Q3 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- The company's enhanced Clinical Decision Support Software (CDSS) significantly broadens their product offerings, appeals to more practitioners, and sets them up for accelerated growth in 2025.
- Vertical integration through Asteria Health is progressing well, with approximately 50% of volume converted to Asteria, leading to margin improvements of about 100 basis points in Q3. The company expects to expand margins further in 2025.
- The dietary supplement business via Amazon is progressing according to plan, with expectations of accelerated growth into 2025, indicating a strengthening revenue stream.
- The implementation of the updated Clinical Decision Support Software (CDSS) caused temporary disruptions in procedure volumes due to workflow adjustments and training needs, impacting growth in Q3 and expected to have a small impact in Q4 as well, raising concerns about execution risks and future growth projections. , ,
- The company is still in the process of obtaining state licenses for Asteria Health, with approximately 30 states licensed and potential delays in key states like California, which may affect their ability to fully integrate vertically and realize expected cost savings, potentially impacting margins and expansion plans. ,
- Regulatory uncertainties surrounding the compounding of GLP-1 products, and the fact that the company's offerings depend on products remaining on the FDA's shortage list (e.g., Tirzepatide and Semaglutide), may pose risks to their ability to continue offering these products, potentially limiting growth opportunities in this area.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +13% | Broad-based procedure growth and incremental gains in service offerings supported higher revenue. Continued adoption by new clinics and a stable macro environment contributed to this increase. |
United States Revenue | +12% | Strong demand from existing practitioners and steady clinic onboarding drove domestic revenue. This was partially offset by softer supplement sales compared to the prior year, but overall clinic activity remained robust. |
Pellet Procedures | +7% | The continued expansion of top-tier practitioners and improved training drove up the number of procedures. Although the growth rate moderated somewhat compared to prior periods, broad-based clinic adoption sustained strong performance. |
Shipping Fees | +860% | A change in fulfillment strategy and increased product shipments to clinics led to significantly higher shipping revenue. The company’s transition to a more direct distribution model and reduced reliance on third-party providers also contributed to this marked rise. |
Service Revenue | +116% | Heightened demand for training sessions and additional value-added services more than doubled revenue. New platform offerings and technology fees likely played a role in the substantial jump, reflecting the company’s expanded service portfolio and successful client engagement. |
Operating Income (EBIT) | +60% | Disciplined cost management and a higher gross margin from procedure revenues underpinned the EBIT expansion. Although there were increased investments in sales and marketing, the company’s operating leverage improved relative to the prior year, contributing to profitability gains. |
Net Income | -76% | Despite stronger operating results, fair value adjustments and other one-time items weighed on net income. The company also faced higher interest expenses and some incremental legal or administrative costs, driving a lower bottom line compared to the previous year. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2024 | $200 million to $204 million | $197 million to $201 million | lowered |
Adjusted EBITDA | FY 2024 | $60 million to $63 million | $58 million to $61 million | lowered |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q3 2024 | $200 million to $204 million for FY 2024 | 51.384 million | Met |
Gross Margin | Q3 2024 | Upper 60s range | Approximately 70.5% ((51.384M − 15.172M) / 51.384M) | Beat |
Operating Expenses | Q3 2024 | Anticipated moderation in operating expenses in the second half of FY 2024 compared to the first half | SG&A of 24,028K in Q3 2024, down from 27,649K in Q2 2024 | Met |
Nutraceutical Sales | Q3 2024 | Expected to return to year-over-year growth in the second half of FY 2024 | 10.32M in Q3 2024 vs 8.48M in Q3 2023 | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Asteria Health State Licensing | Q4 2023: Expected full licensing by end of 2024. Q1 2024: Focused on securing major state licenses; California slower. Q2 2024: Halfway through targeted licenses, expecting more approvals soon. | Has approximately 30 state licenses; continuing to pursue all 50, with some states (e.g., California) taking longer. | Consistently mentioned. Ongoing progress with a positive outlook. |
Vertical Integration | Q4 2023: Anticipated full integration of Asteria Health by 2024, no major manufacturing issues. Q1 2024: A key strategic focus to control production internally. Q2 2024: Smooth Asteria integration, driving manufacturing efficiency and cost savings. | Achieved a 100 basis points improvement from vertical integration; converting ~50% of volume to Asteria. | Consistently mentioned. Delivering cost savings and margin improvements. Large future impact. |
Regulatory Risks with GLP-1 Compounding | Q4 2023: Not mentioned. Q1 2024: Not mentioned. Q2 2024: Tied to presence on FDA shortage list (Tirzepatide/Semaglutide); not a major concern given demand outpacing supply. | BioteRx platform ensures compliance; offering GLP-1s under FDA shortage list status, though immaterial to overall business. | New in Q2 2024; carried forward in Q3 2024. Still a limited focus. |
Clinical Decision Support Software (CDSS) | Q4 2023: No mention. Q1 2024: Provides personalized treatment guidance. Q2 2024: Updated functionality, integrating BioteRx products for precision patient care. | Enhanced CDSS caused a temporary disruption in procedure volumes; broadens treatment to wider age groups, supports multiple product lines, and is driving competitive advantage. | Ongoing updates with short-term disruption but positive long-term potential. Large future impact. |
