies. 60 Following the Closing of the Business Combination, the Company is organized in an “Up-C” structure in which the business of the Company is operated by Holdings and its subsidiaries, and Biote’s only material direct asset consists of membership interests in Holdings.
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Operations prior to the Business Combination are those of the BioTE Companies.
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Components of Results of Operations Revenue We sell Biote-partnered clinics the Biote Method, the components of which are specifically developed for practitioners in the hormone optimization space: Biote Method education, training and certification, practice management resources, inventory management resources, and digital and point-of-care-marketing support.
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The master services agreements (“MSAs”) we enter into with Biote-partnered clinics contain tiered pricing provisions for the management fees. These provisions provide for decreasing management fees owed to us based on the number of new patients treated.
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Our revenue represents fees paid for the training, marketing support, practice development, equipment, IP licensing, and product sales of Biote-branded dietary supplements, physician-prescribed procedures, and pellet procedure convenience kits, or trocars.
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This decrease was primarily driven by a $73.1 million decline in stock compensation expense compared to the year ended December 31, 2022, as the Closing of the Business Combination triggered the accelerated vesting of incentive units and phantom equity rights and resulted in the recognition of $78.0 million of stock compensation expense.
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Commissions Commissions consist primarily of fees paid to a third-party sales force and fees paid to Biote-partnered clinics that participate in our clinic mentor program (our “Mentor Program”), which pairs experienced Biote-certified practitioners with newly contracted practitioners.
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Additionally, during the year ended December 31, 2022, the Company incurred transaction-related expenses of $21.6 million related to the Business Combination and other associated capital structure transactions that did not recur during the year ended December 31, 2023.
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Commissions paid to the Company’s third-party sales forces relate to market support and development activities undertaken to increase sales through the acquisition of new Biote-partnered clinics and growth from existing clinics. These are not considered incremental costs to obtain a clinic contract.
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Additionally, outsourced professional services fees increased $6.0 million, primarily due to an increase in legal expenses related to litigation costs incurred to defend the Company against claims asserted by the Company’s former owner (see “Donovitz Litigation” under Item 3 Legal Proceedings in this Annual Report on Form 10-K and Note 18 to our consolidated financial statements for 64 additional information).
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As a result of investing in growing our internal sales capabilities beginning in 2019, we rely less on third-party sales forces and our commissions have decreased over time. We expect external commissions expenses to continue to decrease as we focus our growth initiatives based on an internal sales force model.
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Furthermore, during the year ended December 31, 2023, the Company entered into a $1.2 million legal settlement with a former employee. Marketing expenses increased $1.9 million due to an increase in web-based marketing and the production of informational materials in an ongoing effort to increase awareness of the products and services offered by Biote-certified practitioners.
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However, the employee salaries we pay to our internal sales force are considered compensation expense and allocated to Selling, general and administrative expense. Marketing Marketing consists primarily of advertising expenses, other non-advertising marketing and training program costs, and management services costs. These costs are all expensed as incurred.
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Gain (Loss) from Change in Fair Value of Warrant Liability The change in the gain (loss) from change in fair value of warrant liability was primarily due to the Company’s offer to exchange its outstanding warrants for common stock.
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We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
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On May 9, 2023, the Company announced the commencement of its offer to each holder of its outstanding warrants, the opportunity to receive shares of common stock in exchange for each warrant tendered by the holder. During the year ended December 31, 2023, the Company issued common stock valued at $17.5 million in exchange for all outstanding warrants.
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