Biote (BTMD) Q3 2026 earnings review
Biote's gross margin rebounds, but its procedure sales still shrink
Biote's core hormone pellet business kept shrinking while its vitamin supplement sales and factory margins started to mend. Total revenue fell 10% from a year ago as procedure revenue dropped 15%, missing management's own plan for a sequential uptick from the second quarter. Interim chief executive Bob Peterson pointed to "early evidence of stabilization in underlying demand", and kept the full-year outlook unchanged, which by our math leaves fourth-quarter sales down about 8%.
| Revenue | $43.3M -9.6% from a year ago |
|---|---|
| Procedure revenue | $28.9M -15.1% from a year ago (-4.6% from last quarter) |
| Gross profit margin | 67.7% +2.3 percentage points from last quarter |
| Full-year outlook | Unchanged Revenue above $175M; Adjusted EBITDA above $25M |
⚖️ Verdict: 🔴 Bearish
The story got worse because procedure revenue fell from last quarter even after direct recall disruptions faded. That sequential drop shows clinic departures are still hurting the hormone therapy provider, while $111 million of net debt leaves net leverage near 4.5 times the full-year profit floor ahead of a 3.75x year-end loan test by our math. One bright spot: gross margin recovered 2.3 percentage points from last quarter as recall costs eased, and supplement growth ticked up.
The question now is whether the six-quarter slide in procedure sales is a temporary disruption from the recall and sales force reorganization or a lasting loss of medical clinics. If the problem was temporary, newly trained doctors will lift procedure revenue in coming quarters; if clinic departures stay high, sales will keep shrinking into 2027. Fourth-quarter procedure revenue and the year-end debt covenant test will show which path the business is on.
🐂 Bull Case
In-House Pellet Manufacturing Lifted Gross Margin
Biote makes hormone pellets at its own Asteria Health facility to lower production costs, though that vertical integration also concentrates manufacturing risk at a single plant. After a voluntary product recall in January forced the hormone therapy provider to buy more pellets from outside suppliers, gross margin fell to 65.4% in the second quarter.
In the third quarter, gross margin rebounded 2.3 percentage points from last quarter to 67.7%. Direct recall charges in cost of revenue dropped to $0.3 million from $0.6 million in the prior quarter. That sequential recovery still left gross margin 4.1 percentage points below last year's 71.8%, because the business faced "increased use of lower margin third party pellets", the company said.
What to watch: the percentage of shipped pellets supplied by Asteria Health in the quarterly filing or conference call. A step up from last quarter's 30% share would show that in-house production can push gross margin back toward 70%.
Dietary Supplements Accelerated Back to 7.3% Growth
Biote sells dietary supplements, which are vitamins and wellness products that complement its hormone procedures, through medical clinics and its online store. Supplement growth had slowed from 19.1% in the first quarter to 5.7% in the second quarter, raising concern that clinic departures were dragging down product sales.
This quarter, dietary supplements revenue rose 7.3% from a year ago to $12.0 million, and grew 5.3% from last quarter. Because procedures shrank, supplements reached 27.7% of total revenue by our math, up from 23.3% a year ago. Management kept its full-year plan for mid- to high-single-digit growth.
What to watch: fourth-quarter dietary supplements revenue against last year's $11.7 million. By our math, the middle of the full-year outlook points to a 1.7% decline in the fourth quarter, so beating that number would show online demand remains steady.
Positives this quarter didn't test
Two standing growth initiatives got no new numbers in the earnings release, though interim chief executive Bob Peterson highlighted clinical support efforts.
- Practitioner engagement and sales activity: Chief Medical Officer Dr. Komal Bajaj is working with clinics to "strengthen clinical excellence across our network", Peterson said, while the commercial team aims to "improve sales productivity and strengthen engagement with our trained practitioners"; a disclosed drop in clinic departures or higher revenue per clinic would show this works.
- Acquisitions: Biote recorded zero merger and acquisition legal expenses this quarter after spending $0.1 million in the first half on "strategic opportunities to expand the business"; a named acquisition target and funding plan would test this avenue.
🐻 Bear Case
Procedure Revenue Missed the Sequential Recovery Plan
Procedure revenue comes from hormone pellets and management fees charged to medical clinics in Biote's network. After cutting the full-year outlook three months ago, management forecast that procedure sales would improve from the second quarter's $30.3 million. In this release, interim chief executive Bob Peterson said "While a recent improvement in procedure volume provides early evidence of stabilization in underlying demand, our return to growth is progressing more slowly than anticipated."
The numbers cut against the claim of stabilization, because procedure revenue fell 4.6% from last quarter to $28.9 million. Compared with a year ago, the decline deepened for a seventh straight quarter to 15.1%, down from a 13.9% drop in the second quarter. Even though direct recall disruptions faded, departures of existing clinics and slow ramp-ups at new practices kept shrinking the revenue base.
What to watch: fourth-quarter procedure revenue against this quarter's $28.9 million. Another sequential drop would show that clinic departures are still outpacing newly trained doctors.