Nutraceutical/Dietary Supplement Business | Q4 2023: Revenue declined 14.6%, transition challenges with distributors and Amazon, expecting growth 2H 2024. Q1 2024: Down 11.3% year-over-year, clearing old inventory, anticipating 2H 2024 rebound. Q2 2024: Down 32.2%, still transitioning but expecting recovery. | Grew 21.7% year-over-year; however, margin impacted by revenue mix shift, partly offset by cost savings. | Rebounded in Q3 2024 after prior declines. Sentiment shifting positively. |
BioteRx New Product Offering and Rollout | Q4 2023: ~10 new wellness products launched in February 2024, phased introduction to 100 clinics. Q1 2024: Strong reception from initial providers, expanding to more clinics, covering sexual health/weight loss/preventative wellness. Q2 2024: Phased rollout to ~600 clinics, introducing advanced technical tools and product categories. | Introduced further products for sexual health, weight loss, and preventative wellness. Integration into CDSS; modest direct revenue but strategically important. Expanded into additional states for GLP-1 offerings. | Consistent expansion since Q4 2023. Strategic focus with modest near-term revenue. |
Reliance on Existing vs. New Clinics | Q4 2023: Stable core providers, plus ramping up new clinics more quickly. Q1 2024: Bulk of procedure growth from top-tier existing clinics, with new clinic onboarding offering future upside. Q2 2024: 30% increase in new clinics while leveraging established top-tier accounts. | Maintaining a strong focus on top-tier clinics for revenue while onboarding new clinics via the QuickStart program; balanced approach. | Recurring topic. Emphasis on existing high-performing clinics plus gradual ramp of new ones. |
Men’s Health Market Expansion | Q4 2023: Discussed as a large, undertreated market (~45 million men over age 40, only 10-12% seeking treatment). Q1 2024: Not mentioned. Q2 2024: Not mentioned. | No mention in Q3 2024. | Mentioned only in Q4 2023. No updates or references in subsequent periods. |
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Procedure Revenue Growth
Q: Can you elaborate on the outlook for procedure revenue growth in 2025?
A: Management is confident about accelerated procedure revenue growth in 2025, expecting double-digit growth. They attribute this optimism to the recovery from the CDSS disruption, strong patient demand, and enhancements from the new software, which broaden their market appeal. -
CDSS Disruption Impact
Q: What caused the disruption from the new Clinical Decision Support Software?
A: The implementation of the enhanced CDSS led to a workflow adjustment across 7,100 clinics, causing a temporary slowdown. While there was a learning curve, management notes that the net result will be excellent, enhancing capabilities and expanding their competitive moat. They are starting to see a bounce back and believe they would have met guidance without this headwind. -
Margin Outlook and Asteria Health
Q: How is the progress with Asteria Health's state licenses affecting margins?
A: Asteria Health has obtained approximately 30 state licenses and converted around 50% of volume, resulting in about 100 basis points of margin improvement in Q3. Management expects further margin expansion in 2025 as they continue to obtain licenses and increase vertical integration. -
Competitive Pressure from GLP-1
Q: Are GLP-1 offerings impacting your business?
A: Management stated that GLP-1 offerings are immaterial to their overall business. They haven't lost patients to weight loss clinics and continue to offer GLP-1 products where legally allowed. They are innovating in areas like formulations for stepping patients down from GLP-1s. -
BioteRx Contribution
Q: Can you quantify the size and outlook of the BioteRx business?
A: BioteRx currently contributes a small amount of income but provides significant competitive value by offering access to recommended products through one platform. It's expected to make a modest contribution in 2024 and a greater, though still minor, contribution in 2025. -
Amazon Storefront Progress
Q: How is the Amazon storefront performing versus expectations?
A: Management reports that the decision to change the distribution channel model was correct. The Amazon storefront is progressing according to plan, with line of sight into accelerated growth. They anticipate seeing real benefits in 2025, with no major mix shift changes expected. -
Hurricane Impact
Q: What was the impact of hurricanes on clinics and procedures?
A: The hurricanes caused temporary clinic closures, impacting procedure volumes. Management expects most procedures to return over Q4 and early next year, as these procedures are delayed rather than lost. -
New CDSS Capabilities
Q: What new capabilities does the enhanced CDSS offer?
A: The enhanced CDSS incorporates updated algorithms and lab tests, allowing treatment tailored to specific patients from their early 40s to 100. It provides recommendations across the entire product portfolio, enhancing practitioner offerings and broadening appeal to mainstream doctors, thus strengthening their competitive moat. -
Innovations and Product Offerings
Q: Any plans for new product offerings or M&A?
A: Management is focusing on products their providers regularly use, particularly in hormone optimization and therapeutic wellness. They are considering innovations like formulations to help patients transition off GLP-1s and expect to introduce interesting innovations in 2025. -
EBITDA Margin Outlook
Q: Is there room for EBITDA margin improvement beyond Q3 levels?
A: Margin improvement is contingent on obtaining additional state licenses and increasing volumes through vertical integration. Management is excited about the opportunity to expand margins further in 2025.