Debt Leverage Nears the Year-End Covenant Limit
Biote carries a term loan that requires total debt minus cash to stay below 3.75 times trailing twelve-month profit at the end of 2026. During the first nine months of the year, the medical supplier spent $18.5 million to settle founder share repurchase obligations and $7.2 million on open-market stock buybacks, including $1.4 million in the third quarter by our math.
- Cash and cash equivalents: $8.9 million, down from $11.2 million last quarter and $24.1 million at year-end
- Total term loan debt: $120.1 million, leaving net debt at $111.2 million by our math
- Full-year profit floor: Adjusted EBITDA (profit before interest, taxes, depreciation, and one-offs) above $25.0 million
This matters because $111.2 million of net debt against $25.0 million of profit equals 4.45 times net leverage by our math. Unless the credit agreement adds back extra items or fourth-quarter profit beats the floor by several million dollars, the company risks breaching its loan limit at year-end.
What to watch: the debt footnote in the third-quarter 10-Q filing and year-end net leverage. A ratio above 3.75 times would require a lender waiver or a loan amendment.
Operating Expenses Took a Larger Share of Sales
Biote's operating margin fell 11.5 percentage points from a year ago to 5.7%, as operating income dropped from $8.3 million to $2.5 million. Excluding a $1.0 million accounting gain from revaluing acquisition payouts (earnout liabilities), the business posted a net loss of $0.4 million by our math.
Overhead grew even as revenue shrank. Selling, general, and administrative expenses — which cover sales reps, marketing, and corporate staff — rose 7.4 percentage points of revenue to 61.9% by our math ($26.8 million vs $26.2 million a year ago). Cost of revenue — the cost of making pellets and supplements — rose 4.1 percentage points to 32.3% of sales.
What to watch: selling, general, and administrative expenses in the fourth quarter. If sales force spending does not bring revenue growth or cost cuts, operating profit will stay near zero.
Risks this quarter didn't answer
Three standing operational and governance risks received no update in the third-quarter press release.
- Clinic attrition rate: not mentioned in the release after sitting at roughly 8% for five straight readings; the conference call Q&A will show if departures slowed.
- Permanent chief executive search: Bob Peterson remains interim chief executive for a second quarter with no succession timeline disclosed; a permanent appointment would settle leadership structure.
- Supplier concentration: three vendors supplied over 90% of inventory purchases last quarter; the 10-Q filing's concentration footnote will show if reliance on outside suppliers eased.
💲 Other KPIs
Deferred revenue — cash clinics and patients have paid for procedures and training not yet delivered — fell 29.7% from a year ago and 9.5% from last quarter by our math. The decline has widened over the past four quarters from 8.9% to 29.7%, showing a smaller backlog of prepaid work.
Diluted shares fell 25.3% from 36.7 million a year ago, and dropped 4.2% from 28.6 million last quarter. Biote retired 6.1 million founder voting shares in the first half and bought back $7.2 million of common stock over the first nine months.
By our math, third-quarter free cash flow (operating cash flow minus property and software purchases) was $0.66 million, down 95.1% from $13.4 million a year ago. That turned positive after a $1.07 million cash burn in the first half, leaving nine-month free cash flow at negative $0.41 million.
🔮 Guidance
Unchanged. The full-year floor still points to a decline of up to 9.0% from last year's $192.2 million. By our math, clearing $175.0 million after $132.5 million in the first nine months leaves at least $42.5 million for the fourth quarter, an 8.4% drop from a year ago. Management cut this target by $15 million last quarter.
Unchanged. The full-year floor for Adjusted EBITDA (profit before interest, taxes, depreciation, and one-offs) still has profit falling up to 53.3% from last year's $53.5 million. By our math, with $19.4 million earned in the first nine months, the floor leaves at least $5.6 million (a 13.3% margin) for the fourth quarter, up from $5.1 million this quarter.
Unchanged. Biote still plans for dietary supplements revenue to rise 5% to 9% for the full year. After $34.4 million in the first nine months, the 7% middle of the range leaves about $11.5 million for the fourth quarter by our math, a 1.7% decline against last year's tough 16.0% growth comparison.
❓ Key Questions
Did procedure revenue or only procedure volume stabilize?
Interim chief executive Bob Peterson noted a recent improvement in procedure volume, yet procedure revenue fell 4.6% from last quarter to $28.9 million. How much of the revenue drop came from volume versus volume-based fee discounts?
What is the year-end net leverage ratio under the loan?
Net debt of $111.2 million against the $25.0 million Adjusted EBITDA floor equals 4.45 times leverage by our math, above the 3.75x covenant limit tested in December. Does the credit agreement allow extra add-backs to clear the test?
What share of pellets did Asteria Health supply in Q3?
Gross margin recovered 2.3 percentage points from last quarter to 67.7%, but Biote still cited lower-margin third-party pellets. Did Asteria Health's share of shipped pellets rise above the 30% level reported in the first and second quarters?
What were clinic attrition and new practitioner training counts?
Clinic departures sat at roughly 8% for five quarters, and Biote did not update trained practitioner counts last quarter. What were the third-quarter readings for both figures?